UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                    For the quarter ended September 30, 2004

                           Commission File No. 0-23016

                                 Medifast, Inc.
--------------------------------------------------------------------------------
              (Exact name of small business issuer in its charter)

                Delaware                            13-3714405
--------------------------------------------------------------------------------
   (State or other jurisdiction of      (I.R.S. Employer Identification No.)
    incorporation or organization)

       11445 Cronhill Drive, Owings Mills, MD                   21117
--------------------------------------------------------------------------------
           (Address of principal offices)                     (Zip Code)

Registrant's telephone number, including Area Code:        (410) 581-8042
                                                        ----------------------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]


NUMBER OF SHARES OUTSTANDING OF REGISTRANT'S COMMON STOCK, AS OF SEPTEMBER 30,
2004: 10,986,466

<PAGE>


                                      INDEX

PART I
FINANCIAL INFORMATION:

<TABLE>
<CAPTION>
              Condensed Consolidated Balance Sheets -
<S>                                                                                                       <C>
                  September 30, 2004 (unaudited) and December 31, 2003 (audited)................          3

              Condensed Consolidated Statements of Income -
                  Three and Nine Months Ended September 30, 2004 and 2003 (unaudited)..........           4

              Condensed Consolidated Statements of Cash Flows -
                  Nine Months Ended September 30, 2004 and 2003 (unaudited).....................          5

              Notes to Condensed Consolidated Financial Statements..............................          6

              Management Discussion and Analysis of Financial Condition
                  And Results of Operations.....................................................          7

PART II
              Signature Page....................................................................          10

              CEO Certification.................................................................          11

</TABLE>


<PAGE>
                         MEDIFAST, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                                September 30, 2004       December 31, 2003
                                                                               ---------------------   ---------------------
                                                                                   (Unaudited)              (Audited)
ASSETS
CURRENT ASSETS:
<S>                                                                                       <C>                   <C>
     Cash                                                                                 $ 472,000             $ 2,524,000
     Accounts receivable-net of allowance for doubtful accounts of $55,000                1,126,000                 641,000
     Inventory                                                                            4,093,000               2,988,000
     Investment securities                                                                2,610,000               3,983,000
     Deferred compensation                                                                  448,000                 321,000
     Prepaid expenses and other current assets                                            3,742,000                 936,000
     Deferred tax asset                                                                           -                 596,000
                                                                               ---------------------   ---------------------
          TOTAL CURRENT ASSETS                                                           12,491,000              11,989,000

Property, plant and equipment - net                                                       8,308,000               7,449,000
Trademarks and intangibles                                                                4,433,000               4,419,000
Other assets                                                                                 63,000                 375,000
                                                                               ---------------------   ---------------------

          TOTAL ASSETS                                                                 $ 25,295,000            $ 24,232,000
                                                                               =====================   =====================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable and accrued expenses                                              $ 1,110,000             $ 1,714,000
     Dividends payable                                                                       58,000                  58,000
     Deferred tax liability                                                                  33,000                       -
     Line of credit                                                                               -                  55,000
     Current maturities of long-term debt                                                   656,000                 764,000
                                                                               ---------------------   ---------------------
          TOTAL CURRENT LIABILITIES                                                       1,857,000               2,591,000

     Long-term debt, net of current portion                                               4,631,000               4,564,000
                                                                               ---------------------   ---------------------
          TOTAL LIABILITIES                                                               6,488,000               7,155,000
                                                                               ---------------------   ---------------------

Stockholder's Equity:

Series B Convertible Preferred Stock; par value $1.00; 600,000 shares
     authorized; 300,614 and 403,734 shares issued
     and outstanding, respectively                                                          301,000                 404,000
Series C Convertible Preferred Stock; stated value $1.00;
     1,015,000 shares authorized; 200,000 and 267,000 shares issued
     and outstanding, respectively                                                          200,000                 267,000
Common stock; par value $.001 per share; 15,000,000 authorized;
     10,986,466 and 10,482,609 shares issued and outstanding, respectively                   11,000                  10,000
Additional paid-in capital                                                               20,394,000              20,120,000
Accumulated comprehensive loss                                                              (86,000)                (25,000)
Accumulated deficit                                                                      (1,321,000)             (3,016,000)
                                                                               ---------------------   ---------------------
                                                                                         19,499,000              17,760,000
Less cost of common stock treasury; 86,000 and 83,863
     shares, respectively                                                                  (692,000)               (683,000)
                                                                               ---------------------   ---------------------
TOTAL STOCKHOLDER'S EQUITY                                                                18,807,000             17,077,000
                                                                               ---------------------   ---------------------

TOTAL LIABILITIES & STOCKHOLDER EQUITY                                                 $ 25,295,000            $ 24,232,000
                                                                               =====================   =====================
</TABLE>



      See accompanying notes to condensed consolidated financial statements



                                       3
<PAGE>


                         MEDIFAST, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>

                                               Three Months Ended September 30        Nine Months Ended September 30
                                                  2004               2003                2004              2003
                                              --------------     --------------      --------------   ---------------
                                               (Unaudited)          (Audited)          (Unaudited)       (Audited)
<S>                                               <C>              <C>                  <C>              <C>
Revenue                                           7,268,000        $ 6,775,000          21,442,000       $19,539,000
Cost of sales                                     1,886,000          1,925,000           5,182,000         5,236,000
                                              --------------     --------------      --------------   ---------------
GROSS PROFIT                                      5,382,000          4,850,000          16,260,000        14,303,000

Selling, general, and administration              4,855,000          4,149,000          13,832,000        11,187,000
                                              --------------     --------------      --------------   ---------------
INCOME FROM OPERATIONS                              527,000            701,000           2,428,000         3,116,000

Other income/(expense)
     Interest expense                                (4,000)           (31,000)            (79,000)          (95,000)
     Other income (expense)                          (2,000)            17,000              (9,000)           26,000
                                              --------------     --------------      --------------   ---------------

INCOME BEFORE PROVISION FOR INCOME TAXES            521,000            687,000           2,340,000         3,047,000
Provision for income tax benefit (expense)         (130,000)          (167,000)           (628,000)       (1,072,000)
                                              --------------     --------------      --------------   ---------------

Net income                                          391,000            520,000           1,712,000         1,975,000

Less:  Stock dividend on preferred stock                  -              9,000              18,000            39,000
                                              --------------     --------------      --------------   ---------------

Net income attributable to shareholders            $391,000           $511,000         $ 1,694,000       $ 1,936,000
                                              ==============     ==============      ==============   ===============

Basic earnings per share                             $ 0.04             $ 0.05              $ 0.16            $ 0.22
Diluted earnings per share                           $ 0.03             $ 0.04              $ 0.14            $ 0.18

Weighted average share outstanding -
     Basic                                       10,982,578          9,872,120          10,774,663         8,953,569
     Diluted                                     12,412,265         11,863,185          12,118,790        11,076,550
</TABLE>



     See accompanying notes to condensed consolidated financial statements.



                                       4
<PAGE>


                         MEDIFAST, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                           Nine Months Ended September 30,
                                                                              2004                 2003
                                                                          -----------          -----------
                                                                          (Unaudited)           (Unaudited)
Cash flows from operating activities:
<S>                                                                       <C>                  <C>
   Net income                                                             $ 1,712,000          $ 1,975,000
   Adjustments to reconcile net income to net cash
        provided by (used in) operating activities from
        continuing operations:
        Depreciation and amortization                                         910,000              365,000
        Issuance of stock for services                                         83,000               61,000
        Net change in other comprehensive (loss)                              (61,000)                  --
        Deferred income taxes                                                 629,000            1,031,000

Changes in assets and liabilities:
        (Increase) in accounts receivable                                    (485,000)            (234,000)
        (Increase) in inventory                                            (1,105,000)            (524,000)
        (Increase) in prepaid expenses & other current assets              (2,806,000)            (619,000)
        (Increase) in deferred compensation                                  (127,000)                  --
        (Increase)/decrease in other assets                                   312,000              (61,000)
        (Decrease) in accounts payable and accrued expenses                  (603,000)            (349,000)
                                                                          -----------          -----------
              Net cash provided by (used in) operating activities          (1,541,000)           1,645,000
                                                                          -----------          -----------

Cash Flow from Investing Activities:
   Sale/(purchase) of investment securities, net                            1,373,000           (3,788,000)
   Purchase of equipment/leasehold/improvements                            (1,363,000)          (2,720,000)
   Purchase of intangible assets                                             (420,000)            (147,000)
                                                                          -----------          -----------
              Net cash (used in) investing activities                        (410,000)          (6,655,000)
                                                                          -----------          -----------

Cash Flow from Financing Activities:
   (Decrease)/increase in credit line                                         (55,000)             166,000
   Issuance of common stock, options and warrants                               6,000            6,496,000
   Proceeds from long-term debt                                               475,000            1,951,000
   Principal repayments of long-term debt                                    (516,000)            (265,000)
   Dividends paid on preferred stock                                          (11,000)             (12,000)
                                                                          -----------          -----------
              Net cash provided by (used in) financing activities            (101,000)           8,336,000
                                                                          -----------          -----------

NET INCREASE (DECREASE)  IN CASH AND
    CASH EQUIVALENTS                                                       (2,052,000)           3,326,000

Cash and cash equivalents - beginning of the period                         2,524,000              837,000
                                                                          -----------          -----------
Cash and cash equivalents - end of period                                 $   472,000          $ 4,163,000
                                                                          ===========          ===========

Supplemental disclosure of cash flow information:
   Interest paid                                                          $    51,000          $    96,000
                                                                          ===========          ===========
   Income taxes                                                           $        --          $    42,000
                                                                          ===========          ===========

Supplemental disclosure of non cash activity:
  Common shares issued for options and warrants
  Conversion of preferred stock B and C to common stock                   $   170,000          $        --
                                                                          ===========          ===========
  Common stock for services                                               $    55,000          $        --
                                                                          ===========          ===========
  Purchase of Consumer Choice Systems for stock, option,
     warrants, and other liabilities                                      $        --          $ 1,766,000
                                                                          ===========          ===========
  Conversion of debt to equity                                            $    28,000          $        --
                                                                          ===========          ===========
  Common stock issued for preferred stock C dividends                     $     7,000          $        --
                                                                          ===========          ===========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.



                                       5
<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GENERAL

1.       Basis of Presentation

The information contained herein with respect to the three month periods and
nine month periods ended September 30, 2004 and 2003 has been reviewed by the
independent auditors and was prepared in conformity with generally accepted
accounting principles for interim financial information and instructions for
Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, the condensed
consolidated financial statements do not include information and footnotes
required by generally accepted accounting principles. Included are the
adjustments, which, in the opinion of management, are necessary for a fair
presentation of the financial information for the three-month periods and
nine-month periods ended September 30, 2004 and 2003. The results are not
necessarily indicative of results to be expected for the year.

2. Income Per Common Share

Basic income per share is calculated by dividing net income attributable to
common stockholders by the weighted average number of outstanding common shares
during the year. Basic income per share excludes any dilutive effects of
options, warrants and other stock-based compensation.

3. Stock-Based Compensation

The Company has adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS 123"). The provisions of SFAS
123 allow companies to either expense the estimated value of stock options or to
continue to follow the intrinsic value method set forth in Accounting Principles
Bulletin Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"),
but disclose the pro forma effects on net income (loss) had the fair value of
the options been expensed. The Company has elected to continue to apply APB 25
in accounting for its employee stock option incentive plans. Under APB 25, where
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation is
recognized.

If compensation expense for the Company's stock-based compensation plans had
been determined consistent with SFAS 123, the Company's net income per share
including pro forma results would have been the amounts indicated below:

<TABLE>
<CAPTION>
                                                             Three Months ended September 30      Nine months ended September 30,
                                                             -------------------------------      -------------------------------
                                                                   2004              2003             2004               2003
                                                              -------------     -------------    -------------      -------------
Net Income:
<S>                                                           <C>               <C>              <C>                <C>
   As reported                                                $     391,000     $     520,000    $   1,694,000      $   1,975,000
       Total stock based director compensation
      Expense determined under fair value based
       method for all awards, net of related tax effects                  0           (58,000)        (170 000           (111,000)
                                                              -------------     -------------    -------------      -------------
   Pro forma                                                  $     391,000     $     462,000    $   1,524,000      $   1,864,000
                                                              =============     =============    =============      =============

Net Income per share:
   As reported:
      Basic                                                   $         .04     $         .05             0.16               0.22
      Diluted                                                           .03               .04             0.14               0.18
  Pro forma:
      Basic                                                             .04               .05             0.14               0.20
     Diluted                                                            .03               .04             0.13               0.17
</TABLE>





                                       6
<PAGE>

                      MANAGEMENT DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Except for the historical information contained herein, this Report on Form 10-Q
contains certain forward-looking statements that involve substantial risks and
uncertainties. When used in this Report, the words "anticipate," "believe,"
"estimate," "expect" and similar expressions, as they relate to Medifast, Inc.
or its management, are intended to identify such forward-looking statements. The
Company's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Accordingly, there is no assurance that the results in the forward-looking
statements will be achieved.

GENERAL

NINE MONTHS ENDED SEPTEMBER 30, 2004 AND SEPTEMBER 30, 2003

Revenue for the first nine months of 2004 was $21,442,000, representing an
increase of $1,880,000 (10%) from the $19,539,000 reported for the nine-month
period ending September 30, 2003. The revenue obtained from domestic sales in
the third quarter was $17,303,000 in 2003 and rose to $21,271,000 in 2004, an
increase of 23%. A number of factors contributed to the improved revenue
performance through the first nine months of 2004. A significant contributor to
the growth in revenue came from the continued success of the Take Shape For Life
division. The success in Take Shape For Life was largely due to the success of
the replicating website and internet distribution program, which has proven to
be effective at generating revenues, as well recruiting new Health Advisors and
customers. Other contributors to the 2004 revenue growth have been the Company's
extensive national advertising campaign, and more recently the redesign of the
Company's website. The user-friendly website was largely responsible for more
than a 40% increase of Internet sales from August 2004 to September 2004. Cost
of sales for the first nine months of 2004 decreased by $54,000 (1%) from 2003.
Gross profit for the first nine months of 2004 increased by $1,957,000 (14%)
from 2003 due to the increased manufacturing and distribution efficiencies
related to the acquired distribution facility located in Ridgley, Maryland.
Selling, general and administrative expenses for the first nine months of 2004
were $13,832,000, which increased by $2,645,000 (24%) over the same period of
2003. This increase is due to the expansion of its commissioned sales
organization, increased advertising expenses including celebrity endorsements,
expenses related to introducing and operating the Hi Energy Clinic model to
additional locations, as well as overall corporate infrastructure improvements.

The Company also experienced substantial increases in major expense categories,
to include insurance, legal, and utilities. Throughout the course of 2004, the
Company's insurance expense has increased over 300% from the same time period in
2003 even though the Company has only had one claim since 1996. This is due to
industry wide increases in the weight loss industry, along with the additional
insurance costs associated with venturing into the clinic model. Legal expenses
over the first nine months of 2004 increased over 300% from the same time period
in 2003. The Company believes that 3 frivolous lawsuits, including a class
action suit from a San Francisco law firm, pertaining to the use of Vitamin D,
(which has been stayed) is responsible for this increased cost. The Company has
not suffered any adverse judgments in any lawsuits in the past 3 years despite,
numerous attempts to extract settlements. The Company believes that due to
changing insurance carriers, purchasing electricity contracts from a deregulated
generation plant and the reduction of active litigation and disputes, will
reduce these extra ordinary expenses by an estimated 25% next year effective
January 1, 2005. Income from Operations was $2,428,000 a decrease of $688,000
(22%), due to the increased selling, general and administrative expenses
mentioned above, in addition to the expenses related to general advertising
costs caused by competitive pressures.



                                       7
<PAGE>

The Company's Hi-Energy division experienced revenue and profit far below
expectations for the third quarter of 2004. This was due to the multiple
hurricanes that struck the Florida panhandle region during this time period.
These natural disasters caused for reduced revenue in the Company's licensee
clinic model, in addition to a three-month delay in the launch of the Company's
Corporate Clinics throughout the southeast. This also caused a three-month delay
in opening up High Energy Corporate Clinics in Texas.

Consumers Choice Systems was acquired in June of 2003. In order to solidify the
distribution and promote its Menopause Relief and urinary Tract Infection (UTI)
products the Company introduced a new UTI Test Stick, and a reformulated
Menopause Relief that incorporated a new and revolutionary time released formula
using Solae soy isoflavines. The Company restructured CCS sales marketing and
distribution to expedite its new product launch, and as a result experienced
significant returns in excess of $500,000 in old and obsolete product from three
major retail chains. In addition the Company closed its Seattle offices and
significantly reduced its operating and sales expenses by consolidating its
operations in Ridgely, Maryland. The Company believes that it has successfully
salvaged its distribution and stabilized its sales organization, in order to
grow the business in 2005.

The Company's partnership with XL Health failed to produce significant planned
revenues because the initial group of Medicare patients assigned to the CMS
demonstration were in such poor health that they were not eligible for the
Medifast Plus for Diabetics program. As a result of this performance the Company
has been released from its guarantee of one million dollars to Mercantile Safe
Deposit and Trust, and is renegotiating the agreement.

The Company had fully diluted earnings per share of $0.14 in the first nine
months of 2004, versus $0.18 in 2003, with a dilution increase of 1 million
shares, primarily from conversions of preferred stock, the exercise of options
and warrants, and the sale of common stock in a capital raising completed in
July 2003. The Company has made substantial investments in growing
infrastructure and revenues during the first nine months of the year that they
believe will have a positive impact on improving revenues, cash flow and
operating results in the future.



THREE MONTHS ENDED SEPTEMBER 30, 2004 AND SEPTEMBER 30, 2003

Third quarter revenues for 2004 of $7,268,000 increased by $493,000 (7%) from
$6,775,000 for the three-month period ended September 30, 2003. Cost of sales
for the period was $1,886,000, a decrease of $39,000 (2%) from $1,925,000 during
the same period of 2003. Gross profits of $5,382,000 for the third quarter of
2004 increased by $532,000 (11%) from $4,850,000 in the third quarter of 2003.
During the quarter the Company experienced a profit from operations of $527,000
compared to a profit of $701,000 for the third quarter of 2003. The income
before provision for income taxes for the third quarter of 2004 was $521,000
compared to $687,000 in the third quarter of 2003.



                                       8
<PAGE>

SEASONALITY

The Company's weight management products and programs are subject to
seasonality. Traditionally the holiday season in November/December of each year
is considered poor for diet control products and services. January and February
generally show increases in sales, as these months are considered the
commencement of the "diet season." The Company will not experience the same
degree of seasonality in 2004 because of the introduction of its full line of
products that are designed to provide nutritional solutions for people with
diabetes, arthritis, coronary health, and menopause.

LIQUIDITY AND CAPITAL RESOURCES

The Company had stockholders' equity of $18,807,000 and working capital of
$10,634,000 on September 30, 2004 compared with $15,107,000 and $9,414,000 at
September 30, 2003, respectively.

INFLATION

To date, inflation has not had a material effect on the Company's business.

ITEM 5. OTHER INFORMATION

Litigation: On December 16, 2003 John Donavin, on behalf of the General Public,
filed suit, against Jason Pharmaceuticals, Inc. in the Superior Court of the
State of California, City and County of San Francisco. The suit alleges that
Medifast bars contain Vitamin D3 or Vitamin D in violation of Federal laws and
regulations, and asks for equitable relief and damages. The Company's general
council believes that the Company's formulation used in its "meal replacement"
bars for over 20 years has been and is in conformity with current and past FDA
regulations. The Company believes that the plaintiff's claim lacks merit and may
even be considered frivolous. The suit has been stayed upon appeal to the FDA to
clarify its regulations.


Other: During the quarter the Company, along with the assistance from its
advertising agencies, simultaneously tested several new methods of advertising
concepts and strategies. These tests were completed in order to ensure the most
effective plan would be in place at the start the Company's 2004 T.V. and Print
advertising campaign. The Company estimated its uncapitalized financial cost
attributable to these comparison tests to be an incremental Two Hundred Thousand
Dollars ($200,000). The Company believes the benefits from this expense will be
realized in 2004, although expensed in 2003.


Earnings Per Share: The Company follows the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." The calculation of basic and
diluted earnings per share ("EPS") is reflected on the accompanying Consolidated
Statement of Operations.


Issuance of Common Stock. Throughout the third quarter of 2004, the Company
issued 20,897 shares of Common Stock.

On July 1, 2004, Terry Kelley, former employee, was granted two thousand five
hundred (2,500) shares of common stock. The grant is from terms outlined in his
non-compete agreement.


Forward Looking Statements: Some of the information presented in this quarterly
report constitutes forward-looking statements within the meaning of the private
Securities Litigation Reform Act of 1995. Statements that are not historical
facts, including statements about management's expectations for fiscal year 2004
and beyond, are forward looking statements and involve various risks and
uncertainties. Although the Company believes that its expectations are based on
reasonable assumptions within the bounds of its knowledge, there can be no
assurance that actual results will not differ materially from the Company's
expectations. The Company cautions investors not to place undue reliance on
forward-looking statements which speak only to management's experience on this
date.



                                       9
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                Medifast Inc.
                                (Registrant)

                                /s/ Bradley T. MacDonald
                                ------------------------------------
                                Bradley T. MacDonald
                                Chairman and CEO