Edgar Filing: MEDIFAST INC

SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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of the Securities Exchange Act of 1934
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(Name of Registrant as Specified in Its Charter)

MEDIFAST, INC.
---------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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[LOGO] MEDIFAST, INC.

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MEDIFAST, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held September 16, 2005

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

To the Shareholders of Medifast, Inc.:

You are invited to be present either in person or by proxy at the Annual Meeting
of Shareholders of Medifast, Inc., (the "Company"), to be held on Friday,
September 16, 2005 at The Roland E. Powell Convention Center. The Convention
Center is located at 4001 Coastal Highway, Ocean City, MD 21842. The meeting
will begin at 11:00 A.M., Eastern Daylight Time, for the following purposes:

(1) To elect a classified Board of Directors consisting of seven
directors, divided into three classes. Class I directors were
elected to a three year term in 2004, with that term expiring in
2007. Class II directors are up for election for a three-year term,
that will expire in 2008 and the term of Class III will expire at
the next Annual Meeting of Shareholders in 2006, at which their
class term expires and their respective successors will be duly
elected and qualified.

(2) To approve the re-appointment of Bagell, Josephs & Company, LLC, an
independent member of the BDO Seidman alliance, as the Company's
independent auditors for the fiscal year ending December 31, 2005.

(3) To increase the number of authorized shares of common stock by 5
million shares to 20 million shares authorized.

(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.

Your Board of Directors urges shareholders to vote FOR Items 1, 2, and 3.

All of these proposals are more fully described in the Proxy Statement that
follows. Shareholders of record at the close of business on August 4, 2005, will
be entitled to vote at the meeting and any adjournments thereof.

By Order of the Board of Directors,

/s/ Bradley T. MacDonald

Bradley T. MacDonald
Chairman of the Board
& Executive Chairman
August 11, 2005

CONTENTS

Page
----

Proxy Statement.............................................................. 2
Proxy Solicitation........................................................... 2
Item 1. Election of Directors................................................ 3
Principal Stockholders....................................................... 6
Security Ownership of Directors and Executive Officers....................... 7
Executive Compensation....................................................... 7
Report of the Audit Committee................................................ 8
Section 16(a) Beneficial Ownership Reporting Compliance...................... 9
Performance Comparison....................................................... 10
Item 2. Ratification of Appointment of Independent Auditors.................. 11
Annual Report................................................................ 12
Other Matters................................................................ 12

MEDIFAST, INC.
11445 Cronhill Drive
Owings Mills, MD 21117
(410) 581-8042

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

PROXY STATEMENT
FOR 2005 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 16, 2005

GENERAL INFORMATION

This proxy statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Medifast, Inc., a
Delaware corporation (the "Company" or "Medifast"), to be voted at the
Annual Meeting of Shareholders (the "Meeting") scheduled to be held at The
Roland E. Powell Convention Center. The Convention Center is located at
Ocean City, MD 21842. The meeting will begin at 11:00 A.M., Eastern
Daylight Time, Friday, September 16, 2004, and at any adjournments
thereof.

Only shareholders of record as of the close of business on August 4,
2005* are entitled to notice of and to vote at the Meeting or any
adjournment thereof. On that date, the Company had outstanding 12,639,001
shares of Common Stock, par value $.01 per share (the "Common Stock")
issued less 78,160 shares of treasury stock leaving a total of 12,560,841
shares of common stock outstanding and entitled to vote on all matters.
Each outstanding share of common stock entitles the holder to one vote.
The presence in person or by proxy of the holders of a majority of the
outstanding common stock is necessary to constitute a quorum at the
meeting.

Each form of proxy which is properly executed and returned to the
Company will be voted in accordance with the directions specified thereon,
or, if no directions are specified, will be voted (i) for the election as
Directors of the persons named herein under the caption "Election of
Directors," (ii) for the approval of the re-appointment of Bagell, Josephs
& Company, LLC as the Company's independent auditors for the fiscal year
ending December 31, 2005 and (iii) to increase the number of authorized
shares of Common Stock by 5 million shares from 15 million to 20 million
shares. Any stockholder giving a proxy may revoke it at any time before it
is exercised. Such revocation may be affected by voting in person or by
proxy at the Meeting, by returning to the Company prior to the Meeting a
proxy bearing a later date, or by otherwise notifying the Secretary of the
Company in writing prior to the Meeting. The Company is not aware of any
matter, other than as referred to in this proxy statement, to be presented
at the meeting.

The Company's executive offices are at 11445 Cronhill Drive, Owings
Mills, Maryland 21117 and its telephone number is (410) 581-8042. This
proxy statement and the accompanying proxy are first being distributed to
the shareholders of the Company on or about August 15, 2005.

* Record Date

PROXY SOLICITATION

The cost of soliciting proxies will be borne by the Company. In addition
to the use of mail, proxies may be solicited personally, by telephone,
telegraph, by officers, directors and regular employees of the Company, who will
not be specially compensated for this purpose. The Company will also request
record holders of Common Stock who are securities brokers, custodians, nominees
and fiduciaries to forward soliciting material to the beneficial owners of such
stock, and will reimburse such brokers, custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses in forwarding soliciting material.

ITEM 1. ELECTION OF DIRECTORS

The Board of Directors are divided into three classes consisting of Class
I, Class II, and Class III. At the 2004 Annual Meeting Class I directors
consisting of Bradley T. MacDonald and Fr. Donald F. Reilly were elected to a
three-year term expiring in 2007. The Annual Meeting represents the re-election
of Class II and Class III directors. Directors for each of the two classes will
need to be elected at the Annual Meeting. Only Class III directors terms will
expire and will need to be elected at the next annual meeting.

The number of directors in each class is determined by the Board of
Directors and consists of as nearly equal a number of directors as possible. The
term of Class I will expire in 2007. The term of Classes II will expire in 2008.
Class III will then be up for re-election for a one-year term, followed by an
election for a three-year term ending in 2009.

The Board of Directors has nominated the nominees named below, which
nominees are currently serving as directors and have indicated their willingness
to continue serving as directors. The Board of Directors knows of no reason why
such nominees would be unable to serve as directors. If any of the nominees
should for any reason become unable to serve, then valid proxies will be voted
for the election of such substitute nominee as the Board of Directors may
designate. The three nominees for Class II Directors are Michael C. MacDonald,
Mary T. Travis and Rev. Joseph Calderone. The two nominees for Class III
Directors are Michael J. McDevitt, and George Lavin, Jr., Esq.

Each director serves until his or her successor is elected and qualified
or until his or her death, retirement, resignation, or removal. Should a vacancy
occur or be created, whether arising through death, resignations, retirement or
removal of a director, the vacancy will be filled by a majority vote of the
remaining directors. A director so elected to fill a vacancy will serve for the
remainder of the present term of office of the class to which he or she was
elected.

Information Concerning Nominees

The name and age of each nominee and the year he/she became a director of the
Company, according to information furnished by each, is as follows:

YEAR FIRST
ELECTED AS
NAME AGE A DIRECTOR
---- --- ----------
Bradley T. MacDonald (1)(4)(6) ......................... 57 1996
Rev. Donald F. Reilly, O.S.A. (3)(4) ................... 58 1998
Michael C. MacDonald (1)(4) ............................ 52 1999
Michael J. McDevitt (3)(4) ............................. 56 2002
Mary T. Travis (2)(3)(5) ............................... 53 2002
Rev. Joseph Calderone, O.S.A. (2)(5) ................... 57 2003
George Lavin, Jr., Esq. (5) ............................ 76

----------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Nomination Committee
(5) Independent director per the American Stock Exchange regulations.
(6) Executive Chairman and Chief Financial Officer

Class I Directors

Bradley T. MacDonald became Chairman of the Board and Chief Executive Officer of
Medifast, Inc. on January 28, 1998. Prior to joining the Company, he was
appointed as Program Director of the U.S. Olympic Coin Program of the Atlanta
Centennial Olympic Games. Mr. MacDonald was previously employed by the Company
as its Chief Executive Officer from September 1996 to August 1997. From 1991
through 1994, Colonel MacDonald returned to active duty to be Deputy Director
and Chief Financial Officer of the Retail, Food, Hospitality and Recreation
Businesses for the United States Marine Corps. Prior thereto, Mr. MacDonald
served as Chief Operating Officer of the Bonneau Sunglass Company, President of
Pennsylvania Optical Co., Chairman and CEO of MacDonald and Associates, which
had major financial interests in a retail drug, consumer candy, and pilot
sunglass companies. Mr. MacDonald was national president of the Marine Corps
Reserve Officers Association and retired from the United States Marine Corps
Reserve as a Colonel in 1997, after 27 years of service. He has been appointed
to the Defense Advisory Board for Employer Support of the Guard and Reserve
(ESGR). Mr. MacDonald serves on the Board of Directors of the Wireless
Accessories Group (AMEX: XWG) an American Stock Exchange listed Company. He is
also on the Board of Directors of the Marine Corps Reserve Toys for Tots
Foundation and is a Foundation Trustee of the Marine Reserve Association.

Very Reverend Donald Francis Reilly, O.S.A. holds a Doctorate in Ministry
(Counseling) from New York Theological and an M.A. from Washington Theological
Union as well as a B.A. from Villanova University. Very Reverend Reilly was
ordained an Augustinian priest in 1974 and now serves as the Provincial for the
Augustinian Order at Villanova, Pennsylvania. He is currently on the Board of
Trustees of Villanova University, is President of the Board of "Bird Nest" in
Philadelphia, Pennsylvania and is board member of Prayer Power. Fr. Reilly
oversees more than 250 Augustinian Friars and their service to the Church,
teaching at universities and high schools, ministering to parishes, serving as
chaplains in the Armed Forces and hospitals, ministering to AIDS victims, and
serving missions in Japan, South America, and South Africa. He is a member of
the Medifast Compensation and Nomination Committees.

Class II Directors

Michael C. MacDonald, a Director, is a corporate officer and President of Global
Accounts and Marketing Operations, for the Xerox Corporation. Mr. MacDonald's
former positions at Xerox Corporation include executive positions in the sales
and marketing areas. He is currently on the Board of Trustees of Rutgers
University and a Director of the Jimmy V Foundation. Mr. MacDonald is the
brother of Bradley T. MacDonald, the CEO of the Company. He is a member of the
Medifast Executive and Nomination Committees.

Mary T. Travis is currently the Senior Vice President of Wholesale Operations
for Sunset Mortgage Company, L.P. in Pennsylvania and was formerly the Vice
President of Operations for the Financial Mortgage Corporation. Mrs. Travis is
an expert in mortgage banking with over 36 years of diversified experience. She
is an approved instructor of the Mortgage Bankers Association Accredited School
of Mortgage Banking and is a Delegate and 2nd Vice president of the Mortgage
Bankers Association of Greater Philadelphia. She is a member of the Medifast
Audit Committee and is the qualified financial expert per the American Stock
Exchange and Securities and Exchange Commission regulations. She is also a
member of the Medifast Compensation Committee.

Reverend Joseph D. Calderone, O.S.A., Ed.D., is the Associate Director of Campus
Ministry at Villanova University. Prior to his work at Villanova University,
Reverend Calderone spent over eight years with the Loyola University Medical
Center as the hospital Chaplain and taught multiple courses including
Introduction to the Practice of Medicine and Business Ethics. Rev. Calderone has
taught at Merrimack College, Rollins College, St. Leo's College, De Paul
University and Washington Theological Union. Also, he is currently a Captain in
the US Navy Reserves and serves as the Wing Chaplain for the 4th Marine Aircraft
Wing. He is a member of the Medifast Audit Committee.

Class III Directors

Michael J. McDevitt, a Director, is a retired FBI Special Agent with over 29
years of government service with the United States Marine Corps and the FBI. He
had attained Senior Executive status within the FBI's Investigative Technology
Branch and is currently employed within the private sector as a physical
security specialist.

George Lavin, Jr. Esq., is a senior partner at Lavin, Oneil, Ricci, Ceprone &
Disipio. Mr. Lavin is a 1951 graduate of Bucknell University. He attended the
University of Pennsylvania School of Law, receiving an LL.B. in 1956, and then
served as a Special Agent, Federal Bureau of Investigation, United States
Department of Justice, until 1959. Mr. Lavin is one of the dominant product
liability defense attorneys in the nation. He has had regional responsibilities
in several automotive specialty areas, and has been called upon to try matters
throughout the county on behalf of his clients. Mr. Lavin's present practice and
specialty emphasizes his commitment to defending the automotive industry. Mr.
Lavin is admitted to practice before the Supreme Court of Pennsylvania, the
United States Court of Appeals for the Third Circuit and the United States
District Courts for the Eastern and Middle Districts of Pennsylvania. He is a
member of the Faculty Advisory Board of the Academy of Advocacy, the Association
of Defense Counsel, The Defense Research Institute, The American Board of Trial
Advocates, and the Temple University Law School faculty. He has also been
elected a fellow of the American College of Trial Lawyers. On March 1, 1994, Mr.
Lavin assumed the title of Counsel to The Firm.

Meetings and Committees of the Board

For the fiscal year ended December 31, 2004 ("Fiscal 2004"), the Board of
Directors held four (4) meetings, including those in which matters were adopted
by unanimous written consent. The Board has an Audit Committee, an Executive
Committee, a Nomination Committee and a Compensation Committee. The purpose and
responsibilities for each of these committees is outlined in committee charters
adopted by the Board. The Board may, from time to time, form a new committee or
disband a current committee depending on circumstances. In addition, the Board
may determine to form ad hoc committees from time to time, and determine the
composition and areas of competence of such committees.

The Audit Committee of the Board of Directors consists of Mrs. Mary T.
Travis, Rev. Joseph Calderone, O.S.A. and Mr. R. Scott Zion. The primary
function of the committee is to assist the Board of Directors in fulfilling
their oversight responsibilities by reviewing: the financial reports and other
financial information provided by the Corporation to any governmental body or
the public; the Corporation's systems of internal controls regarding finance,
accounting, legal compliance, and ethics that management and the Board have
established; and the Corporation's auditing, accounting and financial reporting
processes generally. The committee held five (5) meetings during fiscal year
2004. The Audit Committee encourages continuous improvement of, and fosters
adherence to, the corporation's policies, procedures and practices at all levels
and has ensured that the Company complies with the provisions of the
Sarbanes-Oxley Act.

Messrs. Michael C. MacDonald, R. Scott Zion, and Bradley T. MacDonald are
members of the Executive Committee. The Executive Committee has all the
authority of the Board of Directors, except with respect to certain matters that
by statute may not be delegated by the Board of Directors. The Committee meets
periodically during the year to develop and review strategic operational and
management policies for the Company. The Committee held three (3) meetings
during fiscal year 2004.

The Compensation Committee of the Board of Directors held two (2) meetings
during fiscal year 2004. The members were Rev. Donald F. Reilly O.S.A, Mr.
Michael J. McDevitt, and Mrs. Mary T. Travis. The primary purpose of the
Compensation Committee is to assist the Board in discharging its
responsibilities with respect to compensation of the Company's executive
officers and to produce an annual report for inclusion in the Company's proxy
statement on executive compensation. The Committee approved a contract base
salary for Mr. MacDonald, the Chief Executive Officer of $225,000, which has
remained the same since 2003. The board made a $100,000 contribution to his
Selective Retirement Plan for the improved Balance Sheet, increased revenue and
profit generated in 2004.

The Chairman of each committee, in consultation with the committee
members, will determine the frequency and length of the committee meetings
consistent with any requirements set forth in the committee's charter. The
Chairman of each committee, in consultation with the appropriate members of the
committee and management, will develop the committee's agenda. The schedule for
each committee will be furnished to all directors.

Mr. Scott Zion, was nominated and selected as a Class III Director by the
Chairman of the Board, Bradley MacDonald. Mr. Zion is involved in a transaction
that may or may not affect his independence as a director according to the rules
of the American Stock Exchange. Once counsel gives an opinion on Mr. Zion's
independence, he will be nominated as a Class III Director and the Board will
conduct a special vote to elect him to the Board of Directors. Mr. Zion has been
a valuable member of the Board of Directors of Medifast since 1999. If counsel
deems he is not independent, he will be designated as "Special Counsel to the
Chairman of the Board."

DIRECTORS' COMPENSATION

The Company is authorized to pay a fee of $300 for each meeting attended
by its directors who are not executive officers. It reimburses those who are not
employees of the Company for their expenses incurred in attending meetings.
Independent Directors claimed $17,500 in Director's fees and/or expenses in
2004. See "Executive Compensation - Stock Options" for stock options granted
under the 1993 Plan to the Directors. The Company authorized a stock grant under
rule 144 of 5,000 shares to the following directors: Michael J. McDevitt, Mary
Travis, R. Scott Zion, Rev. Donald F. Reilly, Rev. Joseph Calderone and Michael
C. MacDonald in January 2005.

PRINCIPAL STOCKHOLDERS

The following table sets forth as of August 4, 2005, information
concerning the ownership of Common Stock and Preferred Stock by persons which,
to the Company's knowledge, own beneficially more than 5% of the outstanding
shares of Common Stock or Preferred Stock.

Common Stock % of
Name and Address Beneficially Owned Outstanding
---------------- ------------------ -----------
Bradley T. MacDonald ................. 1,306,206 10.3%
11445 Cronhill Drive
Owings Mills, MD 21117

RNI-NV Limited Partnership ........... 1,138,830 9.0%

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information with respect to the beneficial
ownership of shares of Common Stock or voting Preferred Stock as of August 4,
2005 of the Chief Executive Officer, each Director, each nominee for Director,
each current executive officer named in the Summary Compensation Table under
"Executive Compensation" and all executive officers and directors as a group.
The number of shares beneficially owned is determined under the rules of the
Securities and Exchange Commission and the information is not necessarily
indicative of beneficial ownership for any other person. Under such rules,
"beneficial ownership" includes shares as to which the undersigned has sole or
shared voting power or investment power and shares, which the undersigned has
the right to acquire within 60 days of March 15, 2004 through the exercise of
any stock option or other right. Unless otherwise indicated, the named person
has sole investment and voting power with respect to the shares set forth in the
table.

NUMBER % OF
NAME AND ADDRESS* OF SHARES OUTSTANDING
----------------- --------- -----------
Bradley T. MacDonald ............................ 1,306,206(1) 10.3%
Donald F. Reilly ................................ 65,452(2) 0.5%
Michael C. MacDonald ............................ 50,854(2) 0.4%
Scott Zion ...................................... 190,000(2) 1.5%
Mary Travis ..................................... 12,500(2) 0.10%
Michael J. McDevitt ............................. 18,900(2) 0.15%
Rev. Joseph Calderone ........................... 5,000(2) 0.04%

Executive Officers and Directors as a group
(7 persons) ................................... 1,648,912 13.05%

*The address is c/o Medifast, Inc., 11445 Cronhill Drive, Owings Mills, Maryland
21117

(1) Mr. MacDonald beneficially owns 1,306,206 shares of common stock. Mrs.
Shirley D. MacDonald and Ms. Margaret E. MacDonald, wife and daughter of
Mr. MacDonald, individually or jointly own 485,605 shares of stock.
(2) Independent directors were issued 5,000 shares of common stock as
compensation for their participation as Board Members in 2004.

EXECUTIVE COMPENSATION

The following table sets forth information as to the compensation of
the Chief Executive Officer of the Company and each other executive officer that
received or will receive compensation in excess of $100,000 for 2005, 2004, and
2003.

Annual Compensation
-------------------

Value of Common/
Preferred Stock Issued Option Other Annual
Name Year Salary ($) Bonus ($) in Lieu of Cash Awards Compensation
---- ---- ---------- --------- --------------- ------ ------------

Bradley T. MacDonald 2005 225,000 0 0 40,000(1) 100,000(2)
2004 225,000 75,000 0 0 0
2003 225,000 112,000 0 0 0
Leo V. Williams III 2005 125,000 0 0 0 0
2004 118,000 0 0 10,000 0

(1) The Board of Directors awarded Mr. MacDonald 40,000 options @2.67 in the
first quarter of 2005.
(2) The Board of Directors increased the Company's contribution to the Selective
Executive Retirement Plan for Mr. MacDonald by $100,000 in 2005.

STOCK OPTIONS

The Company's 1993 Employee Stock Option Plan (the "Plan"), as amended in
July 1995, December 1997, June 2002, and again in July 2003 authorizes the
issuance of options for 1,250,000 shares of Common Stock. The Plan authorizes
the Board of Directors or the Compensation Committee appointed by the Board to
grant incentive stock options and non-incentive stock options to officers, key
employees, directors, and independent consultants, with directors who are not
employees and consultants eligible only to receive non-incentive stock options.
Employee stock options are vested over 2 years.

* The following tables set forth pertinent information as of December
31, 2004 with respect to options granted under the Plan since the inception of
the Plan to the persons set forth under the Summary Compensation Table, all
current executive officers as a group and all current Directors who are not
executive officers as a group of the Company. In addition, a chart listing
option holders, grants made in the 2004 fiscal year, and a list of aggregate
options and the value of these options, is provided.

ALL CURRENT ALL CURRENT
EXECUTIVE INDEPENDENT
BRADLEY T. OFFICERS DIRECTORS
MACDONALD (1) AS A GROUP AS A GROUP
------------- ---------- ----------
Options granted .................. 215,000 75,000 110,000
Average exercise price ........... $ 0.86 $ 1.98 $ 1.07
Options exercised ................ 215,000 49,999 100,000
Average exercise price .......... $ 0.86 $ 0.88 $ 0.70
Shares sold ...................... * * *
Options unexercised as of 12/31/04 0 11,667 10,000

Approximate 5 YR Value of
FY '04 Grants @ Potential Realizable Unexercised Unexercised
Price & Expiration Value at 10% Annual Options Options
Month/Year Stock Appreciation as of 12/31/03 as of 12/31/03

Current Executive Officers and Directors 10,000@$8.60 2009 $13.86 10,000 $ 0
Employees 20,000@$8.60 2009 $13.86 20,000 0
Consultants 0 0 0
------ ----
30,000 $ 0

SELECTIVE EXECUTIVE RETIREMENT PLAN

On May 27, 2003, the Medifast, Inc. Board of Directors approved the
Selective Executive Retirement Plan for Bradley T. MacDonald, its CEO. The Plan
will be funded over five years. During this period, Mr. MacDonald has
contributed $250,000 of his earned compensation and the Corporation has
contributed $350,000. The funds will be accumulated in a Merrill Lynch account
and upon the retirement of Mr. MacDonald, the Plan will payout the accumulated
principal and interest at the age of sixty or over a ten-year period. Each
Deferred Compensation Plan contribution will vest in three equal phases over a
three-year period. The Plan will vest 33% upon the first anniversary date, 33%
upon the second anniversary date, and 34% upon the third anniversary date. At
the discretion of the Board of Directors of Medifast, Inc. a waiver to the
amended vesting period may be granted upon retirement or resignation of Bradley
T. MacDonald.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee is composed of three directors who are independent, as
defined under the listing standards of The American Stock Exchange, and operates
under a written charter adopted by the Company's Board of Directors.

The purpose of the Audit Committee is to assist the Board of Directors in
its general oversight of the Company. The primary responsibilities of the Audit
Committee are to review and evaluate the Company's audited financial statements
and to monitor and oversee the Company's internal control system, its accounting
and financial reporting process, its independent audit function and its
compliance with applicable laws and regulations. Management is responsible for
the preparation, presentation and integrity of the Company's financial
statements, accounting and financial reporting principles, internal controls and
procedures designed to assure compliance with accounting standards, applicable
laws and regulations. The Company's independent auditing firm is responsible for
performing an independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards and in compliance with the
provisions of the Sarbanes-Oxley Act.

The Audit Committee members are not professional accountants or auditors,
and are not responsible for conducting reviews of auditing or accounting
procedures, nor can the Audit Committee certify that the independent auditor is
"independent" under applicable rules. The Audit Committee serves a board-level
oversight role in which it provides advice, counsel and direction to management
and the auditors on the basis of the information it receives, discussions with
the auditors and the experience of the Audit Committee's members in business,
financial and accounting matters.

Recent years have brought a wave of new legislation and regulations in the
area of corporate governance and financial reporting as the U.S. government took
unprecedented measures to set new standards for corporate behavior and to
restore investor confidence. The Company has a long history of corporate
responsibility and good citizenship, and has taken appropriate measures to
respond to the new standards. The Audit Committee took a lead role in overseeing
the efforts of the Company's Controller's Group, Internal Audit Department,
Legal Department, and independent accountants in ensuring the Company's
compliance with these reforms.

AUDIT COMMITTEE

Mary Travis (Chairperson)
R. Scott Zion
Rev. Joseph Calderone, O.S.A.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules of the Securities and Exchange Commission (the "Commission")
thereunder require the Company's directors and officers, and any person who owns
more than ten percent of the Company's Common Stock (collectively, "Reporting
Persons"), to file reports of their ownership and changes in ownership of Common
Stock with the Commission. Reporting Persons are also required to furnish the
Company with copies of all Section 16(a) reports they file.

Based solely upon a review of copies of such reports furnished to the
Company, and written representations that certain reports were not required, the
Company believes that all of its Reporting Persons filed on a timely basis all
reports required by Section 16(a) of the Exchange Act during or with respect to
the year ended December 31, 2004.

PERFORMANCE COMPARISON

Nutraceutical Group Industry Comparison of Stock Prices
One-Year Comparison

July 28, 2005 July 28, 2004 $ %
Company Stock Price Stock Price Change Change
------- ----------- ----------- ------ ------

Medifast (MED) ................................ $ 6.45 $ 3.45 3.00 86.9%
Natural Alternatives International, Inc. (NAII) 8.20 7.25 0.95 13.1%
Weider Nutrition (WNI) ........................ 4.85 4.30 0.55 12.8%
Pure World, Inc (PURW) ........................ 4.26 1.91 2.35 123.0%
Natures Sunshine Products, Inc. (NATR) ........ 20.46 14.31 6.15 42.9%

One-Year Stock Price Comparison

[LINE GRAPH OMITTED]

Five-Year Comparison

July 28, 2005 July 28, 2000 $ %
Company Stock Price Stock Price Change Change
------- ----------- ----------- ------ ------

Medifast (MED) ................................ $ 6.45 $ .28 6.17 2203.6%
Natural Alternatives International, Inc. (NAII) 8.20 1.88 6.32 336.2%
Weider Nutrition (WNI) ........................ 4.85 2.65 2.20 83.0%
Pure World, Inc (PURW) ........................ 4.26 2.88 1.38 47.9%
Natures Sunshine Products, Inc. (NATR) ........ 20.46 7.00 13.46 192.3%

Five-Year Stock Price Comparison

[LINE GRAPH OMITTED]

Index Comparison

$100 invested in 2000 would return:

2000 2005
---- ----
Nutraceutical Group Index .................. $ 100 $ 672
Medifast ................................... $ 100 $2,302
S&P 500 .................................... $ 100 $ 88

Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.

ITEM 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Audit Committee has recommended for re-appointment, Bagell, Josephs &
Company, LLC, as the Company's independent auditors. Bagell, Josephs & Company,
LLC conducted the audit of the Company's financial statements for the year ended
December 31, 2004. The Sarbanes-Oxley Act of 2002 requires the Audit Committee
to be directly responsible for the appointment, compensation and oversight of
the audit work of the independent auditors. In March 2004, the Audit Committee
recommended for election Bagell, Josephs & Company, LLC to serve as independent
auditors to conduct an audit of the Company's financial statements for 2004.

PRINCIPAL ACCOUNTANT'S FEES

During the time period of January 1, 2004 to December 31, 2004, review and
audit fees paid to Bagell, Josephs & Company, LLC, were $70,000 and includes
work performed on the quarterly reviews and the preparation of the Company's
10-QSB's and 10-KSB. Bagell, Josephs & Company, LLC did not perform any
consulting services for the Company.

A representative of Bagell, Josephs & Company, LLC is expected to be
present or available by telephone at the annual meeting with an opportunity to
make a statement to the stockholders if he desires to do so, and will respond to
appropriate questions.

Selection of the Company's independent auditor is not required to be
submitted to a vote of the shareholders of the Company for ratification.
However, the Board of Directors is submitting this matter to the shareholders as
a matter of good corporate practice. If the shareholders fail to ratify the
selection, the Audit Committee will reconsider whether to retain Bagell, Josephs
& Company, LLC. After doing so, it may retain that firm or another without
re-submitting the matter to the Company's shareholders. Even if the shareholders
ratify the appointment of Bagell, Josephs & Company, LLC, the Audit Committee
may, in its discretion, direct the appointment of different independent auditors
at any time during the year if it determines that such a change would be in the
best interests of the Company and the shareholders.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" THE RATIFICATION OF APPOINTMENT OF BAGELL, JOSEPHS & COMPANY, LLC
AS THE COMPANY'S INDEPENDENT AUDITORS.

ANNUAL REPORT

The Annual Report of the Company to the stockholders for the year ended
December 31, 2004 on Form 10-KSB immediately follows this Proxy Statement. No
part thereof is incorporated by reference in this Proxy Statement.

On written request, the Company will provide without charge to each record
or beneficial holder of the Common Stock as of August 4, 2005, a copy of the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2004 as
filed with the Securities and Exchange Commission. Requests should be addressed
to Investor Relations, c/o Medifast, Inc., 11445 Cronhill Drive, Owings Mills,
Maryland 21117.

OTHER MATTERS

The Company is unaware of any matters, above, which will be brought before
the Meeting.

Any proposals intended to be presented at the Meeting of Shareholders to
be held in 2005 must be received by the Company for inclusion in the Company's
proxy material no later than August 4, 2005.

It is important that your proxy be returned promptly no matter how small
or large your holding may be. Stockholders who do not expect to attend in person
are urged to execute and return the enclosed form of proxy. As a matter of
policy, we keep confidential proxies, ballots and voting tabulations that
identify individual shareholders. Such documents are available for examination
only by the inspector of elections, certain employees and our transfer agent who
are associated with the processing proxy cards and tabulation of the votes. The
vote of any shareholder is not disclosed except in a contested proxy
solicitation or as may be necessary to meet legal requirements.

August 4, 2005

PROXY
MEDIFAST, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

The undersigned hereby appoints Bradley T. MacDonald with full power of
substitution, as attorneys for and in the name, place and stead of the
undersigned, to vote all the shares of the common stock of MEDIFAST INC., owned
or entitled to be voted by the undersigned as of the record date, at the Annual
Meeting of Shareholders of said Company scheduled to be held the Roland E.
Powell Convention Center, located at 4001 Ocean Highway, Ocean City, MD 21842 on
Friday, September 16, 2005, at 11:00 A.M., Eastern Daylight Time or at any
adjournment or adjournments of said meeting, on the following proposals as
indicated.

1. To elect a classified Board of Directors consisting of seven directors.
The Board of Directors are divided into three classes consisting of Class
I, Class II, and Class III, and these classes are based upon seniority.
The Class I Directors will hold office until 2007, while the Class II and
III Directors will hold office until the next Annual Meeting of
Stockholders at which their respective class term expires and their
respective successors will be duly elected and qualified.

CLASS II ELECTION

Class II Directors: Mary T. Travis, Michael C. MacDonald and Rev. Joseph D.
Calderone, O.S.A.

|_| FOR All nominees |_| WITHHOLD
(except as marked to the contrary below)

CLASS III ELECTION

Class III Directors: Michael J. McDevitt, and George Lavin, Esq.

|_| FOR All nominees |_| WITHHOLD
(except as marked to the contrary below)

INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.

2. To approve the re-appointment of Bagell, Josephs & Company, LLC, an
independent member of the BDO Seidman alliance, as the Company's
independent auditors for the fiscal year ending December 31, 2005.

|_| FOR |_| AGAINST |_| ABSTAIN

3. To increase the number of authorized shares of common stock by 5 million
shares to 20 million shares.

|_| FOR |_| AGAINST |_| ABSTAIN

4. To transact such other business as may properly come before the meeting or
any adjournment thereof. (Please date and sign on reverse side).

This proxy, if properly executed and returned will be voted in accordance
with the directions specified hereof. If no directions are specified, this proxy
will be voted FOR the election of the directors named above or their substitutes
as designated by the Board of Directors.

Dated: _______________________ _______________________________________
Signature of Stockholder

_______________________________________
Signature of Co-Holder (if any)

Please sign exactly as your name appears hereon and date. Joint owners
should each sign. Trustees and fiduciaries should indicate the capacity in which
they are signing.