SCHEDULE 14A INFORMATION

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

[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 Commission Only
(as permitted by Rule 14a-6(e)(2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to ss.240.14a-12

GALAXY NUTRITIONAL FOODS, INC., 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] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:

[ ] 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:

[LOGO]
GALAXY NUTRITIONAL FOODS, INC.

GALAXY NUTRITIONAL FOODS, INC.
2441 Viscount Row
Orlando, Florida 32809

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, SEPTEMBER 30, 2003

To the Shareholders:

The Annual Meeting of Shareholders of Galaxy Nutritional Foods, Inc. (the
"Company"), will be held Tuesday, September 30, 2003 at 10:00 a.m. at the
Company's headquarters, located at 2441 Viscount Row, Orlando, Florida 32809 for
the following purposes:

1. To fix the number of directors at eight and elect a Board of Directors
for the ensuing periods.

2. To approve the issuance by the Company of common stock in the event of
a conversion of the Company's Series A convertible preferred stock and
upon the exercise of certain warrants held by the Series A convertible
preferred stockholders.

3. To approve the issuance by the Company of common stock or securities
convertible into common stock in a potential offering the proceeds of
which will be used to finance the Company's redemption of any
outstanding, unconverted Series A convertible preferred stock and to
pay all costs and expenses related to such offering and redemption.

4. To approve certain issuances and potential issuances of common stock
or other securities convertible into common stock by the Company to
officers, directors and key employees.

5. To ratify the retention of BDO Seidman, LLP as the independent
auditors of the Company for the fiscal years ending March 31, 2003 and
March 31, 2004.

6. 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 4, 2003 will be
entitled to vote at the meeting or any adjournment thereof.

By Order of the Board of Directors

/s/ LeAnn Hitchcock
LeAnn Hitchcock
Corporate Secretary
Orlando, Florida
August 22, 2003

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 NUTRITIONAL FOODS, INC.
2441 VISCOUNT ROW
ORLANDO, FLORIDA 32809

PROXY STATEMENT
FOR
THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, SEPTEMBER 30, 2003

PROXIES IN THE FORM ENCLOSED WITH THIS PROXY STATEMENT ARE SOLICITED BY THE
BOARD OF DIRECTORS OF GALAXY NUTRITIONAL FOODS, INC., A DELAWARE CORPORATION
(THE "COMPANY"), FOR THE USE AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
TUESDAY, SEPTEMBER 30, 2003 AT 10:00 A.M. AT THE COMPANY'S HEADQUARTERS, LOCATED
AT 2441 VISCOUNT ROW, ORLANDO, FLORIDA 32809.

Only shareholders of record as of August 4, 2003 will be entitled to vote at the
meeting and any adjournment thereof. As of August 22, 2003, 15,153,932 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. This proxy statement
and the form of proxy were first mailed to shareholders on or about August 29,
2003. The cost of solicitation related to this proxy statement shall be borne by
the Company.

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. In addition to the election of directors, the shareholders will consider
and vote upon (i) the approval of the issuance by the Company of common stock in
the event of a conversion of the Company's Series A convertible preferred stock
and upon the exercise of certain warrants held by the Series A convertible
preferred stockholders, (ii) the approval of the issuance by the Company of
common stock or securities convertible into common stock in a potential offering
the proceeds of which will be used to finance the Company's redemption of any
outstanding, unconverted Series A convertible preferred stock and all costs and
expenses related to such offering and redemption, (iii) the approval of certain
issuances and potential issuances of common stock or other securities
convertible into common stock by the Company to officers, directors and key
employees, and (iv) a proposal to ratify the retention of BDO Seidman, LLP as
the independent auditors of the Company for the fiscal years ending March 31,
2003 and March 31, 2004. 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.

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.

PROPOSAL ONE: ELECTION OF DIRECTORS

Current Board of Directors
- --------------------------

On December 17, 2002, the Board of Directors voted to expand the number of Board
members to six and appointed Charles L. Jarvie as the Company's Chairman of the
Board, Angelo S. Morini as Vice-Chairman of the Board, Thomas R. Dyckman as
Chairman of the Audit Committee, and Michael H. Jordan, Joseph J. Juliano and
David H. Lipka as additional directors. Former directors Dr. Douglas Walsh and
Marshall Luther resigned from the Board of Directors effective as of December
17, 2002, in order to pursue other opportunities. On December 18, 2002, the
Board of Directors again voted to expand the number of Board members to seven
and appointed Christopher J. New, the Company's Chief Executive Officer, as a
director. On April 1, 2003, C. Anthony Wainwright was appointed to the Board to
fill the vacancy created when Michael H. Jordan resigned to accept an
appointment as the chairman and chief executive officer of Electronic Data
Systems Corporation. On May 2, 2003, the Board of Directors voted to expand the
number of Board members to eight and, effective May 30, 2003, appointed Patrice
M.A. Videlier as a director. On August 22, 2003, Charles L. Jarvie resigned as
Chairman of the Board, but will remain a director of the Company. David H. Lipka
was then appointed as the Company's Chairman of the Board.

The Company's Board of Directors is currently comprised of eight members, and
will be fixed at eight members after the annual meeting. Directors shall be
elected to serve until the next annual meeting of shareholders and until their
successors shall have been elected and qualified.

Nominees
- --------

All of the nominees are currently serving as directors of the Company, all have
consented to being named herein and all have indicated their intention to serve
as directors of the Company, if elected. Mr. Lipka has agreed to serve as a
director of the Company at the request of Frederick A. DeLuca, a beneficial
owner of more than five percent (5%) of Company's common stock. Both Mr. Lipka
and Mr. DeLuca are members of the Board of Directors of Doctors Associates, Inc.

The nominees for the Board of Directors and certain information about them are
set forth below:

DAVID H. LIPKA
Age: 73
First Elected: 2002
Experience: Galaxy Nutritional Foods, Inc. - Chairman of the Board of
Directors (Aug. 2003); Director of Doctors Associates,
Inc. (Subway Stores) and consultant to SCIS Food Services
Co. (2001-present); DCA Food Industries - various
management positions including President & Chief Executive
Officer (1955-1995).
Other Directorships: Doctors Associates, Inc.

ANGELO S. MORINI
Age: 60
First Elected: 1987
Experience: Galaxy Nutritional Foods, Inc. - Chairman of the Board of
Directors (1987-Dec. 2002), President (since 1987), and
Chief Executive Officer (1987-Dec. 2002); Galaxy Cheese
Company - President (1980-1987), General Manager
(1972-1980).
Other Directorships: None

THOMAS R. DYCKMAN
Age: 71
First Elected: 2002
Experience: Cornell University - various positions including Ann
Whitney Olin Professor of Accounting, Dean, and Vice
President for Information Technology (1964 - present);
Financial Accounting Standards Board - various positions
including consultant, member of FASAC and FAF (1977-1988);
Author of more than 60 published articles and 10 books.
Other Directorships: None

CHARLES L. JARVIE
Age: 66
First Elected: 2002
Experience: Galaxy Nutritional Foods, Inc. - Chairman of the Board of
Directors (Dec. 2002-Aug. 2003); Partner with Beta Capital
Group LLC (2001-present); President of Host
Communications, Inc., New Era Beverage Company, Schenley
Industries, Inc., Fidelity Investments Marketing Corp.,
and Dr. Pepper Company (1980-2000); Procter & Gamble
Company - various management positions (1959-1979).
Other Directorships: None

JOSEPH JULIANO
Age: 52
First Elected: 1999
Experience: Pepsi-Cola Company - various management positions (1973-
1988); Pepsi Cola Company Bottling Operations - management
(1988-1991); Pepsi Cola North America - Vice President of
Prestige, Sports and Gaming (1991-1998), Vice President of
Entertainment Sales (1998-present).
Other Directorships: Nevada Gold & Casinos, Inc.

CHRISTOPHER J. NEW
Age: 42
First Elected: 2002
Experience: Galaxy Nutritional Foods, Inc. - Chief Executive Officer
(2002-present and Chief Operating Officer (2001-present);
Vice President of Commercial Strategies for Tropicana
Products of Bradenton, FL (1993-2001); Senior Marketing
Manager for Mott's USA (1988-1992).
Other Directorships: None

C. ANTHONY WAINWRIGHT
Age: 69
First Elected: 2003
Experience: Vice Chairman for Arnold Worldwide Partners
(2002-present); Vice Chairman for McKinney & Silver
(1997-2001); Chairman for Harris Drury Cohen (1995-1997);
Chairman for Compton Partners, Saatchi & Saatchi
(1990-1995); President & Chief Operating Officer for The
Bloom Companies (1980-1989); Executive Vice President &
General Manager for The Marschalk Company (1978-1980); and
President & Chief Executive Officer for Wainwright, Spaeth
& Wright (1969-1978).
Other Directorships: Arnold Worldwide Partners, American Woodmark Corporation,
Danka PLC, and Marketing Services Group, Inc.

PATRICE M.A. VIDELIER
Age: 60
First Elected: 2003
Experience: Various management positions with Fromageries Bel, SA,
including the current position as the Senior Vice
President of Marketing - World; Unilever Co. - various
marketing management positions (1969-1989).
Other Directorships: None

Vote Required for Election
- --------------------------

The affirmative vote of the holders of a majority of outstanding shares of
common stock present or represented at the annual meeting is required for the
election of each of the nominees named above. Unless you specify otherwise, your
proxy will be voted to fix the number of directors for the ensuing year at eight
and for the election of the nominees named above, all of whom are now directors.
Abstentions, broker non-votes, and instructions on the accompanying proxy card
to withhold authority to vote for one or more of the nominees will result in the
respective nominees receiving fewer votes. If any nominee becomes unavailable,
your proxy will be voted for a new nominee designated by the Board of Directors
unless the Board of Directors reduces the number of directors to be elected. The
Board of Directors knows of no reason why any 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. In no event, however, shall the proxies be voted for a greater number of
persons than the number of nominees named.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION
OF EACH OF THE NOMINEES DESCRIBED ABOVE.

PROPOSAL TWO: TO APPROVE THE ISSUANCE BY THE COMPANY OF COMMON STOCK IN THE
EVENT OF A CONVERSION OF THE COMPANY'S SERIES A CONVERTIBLE
PREFERRED STOCK AND UPON THE EXERCISE OF CERTAIN WARRANTS HELD BY
THE SERIES A CONVERTIBLE PREFERRED STOCKHOLDERS.

Background on the Series A Preferred Stock Financing
- ----------------------------------------------------

Pursuant to a certain Series A Preferred Stock and Warrants Purchase Agreement
dated as of April 6, 2001 ("Purchase Agreement"), BH Capital Investments, L.P.
and Excalibur Limited Partnership each purchased 36,323 shares of the Company's
Series A convertible preferred stock (the "Series A Preferred Stock") and
warrants to purchase 60,000 shares of the Company's common stock (the "Initial
Warrants"), at an aggregate sales price of approximately $3,082,000. Each of BH
Capital Investments, L.P., and Excalibur Limited Partnership were also issued
warrants to purchase 60,000 shares of common stock, which were exercisable only
upon the redemption of the Series A Preferred Stock (the "Redemption Warrants"
and, together with the Initial Warrants, the "Warrants"). Pursuant to a
Registration Rights Agreement dated as of April 6, 2001, between the Company and
BH Capital Investments, L.P., and Excalibur Limited Partnership (the
"Registration Rights Agreement"), the Company agreed to register the shares of
common stock issuable upon conversion of the Series A Preferred Stock and upon
exercise of the Warrants. Such shares were included in the Registration
Statement No. 333-70884, filed with the Securities and Exchange Commission on
October 3, 2001. The sale and issuance of the Series A Preferred Stock and
Warrants pursuant to the Purchase Agreement was authorized by the Board of
Directors on April 6, 2001. The proceeds derived from the sale of the Series A
Preferred Stock and Warrants were used for general working capital purposes.

Purpose of the Proposal
- -----------------------

The Company is submitting this proposal for shareholder approval for two
reasons. First, the Company is contractually obligated to do so pursuant to the
Purchase Agreement. And, second, the Company is submitting this proposal for
shareholder approval pursuant to the listing standards, policies and
requirements set forth in the American Stock Exchange Company Guide (the "AMEX
Guide").

Contractual Obligation. On November 7, 2002, the holders of a majority of
the shares of Series A Preferred Stock exercised their right under the Purchase
Agreement to require the Company to solicit the approval of its shareholders for
the Company's issuance of all of the shares of common stock potentially issuable
upon conversion of the Series A Preferred Stock in full and the exercise of the
Warrants. This right arose when the number of shares of common stock they are
entitled to receive, assuming conversion of the all of the Series A Preferred
Stock and the exercise of the Warrants, exceeded 15% of the Company's
then-outstanding shares of common stock. The Company was required to hold a
shareholders meeting to solicit such approval on or before February 5, 2003.
Pursuant to a letter agreement in January 2003, the holders of Series Preferred
Stock agreed to extend the deadline to hold a meeting to March 31, 2003.
Subsequently, pursuant to a Stock Purchase Option Agreement, dated as of April
24, 2003, the holders of Series A Preferred Stock agreed, among other things, to
extend the deadline to September 30, 2003.

AMEX Shareholder Approval Requirements. Section 713 of the AMEX Guide
describes transactions for which the American Stock Exchange ("AMEX") will
require shareholder approval as a prerequisite to approval of applications to
list additional shares to be issued in connection such transactions.
Specifically, shareholder approval is required under these AMEX rules for a
transaction, other than a public offering, involving:

o the sale, issuance, or potential issuance by the company of common
stock (or securities convertible into common stock) equal to 20% or
more of presently outstanding stock for less than the greater of book
or market value of the stock.

Because the Series A Preferred Stock financing described in this proposal
involves the potential issuance by the Company of common stock below market
value that, together with certain other issuances of common stock by the Company
required to be counted for purposes of this AMEX rule, amounts to greater than
20% of its presently outstanding common stock, the proposal is subject to these
AMEX shareholder approval rules and, therefore, requires your approval.

Terms of the Series A Preferred Stock
- -------------------------------------

As of August 22, 2003, 55,884 shares of the 72,646 shares of the Series A
Preferred Stock issued pursuant to the Purchase Agreement, together with 11,785
shares of Series A Preferred Stock accrued as dividends pursuant to the
Company's Restated Certificate of Incorporation, were the only shares of Series
A Preferred Stock issued and outstanding. The Series A Preferred Stock is
subject to certain designations, preferences and rights set forth in the
Company's Restated Certificate of Incorporation, including the following:

- Dividend Rights - Each holder of Series A Preferred Stock is also
entitled to receive a stock dividend equal to 10% of the holder's
shares of Series A Preferred Stock for the first year after issuance
and a stock or cash dividend equal to 8% of the holder's shares of
Series A Preferred Stock for each of the subsequent three years
thereafter. All accrued dividends shall become payable upon the
conversion of the shares of Series A Preferred Stock. All accrued
stock dividends related to the converted shares were paid upon the
recent conversion described below.

- Terms of Conversion - Each holder of Series A Preferred Stock has the
right to convert such shares into shares of common stock at any time,
at a current conversion rate (subject to appropriate adjustment for
stock splits, stock dividends, recapitalizations and similar events)
equal to the quotient of:

o $48.18, plus all accrued dividends that are then unpaid for each
share of Series A Preferred Stock then held by the holder,

divided by,

o the lesser of (x) 1.75 or (y) 95% of the average of the two
lowest closing bid prices on the American Stock Exchange of the
common stock out of the fifteen trading days immediately prior to
conversion.

In no case, however, shall any holder of Series A Preferred Stock be
permitted to convert Series A Preferred Stock in an amount that would
cause such holder to beneficially own at any given time, in the
aggregate, such number of shares of common stock which would exceed
9.99% of the aggregate outstanding shares of common stock, unless such
holder waives such restriction upon not less than 61 days prior notice
to the Company. The number of shares issuable upon conversion of the

Series A Preferred Stock will vary depending upon the closing bid
prices of the Company's common stock on the AMEX.

If all of the remaining outstanding shares of the Series A Preferred
Stock, including accrued dividends thereon, were converted on August
22, 2003, the Company would be required to issue approximately
1,862,987 shares based on a conversion price of $1.75.

- Redemption Provisions - Each holder of Series A Preferred Stock has
the right to require the Company to redeem all or any part of the
Series A Preferred Stock at any time subsequent to the fourth
anniversary of the date of issuance of the Series A Preferred Stock to
such holder or upon the occurrence of the following events:

o A consolidation or merger of the Company or the sale of all or
substantially all of the assets of the Company;

o Inability for 30 days or more of any holders of Series A
Preferred Stock to sell their securities pursuant to the
registration statement registering such securities as a direct or
indirect result of any action or omission of the Company in
breach of the Registration Rights Agreement;

o The Company shall fail or default in the timely performance of
any obligation (i) to issue shares upon conversion of the Series
A Preferred Stock or upon exercise of the Warrants as and when
required by the Purchase Agreement, (ii) to remove restrictive
legends pursuant to the Purchase Agreement, and (iii)
constituting a registration default under the Registration Rights
Agreement;

o The Company amends its Certificate of Incorporation or Bylaws
without the consent of holders of Series A Preferred Stock, which
amendment materially and adversely affects the rights of any
holder of Series A Preferred Stock;

o The termination of employment of Angelo S. Morini as Chief
Executive Officer of the Company, whether by the Company,
resignation or otherwise (the holders of Series A Preferred Stock
waived their redemption rights with respect to the resignation of
Mr. Morini as Chief Executive Officer on December 17, 2002);

o The Company's common stock ceases to be listed on AMEX, unless
such common stock is simultaneously being listed on the Nasdaq
National Market or the Nasdaq SmallCap Market;

o Any lender or any holder of indebtedness of the Company for
borrowed money in excess of $250,000 shall declare an event of
default pursuant to documents evidencing such indebtedness that
enables or permits the

holder of such indebtedness to require the payment of such
indebtedness prior to its schedules maturity;

o Failure by the Company to have sufficient shares of common stock
authorized for issuance upon conversion of the Series A Preferred
Stock and exercise of the Warrants; and

o The Company fails (i) to solicit the approval of this proposal
within ninety (90) days of notice from the holders of the Series
A Preferred Stock, or (ii) to secure shareholder approval for
this proposal.

The last redemption event described above would be triggered, and the
Company would be required to redeem for cash the Series A Preferred
Stock in full, if the Company fails to secure shareholder approval for
this proposal. The redemption price would be the greater of (a) 100%
of the original purchase price, plus accrued dividends, or (b) the
market value of the shares of common stock into which the Series A
Preferred Stock would convert assuming conversion in full were
permitted.

The Company previously had a right to redeem all of the unconverted
shares of the Series A Preferred Stock originally issued because the
conversion price had fallen and remained below $3.10 for more than 90
days and the Company had received notice from the holders of the
Series A Preferred Stock of such fact that the Company may redeem all
of the shares of the Series A Preferred Stock originally purchased.
The Company did not exercise its right of redemption and such right of
redemption has expired.

In the event the Company redeems the Series A Preferred Stock, then
the Redemption Warrants become exercisable.

- Voting Rights - So long as at least twenty-five percent (25%) of the
shares of Series A Preferred Stock issued is outstanding, the Company
may not, without first obtaining the affirmative vote written consent
of the holders of not less than sixty percent (60%) of the
then-outstanding shares of the Series A Preferred Stock, take any of
the following actions:

o take any action that materially and adversely alters or changes
the powers, rights, preferences or privileges of the Series A
Preferred Stock;

o redeem, purchase or otherwise acquire for value or declare and
pay or set aside funds for the payment of any dividend (except
dividends payable in Common Stock or preferred stock) with
respect to, any certain shares of capital stock;

o authorize or issue additional shares of Series A Preferred Stock;

o authorize or issue any equity or debt security on a parity with
or having preference or priority over the Series A Preferred
Stock as to liquidation preferences, redemption rights, dividend
rights, or otherwise, with certain exceptions;

o consent to any liquidation, dissolution or winding up of the
Company; or

o amend, restate, modify or alter the By-Laws of the Company in any
way which adversely affects the rights of the holders of the
Series A Preferred Stock.

- Liquidation Rights - The holders of the Series A Preferred Stock are
entitled to a liquidation preference, prior to the payment of any
amounts payable to the holders of the common stock, in an amount per
share equal to the $48.18, plus all accrued dividends that are unpaid
for each share of Series A Preferred Stock then held by the holder.

The Initial Warrants held by BH Capital Investments, L.P. and Excalibur Limited
Partnership were initially exercisable for a period of five years from April 6,
2001, at a per share exercise price of $5.30. Subsequently, the Company agreed
to reduce the per share exercise price on the Initial Warrants to $2.67 in order
to induce the holders of the Initial Warrants to exercise their Initial Warrants
immediately. The Initial Warrants were exercised on or about January 17, 2002 at
a price per share equal to $2.67, which price was $2.54 below the market price
of the Company's common stock on January 17, 2002.

On December 26, 2002, Excalibur Limited Partnership and BH Capital Investments,
L.P. converted 10,378 and 4,884 shares of Series A Preferred Stock,
respectively, plus accrued dividends, into 424,950 and 199,986 shares of common
stock, respectively. The conversion rate was $1.3633 based on 95% of the average
of the two lowest closing bid prices on AMEX for the fifteen trading days
immediately prior to conversion. On June 3, 2003, BH Capital Investments, L.P.
converted 1,500 shares of Series A Preferred Stock into 52,302 shares of common
stock. The conversion price was $1.6483 based on 95% of the average of the two
lowest closing bid prices on the AMEX for the fifteen trading days immediately
prior to conversion. Therefore, as of August 22, 2003, there are 55,884 shares
of the Series A Preferred Stock outstanding, which represents approximately 77%
of the original issuance of 72,646 shares. Additionally as of August 22, 2003,
the Company would be required to issue 11,785 additional shares of Series A
Preferred Stock as payment of the accrued dividends. Excalibur Limited
Partnership and BH Capital Investments, L.P. hold 25,945 and 29,939 shares of
Series A Preferred Stock, respectively, constituting approximately 46.4% and
53.6% of such outstanding shares, respectively.

Effects of this Proposal
- ------------------------

The issuance to date of shares of common stock upon conversion of the converted
shares of Series A Preferred Stock and upon the exercise of the Warrants have
had, and the issuance of additional shares of common stock upon conversion of
the remaining shares of Series A Preferred Stock will have, the effect of
diluting the Company's earnings per share and the voting power of current
shareholders who have not or will not acquire sufficient additional shares to
maintain their percentage of share ownership.

The following table demonstrates the dilutive effect on the voting power on
current shareholders of the conversion of the outstanding shares of Series A
Preferred Stock (assuming conversion as of August 22, 2003):

Dilutive Effect on Voting Power
----------------------------------------------------------------------

Shares of common stock currently outstanding 15,153,932
Shares of common stock into which the
Series A Preferred Stock is convertible into
as of August 22, 2003 1,862,987
----------
Pro-forma shares of common stock outstanding 17,016,919
==========

If the remaining shares of the Series A Preferred Stock were converted to common
shares in accordance with the terms stated above, there would be a 12% dilution
in the Company's common stock. Additionally, Excalibur Limited Partnership and
BH Capital Investments, L.P. together would own 13% of the Company's outstanding
common stock.

The following table demonstrates the dilutive effect on the Company's earnings
per share of the conversion of the outstanding shares of Series A Preferred
Stock:

Dilutive Effect on Earnings Per Share(1)
---------------------------------------------------------------------

Earnings per share prior to conversion $ 0.07
Earnings per share assuming conversion
of all outstanding shares of Series A Preferred Stock $ 0.06
--------
Dilution per share $ 0.01
========

(1) The earnings per share is based on the Company's reported Net Income
for the year ended March 31, 2003 of $1,034,128 divided by the shares
outstanding as reported above.

If the Company does not secure shareholder approval for this proposal, the
Company would thereby become immediately obligated to redeem for cash all of the
outstanding shares of Series A Preferred Stock. The redemption price, calculated
as of August 22, 2003 based on a conversion price of $1.75 per common share and
a market price of $2.684 (the 5-day average of the closing bid prices on AMEX)
per common share, would be approximately $5,000,258. If the shareholders do not
approve this proposal, the Company would be in default of its Certificate of
Incorporation and the Company's obligation to the holders of the Series A
Preferred Stock would become a debt of the Company, thereby weakening the
Company's balance sheet. Additionally, a default by the Company of its
redemption obligations is likely to lead to default by the Company under its
credit facilities from Textron Financial Corporation and SouthTrust Bank which
could give such lenders the right to accelerate the loans, whereupon
substantially all of the Company's debt would become immediately due and
payable, and the right to exercise their other remedies, including the right to
foreclose on all of the Company's assets. The Company does not currently, and
likely will not in the foreseeable future, have available cash to satisfy this
potential obligation. If the Company is unable to satisfy the redemption
obligations, the Company's business, prospects, results of operations, cash
flows, future growth and the market price of its common stock will be negatively
affected and, if its failure to satisfy its redemption obligations leads to a
default under its credit facilities and such defaults are not waived by Textron
Financial Corporation and SouthTrust Bank, the Company will suffer a substantial
risk that it may not be able to continue as a going concern.

Vote Required for Approval
- --------------------------

The affirmative vote of the holders of a majority of outstanding shares of
common stock present or represented at the annual meeting is required for the
approval of this proposal. In accordance with Delaware law, abstentions will be
counted for purposes of determining both whether a quorum is present at the
meeting and the total number of shares represented and voting on this proposal.
While broker non-votes will be counted for purposes of determining the presence
or absence of a quorum, broker non-votes will not be counted for purposes of
determining the number of shares represented and voting with respect to the
particular proposal on which the broker has expressly not voted and,
accordingly, will not affect the approval of this proposal. Mr. Morini, the
Company's President and largest beneficial shareholder, has executed a proxy in
favor of the holders of the Series A Preferred Stock granting them the right to
vote all of his shares in favor of this proposal. As of the record date, Mr.
Morini was entitled to vote 3,444,272

shares of common stock, or 23% of the Company's outstanding common stock on that
date.

Accordingly, the Company expects all of Mr. Morini's shares to be voted in favor
of this proposal at the meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL
OF THE ISSUANCE BY THE COMPANY OF COMMON STOCK IN THE EVENT OF A CONVERSION OF
THE COMPANY'S SERIES A CONVERTIBLE PREFERRED STOCK AND UPON THE EXERCISE OF
CERTAIN WARRANTS HELD BY THE SERIES A CONVERTIBLE PREFERRED STOCKHOLDERS.

PROPOSAL THREE: TO APPROVE THE ISSUANCE BY THE COMPANY OF COMMON STOCK OR
SECURITIES CONVERTIBLE INTO COMMON STOCK IN A POTENTIAL
OFFERING, THE PROCEEDS OF WHICH WILL BE USED TO FINANCE THE
COMPANY'S REDEMPTION OF ANY OUTSTANDING, UNCONVERTED SERIES A
CONVERTIBLE PREFERRED STOCK AND TO PAY ALL COSTS AND EXPENSES
RELATED TO SUCH OFFERING AND REDEMPTION.

Relation of Proposal Three to Proposal Two
- ------------------------------------------

Proposal Two is to approve the issuance by the Company of common stock in the
event of a conversion by the Company's Series A convertible preferred stock and
upon the exercise of certain warrants held by the Series A convertible preferred
stockholders. This Proposal Three is to approve the issuance by the Company of
common stock or securities convertible into common stock in a potential
offering, the proceeds of which will be used to finance the Company's redemption
of any outstanding, unconverted Series A convertible preferred stock and to pay
all costs and expenses related to such offering and redemption. Although
Proposal Two and Proposal Three are related because they both are based upon the
Series A convertible preferred stock, each of Proposal Two and Proposal Three
should be considered on its own merits. Your action on one of the proposals does
not require that you take, or preclude you from taking, any particular action on
the other proposal.

Reasons for Redemption
- ----------------------

The Board of Directors and management believe it to be in the best interest of
the Company that all outstanding, unconverted shares of the Series A Preferred
Stock be converted by the holders thereof or be redeemed by the Company. The
Board of Directors and management believe that the designations, preferences and
rights of the Series A Preferred Stock (see Proposal Two for description) have
had, and will continue to have, a material adverse effect on the financial
condition of the Company and the market price of the Company's common stock. The
Board of Directors and management believe that any such adverse effect is
caused, in part, by the following: (i) the market overhang and potential for
dilution created by Series A Preferred Stock, (ii) the fact that the formula for
determining the conversion price, from time to time, of the Series A Preferred
Stock (95% of the average of the two lowest closing bid prices on the AMEX for
the fifteen trading days immediately prior to conversion) permits the holders
thereof to convert it only when it is beneficial to them, (iii) the dividend and
liquidation rights attributable to the Series A Preferred Stock, (iv) the
holders' option to require that the Company redeem any outstanding, unconverted
shares of the Series A Preferred Stock on April 6, 2005, and the potential for a
required redemption upon the occurrence of certain other events as described in
Proposal Two at a time when the Company may not be able to afford the
redemption, and (v) the effects that the antidilution rights attributable to the
Series A Preferred Stock have had since its issuance on the Company's offering
of its equity securities.

Currently, the Company is not obligated to redeem the Series A Preferred Stock
nor does the Company have the right to require the holders of the Series A
Preferred Stock to submit for redemption their Series A Preferred Stock.
However, as discussed above in Proposal Two, the Company may be required to
redeem the Series A Preferred Stock upon the occurrence of certain events,
including the failure of the Company to secure the approval of Proposal Two.

Terms of Offering
- -----------------

In order to fund a potential redemption of the Series A Preferred Stock, the
Board of Directors is considering a private placement by the Company of common
stock or other securities convertible into common stock. If the Board of
Directors determines that securities convertible into common stock are to be
issued in the private placement, the terms of the securities to be issued,
including dividend or interest rates, conversion prices, voting rights,
redemption prices, maturity dates, and similar matters will be determined by the
Board of Directors. The Board of Directors has not determined the terms and
conditions of the offering although it is anticipated that the offering will be
for a number of shares sufficient to redeem in full the outstanding Series A
Preferred Stock with an offering price at a discount to the market price for the
common stock. It is also anticipated that the Company will grant registration
rights to the purchasers in the offering pursuant to which the Company will
agree to file a registration statement with the Securities and Exchange
Commission to register for resale any shares of common stock constituting or
underlying the securities purchased and list such shares with AMEX. The Company
does not intend to seek further authorization for the issuance of the securities
to be offered in the private placement by a vote of the shareholders prior to
any issuances, unless required by law.

On April 24, 2003, Excalibur Limited Partnership and BH Capital Investments,
L.P. granted to the Company an option, exercisable at the Company's discretion,
to purchase the Series A Preferred Stock owned by the preferred shareholders
immediately prior to the consummation of any such purchase. The exercise price
for each share of Series A Preferred Stock under the option is $50.588, provided
that, from and after June 15, 2003, the exercise price increase by an amount
equal to 2.5% per month until the purchase is consummated, plus all accrued but
unpaid dividends on such shares. As of August 22, 2003, there are 55,884 shares
of the Series A Preferred Stock outstanding, which represents approximately 77%
of the original issuance of 72,646 shares. Additionally as of August 22, 2003,
the Company would be required to pay for each share of the Series A Preferred
Stock $10.16 related to accrued dividends. Excalibur Limited Partnership and BH
Capital Investments, L.P. hold 25,945 and 29,939 shares of Series A Preferred
Stock, respectively, constituting approximately 46.4% and 53.6% of such
outstanding shares, respectively. As of August 22, 2003, the total exercise
price of the option for the 55,884 shares of outstanding Series A Preferred
Stock, plus accrued dividends thereon would be $3,555,296. The option expires on
the earlier of five days after the date of the Company's annual shareholders
meeting to which this proxy relates or September 30, 2003. Excalibur Limited
Partnership and BH Capital Investments, L.P. are not obligated to accept the
Company's redemption of the Series A Preferred Stock except pursuant to the
option.

In the event the Company desires to redeem the Series A Preferred Stock, but
under terms different than those set forth in the option, or fails to exercise
the option prior to its expiration on September 30, 2003, the Company will be
required to negotiate the terms of the redemption with the holders of the Series
A Preferred Stock. There can be no assurance that the holders will agree to any
such redemption or that the terms of such redemption will be acceptable to the
Board of Directors.

In accordance with the original Purchase Agreement, the redemption price would
be the greater of (a) 100% of the original purchase price, plus accrued
dividends, or (b) the market value of the shares of common stock into which the
Series A Preferred Stock would convert assuming conversion in full were
permitted. This redemption price calculated as of August 22, 2003 based on a
conversion price of $1.75 per common share and a market price of $2.684 (the
5-day average of the closing bid prices on AMEX) per common share, would be
$5,000,258.

The Company does not currently have sufficient available cash to consummate a
redemption. If the Company elects to pursue a redemption, it will require
additional financing to fund any redemption of the Series A Preferred Stock. Due
to restrictions on the Company's ability to incur additional debt imposed by the
lenders of the Company's credit facilities, management believes that it can
obtain such financing only by issuing common stock or securities convertible
into common stock.

Purpose for Proposal
- --------------------

The anticipated need to list the shares issued or to be issued in such a
financing requires the Company to secure the approval of its shareholders for
the issuance. Section 713 of the AMEX Guide provides that shareholder approval
is required for any transaction involving the sale, issuance, or potential
issuance by the company of common stock (or securities convertible into common
stock) equal to 20% or more of presently outstanding stock for less than the
greater of book or market value of the stock as a prerequisite to approval of
applications to list additional shares to be issued in connection such
transactions. Because the financing described in this proposal involves the
potential issuance by the Company of common stock that, together with certain
other issuances of common stock by the Company required to be counted for
purposes of this AMEX rule, amounts to greater than 20% of its presently
outstanding common stock at below market value, the proposal is subject to these
AMEX shareholder approval rules and, therefore, requires your approval.

Effects of this Proposal
- ------------------------

In order to pay for the redemption value of $5,000,258 as calculated above, the
number of shares required to be issued assuming a per share purchase price equal
to 95% of the average of the closing prices of the Company's common stock as
reported on AMEX occurring during the thirty (30) consecutive calendar days
prior to August 22, 2003 ($2.76) would be 1,811,688.

Dilutive Effect on Voting Power
----------------------------------------------------------------------
Shares of common stock currently outstanding 15,153,932
Shares of common stock into which the
Series A Preferred Stock is convertible into
as of August 22, 2003 1,811,688
----------
Pro-forma shares of common stock outstanding 16,965,620
==========

If the remaining shares of the Series A Preferred Stock were converted to common
shares in accordance with the terms stated above, there would be a 12% dilution
in the Company's common stock.

The following table demonstrates the dilutive effect on the Company's earnings
per share of the conversion of the outstanding shares of Series A Preferred
Stock:

Dilutive Effect on Earnings Per Share(1)
----------------------------------------------------------------------
Earnings per share prior to conversion $ 0.07
Earnings per share assuming conversion
of all outstanding shares of Series A Preferred Stock $ 0.06
--------
Dilution per share $ 0.01
========

(1) The earnings per share is based on the Company's reported Net Income
for the year ended March 31, 2003 of $1,034,128 divided by the shares
outstanding as reported above.

Vote Required for Approval
- --------------------------

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL
OF THE ISSUANCE BY THE COMPANY OF COMMON STOCK OR SECURITIES CONVERTIBLE INTO
COMMON STOCK IN AN OFFERING, THE PROCEEDS OF WHICH WILL BE USED TO FINANCE THE
COMPANY'S REDEMPTION OF ANY OUTSTANDING, UNCONVERTED SERIES A CONVERTIBLE
PREFERRED STOCK AND TO PAY ALL COSTS AND EXPENSES RELATED TO SUCH OFFERING AND
REDEMPTION.

PROPOSAL FOUR: TO APPROVE CERTAIN ISSUANCES AND POTENTIAL ISSUANCES OF COMMON
STOCK OR OTHER SECURITIES CONVERTIBLE INTO COMMON STOCK BY THE
COMPANY TO OFFICERS, DIRECTORS AND KEY EMPLOYEES.

Section 711 of the AMEX Guide provides that the approval of shareholders
(pursuant to a proxy solicitation conforming to SEC proxy rules) is required as
a prerequisite to approval of applications to list additional shares reserved
for options granted or to be granted to officers, directors or key employees if
such shares, in the aggregate, exceeds 5% in one year or 10% over five years,
regardless of whether or not such authorization is required by law or by the
Company's Certificate of Incorporation.

The Board of Directors is seeking shareholder approval to list 4,375,411
additional shares of common stock with AMEX to be issued upon the exercise of
options granted or to be granted to certain officers, directors and key
employees of the Company. The Board of Directors believes it to be in the best
interest of the Company to secure the prior approval of the stockholders in
order to allow the Board of Directors the flexibility to reward and retain
management and key employees in a timely manner as they are presented to the
Board of Directors. Subject to the rights and preferences of the Series A
Preferred Stock described above, the Board of Directors will determine the terms
of the securities to be issued. The Company does not intend to seek further
authorization for the issuance of the securities described herein by a vote of
the shareholders prior to any issuances, unless required by law.

Pursuant to arrangements approved by the Board of Directors, the terms and
conditions of the options previously granted to directors, officers and key
employees are as follows:

Number Expiration Avg. Exercise Dollar
Name and Position of Shares Date Price ($) Value ($)(1)
----------------- --------- ---- --------- ------------

Angelo S. Morini (3) Jul. 2007 -
Vice-Chairman & President 2,875,125 Dec. 2012 $3.63 $3,450,150

Charles L. Jarvie (2)
Chairman of the Board 200,000 Dec. 2012 $2.17 $366,000

Thomas R. Dyckman (2)
Chairman of the Audit Committee &
Director 200,000 Dec. 2012 $2.17 $366,000

Joseph J. Juliano (2)
Director 2,143 May 2009 $2.05 $3,407

David H. Lipka (2)
Chairman of the Compensation 200,000 Dec. 2012 $2.17 $366,000
Committee & Director

C. Anthony Wainwright (2)
Director 200,000 Apr. 2013 $2.17 $366,000

Christopher J. New (4) Jul. 2011 -
Chief Executive Officer & Director 125,000 Dec. 2012 $1.97 $225,000

Salvatore Furnari (5)
Chief Financial Officer 10,000 Nov. 2011 $2.05 $17,700

LeAnn Hitchcock (5)
SEC Compliance & Internal Audit &
Corporate Secretary 30,000 Oct. 2011 $2.05 $53,100

Christopher Morini (6)
Vice President of International Sales
& Specialty Accounts 75,000 Apr. 2011 $2.05 $129,750

John Jackson (6)
Vice President of Sales 75,000 Apr. 2011 $2.05 $129,750

Kulbir Sabharwal (6) Apr. 2011 -
Director of Technical Services 56,000 Sep. 2012 $2.05 $98,560

All current executive officers
as a group 3,246,125 $3.44

All current directors who are not
executive officers as a group 802,143 $2.17

All employees who are not
executive officers as a group 327,143 $2.07 $592,129

(1) The Company estimated the fair value of the stock options at August 22,
2003 using the "Black-Scholes" option-pricing model with the following
assumptions: (i) no dividend yield; (ii) 43.8% volatility, (iii) risk-free
interest rate of 3.99%, (iv) expected life up to ten years, and (v) closing
stock price on August 22, 2003 of $2.80.

(2) On May 27, 1999, Joseph J. Juliano was granted 2,143 options to purchase
shares of common stock at an exercise price of $3.44 upon his initial
appointment as director. Mr. Juliano's options were subsequently repriced
to $2.05. On December 17, 2002, Charles L. Jarvie, Thomas R. Dyckman,
Michael H. Jordan and David H. Lipka were each granted 200,000 options to
purchase shares of common stock at an exercise price of $2.17 for their
initial appointments as directors. Upon Mr. Jordan's resignation on April
1, 2003, he agreed to cancel his 200,000 options. 200,000 options were then
issued to his successor, C. Anthony Wainwright. Messrs. Jarvie, Dyckman,
Lipka, and Wainwright are director nominees.

(3) In the past five years, the Company has granted Mr. Morini, a director
nominee, an aggregate of 2,875,125 stock options. On June 15, 1999 the
Board of Directors granted Mr. Morini options to acquire 1,375,000 shares
of common stock in connection with his amended and restated employment
agreement dated June 15, 1999. On December 15, 2000, the Board of Directors
granted Mr. Morini options to acquire 343,125 shares of common stock in
consideration of Mr. Morini's pledge of 1,000,000 shares of common stock
and related guaranty to secure a $1.5 million bridge loan to the Company
from SouthTrust Bank. On April 19, 2001, the Company issued 375,000
incentive stock options to Mr. Morini, which vest over five years in
consideration for keeping key members of management in place while the
Company was under contract with an investment banking company to search for
potential buyers. On July 1, 2002, the Board of Directors granted Mr.
Morini options to acquire 289,940 shares of common stock in consideration
of Mr. Morini's pledge of 250,000 shares of common stock to secure a
$550,000 bridge loan to the Company from Excalibur Limited Partnership.
Effective as of December 4, 2002, the Board of Directors granted Mr. Morini
options to acquire 510,060 shares of common stock in accordance with the
terms of a special services agreement between the Company and Mr. Morini
for writing a comprehensive diet and recipe book about the Company and its
products and for the potential distribution of this book worldwide. Mr.
Morini is a director nominee.

(4) The Company granted options to acquire 100,000 shares of common stock to
Mr. New in consideration for his initial employment. The remaining 25,000
options were granted in consideration of for his continued employment with
the Company. Mr. New is also a director nominee.

(5) The options granted to these individuals were in consideration for their
initial employment as officers of the Company.

(6) The options granted to these individuals were in consideration for their
continued employment with the Company.

Tax Treatment
- -------------

The rules governing the tax treatment of stock options and shares acquired upon
the exercise of stock options are technical. Therefore, the description of the
federal income tax consequences set forth below is necessarily general in nature
and does not purport to be complete. Moreover, statutory provisions are subject
to change, as are their interpretations, and their application may vary in
individual circumstances. Finally, the tax consequences under applicable state
and local income tax laws may not be the same as under the federal income tax
laws.

Upon the exercise of the options, the holders will generally recognize taxable
ordinary income, at the time of exercise, in an amount equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise. Such amount will ordinarily be deductible by the Company in the
same year, provided that the amount constitutes reasonable compensation and that
the Company satisfies certain federal income tax withholding requirements.
Subsequent appreciation or decline in value of the shares on the sale or other
disposition of the shares will generally be treated as capital gain or loss. If,
upon the exercise of the option by its holder, the Company must pay amounts for
income tax withholding, then either the Company will appropriately reduce the
amount of stock to be delivered to the holder or require the holder to pay such
amount to the Company.

Equity Compensation Plans
- -------------------------

The following table describes the Company's compensation plans under which the
Company's common stock are authorized for issuance as of August 22, 2003:

EQUITY COMPENSATION PLAN INFORMATION TABLE

(a) (b) (c)
Plan Category Number of Securities Weighted-average Number of securities
to be issued upon exercise price of remaining available
exercise of outstanding options, for future issuance
outstanding options, warrants and rights under equity
warrants and rights compensation plans
(excluding securities
reflected in column
(a))

Equity compensation plans approved by
security holders 103,627 $ 2.66 123,576

Equity compensation plans not
approved by security holders (1) 4,546,840 $ 3.17 N/A

---------------------------------------
Total 4,650,467 $ 3.16
=======================================

(1) The securities issued pursuant to equity compensation plans not approved by
security holders include 4,546,840 options issued to employees or directors
under individual compensation arrangements.

Effects of this Proposal
- ------------------------

The issuance of additional shares of common stock or the rights to acquire such
shares would have the effect of diluting the Company's earnings per share and
would dilute the voting power of current shareholders who do not acquire
sufficient additional shares to maintain their percentage of share ownership.
Additional shares of common stock could also be used by the Company to oppose a
hostile takeover attempt; however, the Board of Directors presently knows of no
such attempt to obtain control of the Company.

Vote Required for Approval
- --------------------------

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL
OF CERTAIN ISSUANCES AND POTENTIAL ISSUANCES BY THE COMPANY OF COMMON STOCK OR
OTHER SECURITIES CONVERTIBLE INTO COMMON STOCK TO OFFICERS, DIRECTORS AND KEY
EMPLOYEES.

PROPOSAL FIVE: TO RATIFY THE RETENTION OF BDO SEIDMAN, LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL YEARS ENDING MARCH 31,
2003 AND MARCH 31, 2004.

The Board of Directors has selected the firm of BDO Seidman, LLP as the
Company's independent certified public accountants for the current fiscal year.
Because BDO Seidman, LLP does not have a local office, it has made arrangements
to use the firm of Gallogly, Fernandez & Riley, LLP to assist in its engagement
by the Company. Gallogly, Fernandez & Riley, LLP is a member of the BDO
Alliance, a nationwide association of independently owned and managed accounting
firms which license the right to use BDO Seidman, LLP's technical assurance
training and materials. Gallogly, Fernandez & Riley, LLP personnel are not
full-time, permanent employees of BDO Seidman, LLP. While the arrangements vary
between BDO Seidman, LLP and members of the BDO Alliance, the arrangement with
Gallogly, Fernandez & Riley, LLP with respect to the Company is equivalent to
that of an employee leasing arrangement. The members of Gallogly, Fernandez &
Riley, LLP worked under the direct guidance of BDO Seidman, LLP's partners. All
of the significant decisions related to the engagement were made by BDO Seidman,
LLP, and all audit committee communications involved BDO Seidman, LLP.

BDO Seidman, LLP has served as the Company's independent public accountants for
each of the last nine years. It is expected that a representative of BDO
Seidman, LLP will be present during the Annual Meeting, or will participate by
telephone conference. 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.

Audit Fees
- ----------
With respect to the fiscal years ended March 31, 2003 and 2002, the aggregate
fees (including expenses) charged the Company by BDO Seidman, LLP for auditing
the annual financial statements and reviewing interim financial statements were
$122,954 and $167,703, respectively. Audit fees consist of those fees incurred
in connection with statutory and regulatory filings or engagements; fees
necessary to perform an audit or review in accordance with GAAS; and services
that generally only an independent accountant reasonably can provide, such as
comfort letters, statutory audits, attest services, consents and assistance with
and review of documents filed with the Commission.

Approximately 75% and 85% of the total hours spent by the auditors in carrying
out the audit of the Company's financial statements for the year ended March 31,
2003 and 2002, respectively were spent by members of the BDO Alliance network of
firms. Such members are not full-time, permanent employees of BDO Seidman, LLP.

Audit-Related Fees
- ------------------
During the fiscal year ended March 31, 2003, BDO Seidman, LLP charged the
Company $32,577 for audit-related fees. These fees related to accounting
research and audit committee meeting attendance. BDO Seidman, LLP did not render
any other audit-related services during the fiscal year ended March 31, 2002.

Tax Fees
- --------
BDO Seidman, LLP did not render any tax services during the fiscal years ended
March 31, 2003 and 2002.

All Other Fees
- --------------
There were no fees for other services charged to the Company by BDO Seidman, LLP
during the fiscal years ended March 31, 2003 and 2002. The Audit Committee has
considered and determined that BDO Seidman, LLP's provision of non-audit
services to the Company during the fiscal years ended March 31, 2003 and 2002 is
compatible with maintaining their independence.

Audit Committee Pre-Approval Policies and Procedures.
- -----------------------------------------------------
All of the services described above under "Audit Fees" that require pre-approval
were approved by the Audit Committee pursuant to Rule 2-01(c)(7)(i)(C) of
Regulation S-X.

Vote Required for Approval
- --------------------------

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

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

The following table sets forth the current directors, executive officers and
significant employees of the Company as of August 22, 2003, as well as their
respective ages and positions with the Company:

NAME AGE POSITIONS
- ---------------------------------------------------------------------------------------------------

David H. Lipka (1) (2) 73 Director, Chairman of the Board of Directors,
Chairman of the Compensation Committee
Angelo S. Morini 60 Director, Vice-Chairman of the Board of Directors and
President
Thomas R. Dyckman (1) (2) 71 Director, Chairman of the Audit Committee
Charles L. Jarvie 66 Director
Joseph J. Juliano (2) 52 Director
C. Anthony Wainwright(1) (2) 69 Director
Christopher J. New 42 Director and Chief Executive Officer
Patrice M.A. Videlier(1) 60 Director
Salvatore Furnari 38 Chief Financial Officer
LeAnn Hitchcock 33 SEC Compliance & Internal Audit Manager & Corporate
Secretary
Christopher Morini 48 Vice President of International Sales and Specialty
Accounts
John Jackson 45 Vice President of Sales
John Ruggieri 57 Vice President of Manufacturing
Kulbir Sabharwal 60 Director of Technical Services

(1) Audit Committee Member
(2) Compensation Committee Member

The directors shall be elected to serve until the next annual meeting of
shareholders and until their successors shall have been elected 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.

Directors
- ---------

David H. Lipka spent forty years (1955-1995) with DCA Food Industries Inc., an
international manufacturer of food ingredients and equipment with combined sales
in excess of $1 billion per annum, holding positions of president, chief
executive officer, and chief operating officer. Since 2001, Mr. Lipka has served
on the board of directors of Doctor's Associates Inc. (Subway Stores) and has
served on numerous boards including Dunkin Donuts Inc. (1989-1994), Allied-Lyons
Inc. (1988-1994), and Kerry Group PLC (1995-1996). Mr. Lipka has also been
chairman and chief executive officer of Pennant Foods and Leons Baking Company.
He obtained a B.S. degree from Brooklyn College and attended the Graduate School
of Business at New York University. Mr. Lipka has agreed to serve as a director
of the Company at the request of Frederick A. DeLuca, a beneficial owner of more
than five percent (5%) of the Company's common stock. Both Messrs. Lipka and
DeLuca are members of the Board of Directors of Doctor's Associates Inc.

Angelo S. Morini has been President of the Company since its inception and is
the inventor of the Company's healthier dairy alternative formula. In December
2002, he was elected as the Vice-Chairman of the Board of Directors and
President. On December 17, 2002, Mr. Morini resigned from his positions as Chief
Executive Officer and Chairman of the Board. From 1987 to December 2002, he
served as Chairman of the Board of Directors, President, and Chief Executive
Officer. Between 1972 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. Mr.
Morini's brother, Christopher Morini, works for the Company as Vice President of
New Business Development and Key Accounts. Angelo S. Morini's wife, Julie
Morini, is employed by the Company in the marketing and public relations
departments and until recently served as the Company's Corporate Secretary.
Also, Mr. Morini's brother, Ronald Morini, works for the Company as an
engineering consultant and his brother-in-law, Robert Peterson, is employed by
the Company as a sales representative.

Thomas R. Dyckman is currently the Ann Whitney Olin Professor of Accounting at
the S.C. Johnson Graduate School of Management at Cornell University, Ithaca,
New York, and has been a professor at Cornell University since 1964. Mr. Dyckman
also served as Acting Vice President of the University for Information
Technology (1998-1999) at Cornell University. He has conducted management
executive programs for Goodyear, IBM, Gould Pump, New England Telephone, Ocean
Spray, Columbia University, G.T.E. and Sylvania. Mr. Dyckman served as a
consultant on research issues to the Financial Accounting Standards Board (FASB)
from 1977 to 1988. During the mid 1990's he was acting dean of the S.C. Johnson
Graduate School of Management at Cornell University. He is a member of the
American Accounting Association and the Accounting Researchers International
Association, and completed terms with the Financial Accounting Standards
Advisory Committee (1984-1987) and the Financial Accounting Foundation
(1989-1993). Mr. Dyckman has more than sixty published articles and is the
author of ten books. He received his B.A., M.B.A. and Ph.D. from the University
of Michigan.

Charles L. Jarvie, a partner with Beta Capital Group, LLC, has had an
illustrious business career. After twenty years with the Procter and Gamble
Company (1959-1979), he was president of Dr. Pepper Company (1980-1983), and
Fidelity Investments Marketing Corp. (1983-1984), and Chief Executive Officer of
Schenley Industries, Inc. (1984-1988). He has also served as a director of
Guinness America, Inc. (1988-1992), chief executive officer of New Era Beverage
Company (1990-1992), chairman of Universal Sports America (1995-2000), president
of Host Communications, Inc. (1992-2000), chairman of Streetball Partners, Inc.
(1990-2000) and chairman of J/P Management Associates, Inc. (1990-present). His
accomplishments include the acquisition of Canada Dry Corporation, and the sale
of Schenley Industries, Host Communications and New Era Beverage Company. Mr.
Jarvie has helped generate and implement and still enforces strategic plans for
many successful turnarounds. Mr. Jarvie has numerous civic and business
associations serving as a director or member of many prestigious organizations
and companies. He is a graduate of Cornell University where he received both his
B.S. and M.B.A.

Joseph J. Juliano was elected to the Board of Directors on June 16, 1999. From
1973 to 1988, Mr. Juliano served in various management positions for Pepsi-Cola
Company. In 1988, Mr. Juliano managed Pepsi Cola Company Bottling Operations
where he achieved record sales and profits during his three-year tenure in this
position. From 1991 to 1998, he served as Vice President of Prestige, Sports and
Gaming for Pepsi Cola North America. In 1998, he was

promoted to Vice President of Entertainment Sales, with expanded domestic and
international account responsibilities encompassing movie theaters, theme parks,
sports venues, golf management companies, theme restaurants, hotels, and
casinos. Mr. Juliano currently serves on the board of Nevada Gold & Casinos,
Inc, a developer of gaming properties. Mr. Juliano received his B.S. in
marketing and Masters in Business Administration from St. John's University in
New York City.

C. Anthony Wainwright currently serves as vice-chairman on the board of Arnold
Worldwide Partners (a division of Havas Advertising), a Boston advertising
agency, which represents such major clients as Procter & Gamble, Coors,
Volkswagen, Monster.com and Fidelity. Mr. Wainwright also currently serves on
the boards of three other public companies including American Woodmark
Corporation, Danka PLC and Marketing Services Group, Inc. In addition, Mr.
Wainwright serves on various other private and charitable boards. From 1997 to
2001, he served as the vice chairman of McKinney & Silver, a North Carolina
advertising agency and a unit of Havas Advertising/Arnold Worldwide. From 1995
to 1997, he served as the chairman of Harris Drury Cohen, a Ft. Lauderdale
advertising agency. From 1990 to 1995, he served as chairman of Compton
Partners, Saatchi & Saatchi, a $3.2 billion New York international advertising
agency and subsidiary of Cordiant, PLC. From 1980 to 1989, Mr. Wainwright was
the President and Chief Operating Officer of The Bloom Companies. From 1978 to
1980, he was the Executive Vice President and General Manager of The Marschalk
Company (now Lowe Partners) and from 1969 to 1978 he was the President and Chief
Executive Officer of Wainwright, Spaeth & Wright in Chicago. Mr. Wainwright
received his B.A. in journalism from the University of Colorado and his Masters
in Business Administration from the University of Chicago.

Christopher J. New was appointed the Company's Chief Marketing Officer and Vice
President of Strategy on September 4, 2001. On December 14, 2001, the Board
appointed Mr. New as Chief Operating Officer and on December 17, 2002 the Board
appointed him as Chief Executive Officer. From 1993 through 2001, Mr. New was
the Vice President of Commercial Strategies & Services for Tropicana Products of
Bradenton, Florida. At Tropicana, Mr. New's responsibilities included direction
and leadership of strategic planning, marketing, business development, sales
planning, e-commerce, customer service and category management. Prior to his
employment at Tropicana, Mr. New served as Senior Marketing Manager of Mott's
USA, a division of Cadbury Schweppes, for four years. Mr. New received his M.S.
in marketing and economics from Cornell University in 1986.

Patrice M.A. Videlier currently serves as Senior Vice President of Marketing -
World for Fromageries Bel S.A. a company organized under the laws of France. Mr.
Videlier has held numerous Sales and Marketing vice presidential positions over
divisions such as the Natural Cheese Division, the European Division, and the
International Worldwide Division; and he has served as a director for
Fromageries Bel S.A. since 1990. From 1969 to 1989, Mr. Videlier was a senior
marketing executive with Unilever Co. Mr. Videlier received his Masters in
Business Administration from Indiana University. Mr. Videlier has agreed to
serve as a director of the Company at the request of Fromageries Bel S.A., a
beneficial owner of more than five percent (5%) of the Company's common stock.

Executive Officers
- ------------------

Salvatore Furnari, CPA was appointed the Company's Chief Financial Officer on
July 8, 2002. From November 11, 2001 until July 8, 2002, Mr. Furnari served as
the Company's Controller. Prior to joining the Company, Mr. Furnari was
Corporate Controller and Treasurer of Pritchard Industries, Inc. From 1998
through 1999, he served as Chief Financial Officer and Vice President

of Finance for Garage Management Corporation; and from 1993 until 1998, he was
Chief Financial Officer of American Asset Corporation. Mr. Furnari received his
B.S. in accounting from Queens College in New York City in May 1987.

LeAnn Hitchcock, CPA was appointed as the Company's Corporate Secretary in
December 2002. Since July 8, 2002, she has served in her new role as the
Company's SEC Compliance and Internal Audit Manager. From October 29, 2001 until
July 8, 2002, Ms. Hitchcock served as the Company's Chief Financial Officer.
From July 1997, Ms. Hitchcock was the Chief Financial Officer for Developed
Technology Resource, Inc. (DTR) and its subsidiary, FoodMaster International
LLC. Ms. Hitchcock was also the Chief Financial Officer of Galaxy Foods Company
from December 1995 to June 1997. From 1994 to 1995, she was a senior auditor for
Coopers and Lybrand LLP in Orlando, FL. From 1992 to 1994, she worked for a
local public accounting firm of Pricher and Company in Orlando as a senior
auditor and tax accountant. Prior to 1992, Ms. Hitchcock worked for Arthur
Andersen LLP as a staff auditor. Ms. Hitchcock obtained a B.S. in business
administration and a B.S. in accounting from Palm Beach Atlantic College in West
Palm Beach, Florida in May 1990, and a Masters in accounting information systems
from Florida State University, Tallahassee, Florida in August 1991.

Christopher Morini has been the Vice President of New Business Development and
Key Accounts since September 2001, having formerly served as Vice President of
Marketing and International Sales for the Company since 1993. From 1986 through
1993, Mr. Morini was a Vice President of the Company, where he has been
responsible for various sales and marketing divisions of the Company, including
the Food Service, International Sales and Retail Sales divisions. Mr. Morini
started with the Company as an area salesman in 1983 and became sales manager in
1984. Mr. Morini received a B.S. in economics from Slippery Rock University in
1978. Christopher Morini's brother, Angelo S. Morini, is the Vice-Chairman of
the Board of Directors and President of the Company.

John Jackson has been Vice President of Sales for the Company since 1993. From
1985 through 1992, Mr. Jackson was director of sales for H.J. Heinz Company. Mr.
Jackson received his B.S. in business administration and accounting from Mars
Hill College in 1980.

John Ruggieri was Vice President of Manufacturing from December 2002 to August
2003. Since 1990, Mr. Ruggieri has been the sole proprietor of Ruggieri
Financial Services, a company that underwrites a variety of small loans and
mortgages. From 1971 through 1990, Mr. Ruggieri served in numerous positions,
including President and Chief Executive Officer, of Comar, Inc., which primarily
produced glass and plastic containers for the pharmaceutical industry. Mr.
Ruggieri received his B.A. from Rutgers University in Camden, New Jersey in 1968
and his Masters in Business Administration from The University of Pennsylvania
in Philadelphia, Pennsylvania in 1985.

Significant Employees
- ---------------------

Kulbir Sabharwal has been Director of Technical Services for the Company since
1991. Dr. Sabharwal worked as the Director of Research and Quality Control for
Gilardies Frozen Foods from 1987 to 1990 and for Fisher Cheese Company from 1972
to 1986. Dr. Sabharwal received his Ph.D. from the Ohio State University in
1972.

Certain Relationships and Related Transactions
- ----------------------------------------------

Employment Agreements

Please see below "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS AND DIRECTORS
- - Employment Agreements."

Options Grants to Management

Please see below "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS AND DIRECTORS
- - Option Grants in Last Fiscal Year Table."

Please see below "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS AND DIRECTORS
- - Report on Repricing of Options" for a discussion regarding the repricing of
certain options granted to the Company's executive officers.

On December 4, 2002, Mr. Morini cancelled options to acquire 1,163,898 shares of
the Company's common stock at an exercise price of $5.72 (110% of market) per
share which he had been granted on May 24, 2002, in consideration of his
personal loan to the Company and his continued guaranty and pledge of one
million of his shares of the Company's common stock for the loan with SouthTrust
Bank.

On December 4, 2002, Mr. Morini cancelled options to acquire 900,000 shares of
the Company's common stock at an exercise price of $2.05 (100% of market). These
options were granted to him on October 24, 2002 in connection with a special
services agreement between the Company and Angelo S. Morini, authorizing him to
author and promote "Veggiesizing, the stealth/health diet" book, which promotes
the Company's products. On December 4, 2002, the Company then issued him new
options to acquire 510,060 shares of common stock - 200,000 options were granted
at an exercise price of $4.08 per share and 310,060 were granted at an exercise
price of $2.05 per share. These options expire on December 4, 2012.

Other Transactions
- ------------------

Angelo S. Morini, Vice-Chairman and President

On June 15, 1999, in conjunction with the entry into a new employment agreement,
the Company agreed to a consolidation of Mr. Morini's two existing promissory
notes in favor of the Company into a single note payable in the amount of
$12,772,200 due and payable on June 15, 2006. This note is non-interest bearing,
non-recourse to Mr. Morini, and is secured by 2,914,286 shares of the Company's
common stock beneficially owned by Mr. Morini. In the event of certain
circumstances, the loan may be forgiven in full. The Company has a security
interest in the pledged shares. The current outstanding balance of the
obligation is $12,772,200.

Prior to June 2002, the Company advanced amounts to or paid amounts on behalf of
Mr. Morini, which were to be charged against future bonuses under his employment
agreement. As of August 22, 2003, Mr. Morini owes the Company approximately
$140,000 related to these non-interest bearing advances.

In November 2000, Angelo S. Morini secured a $1.5 million bridge loan to the
Company from SouthTrust Bank with a personal guaranty and a pledge of 1,000,000
of the above-mentioned shares of common stock as collateral. In consideration of
the pledge of his shares, the Company granted Mr. Morini stock options to
acquire 343,125 shares of common stock at an exercise price of $3.88 per share.
These options expire on December 15, 2010.

In August 2001, the Board of Directors agreed to extend the exercise period of
options to acquire 13,072 shares of common stock held by Angelo S. Morini by
five years, from October 1, 2001 to October 1, 2006.

Pursuant to a Securities Purchase Agreement dated as of January 17, 2002, Angelo
S. Morini, the Company's President and then Chief Executive Officer, purchased
1,000 shares of common stock and warrants to purchase 250 shares of common
stock, at an aggregate sales price of $4,744. The warrants held by Mr. Morini
are exercisable at a price per share equal to $5.744. All of the warrants are
exercisable until January 17, 2007. The shares of common stock purchased and
those underlying the warrants were included in Registration Statement No.
333-83248, filed with the Securities and Exchange Commission on February 22,
2002.

In March 2002, Angelo S. Morini, the Company's President, loaned $330,000 to the
Company in order for it to pay down certain notes payable that were coming due.
This loan bears interest at prime (4.0% at August 22, 2003) and is due on or
before June 15, 2006. On May 24, 2002, in consideration of this personal loan to
the Company and his continued guaranty and pledge of one million of his shares
of the Company's common stock for the loan with SouthTrust Bank, the Company
granted Mr. Morini stock options to acquire 1,163,898 shares of common stock at
an exercise price of $5.72 (110% of market) per share. On December 4, 2002, Mr.
Morini cancelled these options with the Company as a result of discussions and
negotiations with certain major shareholders for the purpose of improving
shareholder value and lessening potential financial statement expense.

On July 1, 2002, in consideration of his pledge of 250,000 shares of the
Company's common stock to secure a $550,000 promissory note by the Company in
favor of Excalibur Limited Partnership, the Company granted Mr. Morini stock
options to acquire 289,940 shares of common stock at an exercise price of $5.17
(110% of market) per share. These options expire on July 1, 2007.

On October 24, 2002, the Company entered into a special services agreement with
Angelo S. Morini, authorizing him to author and promote "Veggiesizing, the
stealth/health diet" book, which promotes the Company's products. In
consideration of these services and for his continued personal pledges, the
Company granted him 900,000 shares at the market price of $2.05 per share on
October 24, 2002. On December 4, 2002, as a result of discussions and
negotiations with certain major shareholders, Mr. Morini cancelled these options
with the Company and accepted new options to acquire 510,060 shares of common
stock - 200,000 options were granted at an exercise price of $4.08 per share and
310,060 were granted at an exercise price of $2.05 per share. These options
expire on December 4, 2012.

Mr. Morini's brother, Christopher Morini, works for the Company as Vice
President of New Business Development and Key Accounts. Angelo S. Morini's wife,
Julie Morini, is employed by the Company in the marketing and public relations
departments and until recently served as the Company's Corporate Secretary. Mr.
Morini's brother, Ronald Morini, works for the Company as an engineering
consultant and was paid $68,400 and $75,578 in consulting fees and benefits
during the fiscal years ended March 31, 2002 and March 31, 2003, respectively.
Mr. Morini's brother-in-law, Robert Peterson, is employed by the Company as a
sales representative.

Mr. Peterson's total compensation for the fiscal years ended March 31, 2002 and
March 31, 2003 were $100,550 and $118,980, respectively (which includes salary,
bonuses, 401k employer contributions, car allowance and health benefits).

John Ruggieri, Former Vice President of Manufacturing

In January 2003, Ruggieri of Windermere Family Limited Partnership, an affiliate
of Mr. John Ruggieri's, entered into a credit arrangement with the Company
pursuant to which the partnership would purchase for the Company raw materials
approximating $500,000. The amounts paid for the purchased materials, plus
interest at the rate of 15% per annum on such amounts, was due and paid in full
by May 31, 2003.

Pursuant to a Securities Purchase Agreement dated as of May 21, 2003, Ruggieri
of Windermere Family Limited Partnership and Ruggieri Financial Pension Plan,
each an affiliate of Mr. Ruggieri, purchased 83,333 and 55,556 shares of common
stock, respectively, at an aggregate sales price of $150,000 and $100,000,
respectively. Pursuant to a Registration Rights Agreement dated as of May 21,
2003, the Company has agreed to register the shares of common stock purchased
with the Securities and Exchange Commission no later than November 24, 2003.

Patrice M.A. Videlier, Director

Effective May 22, 2003, the Company entered into a Master Distribution and
Licensing Agreement with Fromageries Bel S.A., a leading branded cheese company
in Europe, of which Mr. Videlier is the Senior Vice President of Marketing -
World. Under the agreement, the Company has granted Fromageries Bel S.A.
exclusive distribution rights for the Company's products in a territory
comprised of the European Union States and to more than 21 other European
countries and territories, as well as the exclusive option during the term of
the agreement to elect to manufacture the products designated by Fromageries Bel
S.A. for distribution in the territory. Fromageries Bel S.A. also purchased
1,111,112 the Company's common stock at a purchase price of $1.80 per share for
a total investment of $2,000,000 pursuant to a Securities Purchase Agreement
dated as of May 21, 2003 between the Company and Fromageries Bel S.A.

Joseph J. Juliano, Director

During each of the fiscal years ended March 31, 2003, 2002 and 2001, Joseph J.
Juliano, a director of the Company, received cash or benefits totaling $77,520,
$79,600 and $27,000, respectively, in return for developing and maintaining
business relationships with prospective and existing customers and suppliers on
behalf of the Company. From April 2002 to May 31, 2003, the Company leased an
apartment in New York from 400 East 84th Street Associates, LP at $6,460 per
month and allowed Mr. Juliano use of this apartment in lieu of direct cash
payments for Mr. Juliano's services.

BH Capital Investments, L.P., and Excalibur Limited Partnership, Series A
Preferred Stockholders

Pursuant to a Series A Preferred Stock and Warrants Purchase Agreement, the
Company agreed not to sell or enter into any agreement to sell any of its
securities or incur any indebtedness outside the ordinary course of business for
the time period beginning on April 6, 2001 and continuing until 90 days after
the date the shares issuable to BH Capital Investments, L.P. and Excalibur
Limited Partnership, upon the conversion of the Series A preferred stock and
exercise of warrant held by such stockholders have been registered pursuant to
an effective registration statement filed with the Securities and Exchange
Commission. In order to induce such

stockholders to waive this right to allow the completion of a private placement,
the Company agreed to issue 30,000 shares of common stock to each of them. Such
shares were issued on September 25, 2001 and were included in the Registration
Statement No. 333-70884, filed with the Securities and Exchange Commission on
October 3, 2001.

Pursuant to a letter agreement dated October 5, 2001, the Company agreed to
issue warrants to acquire 60,000 shares of common stock at an exercise price of
$5.86 per share to each of BH Capital Investments, L.P. and Excalibur Limited
Partnership. In exchange for the warrants, BH Capital Investments, L.P. and
Excalibur Limited Partnership agreed to provide the Company certain consulting
services, including the introduction of potential customers in Canada.
Subsequently, the Company agreed to reduce the per share exercise price of the
warrants to $2.67 in order to induce BH Capital Investments, L.P. and Excalibur
Limited Partnership to exercise their warrants and to gain their required
approval for a private placement. On January 17, 2002, BH Capital Investments,
L.P. and Excalibur Limited Partnership each exercised all of such warrants. The
shares of common stock issued upon the exercise of the warrants were included in
Registration Statement No. 333-83248, filed with the Securities and Exchange
Commission on February 22, 2002.

On June 26, 2002, the Company signed a $550,000 promissory note with Excalibur
Limited Partnership, one of the holders of the Company's Series A convertible
preferred stock. In consideration of the note, the Company issued Excalibur
Limited Partnership a warrant to purchase 30,000 shares of common stock, which
are exercisable until June 26, 2007 at a price equal to $5.50 per share. This
note was non-interest bearing assuming that it was repaid on or before July 26,
2002. This note was secured by 250,000 shares of the Company's common stock
owned by Angelo S. Morini, the Company's then Chief Executive Officer and
current President. On June 26, 2002, the Company received $500,000 in cash. The
additional $50,000 is payment due for consulting fees provided by Excalibur
Limited Partnership in accordance with a consulting agreement entered into on
June 26, 2002, which expires December 31, 2002.

In connection with the sale of 367,647 shares of common stock and warrants to
purchase 122,549 shares of common stock at an exercise price of $5.52 per share
to Stonestreet Limited Partnership, the Company issued 4,687 shares of common
stock to H&H Securities Limited, an affiliate of Excalibur Limited Partnership
in exchange for its services as a finder. These shares of common stock were
included in Registration Statement No. 333-100190, filed with the Securities and
Exchange Commission on October 16, 2002.

On November 7, 2002, BH Capital Investments, L.P. and Excalibur Limited
Partnership, as holders of a majority of the shares of the Series A convertible
preferred stock, exercised their right under the Purchase Agreement to require
the Company to solicit the approval of its shareholders for the Company's
issuance of all of the shares of common stock potentially issuable upon
conversion of the Series A convertible preferred stock in full and the exercise
of their warrants. This right arose when the number of shares of common stock
they are entitled to receive, assuming conversion of the all of the Series A
convertible preferred stock and the exercise of their warrants, exceeded 15% of
the Company's then-outstanding shares of common stock. The Company was required
to hold a shareholders meeting to solicit such approval on or before February 5,
2003. Pursuant to a letter agreement inJanuary 2003, the holders of the Series A
convertible preferred stock agreed to extend the deadline to hold a meeting to
March 31, 2003. Subsequently, pursuant to the Stock Purchase Option Agreement
described below, the holders of the Series A convertible preferred stock agreed,
among other things, to extend the deadline to September 30, 2003.

On April 24, 2003, the Company and the holders of the Series A convertible
preferred stock entered into that certain Stock Purchase Option Agreement,
whereby the Company was granted the option to purchase all of the shares of the
Series A convertible preferred stock owned by such holders at the time the
purchase is consummated. The option may be exercised by the Company or its
assigns at any time until the earlier of five days after the date of the
Company's next annual shareholders meeting or September 30, 2003. Pursuant to
such agreement, the holders of the Series A convertible preferred stock also
agreed to extend the deadline to hold a shareholders meeting to September 30,
2003. In exchange for the option and the extension of the annual meeting date,
the Company issued to each of BH Capital Investments, L.P. and Excalibur Limited
Partnership warrants to purchase 250,000 shares of the Company's common stock.
These warrants are exercisable until July 15, 2006 at an exercise price equal to
$2.00 per share, which price was greater than the market value of our common
stock on April 24, 2003. The Company agreed to register the shares underlying
the warrants by no later than December 31, 2003.

Frederick DeLuca, 5% Common Stockholder

Pursuant to a Common Stock Purchase Warrant, dated as of October 8, 1998,
Frederick A. DeLuca was granted warrants to purchase 357,143 shares of common
stock at an exercise price of $2.63 per share. On November 8, 2001, Mr. DeLuca
exercised the warrant for 214,286 shares of common stock. On December 21, 2001,
in order to allow Mr. DeLuca to exercise the remaining 142,857 shares, the
Company accelerated the vesting of those remaining shares. On December 28, 2001,
Mr. DeLuca exercised the warrant for the remaining 142,857 shares of common
stock. Pursuant to a Consulting Agreement, the Company agreed to accept $189,286
of strategic planning and marketing consulting services to be provided to the
Company and $750,000 cash for the $2.63 exercise price for the shares underlying
the warrants. The shares were included in Registration Statement No. 333-83248,
filed with the Securities and Exchange Commission on February 22, 2002.

On April 10, 2003, Mr. DeLuca entered into a credit arrangement with the Company
pursuant to which Mr. DeLuca would purchase for the Company raw materials in an
aggregate amount not to exceed $500,000. The amounts paid for the purchased
materials, plus interest at the rate of 15% per annum on such amounts, were paid
in full and the credit arrangement terminated as of June 27, 2003. In
consideration of the credit arrangement, the Company issued to Mr. DeLuca a
warrant to purchase 100,000 shares of the Company's common stock at an exercise
price of $1.70.

Pursuant to a Securities Purchase Agreement dated as of May 21, 2003, Mr. DeLuca
purchased 555,556 shares of common stock, respectively, at an aggregate sales
price of $1,000,000. Pursuant to a Registration Rights Agreement dated as of May
21, 2003, the Company has agreed to register the shares of common stock
purchased with the Securities and Exchange Commission no later than November 24,
2003.

David H. Lipka, Director and Chairman of the Board

Pursuant to a Securities Purchase Agreement dated as of May 21, 2003, David H.
Lipka purchased 55,556 shares of common stock, respectively, at an aggregate
sales price of $100,000. Pursuant to a Registration Rights Agreement dated as of
May 21, 2003, the Company has agreed to register the shares of common stock
purchased with the Securities and Exchange Commission no later than November 24,
2003.

Section 16(A) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's executive officers and directors, and persons who own more than 10% of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the American Stock Exchange. Officers, directors and stockholders owning
more than 10% of the Company's common stock are required by SEC regulations to
provide the Company with copies of all the reports they file pursuant to Section
16(a).

Based solely upon the Company's review of those reports required by Section
16(a) and filed by or on behalf of the Company's officers, directors and
stockholders owning greater than 10% of the Company's common stock, or written
representations that no such reports were required which were submitted by such
persons, the Company believes that during the fiscal year ended March 31, 2003,
all of the officers and directors and stockholders owning greater than 10% of
the Company's common stock complied with all applicable Section 16(a) filing
requirements.

Security Ownership of Management
- --------------------------------

The following table describes the beneficial ownership of the Company's common
stock by (i) each Named Executive Officer, (ii) each director, and (iii) all of
the Company's directors and executive officers as a group, outstanding as of
August 22, 2003. The tables show beneficial ownership in accordance with the
rules of the Securities and Exchange Commission to include securities that a
named person or entity has the right to acquire within 60 days:

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

David H. Lipka 255,556 (5) 1.7%

Angelo S. Morini 6,257,719 (3) 34.8%

Thomas R. Dyckman 200,000 (5) 1.3%

Charles L. Jarvie 200,000 (5) 1.3%

Joseph J. Juliano 43,215 (4) *

C. Anthony Wainwright 203,470 (5) 1.3%

Christopher J. New 98,254 (6) *

Salvatore Furnari 12,666 (7) *

LeAnn Hitchcock 25,893 (8) *

Christopher Morini 72,143 (9) *

John Jackson 75,131 (10) *

All executive officers and directors as a group 7,826,636 40.6%
=========== =====

* 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 as of August 22, 2003 is
15,153,932. The percentages are calculated on the basis of the amount of
shares outstanding plus shares which may be acquired through the exercise
of options, warrants, rights or conversion privileges by such holder
within sixty (60) days of August 22, 2003.

(3) Includes options to acquire 2,813,197 shares of the Company's common stock
which are currently exercisable at prices ranging from $2.05 to $5.25 per
share. Options expire as to 13,072 shares on October 1, 2006, as to 432,797
on July 1, 2007, as to 7,143 shares on December 4, 2007, as to 1,357,000
shares on June 15, 2009, as to 343,125 on December 15, 2010, as to 150,000
on April 19, 2011, and as to 510,060 on December 4, 2012. Also includes a
warrant to purchase 250 shares at an exercise price of $5.744 per share,
which expires on January 17, 2007. With the exception of the options,
10,500 shares held in a nominee name, 286 shares held in joint tenancy and
714 shares held individually, all of Mr. Morini's shares and warrant are
held by Morini Investments Limited Partnership, a Delaware limited
liability partnership, of which Angelo Morini is the sole Limited Partner
and Morini Investments LLC is the sole General Partner. Mr. Morini is the
sole member of Morini Investments LLC.

(4) Mr. Juliano, a current member of the Company's Board of Directors, is the
beneficial owner of 33,571 shares of common stock issuable upon the
exercise of warrants held by JCII Corporation, of which Catherine Juliano,
Mr. Juliano's wife, is the sole shareholder. The exercise price of the
warrants is $2.05 per share and they expire on January 31, 2006. These
warrants had an original exercise price of $4.81 per share, but were
repriced to $2.05 on October 11, 2002. These warrants were granted as
compensation for JCII Corporation's introductions of key accounts to the
Company. Mr. Juliano also beneficially owns 6,571 shares of common stock,
held of record by JCII Corporation. Additionally, Mr. Juliano was granted
options to acquire 3,073 shares of the Company's common stock. All of these
options were issued at the closing bid price as quoted on the American
Stock Exchange on the date of the grant. All of the options are currently
exercisable at $2.05 to $6.00 per share. Options expire as to 2,143 shares
on May 27, 2009, 72 shares on October 1, 2009, 286 shares on each October
1, for the years 2010, 2011 and 2012. All of JCII Corporation's and Mr.
Juliano's options and warrants currently are exercisable.

(5) Includes currently exercisable options to acquire 200,000 shares of the
Company's common stock at $2.17 per share, which expire on December 17,
2012 for all except Mr. Wainwright's options, which expire on April 1,
2013.

(6) Includes currently exercisable options to acquire 66,666 shares of the
Company's common stock at $2.05 per share, which expire on July 16, 2011.
These options had an original exercise price of $4.98 per share, but were
repriced to $2.05 on October 11, 2002. Also, includes currently exercisable
options to acquire 25,000 shares of the Company's common stock at $1.67 per
share, which expire on December 5, 2012. Includes a warrant to purchase
1,318 shares of the Company's common stock at an exercise price of $5.744
per share, which expires on January 17, 2007.

(7) Includes currently exercisable options to acquire 5,000 and 6,666 shares of
the Company's common stock at $2.05 per share, which expire on November 12,
2011 and July 8, 2012, respectively. These options had an original exercise
price of $5.60 and $4.55 per share, respectively, but were repriced to
$2.05 on October 11, 2002.

(8) Includes currently exercisable options to acquire 20,000 shares of the
Company's common stock at $2.05 per share, which expire on October 29,
2011. These options had an original exercise price of $5.90 per share, but
were repriced to $2.05 on October 11, 2002. Also includes a warrant to
purchase 250 shares at an exercise price of $5.744 per share, which expires
on January 17, 2007.

(9) Includes currently exercisable options to acquire 72,143 shares of the
Company's common stock at $2.05 per share. These options had an original
exercise prices ranging from $2.84 to $8.47 per share, but were repriced to
$2.05 on October 11, 2002. Options expire as to 714 on August 31, 2003, as
to 7,143 shares on May 16, 2006, as to 14,286 shares on September 24, 2008,
and as to 50,000 shares on April 19, 2011.

(10) Includes currently exercisable options to acquire 71,429 shares of the
Company's common stock at $2.05 per share. These options had an original
exercise prices ranging from $2.84 to $8.47 per share, but were repriced to
$2.05 on October 11, 2002. Options expire as to 7,143 shares on May 16,
2006, as to 14,286 shares on September 24, 2008, and as to 50,000 shares on
April 19, 2011.

The Board of Directors and its Committees.
- ------------------------------------------

Board Meetings. The Board of Directors met three times during the fiscal year
ended March 31, 2003. Messrs. Dyckman and Jordan each missed one meeting.
Otherwise, all of the directors were present at each meeting.

Audit Committee. During the fiscal year ended March 31, 2002 and the majority of
the fiscal year ended March 31, 2003, the Audit Committee consisted of Douglas
Walsh, Marshall Luther and Joseph Juliano. During this time, Messrs. Walsh, and
Luther were independent pursuant to Section 121 A. of the AMEX's listing
standards. The Company determined that Mr. Juliano was not considered
independent under Section 121 A. of the AMEX's listing standards because he had
accepted compensation from the Company in excess of $60,000 during the fiscal
years ended March 31, 2003 and March 31, 2002, other than for compensation for
board service, benefits under a tax-qualified retirement plan, or
non-discretionary compensation. During the fiscal years ended March 31, 2003 and
March 31, 2002, Mr. Juliano received cash and benefits totaling $77,520 and
$79,600, respectively, in return for developing and maintaining business
relationships with prospective and existing customers and suppliers on behalf of
the Company. Notwithstanding that Mr. Juliano did not meet the requirements for
independent directors under the AMEX's listing standards, the Board of Directors
determined that the best interests of the Company and its stockholders required
that Mr. Juliano be retained as a member of the Audit Committee for the fiscal
year ended March 31, 2002 and through December 17, 2002. The Board's
determination was based on Mr. Juliano's exceptional business experience and
financial expertise. Section 121 B.(b)(ii) of the AMEX's listing standards
permits a director who does not otherwise meet the independence requirements for
directors to be a member of a company's audit committee under exceptional and
limited circumstances, and the Board of Directors had determined that such
circumstances were present in the case of Mr. Juliano. Mr. Juliano no longer
serves as a member of the Audit Committee.

On December 17, 2002, Messrs. Walsh, Luther and Juliano resigned from the Audit
Committee, and the Board of Directors appointed Thomas R. Dyckman, Michael H.
Jordan and David H. Lipka to the Audit Committee. Mr. Dyckman was appointed
Chairman of the Audit Committee. The vacancy on the Audit Committee created on
April 1, 2003 by Mr. Jordan's resignation from the Board of Directors was filled
by Mr. Wainwright. On August 22, 2003, the Board of Directors appointed M.A.
Patrice Videlier to the Audit Committee. The Audit Committee currently consists
of four directors, Mr. Dyckman, Mr. Lipka, Mr. Videlier and Mr. Wainwright, all
of which are non-employee directors. Additionally, each member of the current
Audit Committee is independent pursuant to Section 121 A. of the AMEX's listing
standards.

AUDIT COMMITTEE REPORT FOR FISCAL YEAR ENDED MARCH 31, 2003

The Board of Directors established the Audit Committee during the fiscal year
ended March 31, 2001. The Audit Committee operates under a written charter,
which sets forth its responsibilities and duties, as well as requirements for
the Committee's composition and meetings. The Audit Committee held five meetings
during the fiscal year ended March 31, 2003, and other than one missed meeting
by Mr. Jordan, all of the committee members were present. At each of the
meetings, the Committee reviewed and discussed various business risks of the
Company, financial management, accounting, and internal control issues with the
Chief Financial Officer, the Internal Auditor, and BDO Seidman, LLP.

In each of its quarterly and annual meetings with representatives from BDO
Seidman, LLP, the Company's independent auditors, the Committee had them address
the following issues:

o Are the significant judgments and accounting estimates made by
management in preparing the financial statements appropriate?

o Based on the auditor's experience, and their knowledge of the Company,
do the Company's financial statements fairly present to investors, the
Company's financial position and performance for the reporting period
in accordance with generally accepted accounting principles and SEC
disclosure requirements?

o Based on the auditor's experience, and their knowledge of the Company,
has the Company implemented sufficient internal controls that are
appropriate?

o During the reporting period, have there been any disagreements with
management or have the auditors received any communication indicating
any improprieties with respect to the Company's management, accounting
and reporting procedures or reports?

The Audit Committee has discussed with its independent auditors that they are
retained by the Committee and that the auditors must raise any concerns about
the Company's management or financial reporting and procedures directly with the
Committee.

The Committee has received from BDO Seidman, LLP the written disclosures and the
letter required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, and the Committee has discussed with BDO
Seidman, LLP that firm's independence. The Committee has concluded that BDO
Seidman, LLP is independent from the Company and its management.

Based on the discussions with the Company's management and its independent
auditors, the Committee recommended that the Company's audited financial
statements for the Company be included in the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 2003 to be filed with the Securities
Exchange Commission.

The Audit Committee has reviewed and discussed the fees paid to BDO Seidman, LLP
during fiscal 2003 for audit, audit-related, tax and other services, which are
discussed under Proposal No. 5, and has determined that the provision of
non-audit services is compatible with BDO Seidman, LLP's independence.

Respectively submitted by the current members of the Audit Committee:
Thomas R. Dyckman, Chair
David H. Lipka
C. Anthony Wainwright

Other Committees. In March 2003, the Board of Directors formally established a
Compensation Committee to consider the compensation of management. Messrs.
Dyckman, Juliano, Lipka and Jordan were appointed to the Compensation Committee,
which is chaired by Mr. Lipka. The vacancy on the Compensation Committee created
on April 1, 2003 by Mr. Jordan's resignation from the Board of Directors was
filled by Mr. Wainwright. Other than the Audit Committee and the Compensation
Committee, the Board of Directors did not have any other committee for the
fiscal year ended March 31, 2003.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

Summary Compensation Table
- --------------------------
The following table sets forth the compensation of the Company's Chief Executive
Officer, its four other most highly compensated executive officers (the "Named
Executive Officer"), as well as two additional individuals who were among the
four most highly compensated executive officers prior to March 31, 2003, during
the fiscal years ended March 31, 2003, 2002 and 2001:

SUMMARY COMPENSATION TABLE

Long-Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)

Other
Annual Restricted Securities All
Compen- Stock Underlying LTIP Other
Names and Fiscal Salary Bonus sation Award(s) Options/SARs Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($) (33)
- --------------------------------------------------------------------------------------------------------------------------

Angelo S. Morini 2003 300,000 53,706 (1) 33,705 (2) - 800,000 (5) - 4,200
President & 2002 300,000 - 31,407 (3) - 375,000 (6) - 3,450
Vice-Chairman 2001 300,000 - 28,656 (4) - 343,125 (7) - 2,700
of the Board (1)

Christopher J. New 2003 165,673 - 16,564 (9) - 125,000 (11) - 2,855
Chief Executive Officer 2002 89,693 - 7,583 (10) - 100,000 (12) - -
(8)

Salvatore Furnari 2003 116,923 - (32) - 30,000 (14) - 4,680
Chief Financial Officer 2002 28,077 - (32) - 10,000 (15) - 700
(13)

Keith Ewing 2001 125,000 - 9,716 (17) - - - 3,000
Chief Financial Officer
(16)

LeAnn Hitchcock 2003 78,347 - (32) - 30,000 (19) - 3,800
SEC Compliance, Internal 2002 62,487 - (32) - 30,000 (19) - 2,100
Audit Manager &
Corporate Secretary(18)

Christopher Morini 2003 155,000 - 17,775 (21) - 97,143 (24) - 4,680
Vice President of Int'l 2002 155,000 23,000 18,865 (22) - 75,000 (25) - 3,450
Sales (20) 2001 153,000 - 29,372 (23) - - - 3,000

John Jackson 2003 138,000 - 12,241 (27) - 96,429 (30) - 2,600
Vice President of Sales 2002 138,000 38,300 10,296 (28) - 75,000 (31) - 1,200
(26) 2001 128,000 - 10,390 (29) - - - 2,700

(1) On December 17, 2002, Angelo S. Morini resigned from his positions as Chief
Executive Officer and Chairman of the Board. Mr. Morini retained his
position as President and accepted an appointment as Vice-Chairman of the
Board in order to focus his attention on expanding the Company's brand
awareness and marketing relationships. Mr. Morini is paid compensation and
bonuses in accordance with his employment agreement dated June 15, 1999.
Mr. Morini received a bonus of $53,706 based on the results for the fiscal
year ended March 31, 2003.

(2) For the fiscal year ended March 31, 2003, the Company paid $21,081 in auto
lease payments, $1,670 for automobile insurance, $10,598 for club dues and
$356 for the employer's portion of 401k contributions for Mr. Morini.

(3) For the fiscal year ended March 31, 2002, the Company paid $20,833 in auto
lease payments, $1,670 for automobile insurance, and $8,904 in club dues
for Mr. Morini.

(4) For the fiscal year ended March 31, 2001, the Company paid $18,552 in auto
lease payments, $1,200 for automobile insurance, and $8,904 in club dues
for Mr. Morini.

(5) On July 1, 2002, the Board of Directors granted Mr. Morini options to
acquire 289,940 shares of common stock at an exercise price of $5.17 per
share (110% of market) in consideration of Mr. Morini's pledge of 250,000
shares of the Company's common stock to secure a $550,000 bridge loan to
the Company from Excalibur Limited Partnership. Such options are fully
exercisable and shall expire on July 1, 2007. Effective as of December 4,
2002, the Board of Directors granted Mr. Morini options to acquire 510,060
shares of common stock in accordance with the terms of a special services
agreement between the Company and Mr. Morini for writing a comprehensive
diet and recipe book about the Company and its products and for the
potential distribution of this book worldwide. Of these 510,060 options,
200,000 have an exercise price of $4.08 per share and 310,060 have an
exercise price of $2.05 per share. Such options are fully exercisable and
shall expire on December 4, 2012. The market price on the date of grant was
$1.67.

(6) In April 2001, Angelo S. Morini was granted incentive stock options to
acquire 375,000 shares of common stock at an exercise price equal to the
market price on the date of grant of $4.40 per share. One-fifth of such
options shall become exercisable on each anniversary of the grant date
until all such options are exercisable. Such options shall expire on April
19, 2011.

(7) In October 2000, the Company obtained a $1.5 million bridge loan from
SouthTrust Bank, which is guaranteed by Mr. Morini and secured by the
pledge of one million shares of the Company's common stock owned by him. In
consideration of his guaranty and stock pledge in respect to this loan, the
Company granted stock options to acquire 343,125 shares of common stock at
an exercise price of $3.88 per share (109% of market). Such options are
fully exercisable and shall expire on December 15, 2010.

(8) On September 4, 2001, Christopher J. New was appointed Chief Marketing
Officer and Vice President of Strategy. In December 2001, the Board
appointed Mr. New as Chief Operating Officer and on December 17, 2002, the
Board appointed Mr. New as Chief Executive Officer. As such, he did not
earn any compensation from the Company during the fiscal year ended March
31, 2001. Mr. New's current employment agreement provides for an annual
base salary of $180,000.

(9) For the fiscal year ended March 31, 2002, the Company paid $14,835 for a
car allowance and $1,729 for auto insurance for Mr. New.

(10) For the fiscal year ended March 31, 2002, the Company paid $7,583 to Mr.
New for a car allowance.

(11) In December 2002, the Company granted options to acquire 25,000 shares of
the Company's common stock at an exercise price equal to the market price
on the date of grant of $1.67 per share to Mr. New in consideration for his
continued employment with the Company. Such options are fully exercisable
and expire December 5, 2012. In October 2002, the Company repriced 100,000
options, which were previously granted (as described below in footnote 12)
and therefore are included.

(12) Under the terms of his employment agreement, Mr. New received an option to
purchase up to 100,000 shares of the Company's common stock at an exercise
price equal to the market price on the date of grant of $4.98 per share. On
October 11, 2002, the Company repriced the options to purchase 100,000
shares from $4.98 per share to the then-market price of $2.05 per share.
One-third of such options shall become exercisable in September each year
until all such options are exercisable. In the event of a change in
control, all such options shall immediately become exercisable. Such
options expire July 16, 2011.

(13) On July 8, 2002, Salvatore Furnari was appointed Chief Financial Officer of
the Company. From November 2002 to July 8, 2002, he worked as the Company's
Controller. As such, he did not earn

any compensation from the Company during the fiscal year ended March 31,
2001. Mr. Furnari's current employment agreement provides for an annual
base salary of $130,000.

(14) On July 8, 2002, the Company granted options to acquire 20,000 shares of
the Company's common stock at an exercise price equal to the market price
on the date of grant of $4.55 per share to Mr. Furnari in consideration for
his continued employment with the Company. On October 11, 2002, the Company
repriced the options to purchase 20,000 shares from $4.55 per share to the
then-market price of $2.05 per share. One-third of such options shall
become exercisable each year in July 2003, 2004 and 2005 until all such
options are exercisable. In the event of a change in control, all such
options shall immediately become exercisable. Such options expire July 8,
2012. In October 2002, the Company repriced 10,000 options, which were
previously granted (as described below in footnote 15) and therefore are
included.

(15) Under the terms of his employment agreement, Mr. Furnari received an option
to purchase up to 10,000 shares of the Company's common stock at an
exercise price equal to the market price on the date of grant of $5.60 per
share. On October 11, 2002, the Company repriced the options to purchase
10,000 shares from $5.60 per share to the then-market price of $2.05 per
share. One-fourth of the options became exercisable February 12, 2002 and
one-fourth shall become exercisable on each of the following December 12,
2002, 2003 and 2004. Such options expire November 12, 2011.

(16) In February of 2000, Keith Ewing was appointed as Chief Financial Officer.
The base salary provided for Mr. Ewing was $125,000. On April 12, 2001, the
Company terminated Mr. Ewing.

(17) For the fiscal year ended March 31, 2001, the Company paid $6,685 in lease
payments for Mr. Ewing's automobile, and approximately $75 per month for
automobile insurance and $2,131 in club dues for Mr. Ewing.

(18) On July 8, 2002, LeAnn Hitchcock was appointed SEC Compliance and Internal
Audit Manager of the Company. From October 2001 to July 8, 2002, she worked
as the Company's Chief Financial Officer. In December 2002, she was
appointed as Corporate Secretary of the Company. As such, she did not earn
any compensation from the Company during the fiscal year ended March 31,
2001. Ms. Hitchcock's current employment agreement provides for
compensation of $70 per hour.

(19) Under the terms of her employment agreement, Ms. Hitchcock received an
option to purchase up to 30,000 shares of the Company's stock at an
exercise price equal to the market price on the date of grant of $5.90 per
share. On October 11, 2002, the Company repriced the options to purchase
30,000 shares from $5.90 per share to the then-market price of $2.05 per
share. One-third of the options became exercisable immediately and
one-third shall become exercisable on each of the following two anniversary
dates of the date of grant. Such options expire October 29, 2011.

(20) Mr. C. Morini's current employment agreement provides for an annual base
salary of $155,000. In March 2002, Mr. Morini received $23,000 in bonuses
related to fiscal 2000.

(21) For the fiscal year ended March 31, 2003, the Company paid $12,595 in auto
lease payments, $1,368 for automobile insurance, $3,663 for club dues and
$149 for the employer's portion of 401k contributions for Mr. C. Morini.

(22) For the fiscal year ended March 31, 2002, the Company paid $12,536 in auto
lease payments, $1,368 for automobile insurance, and $4,961 for club dues
for Mr. C. Morini.

(23) For the fiscal year ended March 31, 2001, the Company paid $11,228 in auto
lease payments, $1,200 for automobile insurance, and $16,944 for club dues
for Mr. C. Morini.

(24) On October 11, 2002, the Company repriced all 97,143 outstanding options
held by Mr. C. Morini from their original exercise price to the then-market
price of $2.05 per share. The original exercise prices of the options were
equal to the market price on the date of grant as follows: 14,286 options
at $2.84, 714 options at $3.50; 75,000 options (as further described below
in footnote 25) at $4.40 and 7,43 options at $8.47.

(25) In April 2001, Mr. C. Morini was granted an incentive stock option to
purchase up to 75,000 shares of common stock at an exercise price equal to
the market price on the date of grant of $4.40 per share. On October 11,
2002, the Company repriced the options to purchase 75,000 shares from $4.40
per share to the then-market price of $2.05 per share. One-third of such
options shall become

exercisable on each anniversary of the grant date until all such options
are exercisable. Such options expire April 19, 2011.

(26) Mr. Jackson's current employment agreement provides for an annual base
salary of $138,000. In March 2002, Mr. Jackson received $38,300 in bonuses
related to fiscal 2000.

(27) For the fiscal year ended March 31, 2003, the Company paid $8,871 in auto
lease payments, $1,379 for automobile insurance, and $1,991 for the
employer's portion of 401k contributions for Mr. Jackson.

(28) For the fiscal year ended March 31, 2002, the Company paid $8,917 in auto
lease payments and $1,379 for automobile insurance.

(29) For the fiscal year ended March 31, 2001, the Company paid $8,917 in auto
lease payments and $1,473 for automobile insurance.

(30) On October 11, 2002, the Company repriced all 96,429 outstanding options
held by Mr. Jackson from their original exercise price to the then-market
price of $2.05 per share. The original exercise prices of the options were
equal to the market price on the date of grant as follows: 14,286 options
at $2.84; 75,000 options (as further described below in footnote 31) at
$4.40 and 7,143 options at $8.47.

(31) In April 2001, Mr. Jackson was granted an incentive stock option to
purchase up to 75,000 shares of common stock at an exercise price equal to
the market price on the date of grant of $4.40 per share. On October 11,
2002, the Company repriced the options to purchase 75,000 shares from $4.40
per share to the then-market price of $2.05 per share. One-third of such
options shall become exercisable on each anniversary of the grant date
until all such options are exercisable. Such options expire April 19, 2011.

(32) Other than the options described in the footnotes above, there were no
other annual compensation, perquisites or other personal benefits,
securities or property equal to the lesser of $50,000 or 10% of the total
annual salary and bonus reported for such Named Executive Officer.

(33) "All Other Compensation" represents the health insurance premiums paid by
the Company on behalf of the indicated Named Executive Officer.

Option Grants in Last Fiscal Year Table
- ---------------------------------------

The following table summarizes for each Named Executive Officer each grant of
stock options during the fiscal year ended March 31, 2003:

Option Grants in Last Fiscal Year
- --------------------------------------------------------------------------------------------------------------------
Percent of Exercise
Number of Total or Base
Securities Options Price($/Sh)
Underlying Granted to
Options Employees in Grant Date Fair
Name Granted (#) Fiscal Year (1) Expiration Date Value ($) (2)
- --------------------------------------------------------------------------------------------------------------------

Angelo S. Morini 1,163,898 (3) 14.2% $5.72 May 24, 2012 $3,363,665
1,163,898 (4) 14.2% $5.72 May 24, 2012 $3,363,665
289,940 3.5% $5.17 July 1, 2007 $492,898
289,940 (4)(6) 3.5% $5.17 July 1, 2007 $492,898
900,000 (3) 11.0% $2.05 October 24, 2012 $1,116,000
200,000 2.4% $4.08 December 4, 2012 $130,000
310,060 3.8% $2.05 December 4, 2012 $288,356
1,357,000 (5)(6) 16.5% $2.05 June 15, 2009 $1,384,140
13,072 (5)(6) 0.2% $2.05 October 1, 2006 $13,333
7,143 (5)(6) 0.1% $2.05 December 4, 2007 $7,286
343,125 (5)(6) 4.2% $2.05 December 15, 2010 $349,986
375,000 (5)(6) 4.6% $2.05 April 19, 2011 $382,500
142,857 (5)(6) 1.7% $2.05 July 1, 2007 $145,714
Christopher New 25,000 0.3% $1.67 December 5, 2012 $22,250
100,000 (5) 1.2% $2.05 July 16, 2011 $102,000
Salvatore Furnari 20,000 0.2% $4.55 July 8, 2012 $52,400
20,000 (4) 0.2% $2.05 July 8, 2012 $20,400
10,000 (5) 0.1% $2.05 November 12, 2011 $10,200
Christopher Morini 714 (5) 0.0% $2.05 August 31, 2003 $728
7,143 (5) 0.1% $2.05 May 16, 2006 $7,286
14,286 (5) 0.2% $2.05 September 24, 2008 $14,572
75,000 (5) 0.9% $2.05 April 19, 2011 $76,500
John Jackson 7,143 (5) 0.1% $2.05 May 16, 2006 $7,286
14,286 (5) 0.2% $2.05 September 24, 2008 $14,572
75,000 (5) 0.9% $2.05 April 19, 2011 $76,500
LeAnn Hitchcock 30,000 (5) 0.4% $2.05 October 29, 2011 $30,600
- --------------------------------------------------------------------------------------------------------------------

(1) The total number of options granted, including repricings, to
employees and directors in the fiscal year ended March 31, 2003 was
8,217,007, of which 3,932,899 were original grants and 4,284,108 were
deemed grants due to the repricing on October 11, 2002, which
repricing is described in the Report on Repricing of Options below.

(2) The Company estimated the fair value of the stock options at the grant
date or the repricing date, as applicable, using a Black-Scholes
option-pricing model with the following assumptions: (i) no dividend
yield; (ii) 37% to 44% volatility, (iii) risk-free interest rate of
1.71% to 5.03%, and (iv) expected life of five to ten years.

(3) On December 4, 2002, as a result of discussions and negotiations with
certain major shareholders, Mr. Morini cancelled these options with
the Company.

(4) These options represent the options which were previously issued in
the fiscal year ended March 31, 2003 as described in the line item
immediately above this line item, and which were repriced to $2.05 per
share on October 11, 2002.

(5) These options represent options which were issued prior to the most
recent completed fiscal year, and which were repriced to $2.05 per
share on October 11, 2002.

(6) On December 4, 2002, Mr. Morini agreed to reverse the repricing
related to these shares and they reverted back to their exercise price
before the October 11, 2003 repricing as indicated in the repricing
table below.

Aggregate Option Exercises and Fiscal Year-End Option Value Table
- -----------------------------------------------------------------

The following table summarizes for each Named Executive Officer each exercise of
stock options during the fiscal year ended March 31, 2003 and the fiscal
year-end value of unexercised options. The value of unexercised in-the-money
options at March 31, 2003 is based on a value of $1.87 per share, the prior
closing price of the Company's common stock on the American Stock Exchange on
March 31, 2003:

Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values

- ------------------------------------------------------------------------------------------------------------------
Shares Number of Securities Value of
Acquired on Value Underlying Unexercised Unexercised
Exercise Realized Options/SARS at In-the-Money Options/SARS
Name (#) ($) Fiscal Year-End (#) at Fiscal Year-End ($)
- ------------------------------------------------------------------------------------------------------------------

Exercisable Unexercisable Exercisable Unexercisable
---------------------------------------------------------------

Angelo S. Morini -- -- 2,813,197 225,000 -- --
Christopher J. New -- -- 58,333 66,667 $5,000 --
Salvatore Furnari -- -- 5,000 25,000 -- --
LeAnn Hitchcock -- -- 20,000 10,000 -- --
Christopher Morini -- -- 72,143 25,000 -- --
John Jackson -- -- 71,429 25,000 -- --
- ------------------------------------------------------------------------------------------------------------------

Board Report on Repricing of Options
- ------------------------------------

The following report by the Board of Directors (as constituted on October 11,
2002) describes the repricing of options held by executive officers in the
fiscal year ended March 31, 2003, and the basis for the repricing.

On October 11, 2002 through unanimous consent of the Board of Directors, the
Company repriced all outstanding options granted to employees prior to this date
(4,284,108 shares at former prices ranging from $2.84 to $10.28) to the market
price of $2.05 per share. In addition, the Company repriced the outstanding
warrants held by current consultants prior to this date (291,429 shares at
former prices ranging from $3.31 to $5.50) to the market price of $2.05 per
share. This stock option repricing resulted in variable accounting treatment for
these stock options beginning with the quarter ended December 31, 2002. This
variable accounting treatment will continue until the related options have been
cancelled, expired or exercised. On December 4, 2002, as a result of discussions
and negotiations with certain major shareholders, Angelo S. Morini, the
Company's President, agreed to reverse the repricing of his 3,692,035 options
for the purpose of improving shareholder value and lessening potential financial
statement expense. Although the exercise prices of the options were reversed
back to their original amounts, the Company is still required to account for any
outstanding options related to these reversed-repriced options and all new
options issued to the Company's President prior to June 4, 2003 in accordance
with variable accounting standards each quarter.

Respectively submitted by the Board of Directors: Angelo S. Morini
Joseph J. Juliano
Marshall K. Luther
Douglas A. Walsh

The following table summarizes the repricing of options held by each executive
officer during the last ten completed fiscal years:

- --------------------------------------------------------------------------------------------------------------------
Number of Market Exercise Length of
Securities Price Price Original Option
Underlying of Stock at of Option at Term Remaining
Options/ SARs Time of Time of New at Date of
Date of Repriced or Repricing Repricing Exercise Repricing or
Name Repricing Amended or Amendment or Amendment Price Amendment (in
(#) ($) ($) ($) months)
- --------------------------------------------------------------------------------------------------------------------

Angelo S. Morini Oct 11, 2002 1,163,898 (1)(2) $2.05 $5.72 $2.05 117
Oct 11, 2002 289,940 (1) $2.05 $5.17 $2.05 57
Oct 11, 2002 1,357,000 (1) $2.05 $3.31 $2.05 81
Oct 11, 2002 13,072 (1) $2.05 $3.50 $2.05 48
Oct 11, 2002 7,143 (1) $2.05 $3.50 $2.05 63
Oct 11, 2002 343,125 (1) $2.05 $3.88 $2.05 100
Oct 11, 2002 375,000 (1) $2.05 $4.40 $2.05 104
Oct 11, 2002 142,857 (1) $2.05 $5.25 $2.05 57
Aug 31, 1993 13,072 $3.50 $25.02 $3.50 98
Aug 31, 1993 7,143 $3.50 $19.25 $3.50 113
Christopher New Oct 11, 2002 100,000 $2.05 $4.98 $2.05 107
Salvatore Furnari Oct 11, 2002 20,000 $2.05 $4.55 $2.05 119
Oct 11, 2002 10,000 $2.05 $5.60 $2.05 111
Christopher Morini Oct 11, 2002 714 $2.05 $3.50 $2.05 11
Oct 11, 2002 7,143 $2.05 $8.47 $2.05 44
Oct 11, 2002 14,286 $2.05 $2.84 $2.05 73
Oct 11, 2002 75,000 $2.05 $4.40 $2.05 104
Aug 31, 1993 3,571 $3.50 $10.50 $3.50 98
John Jackson Oct 11, 2002 7,143 $2.05 $8.47 $2.05 44
Oct 11, 2002 14,286 $2.05 $2.84 $2.05 73
Oct 11, 2002 75,000 $2.05 $4.40 $2.05 104
LeAnn Hitchcock Oct 11, 2002 30,000 $2.05 $5.90 $2.05 110

- --------------------------------------------------------------------------------------------------------------------

(1) On December 4, 2002, as a result of discussions and negotiations with
certain major shareholders, Mr. Morini reversed the repricing of these
options back to their original exercise prices.

(2) On December 4, 2002, as a result of discussions and negotiations with
certain major shareholders, Mr. Morini cancelled these options with
the Company.

Compensation of Directors
- -------------------------

Standard Arrangements. Each non-employee director who served on the Board of
Directors during the fiscal year ended March 31, 2003 was entitled to receive a
fee of $2,500 plus expenses for each Board of Directors meeting in which they
attended in person. 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) 286 shares, if such director served for a
full year prior to the October 1 anniversary date, or (ii) a pro rated amount
equal to 24 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, 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 the same was amended by that certain 1996 Amendment and
Restatement of the 1991 Non-Employee Director Stock Option Plan (as amended, the
"Director Plan").

Other Arrangements. During each of the fiscal years ended March 31, 2003, 2002
and 2001, Joseph J. Juliano, a director of the Company, received cash or
benefits totaling $77,520, $79,600, and $27,000, respectively, in return for
developing and maintaining business relationships with prospective and existing
customers and suppliers on behalf of the Company. On December 17, 2002, the new
independent directors, Charles L. Jarvie, Thomas R. Dyckman, Michael H. Jordan
and David H. Lipka, were each granted options to acquire 200,000 shares of
common stock at an exercise price of $2.17 per share (130% of the closing price
of the common stock as reported by AMEX on December 4, 2002 which was the date
they agreed to become a director of the Company) in consideration of their
acceptance of positions as members of the Board of Directors. Mr. Jordan agreed
to cancel his 200,000 options upon his resignation on April 1, 2003. The Company
granted options to acquire 200,000 shares of common stock at an exercise price
of $2.17 per share to Mr. Jordan's successor, C. Anthony Wainwright. Charles L.
Jarvie, the Chairman of the Board, receives compensation of $60,000 per year for
his services as Chairman.

Employment Agreements
- ---------------------

Angelo S. Morini. As of June 15, 1999, the Company entered into a new Employment
Agreement (the "Agreement") with Angelo S. Morini, the Company's President and
Chief Executive Officer. The Agreement has a rolling term of five years and
provides for an annual base salary of $300,000. Additionally, Mr. Morini will
receive an annual bonus in an amount equal to or between three and five percent
of the Company's pre-tax net income for book purposes, depending on the level of
pre-tax income achieved, as determined by the Company's independent certified
public accounting firm. Other material provisions of the Agreement are as
follows:

1. Mr. Morini was granted an option to purchase 1,357,000 shares of the
Company's common stock at a per share price of $3.31 per share. The
options granted as aforesaid have a term of ten years from the date
granted and are exercisable in whole or in part upon the delivery by
Mr. Morini to the Company of written notice of exercise.

2. 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.

3. If the Agreement is terminated by the Company without cause, Mr.
Morini shall become fully vested in any stock 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, or if there
is a material breach in the employment contract, the Company shall pay
to Mr. Morini or his estate severance pay equal to Mr. Morini's annual
base salary (before deductions for withholding, employment and
unemployment taxes) for a period of sixty months and all amounts due
in connection with his $12,772,200 loan (discussed below) will be
forgiven.

4. 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.

5. Pursuant to the Agreement, the Company will obtain, and maintain in
effect during the term of the Agreement, for the benefit of (i) a Two
Million Dollar (2,000,000) term life insurance policy insuring his
life, the beneficiaries of which shall be designated by Mr. Morini,
and (ii) a disability insurance policy providing for payment of at
least two-thirds (2/3) of Mr. Morini's base salary.

6. In connection with Mr. Morini's exercise of certain rights to purchase
Company common stock, Mr. Morini has previously delivered two interest
bearing promissory notes to the Company in the amounts of $11,572,200
and $1,200,000, representing the purchase price for such common stock
purchases. The $11,572,200 Note is secured by certain shares of the
Company's common stock owned by Mr. Morini. The Company agreed to
cancel the $11,572,200 Note and the $1,200,000 Note (with the Company
forgiving any accrued interest thereunder) and the parties entered
into a new loan agreement in lieu thereof. Pursuant to the agreement,
Mr. Morini and the Company executed a new non-interest bearing and
non-recourse promissory note in the amount of $12,772,200 and a stock
pledge agreement to secure the note. The Company has a security
interest in the pledged shares.

On December 17, 2002, Mr. Morini resigned as Chief Executive Officer and as
Chairman of the Board in order to focus his attention on expanding the Company's
brand awareness and marketing relationships. Mr. Morini remains in his position
as President and has been appointed the Vice-Chairman of the Board.
Additionally, all terms and conditions of his employment contract from June 1999
as described above remain in effect.

Christopher J. New. On September 4, 2001, Christopher J. New was appointed Chief
Marketing Officer and Vice President of Strategy. In December 2001, the Board
appointed him to Chief Operating Officer and in December 2002, the Board
appointed him to Chief Executive Officer. Mr. New's current employment agreement
provides for a base salary of $180,000. Mr. New will also be entitled to receive
a bonus of up to 40% of his base salary at fiscal year end with the
qualification of such bonus to be determined by the Board of Directors. The
agreement also

provides for an automobile allowance up to $1,250 per month plus auto insurance.
In the event of a change in ownership of the Company which results in his
termination, Mr. New will be entitled to receive three years of his base salary
as severance. In the event Mr. New's employment is otherwise terminated after
September 4, 2002, but prior to September 4, 2003, he will be entitled to
receive one year of his base salary as severance. In the event Mr. New's
employment is terminated after September 4, 2003, but prior to September 4,
2004, he will be entitled to receive two years of his base salary as severance.
In the event Mr. New's employment is terminated after September 4, 2004, he will
be entitled to receive three years of his base salary as severance. Mr. New was
also granted stock options to purchase 100,000 shares of common stock at an
exercise price of $4.98. These options were repriced to $2.05 on October 11,
2002. The stock options will expire on September 4, 2011. One third of the stock
options will vest on each anniversary of the grant date until fully vested. In
the event the Company is purchased, all such stock options will immediately
vest. On December 5, 2002, the Company granted stock options to purchase 25,000
shares of common stock at an exercise price of $1.67. These options will expire
on December 5, 2012.

Salvatore Furnari. On November 11, 2001, Mr. Furnari was appointed the Company's
Controller and received a stock option to purchase up to 10,000 shares of the
Company's common stock at $5.60 per share. These options were repriced to $2.05
per share on October 11, 2002. One-fourth of the stock options are currently
vested and one-fourth will vest in the anniversary of the grant date until fully
vested. On July 8, 2002, Mr. Furnari was appointed the Company's Chief Financial
Officer. Under the terms of his current employment agreement, he will receive an
annual base salary of $130,000 and a stock option to purchase up to 20,000
shares of the Company's common stock at $4.55 per share. These options were
repriced to $2.05 per share on October 11, 2002. One-third of the stock options
will vest each year on the anniversary of the grant date until fully vested. In
the event the Company is purchased, all such stock options will immediately
vest. In the event Mr. Furnari's employment is terminated after July 8, 2003, he
will be entitled to receive six months of his base salary as severance.

LeAnn Hitchcock. On October 29, 2001, LeAnn Hitchcock was appointed Chief
Financial Officer of the Company. Ms. Hitchcock's employment agreement then
provided for an annual base salary of $130,000. The agreement also provided Ms.
Hitchcock with a non-qualified stock option to purchase up to 30,000 shares of
the Company's common stock at an exercise price of $5.90 per share with
one-third of the options vesting immediately and one-third on each of the
following two anniversary dates of the date of grant. These options were
repriced to $2.05 per share on October 11, 2002. In the event the Company is
purchased, all such stock options will immediately vest. On July 8, 2002, Ms.
Hitchcock changed her position with the Company to become its SEC Compliance and
Internal Audit Manager with compensation of $70 per hour. In December 2002, Ms.
Hitchcock was also appointed as Corporate Secretary of the Company.

Christopher Morini. Angelo S. Morini's brother, Christopher Morini, works for
the Company as Vice President of New Business Development and Key Accounts. From
February of 1993 until October 2001, Christopher Morini served as Vice President
of Marketing. Mr. C. Morini's employment agreement provides for $126,250 base
salary. In May 2000, his base salary was increased to $155,000 per year. The
agreement also provides for an automobile lease with insurance, which together
shall not exceed $1,100 per month and monthly country club dues. Mr. C. Morini
will also be entitled to a bonus that shall not exceed 40% of his base salary
based on certain personal and Company goals as established by the Company's
Chief Executive Officer. In the event Mr. C. Morini's employment is terminated,
Mr. C. Morini will be entitled to receive five years of his base salary as
severance.

John Jackson. In August of 1993, John Jackson was appointed as Vice President of
Sales. Mr. Jackson's employment agreement provides for $113,750 base salary. In
January 2000, his base salary was increased to $125,000 per year and then
increased to $138,000 per year in January 2001. The agreement also provides for
an automobile lease with insurance, which together shall not exceed $850 per
month. Mr. Jackson will also be entitled to a bonus that shall not exceed 40% of
his base salary based on certain personal and Company goals as established by
the Company's Chief Executive Officer. In the event of a change in ownership of
the Company which results in his termination, Mr. Jackson will be entitled to
receive three years of his base salary as severance. In the event Mr. Jackson's
employment is otherwise terminated, he is entitled to receive one year of his
base salary as severance, the payment of which shall be made at the Company's
discretion.

Additional Information with Respect to Insider Participation in Compensation
- --------------------------------------------------------------------------------
Committee
- ---------

Mr. Morini's current employment contract, as detailed above under Employment
Agreements, was approved in June 1999 by Joseph J. Juliano, Marshall K. Luther
and Douglas A. Walsh, each a member of the Board of Directors prior to December
17, 2002, after they conducted discussions and negotiations with Mr. Morini.
Prior to June 2002, the Company advanced amounts to or paid amounts on behalf of
Mr. Morini, which were to be charged against future bonuses under his employment
agreement. As of August 22, 2003, Mr. Morini owes the Company approximately
$140,000 related to these non-interest bearing advances. In March 2002, Angelo
S. Morini loaned $330,000 to the Company in order for it to pay down certain
notes payable that were coming due. This loan bears interest at the prime rate
(4.0% at August 22, 2003) and is due on or before June 15, 2006.

Mr. Morini's brother, Christopher Morini, works for the Company as Vice
President of New Business Development and Key Accounts. Angelo S. Morini's wife,
Julie Morini, is employed by the Company in the marketing and public relations
departments and until recently served as the Company's Corporate Secretary.
Also, Mr. Morini's brother, Ronald Morini, works for the Company as an
engineering consultant and his brother-in-law, Robert Peterson, is employed by
the Company as a sales representative.

Board Report on Executive Compensation
- --------------------------------------

The following report describes the Company's executive officers' compensation
for the fiscal year ended March 31, 2003:

The Company did not have a compensation committee or a committee of the Board of
Directors performing similar functions until March 27, 2003. Until December 4,
2002, compensation for all employees other than Angelo S. Morini, the Company's
President and former Chief Executive Officer, was determined independently by
Mr. Morini. Compensation for Mr. Morini was determined by the Board of
Directors, however, no action related to compensation for Mr. Morini was
necessary during fiscal 2003 because Mr. Morini's compensation is established by
his Employment Agreement dated June 15, 1999. The following discretionary option
grants made to Mr. Morini during fiscal 2003 were approved by the Board of
Directors at the time of their grant:

- ------------------------------------------------------------------------------------------------
Number of
Securities
Underlying
Options Exercise or Grant Date Fair
Name Granted Base Price Grant Date Value (1)
- ------------------------------------------------------------------------------------------------

Angelo S. Morini 1,163,898 (2) $5.72 May 24, 2002 $3,363,665
289,940 $5.17 July 1, 2002 $492,898
900,000 (2) $2.05 October 24, 2002 $1,116,000
200,000 $4.08 December 4, 2002 $130,000
310,060 $2.05 December 4, 2002 $288,356
- ------------------------------------------------------------------------------------------------

(1) The Company estimated the fair value of the stock options at the grant date
or the repricing date, as applicable, using a Black-Scholes option-pricing
model with the following assumptions: (i) no dividend yield; (ii) 37% to
44% volatility, (iii) risk-free interest rate of 1.71% to 5.03%, and (iv)
expected life of five to ten years.

(2) On December 4, 2002, as a result of discussions and negotiations with
certain major shareholders, Mr. Morini cancelled these options with the
Company. Thus, total net shares remaining available for purchase under the
fiscal 2003 option grants were 800,000.

Additionally, on October 11, 2002 through unanimous consent of the Board of
Directors, the Company repriced all outstanding options granted to employees
prior to this date (4,284,108 shares at former prices ranging from $2.84 to
$10.28) to the market price of $2.05 per share. Mr. Morini owned 3,692,035 of
the 4,284,108 repriced options. On December 4, 2002, as a result of discussions
and negotiations with certain major shareholders, Mr. Morini agreed to reverse
the repricing of his 3,692,035 options for the purpose of improving shareholder
value and lessening potential financial statement expense.

For fiscal 2004, all compensation matters for officers and key management
employees will be considered by the Company's Compensation Committee, which will
present its recommendations to the Board of Directors for action. Compensation
matters for all other employees will be considered and determined by the
Company's Chief Executive Officer after general consultation with the
Compensation Committee and in accordance with guidelines and policies that may
from time to time be adopted by the Compensation Committee. The Compensation
Committee is currently developing such guidelines and policies and, upon
completion, they will be presented to the Board of Directors for consideration
and approval.

Respectively submitted by the Compensation Committee: David H. Lipka
Thomas R. Dyckman
Joseph J. Juliano
C. Anthony Wainwright

Stock Performance Graph
- -----------------------

The following graph provides a comparison of the Company's cumulative total
shareholder return on the Company's Common Stock with the cumulative total
return of the Standard & Poor's SmallCap Index and a peer group index for the
five-year period beginning April 1, 1998:

COMPARATIVE OF FIVE YEAR (1) CUMULATIVE TOTAL RETURNS OF (2)
GALAXY NUTRITIONAL FOODS COMMON STOCK, THE S&P
SMALLCAP INDEX (3) AND A PEER GROUP INDEX (4)

[GRAPHIC OMITTED]

COMPARATIVE OF FIVE YEAR (1) CUMULATIVE TOTAL RETURNS OF (2)
GALAXY NUTRITIONAL FOODS COMMON STOCK, THE S&P
SMALLCAP INDEX (3) AND A PEER GROUP INDEX (4)

1999 2000 2001 2002 2003
--------------------------------------------------------

Galaxy Nutritional Foods $ 57.12 $ 54.36 $ 72.82 $ 80.04 $ 27.56

S&P Small Cap $ 80.20 $ 104.04 $ 101.96 $ 123.44 $ 92.00

Peer Group $ 81.41 $ 70.04 $ 71.28 $ 52.87 $ 40.49

(1) Compares fiscal years ending on or about March 31st of the years indicated.

(2) The comparison of total return on investment assumes $100 invested on April
1, 1998 in Galaxy Nutritional Foods Common Stock and in each S&P Small Cap
Index and the S&P Food Group Index.

(3) The S&P Small Cap Index is composed of public companies with market
capitalizations between zero and $1 billion. As of August 22, 2003, the
Company had a market capitalization of approximately $42 million.

(4) Companies in the Peer Group Index are as follows: Hain Celestial Group,
Horizon Organic, Conagra Foods, International Multifoods, Lance, and
Tofutti Brands.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following tables describe the beneficial ownership of the Company's common
stock and the Company's Series A convertible preferred stock by each person or
entity known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Company's capital stock outstanding as of August 22,
2003. The tables show beneficial ownership in accordance with the rules of the
Securities and Exchange Commission to include securities that a named person or
entity has the right to acquire within 60 days.

COMMON STOCK OWNERSHIP OF 5% OR MORE STOCKHOLDERS

Angelo S. Morini
2441 Viscount Row
Orlando, Florida 32809 6,257,719 (3) 34.8%

John Hancock Advisors, LLC
200 Clarendon Street
Boston, Massachusetts 02117 1,441,348 (4) 9.5%

BH Capital Investments, L.P.
175 Bloor Street East
South Tower, 7th Floor
Toronto, Ontario, Canada M4W 3R8 1,155,222 (5) 7.0%

Excalibur Limited Partnership
33 Prince Arthur Avenue
Toronto, Ontario, Canada M5R IB2 1,357,884 (6) 8.2%

Royce & Associates LLC
1414 Avenue of the Americas
New York, NY 10019 1,242,000 (7) 8.2%

Frederick A. DeLuca
c/o Doctor's Associates, Inc.
325 Bic Drive
Milford, Connecticut 06460 1,269,842 8.4%

Fromageries Bel S.A.
16, Bd Malesherbes 75008
Paris, France 1,111,112 (8) 7.3%

(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 as of August 22, 2003 is 15,153,932.
The percentages are calculated on the basis of the amount of shares
outstanding plus shares which may be acquired through the exercise of
options, warrants, rights or conversion privileges by such holder within
sixty (60) days of August 22, 2003.

(3) Includes options to acquire 2,813,197 shares of the Company's common stock,
which are currently exercisable at prices ranging from $2.05 to $5.25 per
share. Options expire as to 13,072 shares on

October 1, 2006, as to 432,797 on July 1, 2007, as to 7,143 shares on
December 4, 2007, as to 1,357,000 shares on June 15, 2009, as to 343,125 on
December 15, 2010, as to 150,000 on April 19, 2011, and as to 510,060 on
December 4, 2012. Also includes a warrant to purchase 250 shares at an
exercise price of $5.744 per share, which expires on January 17, 2007. With
the exception of the options, 10,500 shares held in a nominee name, 286
shares held in joint tenancy and 714 shares held individually, all of Mr.
Morini's shares and warrant are held by Morini Investments Limited
Partnership, a Delaware limited liability partnership, of which Angelo
Morini is the sole Limited Partner and Morini Investments LLC is the sole
General Partner. Mr. Morini is the sole member of Morini Investments LLC.

(4) John Hancock Advisers, LLC is a wholly-owned subsidiary of The Berkeley
Financial Group, LLC, which is a wholly-owned subsidiary of John Hancock
Subsidiaries, LLC, which is a wholly-owned subsidiary of John Hancock Life
Insurance Company, which is a wholly-owned subsidiary of John Hancock
Financial Services, Inc. Pursuant to a Securities Purchase Agreement dated
as of September 24, 2001, Hare & Co. f/b/o John Hancock Small Cap Value
Fund, an affiliate of John Hancock Advisors, LLC, purchased 522,648 shares
of common stock and warrants to purchase 140,000 shares of common stock, at
an aggregate sales price of $3,000,000. The warrants held by Hare & Co.
f/b/o John Hancock Small Cap Value Fund are exercisable at a price per
share equal to $6.74 until September 25, 2006. Subsequently, the Company
agreed to reduce the per share exercise price on all the warrants to $4.50
in order to induce John Hancock Advisers, LLC to exercise the warrants held
by Hare & Co. f/b/o John Hancock Small Cap Value Fund. All of the warrants
were exercised in January 2002 at a price of $4.50 per share.

The following information is based solely on a Schedule 13G, dated February
11, 2002, and filed with the SEC by each of the reporting persons listed
below: John Hancock Advisers, LLC has direct beneficial ownership of, and
sole voting power and sole dispositive power to, the reported shares
pursuant to Advisory Agreements for the following: John Hancock Small Cap
Value Fund, John Hancock Small Cap Equity Fund, John Hancock Small Cap
Value Fund, John Hancock Focused Relative Value Fund, and John Hancock
Small Cap Value Fund. Each of The Berkeley Financial Group, LLC, John
Hancock Subsidiaries, LLC, John Hancock Life Insurance Company, and John
Hancock Financial Services, Inc. report that they do not beneficially own
any of the reported shares except through their indirect, wholly owned
subsidiary, John Hancock Advisers, LLC. The principal business office of
John Hancock Subsidiaries, LLC, John Hancock Life Insurance Company, and
John Hancock Financial Services, Inc. is at John Hancock Place, P.O. Box
111, Boston, Massachusetts 02117. The principal office address of The
Berkeley Financial Group, LLC and John Hancock Advisers, LLC is 101
Huntington Avenue, Boston, Massachusetts 02119.

(5) In connection with an extension agreement, the Company issued to BH Capital
Investments, L.P. a warrant to purchase 250,000 shares of the Company's
common stock, which is exercisable until July 15, 2006 at $2.00 per share.
On December 26, 2002, BH Capital Investments, L.P. converted 4,884 shares
of the Series A convertible preferred stock, plus accrued dividends, into
199,986 shares of common stock. The conversion rate was $1.3633 based on
95% of the average of the two lowest closing bid prices on AMEX for the
fifteen trading days immediately prior to conversion. On June 3, 2003, BH
Capital Investments, L.P. converted 1,500 shares of the Series A
convertible preferred stock into 52,302 shares of common stock. The
conversion price was $1.6483 based on 95% of the average of the two lowest
closing bid prices on the AMEX for the fifteen trading days immediately
prior to conversion. BH Capital Investments, L.P. informed the Company that
it owned 44,888 shares of the Company's common stock as of August 22, 2003.
Additionally, BH Capital Investments, L.P. still holds 29,939 shares of the
Series A convertible preferred stock, which are presently convertible with
accrued dividends into 998,067 shares of common stock. However, BH Capital
Investments, L.P., together with its affiliates (which includes Excalibur
Limited Partnership), may not convert the Series A convertible preferred
stock in excess of that number of the Series A convertible preferred stock
that, upon giving effect to such conversion, would cause the aggregate
number of shares of common stock beneficially owned by BH Capital
Investments, L.P. and its affiliates to exceed 9.99% of the outstanding
shares of common stock following such conversion, unless BH Capital
Investments, L.P. waives such restriction upon not less than 61 days prior
notice to the Company.

Pursuant to the terms of the Series A convertible preferred stock, BH
Capital Investments, L.P. and Excalibur Limited Partnership cannot
collectively own more than 9.99% of the outstanding shares of the Company's
common stock without providing 61 days prior notice to the Company (as of
August 22, 2003, the Company has not received such notice). Because BH
Capital Investments, L.P. currently owns 44,888 shares of common stock,
excluding unconverted Series A convertible preferred stock, and Excalibur
Limited Partnership currently owns 217,550 shares of common stock,
including shares underlying warrants but excluding unconverted Series A
convertible preferred stock, BH Capital Investments, L.P. may only convert
its Series A convertible preferred stock into 860,334 shares of common
stock as of August 22, 2003. In the event Excalibur Limited Partnership
converts any of its Series A convertible preferred stock into shares of
common stock, BH Capital Investments, L.P.'s beneficial ownership of common
stock would be reduced by such number of shares (e.g., if Excalibur Limited
Partnership converted its shares of the Series A convertible preferred
stock into 100,000 shares of common stock, then the number of shares of
common stock beneficially owned by BH Capital Investments, L.P. would be
reduced by 100,000 shares, absent a waiver of the 9.99% limitation).

The following information is based solely on a Schedule 13G, dated February
10, 2003, and filed with the SEC: Each of the following reporting persons
are deemed to beneficially own a pro rata share of the maximum 9.9% of the
Company's common stock beneficially owned by the group, which pro rata
share does not exceed 4.99% of the class: BH Capital Investments, L.P., HB
and Co., Inc., Henry Brachfeld, Excalibur Limited Partnership, Excalibur
Capital Management, Inc. and William S. Hechter. Lillian Brachfeld is the
sole stockholder of HB and Co, Inc. and the wife of Henry Brachfeld.
Lillian Brachfeld has disclaimed pursuant to Rule 13d-4 of the Securities
Exchange Act of 1934, as amended, beneficial ownership of all shares she
may be deemed to beneficially own by reason of such status. The address of
the principal business office of BH Capital Investments, L.P., HB and Co.,
Inc., Henry Brachfeld and Lillian Brachfeld is 175 Bloor Street East, South
Tower, Suite 705, Ontario Canada M4W 3R8. The address of the principal
business office of Excalibur Limited Partnership, Excalibur Capital
Management, Inc. and William S. Hechter is 33 Prince Arthur Avenue,
Toronto, Ontario, Canada M5R 1B2.

(6) In addition to the beneficial ownership described below, in consideration
of a $550,000 short-term promissory note made by Excalibur Limited
Partnership (which has been repaid in full), the Company issued Excalibur
Limited Partnership a warrant for consulting services to purchase 30,000
shares of common stock which is exercisable until June 26, 2007 at a price
equal to $5.50 per share. These warrants were repriced to $2.05 on October
11, 2002. In connection with an extension agreement, the Company also
issued to Excalibur Limited Partnership a warrant to purchase 250,000
shares of the Company's common stock which is exercisable until July 15,
2006 at $2.00 per share. On December 26, 2002, Excalibur Limited
Partnership converted 10,378 shares of the Series A convertible preferred
stock, plus accrued dividends, into 424,950 shares of common stock. The
conversion rate was $1.3633 based on 95% of the average of the two lowest
closing bid prices on AMEX for the fifteen trading days immediately prior
to conversion. Excalibur Limited Partnership informed the Company that it
owned 217,550 shares of the Company's common stock as of August 22, 2003.
Additionally, Excalibur Limited Partnership holds 25,945 shares of the
Series A convertible preferred stock, which are presently convertible with
accrued dividends into 864,920 shares of common stock. However, Excalibur
Limited Partnership, together with its affiliates (which includes BH
Capital Investments, L.P.), may not convert the Series A convertible
preferred stock in excess of that number of the Series A convertible
preferred stock that, upon giving effect to such conversion, would cause
the aggregate number of shares of common stock beneficially owned by
Excalibur Limited Partnership and its affiliates to exceed 9.99% of the
outstanding shares of common stock following such conversion, unless
Excalibur Limited Partnership waives such restriction upon not less than 61
days prior notice to the Company.

common stock, including shares underlying warrants but excluding
unconverted Series A convertible preferred stock, Excalibur Limited
Partnership may only convert its Series A convertible preferred stock into
860,334 shares of common stock as of August 22, 2003. In the event BH
Capital Investments, L.P. converts any of its Series A convertible
preferred stock into shares of common stock, Excalibur Limited
Partnership's beneficial ownership of common stock would be reduced by such
number of shares (e.g., if BH Capital Investments, L.P. converted its
shares of the Series A convertible preferred stock into 100,000 shares of
common stock, then the number of shares of common stock beneficially owned
by Excalibur Limited Partnership would be reduced by 100,000 shares, absent
a waiver of the 9.99% limitation).

(7) The following information is based solely on a Schedule 13G, dated February
5, 2003, and filed with the SEC by Royce and Associates, LLC: Royce and
Associates, LLC has the sole voting power and sole dispositive power of all
of the shares reported. The address of the principal business office of
Royce and Associates, LLC is 1414 Avenue of the Americas, New York, New
York 10019.

(8) The following information is based solely on a Schedule 13D, dated June 9,
2003, and filed with the SEC by Fromageries Bel S.A.: Fromageries Bel S.A.
owns directly and beneficially all of the reported shares. Unibel, a French
limited partnership, is deemed to beneficially own the reported shares by
reason of the provisions of Rule 13d-3 of the Securities Exchange Act of
1934, as amended. Each of Fromageries Bel S.A. and Unibel, a French limited
partnership, has shared voting power and shared dispositive power of all of
the reported shares of the Company's common stock. The address of the
principal office of Fromageries Bel S.A. and Unibel is 4 rue d Anjou 75008,
Paris, France.

SERIES A CONVERTIBLE PREFERRED STOCK OWNERSHIP OF 5% OR MORE STOCKHOLDERS

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

BH Capital Investments, L.P. (2)
175 Bloor Street East
South Tower, 7th Floor
Toronto, Ontario, Canada M4W 3R8 29,939 Series A 53.6%

Excalibur Limited Partnership (2)
33 Prince Arthur Avenue
Toronto, Ontario, Canada M5R IB2 25,945 Series A 46.4%

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

(2) Pursuant to a certain Series A Preferred Stock and Warrants Purchase
Agreement dated as of April 6, 2001, BH Capital Investments, L.P. and
Excalibur Limited Partnership each purchased 36,323 shares of the Company's
Series A convertible preferred stock and warrants to purchase 60,000 shares
of common stock, at an aggregate sales price of approximately $3,082,000.
BH Capital Investments, L.P. and Excalibur Limited Partnership exercised
their warrants and the Company has been informed that they have sold all of
the shares received upon the exercise of the warrants. As of August 22,
2003, the holders of the Series A convertible preferred stock were each
entitled to an additional $10.16 per outstanding preferred share, or 11,785
total additional shares of the Series A convertible preferred stock, for
dividends accrued on their initial purchase of the Series A convertible
preferred stock. This dividend is payable in cash or shares of the Series A
convertible preferred stock at the Company's discretion. However, in
accordance with the terms of our asset-based loan from Textron Financial
Corporation, we are prohibited from paying dividends in cash without
Textron's consent. On December 26, 2002, Excalibur Limited Partnership and
BH Capital Investments, L.P. converted 10,378 and 4,884 shares of the
Series A convertible preferred stock, respectively, plus accrued dividends,
into 424,950 and 199,986 shares of common stock, respectively. The
conversion rate was $1.3633 based on 95% of the average of the two lowest
closing bid prices on the AMEX for the fifteen trading days immediately
prior to conversion. On June 3, 2003, BH Capital Investments, L.P.
converted 1,500 shares of the Series A convertible preferred stock into
52,302 shares of common stock. The conversion price was $1.6483 based on
95% of the average of the two lowest closing bid prices on the AMEX for the
fifteen trading days immediately prior to conversion.

LEGAL PROCEEDINGS

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.

OTHER BUSINESS

The Board of Directors knows of no business which will be presented for
consideration at the meeting other than that which is 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.

SHAREHOLDER PROPOSALS

It is anticipated that the Company's next annual meeting of shareholders will be
held in September 2004, and proposals of shareholders intended for inclusion in
the proxy statement will be furnished to all shareholders 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 1, 2004. It is suggested that
proponents submit their proposals by Certified Mail-Return Receipt Requested.
Notice of shareholder proposals outside the processes of Rule 14a-8 of the
Securities Exchange Act of 1934, as amended, (for proposals submitted for
inclusion in proxy statement and form of proxy) for the next annual meeting of
shareholders must be received at the Company's principal executive offices no
later than August 15, 2004.

INCORPORATION BY REFERENCE

The Securities and Exchange Commission allows the Company to "incorporate
by reference" certain the information the Company files with them, which means
that the Company can disclose important information to you by referring you to
the documents in which such information is contained. The Company incorporates
by reference its Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 2003.

The Company will provide without charge to each person to whom a Proxy is
delivered, upon written or oral request of such person, a copy of the
information incorporated by reference in this Proxy (not including exhibits to
the information that is incorporated by reference unless the exhibits are
themselves specifically incorporated by reference), by first class mail or other
equally prompt means within one business day of receipt of such request. Such a
request should be directed to Galaxy Nutritional Foods, Inc., 2441 Viscount Row,
Orlando, Florida 32809, Attention: Investor Relations, or if by telephone, (407)
855-5500.

THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED HEREBY, UPON THE WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND THE
FINANCIAL STATEMENT SCHEDULES, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR THE COMPANY'S FISCAL YEAR ENDED MARCH 31, 2003. ALL SUCH REQUESTS SHOULD BE
DIRECTED TO INVESTOR RELATIONS, AT 2441 VISCOUNT ROW, ORLANDO, FLORIDA 32809.

PROXY CARD

GALAXY NUTRITIONAL FOODS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - MARCH 27, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Charles L. Jarvie with full power of
substitution, the proxies of the undersigned to vote all shares of Common Stock
of Galaxy Nutritional Foods, Inc. (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of the Shareholders of the Company to be
held, ___________, _____________ ___, 2003 at 10:00 a.m., local time, at the
Company's headquarters, located at 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.) PROPOSAL ONE: TO FIX THE NUMBER OF DIRECTORS AT EIGHT AND ELECT A BOARD OF
DIRECTORS FOR THE ENSUING PERIODS.

[ ] 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)

Charles L. Jarvie, Angelo S. Morini, Thomas R. Dyckman, Joseph J. Juliano,
David H. Lipka, Christopher J. New, C. Anthony Wainwright, Patrice M.A.
Videlier

2.) PROPOSAL TWO: TO APPROVE THE ISSUANCE BY THE COMPANY OF COMMON STOCK IN THE
EVENT OF A CONVERSION OF THE COPMANY'S SERIES A CONVERTIBLE PREFERRED STOCK
AND UPON THE EXERCISE OF CERTAIN WARRANTS HELD BY THE SERIES A CONVERTIBLE
PREFERRED STOCKHOLDERS.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

(Continued and to be signed on reverse side)

3.) PROPOSAL THREE: TO APPROVE THE ISSUANCE BY THE COMPANY OF COMMON STOCK OR
SECURITIES CONVERTIBLE INTO COMMON STOCK IN A POTENTIAL OFFERING, THE
PROCEEDS OF WHICH WILL BE USED TO FINANCE THE COMPANY'S REDEMPTION OF ANY
OUTSTANDING, UNCONVERTED SERIES A CONVERTIBLE PREFERRED STOCK AND TO PAY
ALL COSTS AND EXPENSES RELATED TO SUCH OFFERING AND REDEMPTION.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4.) PROPOSAL FOUR: TO APPROVE CERTAIN ISSUANCES AND POTENTIAL ISSUANCES OF
COMMON STOCK OR OTHER SECURITIES CONVERTIBLE INTO COMMON STOCK BY THE
COMPANY TO OFFICERS, DIRECTORS AND KEY EMPLOYEES.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

5.) PROPOSAL FIVE: TO RATIFY THE RETENTION OF BDO SEIDMAN, LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEARS ENDING MARCH 31,
2003 AND MARCH 31, 2004.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

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, FOR proposal 2,
FOR proposal 3, FOR proposal 4 and FOR
proposal 5. 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.

Date:___________________________________
Signature:______________________________
Signature:______________________________

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