Synergy Brands Reports Six Months and Three Months Results

12 August 2008

Six Months Results:

• Revenues increased by 16% to $44.5 Million
• Gross Profit increased by 49% to $4.5 Million
• Operating Cash Flow increased by 17% to $487,771.

Three Months Results:

• Revenues increased by 13% to $24 Million
• Gross Profit increased by 41% to $2.4 Million
• Operating Cash Flow decreased to $354,268 from $445,195.

Synergy Brands reported its six months and three months results as of June 20, 2008. Revenues increased by 16% to $44.5 Million while gross profit increased by 49% to $4.5 million for the six months ended June 30, 2008. The reported net GAAP loss from continued operations increased to $599,907 for the six months as compared to a Net GAAP profit of $47,554 for the comparable period. The Company measures its performance before non-cash charges since major expenses in its operating statements are non-cash accruals in connection with the purchase of its Michigan Facilities, financing and corporate expenses. Below is a table summarizing the results of operations for the six months and three months of 2008 as compared to 2007.

The Company continues to grow all of its core businesses, which include its Michigan Baking mix operations, packaged meals and spices. The Company is continuing its private label programs to several national chains along with the distribution of its proprietary products under the “Loretta” label, “County Fare”, “Country Value”, “Rich & Moist” and several others. The Company believes that penetration of proprietary labels may build franchise values for the Company brands. The Company continues to grow and expand its New York operations. The logistical plan of building a corridor between NY and Michigan operations has reduced transportation costs as percentage of sales in a rising fuel environment. In addition, commodity prices in the Wheat, Corn and Sugar markets have squeezed margins for Michigan operations as well as increased costs for consumer goods in the NY market. However, largely the Company has been able to pass along its increased costs except for forward buying accommodations provided to its major customers.

Operating performance for the first half of 2008 has been exceptionally good in a challenging environment. The Company has been able to increase sales and gross profit to record levels. The Company believes that since its customer base consists of discount chains, its value based product mix seems to be well received in a weaker economy. However, non-cash charges increased from $368,525 to $1,087,378 for the same period increasing cash flow for the period by $71,392 to $487,481. The material increase in non-cash charges is largely due to the increase attributable to Depreciation & Amortization of the Michigan facilities and associated non-cash financing and operating charges, which did not exist in the comparable period in 2007. It is important to note that, the Company did not acquire the Michigan facility until July 1, 2007. During most of the six months of 2007, the Company co-packed its needs from the predecessor Company in Michigan and generated a fixed based gross profit for that period. In 2008, the Company expanded its Michigan facilities, and its operating profit for the period was lower than its fixed margin based arrangement in 2007. The Company expanded Michigan operations to include Spice and packaged meal distribution in addition to expanding its production lines. The purpose for this expansion was to increase capacity, which would have been limited by the acquired manufacturing facility. Management estimates that the facility acquired in 2007 had capacity to process about $12 million in annual sales. The expansion in 2008 allows processed sales to reach $50 million at current commodity pricing levels.

The Company continued to grow its NY operations predominately due to an expansion of its trucking fleet together with integrating Michigan products to its wholesale lists. Wholesale prices by consumer product manufacturers such as P&G and Clorox have been steadily increasing and thus raising wholesale costs. In addition, major manufacturers have reduced promotional rebated which also affect wholesale prices and gross margins. Gross profits for the comparable periods increased from 8% to 10%. The increase is gross profits is attributable to higher gross margins recognized from Michigan operations and increased retail store penetration with the Company’s mix of wholesale consumer products.

Management believes that it can improve its results of operations in the third and fourth quarter of operations. The Company suffered from higher commodity prices in the first half that it has adjusted through price increases that should be fully in effect in second half of FY 2008.

Synergy Brands has also been granted a hearing date to appeal its delisting notice from Nasdaq scheduled for September 4, 2008.