SALES & MARKETING PROGRESS...

Preliminary numbers reflect we have finished the fiscal year with record sales and margins that exceeded expectations.

Sales are continuing at record pace with increased interest from the international community.  (Further indication that international consumers are ready for a new, nutritious alternative to dairy.)  Steps are being taken to develop a sales network of brokers and distributors to handle this additional business.  This dramatic increase in sales and projected sales will enable us to make an investment in consumer advertising.  Our staff is in the process of putting together a comprehensive marketing and advertising budget to promote the Veggie brand in select markets where distribution is extensive. 
The overall plan consists of six key points:

The first two markets that will be addressed are the New England area and Florida. These are two markets in which Galaxy Foods is on the shelf of nearly every supermarket. Advertising will begin during the first quarter of the fiscal year. 

We are planning for an extraordinary return on this investment; and we have taken steps to prepare our staff, manufacturing and the balance of our infrastructure for the projected sales increase that this level of consumer advertising will generate. We'll keep you posted in the Monthly Insight.

AROUND THE WORLD...

Good news from Mexico! The government and the trade has officially welcomed our products into the country and we should begin shipping the first quarter of fiscal '99.  Other international sales continue to increase at a steady pace and negotiations are under way to establish an international network of brokers and distributors to help manage this growth. An agreement has already been reached with a distributor covering 2,000 supermarkets in the U.K. to complement our already existing health food distribution in our Soyco division. We expect to begin shipments by the end of the first quarter of fiscal year 1999.

New distribution has been gained in Kuwait, Israel and Denmark; and Cyprus has placed a second order which far surpassed original expectations. We're also expecting good news soon from France, Germany, Italy and Switzerland.

Great news on the store front! Galaxy sales force has landed the Food Lion account -- all 1200 stores nationwide!! Winn Dixie Orlando's 105 stores will be placing seven items in their produce set; Dillon Stores (KS) will be setting 11 skus and Hillers Markets (MI) will be placing 9 skus in produce. Other successes for March include Caito Foods (MN) six new items, and C$S Wholesale (NJ) five new items.

Consumers are confirming Veggie Slices(r) are becoming the cheese of choice. In February 1997 Galaxy sold 6,000 cases of Veggie Slices(r). In February 1998, a total of 37,000 cases of Veggie Slices(r) were shipped out! That's more than a 600% increase in sales!

The number one seller in the Soyco Foods division continues to be the Rice Slice(r). Sales of the Rice Slice(r) in fiscal '98 have increased by 26% over the same period in fiscal '97.

IN RESTAURANTS...

A promotional sign for the Veggie Slice Low-Fat pizza has been shipped to each Sbarro restaurant nationwide. Additional stickers, coupons and pizza labels have also been sent. Reports are coming in daily that demand has been so high Sbarro is having to increase the size and frequency of orders. Sbarro has also created five new pizza recipes because of Galaxy's formagg(r) low-fat cheese!!

Galaxy expects to make an announcement in the near future on two pending deals that will translate into significant restaurant business. Keep your eye on the Monthly Insight!

IT'S SHOW TIME...

On March 13 - 15 Galaxy participated in the Natural Products Industry's Expo West, the largest of its kind.  It is estimated up to 25,000 people attended the show.

This show served as the initial introduction of our Lite Bakery(r) product line and Soft & Creamy(r) soy soft serve. Inquiries into this product are being followed up by brokers and sales staff and initial response is going well. Our largest distributor has expressed sincere interest in the entire Lite Bakery(r) product line.

Galaxy's Soyco Foods definitely made an impact on those who stopped by to sample cheese, try a freshly-cooked quesadilla made with Rice(r) and Veggy Slices(r), sample baked goods made with our Lite Bakery(r) mix and top  it all off with a cone of our Soft & Creamy soy soft serve.

Of particular interest was the number of international business professionals who stopped by to affirm the interest in American health food, especially soy and rice-based cheese products.

NEW PRODUCTS...

Another first from Galaxy!  Galaxy Foods is proud to announce the introduction of new Tofu Slices(r) made with organic tofu. Now you can enjoy your favorite tofu flavors (original, savory, smoked hickory and italian garlic and herb) in convenient slices. Each pack contains eight 1-oz. slices.  And, not only can you use Tofu Slices(r) on sandwiches, salads and stir fry, but you can also make a quick cup of soup! Pour one cup of hot water over two slices and salt to taste! The first shipment of Tofu Slices(r) is on its way to Canada and sales efforts in the United States are producing significant interest.

Several large distributors have expressed interest in the Lite Bakery(r) and Soft & Creamy(r) product lines. Reaction to the products at Expo West was phenomenal.

New packaging for chunk products has arrived. This new hot process film looks fantastic and will definitely add to the overall aesthetics of our line.

HIGHEST RATING RECEIVED...

Galaxy Foods recently received its annual audit/food safety inspection by the American Institute of Baking (AIB) and was given the highest rating possible - SUPERIOR. A Superior rating indicates the manufacturer has implemented procedures and made investments in equipment which will guarantee freshness and the safety of its food.  The AIB publishes these scores and distributes the results worldwide. This rating affirms to our customers that they are receiving the highest quality products manufactured with extremely high standards of hygiene and food safety.

Other news from the manufacturing front:

QUOTE FOR THE MONTH...

"With regard to excellence, it is not enough to know, but we must try to have and use it." Aristotle