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                            GALAXY NUTRITIONAL FOODS

For Immediate Release:                  Contact:
August 3, 2006                          Dawn M. Robert, Investor Relations
                                        Galaxy Nutritional Foods, Inc.
                                        (407) 854-0433

              GALAXY NUTRITIONAL FOODS ANNOUNCES LEASE TERMINATION
                AGREEMENT THAT REDUCES FUTURE LEASE OBLIGATIONS

ORLANDO, Florida (August 3, 2006) Galaxy Nutritional Foods, Inc. (OTC BB: GXYF),
a leading  developer  and  marketer  of  cheese  alternative  and  dairy-related
products,  today  announced the execution of an agreement  that  terminates  its
operating lease on unused distribution facilities in Orlando, Florida.

Under the terms of the agreement with its landlord,  CLP Industrial  Properties,
the Company will be released from $1,068,869 in future payment obligations under
its current  operating  lease,  in exchange  for a  termination  fee of $228,859
payable as follows: $128,859 upon signing of the agreement; followed by payments
of $75,000 and $25,000 to be made thirty days and  forty-five  days  thereafter,
respectively.

"Following  the  full   implementation   of  our  production  and   distribution
outsourcing  agreement in December  2005,  we had no further need for our 64,000
square feet of  distribution  facilities in Orlando."  commented  Michael Broll,
Chief Executive  Officer of Galaxy  Nutritional  Foods,  Inc. "We are pleased to
announce this agreement,  which in exchange for the termination fee, reduces our
future lease obligations by approximately  $1.1 million,  thereby  strengthening
our balance sheet and enhancing  the  Company's  plans to restore  positive cash
flows in the future."

Additionally,  the Company expects to relocate its corporate  headquarters  from
its current 55,000 square foot manufacturing facility to a much smaller and more
cost-effective  office  facility  within  the next 120  days.  The  lease on the
current manufacturing facility expires in November 2006.

About Galaxy Nutritional Foods, Inc.

Galaxy  Nutritional  Foods,  Inc. (OTC BB: GXYF)  develops and globally  markets
plant-based cheese and dairy  alternatives,  as well as processed organic cheese
and cheese food to grocery and natural foods retailers,  mass  merchandisers and
foodservice   accounts.   Veggie,  the  leading  brand  in  the  grocery  cheese
alternative  category and the Company's top selling  product group, is primarily
merchandised  in the produce  section and provides  calcium and protein  without
cholesterol,  saturated fat or trans-fat.  Other popular brands  include:  Rice,
Veggy, Vegan, and Wholesome Valley.  Galaxy Nutritional Foods, Inc. is dedicated
to developing nutritious products to meet the taste and dietary needs of today's
increasingly   health  conscious   consumers.   For  more   information,   visit
www.galaxyfoods.com.


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Galaxy  Nutritional  Foods, Inc. is headquartered in Orlando,  Florida,  and its
common stock is quoted on the OTC Bulletin Board under the symbol "GXYF".

THIS PRESS RELEASE CONTAINS  "FORWARD-LOOKING"  STATEMENTS WITHIN THE MEANING OF
THE  PRIVATE  SECURITIES  LITIGATION  REFORM ACT OF 1995.  SUCH  FORWARD-LOOKING
STATEMENTS  INVOLVE  KNOWN AND UNKNOWN  RISKS,  UNCERTAINTIES,  OR OTHER FACTORS
WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE
MATERIALLY  DIFFERENT  FROM ANY  FUTURE  RESULTS,  PERFORMANCE  OR  ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING  STATEMENTS.  READERS ARE CAUTIONED
NOT TO PLACE UNDUE  RELIANCE ON THOSE  FORWARD-LOOKING  STATEMENTS,  WHICH SPEAK
ONLY AS OF THE DATE HEREOF.  THE COMPANY  UNDERTAKES  NO  OBLIGATION TO PUBLICLY
RELEASE ANY REVISIONS TO THESE  FORWARD-LOOKING  STATEMENTS TO REFLECT EVENTS OR
CIRCUMSTANCES  AFTER  THE DATE  HEREOF  OR TO  REFLECT  UNANTICIPATED  EVENTS OR
DEVELOPMENTS.

RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY AND ADVERSELY  FROM THOSE IN THE  FORWARD-LOOKING  STATEMENTS  HEREIN
INCLUDE (THE "CAUTIONARY STATEMENTS"), WITHOUT LIMITATION: THE COMPANY'S ABILITY
TO FIND NEW OFFICE SPACE, ITS ABILITY TO EXECUTE ITS BUSINESS STRATEGY IN A VERY
COMPETITIVE  ENVIRONMENT,  OUR  ABILITY  TO RESTORE  POSITIVE  CASH FLOWS IN THE
FUTURE,  AND OTHER RISKS  REFERENCED FROM TIME TO TIME IN THE COMPANY'S  FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION.


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