Press Releases

Medifast, Inc. reported today record first quarter revenue for the period ended March 31, 2005. The Company reported revenue of $8.33 million, versus $6.82 million for the same period in 2004, representing an increase of $1.51 million or 22% from the first quarter of 2004. Medifast generated pre-tax Income from Operations of $854,000 versus $894,000 in the 2004 first quarter.

The Company reported net income of $507,000, or $0.04 per share ($0.04 per share on a fully diluted basis) in the first quarter of 2005, versus $647,000, or $0.06 per share ($0.05 per share on a fully diluted basis) for the 2004 first quarter. Earnings per share were affected by the dilution caused by the conversion of the remaining Series “B” Preferred Stock during the first quarter. Selling, General and Administrative expenses increased from $4.5 million in the year earlier period to $5.3 million in the 2005 first quarter. This was partially a result of increased commissions from increased revenues as well as overall corporate infrastructure improvements. SG&A also increased due to initial expenses related to the opening of corporately owned Hi-Energy Weight Control Clinics in the Dallas/Ft. Worth, Texas area.

The Company improved Stockholders’ Equity at the end of the first quarter of 2005 to $19.7 million, versus $19.2 million at December 31, 2004. The Company ended the quarter with $916,000 in cash and cash equivalents, along with $2.6 million in investment securities. The first quarter of 2005 represented the Company’s twenty-second consecutive quarter of profitability.

At the close of the first quarter of 2004, the Company’s fully diluted shares outstanding were 12,157,860 versus 12,729,459 at the end of the first quarter 2005. The Company does not anticipate significant dilution in the near future from the conversion of Preferred Stock, because the conversion of the remaining 200,000 shares of Series “C” Preferred stock has been accounted for in the fully diluted shares outstanding.

“We are happy with our first quarter results,” stated Michael S. McDevitt, Medifast’s President. “All of our divisions have made great strides this quarter, and the proof is in the results.”

Throughout the first quarter, Medifast continued to increase its advertising campaign which assisted in generating increased revenues and brand awareness. The campaign consisted of print, TV, Internet and radio advertising. The Medifast website, http://www.medifastdiet.com/, is an increasingly powerful sales channel, which now includes message boards so that Medifast’s customers can share their dieting experiences and successes with others.

The Take Shape for Life Health Network continues to grow its network of Certified Health Advisors and increase sales through multiple recruiting initiatives. During the quarter, Take Shape for Life introduced the “Blueprint for Success” training program. The program assisted in increasing revenues and helped to add new Health Advisors to the TSFL network. This extensive training is comprised of two manuals, one for new Health Advisors and another for existing Health Advisors. The program is designed to educate Health Advisors on customer acquisition, selling, retention, recruiting and business building techniques.

The Company’s Hi-Energy Weight Control Centers also continued to expand. The Company entered into a partnership with Kerr Drug Stores to place four full-service Hi-Energy Weight Control Centers within the drug stores. It is part of a “store within a store” program under Kerr Drug’s clinical pharmacy program. This program has received widespread publicity in the pharmaceutical industry. “We are very excited about our new partnership with Kerr Drug,” said Brad MacDonald, Medifast’s Executive Chairman. “Our clinically proven products and programs will provide another solution for the clinical pharmacist to improve the overall health and weight of their customers.”

In addition, in January 2005, the Company opened four corporately owned Hi-Energy Weight Control Centers in the Dallas/Ft. Worth, Texas area. These centers will also serve as business models for recruitment of Licensee owned centers.

The Company, well known for its clinically proven programs, is citing one more study proving the efficacy of its programs. In January 2005, the Johns Hopkins Bloomberg School of Public Health concluded an 86-week study of Type 2 Diabetics using Medifast Plus for Diabetics compared to an American Diabetic Association (ADA) recommended diet. The preliminary results of the first 34 weeks of the study showed that those study volunteers on Medifast Plus for Diabetics lost twice as much weight and were twice as compliant as compared to those following the basic nutrition recommendations from the ADA. The final study results are scheduled to be presented at the American Diabetes Association Annual Sessions on June 10, 2005 in San Diego, CA.

2005 Financial Guidance

The Company expects to report full-year revenue of $32 to $34 million with a pretax profit of $0.24 to $0.29 per diluted share. For the second quarter ending June 30, 2005, Medifast expects to report revenue of $8.4 to $8.6 million, and pretax profit of $850,000 to $1.0 million or $0.07 to $0.08 per diluted share.

The Company will hold a conference call and webcast today at 4:30 pm. Interested participants should call (800) 706-7745 when calling within the United States or (617) 614-3472 when calling internationally. Please refer to passcode 44728898. There will be a playback available as well. To listen to the playback, please call (888) 286-8010 when calling within the United States or (617) 801-6888 when calling internationally. Please use passcode 99025639 for the replay. The replay will be available until July 5, 2005.

The webcast may be accessed via the Company’s web site at http://www.medifastdiet.com/. Interested parties should go to the section marked “Investor Relations” to listen to the call. The webcast can be accessed until July 5, 2005.

About Medifast: (http://www.medifastdiet.com/)

Medifast has been helping people lose weight and achieve better health for almost 25 years. Its meal replacement foods have been proven effective at Johns Hopkins University, recommended by over 15,000 physicians and used by more than 1,000,000 customers. Medifast offers its customers world-class customer service, technical and medical support.

Forward-Looking Statement Disclaimer

This release contains forward-looking statements that may involve known, and unknown risks, uncertainties and other factors that may cause Medifast’s actual results and performance in future periods to be materially different from any future results or performance suggested by these statements. Medifast cautions investors not to place undue reliance on forward-looking statements, which speak only to management’s expectations or beliefs on this date.

                        MEDIFAST, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                          March 31, 2005  December 31, 2004
                                           (Unaudited)        (Audited)
   ASSETS
   Current assets:
     Cash                                     $916,000         $612,000
     Accounts receivable-net of
      allowance for doubtful
      accounts of $100,000
      and $87,000, respectively              1,159,000        1,063,000
     Inventory                               4,462,000        4,251,000
     Investment securities                   2,635,000        2,626,000
     Deferred compensation                     321,000          321,000
     Prepaid expenses and other current
      assets                                 1,293,000        1,079,000
     Deferred tax asset                         24,000           19,000
          Total Current Assets              10,810,000        9,971,000

   Property, plant and equipment - net       8,981,000        8,698,000
   Trademarks and intangibles - net          6,937,000        7,138,000
   Deferred tax asset, net of current
    portion                                    121,000           91,000
   Other assets                                 70,000           70,000

          TOTAL ASSETS                     $26,919,000      $25,968,000

   LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities:
     Accounts payable and accrued
      expenses                              $1,136,000         $940,000
     Income taxes payable                      357,000          674,000
     Dividends payable                          65,000           65,000
     Line of credit                            660,000          369,000
     Current maturities of
      long-term debt                           555,000          458,000
          Total current liabilities          2,773,000        2,506,000

     Long-term debt, net of current
      portion                                4,398,000        4,256,000
          Total Liabilities                  7,171,000        6,762,000

   Stockholders' Equity:

   Series B Convertible Preferred Stock;
    par value $1.00; 600,000 shares
    authorized; 0 and 300,614 shares
    issued and outstanding                           -          301,000
   Series C Convertible Preferred Stock;
    stated value $1.00;
    1,015,000 shares authorized;
    200,000 shares issued and
    outstanding                                200,000          200,000
   Common stock; par value $.001 per
    share; 15,000,000 authorized;
    12,173,456 and 11,001,070 shares
    issued and outstanding,
    respectively                                12,000           11,000
   Additional paid-in capital               21,229,000       20,556,000
   Accumulated comprehensive loss              (96,000)         (39,000)
   Accumulated deficit                      (1,061,000)      (1,287,000)
                                            20,284,000       19,742,000
   Less cost of 78,160 shares of common
    stock in treasury                         (536,000)        (536,000)
   Total Stockholders' Equity               19,748,000       19,206,000

   TOTAL LIABILITIES & STOCKHOLDERS'
    EQUITY                                 $26,919,000      $25,968,000


                        MEDIFAST, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME


                                           Three months Ended March 31,
                                              2005              2004
                                          (Unaudited)       (Unaudited)

    Revenue                                $8,326,000        $6,817,000
    Cost of sales                           2,073,000         1,350,000
    Gross Profit                            6,253,000         5,467,000
    Selling, general, and
     administration                         5,341,000         4,548,000

    Income from operations                    912,000           919,000

    Other income/(expense)
         Interest expense                     (65,000)          (23,000)
         Interest income                       28,000                 -
         Other expense                        (21,000)           (2,000)

    Income before provision for income
     taxes                                    854,000           894,000
    Provision for income tax (expense)       (347,000)         (247,000)

    Net income                               $507,000          $647,000


    Basic earnings per share                    $0.04             $0.06
    Diluted earnings per share                  $0.04             $0.05

    Weighted average shares outstanding -
         Basic                             11,916,241        10,610,391
         Diluted                           12,729,459        12,157,860

SOURCE: Medifast, Inc.