Filed pursuant to Rule 424(b)(3)
Registration No. 333-108211
MEDIFAST, INC.
682,500 Shares
Common Stock
--------
This prospectus (this "Prospectus") relates to an aggregate of 682,500
shares of common stock, $0.001 par value each of Medifast, Inc. (the "Company"
or "Registrant"), consisting of (a) 550,000 shares of common stock issued to two
accredited investors (the "Private Placement Investors") in connection with a
private placement of the Registrant's common stock and warrants for common stock
that closed as of July 24, 2003 (the "Private Placement"), (b) 82,500 shares of
common stock issuable upon the exercise of warrants that were issued to the
Private Placement Investors, and (c) 50,000 shares of common stock issuable upon
the exercise of warrants issued to fourteen persons in connection with the
consummation of that certain Asset Purchase Agreement (collectively the "Asset
Sellers")that closed on June 16, 2003 (the "Asset Purchase Agreement"). The
Private Placement Investors and the Asset Sellers are collectively referred to
herein as, the "Selling Stockholders." (See "Selling Stockholders" on page 12).
Merrill Lynch acted as agent on behalf of the Registrant for the Private
Placement.
The Selling Stockholders may sell any or all of the shares, subject to
federal and state securities laws, but are not obligated to do so. The Company
will not sell any of the shares covered by this Prospectus and we will not
receive any proceeds from the offering or sale of such shares; provided,
however, that any proceeds from the exercise of the warrants on a cash basis
will go to the Company.
The price at which the Selling Stockholders may sell the shares of our
common stock will be determined by the prevailing market for the shares or in
negotiated transactions.
Medifast, Inc.'s common stock is listed on the American Stock Exchange
under the symbol "MED".
Investing in our common stock involves risks. You should consider
carefully the risk factors beginning on page 4 of this Prospectus before making
a decision to purchase our stock.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is October 10, 2003.
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TABLE OF CONTENTS
PROSPECTUS
Item / Description Page Number
Incorporation of Certain Information by Reference 2
Prospectus Summary 3
Risk Factors 4
Forward Looking Statements 7
The Company 7
The Offering 10
Use of Proceeds 11
Determination of Offering Price 11
Selling Stockholders 12
Plan of Distribution 15
Experts and Counsels 17
Material Changes 17
Available Information 17
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR
TO WHICH WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS
LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT IS ACCURATE
ONLY ON THE DATE OF THIS DOCUMENT.
In this Prospectus, the words, "Medifast," "we," "us" and "our" refer
to Medifast, Inc. and its subsidiaries, unless the context otherwise requires.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Securities and Exchange Commission (the "Commission") allows us to
"incorporate by reference" the information we file with them, which means that
we can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be part of
this Prospectus, and information that we file later with the Commission will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings we have made and will make
with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act, as amended (the "Exchange Act"). All filings pursuant to the
Exchange Act after the date of the registration statement, of which this
Prospectus is a part, and prior to the termination of this offering shall also
be deemed to be incorporated by reference into this Prospectus. The previously
filed documents we incorporate by reference into this Prospectus are:
(a) Our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2002, as amended;
(b) Our Quarterly Report on Form 10-QSB for the quarter ending
June 30, 2003;
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(c) Our Quarterly Report on Form 10-QSB for the quarter ending
March 31, 2003, as amended;
(d) Our Current Report on Form 8-K filed July 31, 2003;
(e) Our Current Report on Form 8-K filed July 25, 2003;
(f) Our Current Report on Form 8-K filed June 11, 2003;
(g) Our Current Report on Form 8-K filed September 15, 2003; and
(h) Our Registration Statement on Form 8-A filed with the
Commission on December 18, 2002, as amended.
We will furnish to you without charge upon your request a copy of any of the
documents incorporated in this Prospectus and any statement in, or incorporated
in, this Prospectus by reference, other than the exhibits to those documents
unless those exhibits are specifically incorporated by reference. For a copy of
the documents you should contact Medifast, Inc. 11445 Cronhill Dr., Owings
Mills, MD 21117, Attention: Corporate Secretary or by telephone at (410)
581-8042.
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL THE INFORMATION THAT MAY
BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS AND THE INFORMATION
INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE MAKING AN INVESTMENT
DECISION, ESPECIALLY THE INFORMATION PRESENTED UNDER THE HEADING "RISK FACTORS."
Medifast, Inc. is engaged in the development, production and marketing
of a wide range of clinically-tested meal replacement programs (the "Medifast
Program") and products (the "Medifast Products"). The Medifast Program is a
medically supervised weight loss program which specializes in multidisciplinary
patient education and uses high quality meal replacement supplements. The
Company has experienced tremendous growth during the last two years since it
changed its name and implemented a vigorous development, manufacturing and
marketing plan. To illustrate, its net sales were $12,764,000 (net income
$1,455,000), $12,345,000 (net income $2,623,000)and $ 5,022,000 (net income
$588,000) for the six months ending June 31, 2003 (unaudited), year ending
December 31, 2002 (audited) and December 31, 2001 (audited), respectively.
Medifast, Inc.'s shares of common stock are listed on the American Stock
Exchange under the symbol MED.
On July 24, 2003, the Company sold 550,000 shares of common stock to
the Private Placement Investors pursuant to a Securities Purchase Agreement and
issued warrants to the Private Placement Investors for the issuance of 82,500
shares of common stock. The Company agreed to register the shares sold and
issuable upon exercise of the warrants. Separately, on June 16, 2003, the
Company entered into an asset purchase agreement with a Delaware corporation for
purchase of certain of its assets. As part of the consideration, the Company
agreed to (i) issue to the Asset Sellers warrants to acquire 50,000 shares of
common stock of the Company in the aggregate and (ii) include those warrants in
any registration statement it files after the date thereof. This prospectus is
made pursuant to the foregoing agreements entered into by the Company.
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The proceeds from the sale of shares offered herein, as and when made
by the Selling Stockholders, shall go entirely to the Selling Stockholders and
the Company shall receive no part of it; provided, however, that the proceeds
from the exercise of the warrants on a cash basis will go to the Company. The
price at which the Selling Stockholders sell, if and when they sell, the shares
registered pursuant to this Prospectus, shall be market prices as established on
the American Stock Exchange where shares of the same class are registered and to
which exchange the Company has filed an additional listing application providing
for the additional listing of these shares as and when the Registration
Statement becomes effective.
Investment in shares of the Company involves risk. Please see "Risk
Factors" on page 4.
Our principal executive offices are located at 11445 Cronhill Dr.,
Owings Mills, MD 21117. Our telephone number at that address is (410) 581-8042.
RISK FACTORS
An investment in our common stock involves risks. You should carefully
consider in addition to the other information contained or incorporated by
reference in this Prospectus, the risks described below before investing in our
common stock. The risks described below are not the only ones facing us.
Additional risks not currently known to us or that we may currently believe are
immaterial may impair our business operations and financial condition.
Regulatory:
The Company's operations (formulation, processing, packaging, labeling
and advertising of products) are subject to governmental regulations by several
agencies. The primary regulator is the United States Food and Drug
Administration ("FDA"). FDA regulations require that the Company comply with
labeling and packaging standards for the marking and sale of vitamins and
nutritional products. At any time the FDA could require the reformulation of a
product in order for a product to meet a new standard, require the recall of a
product, or have a product discontinued if it is not capable of being
reformulated. During 2001, the Company was subject to an unannounced detailed
inspection of its production facility. The FDA provided the Company with a
letter stating that areas inspected appear to be in compliance with the
applicable requirements of the Federal Food, Drug, and Cosmetics Act. Any
unexpected changes to FDA regulations could negatively impact the Company's
operations.
A few states have implemented and other states may implement laws that
limit the ability of physicians to buy and resell products within their own
practices. Management, in response to the changing operating environment,
implemented new programs, which provide for participating physicians to receive
a monthly consultation fee on all orders placed by their patients. The Company's
operations may be negatively impacted if physicians are not receptive to
programs or states broaden or change existing laws.
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The Company is, and may in the future be, subject to laws of countries
to which it exports the Medifast Program and the Medifast Products. These laws
may change unexpectedly and adversely affect the Company. To the extent the
Company's revenue is generated from exports, the Company may be affected by
changes in laws of the countries to which it exports.
Product Liability:
The Company, like other producers and distributors of products that are
ingested, face an inherent risk of exposure to product liability claims in the
event that the use of its products results in injury. To mitigate this risk, the
Company maintains insurance against product liability claims with respect to the
products it produces. It is possible that the liability the Company may face may
be unforeseen and therefore not covered by the insurance, or that the insurance
may not be adequate to cover the liability. In either event, the Company will be
adversely affected by an unforeseen or substantial product liability claim.
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." Although the Company has embarked on a robust
and vigorous export program to mitigate seasonality, there is no assurance that
the Company's performance will remain unaffected by seasonality or that the
export efforts shall succeed in mitigating it.
Industry Growth:
The Company is growing rapidly but remains a relatively small
participant in its industry. The business of the Company is competitive, and
some of the competitors have substantial marketing and financial resources.
Competition:
The weight loss industry as a whole is highly competitive. There are
numerous methods of weight loss, including individual do-it-yourself diet plans,
commercial weight loss programs, nutritionists, dieticians and the
pharmaceutical industry. An increase in this competition or these competitors
alone could result in decreased demand for our products.
The meal replacement business is dominated by SlimFast Foods Company
(Unilever), which has a strong foothold in retail markets. Medifast's management
estimates that SlimFast retail sales are $1 Billion annually. SlimFast products
generally have higher caloric and sugar content than comparative Medifast
Products. Weight Watchers International and Jenny Craig, Inc. (privately held)
sell low-calorie, prepackaged meals and preach the benefits of portion control.
Weight Watchers helps to generate demand for its products and "winning points"
program by hosting pay-as-you-go meetings, and it generates significant fees
from those meetings. There are two other competitors making use of medical
weight management. These companies include OptiFast, which is managed by
Novartis Nutrition Corporation, and Robards, Inc., which is managed by Food
Sciences Corporation, Inc.
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While we believe that we have certain advantages over existing
competition, such as (i) our products are based on clinically proven studies
conducted at the Johns Hopkins University School of Medicine, (ii) our weight
and disease management products contain high quality meal replacement
supplements, (iii) we have a large product line consisting of over 75 sku's of
product that help us minimize or eliminate taste fatigue as an obstacle for a
weight loss patient to overcome, and (iv) we are probably the only weight loss
company that has touched on the belief that when it comes to weight loss, men
and woman have different needs as well as requirements, the growing size of the
market offers tremendous opportunity to new entrants and existing competitors to
replicate our unique selling propositions.
Breakthrough Technologies:
A breakthrough in other weight loss technologies would seriously limit
the potential of the meal replacement products such as those produced and
marketed by Medifast.
Raw Materials:
The Company's margins may be impacted due to raw material costs since
they are reliant on certain commodities that fluctuate in price. The price
fluctuations occur as the supply of such products changes throughout the year.
Legal:
The Company is a defendant in a lawsuit, in which its competitor,
Robards, Inc. is alleging that the Company made slanderous and untrue statements
to Robard's customers. Medifast has filed a counter-claim alleging conspiracy to
damage the Company's business. Both claim damages in excess of $75,000, which
could materially affect financial results.
Marketing Programs:
Some of the Company's new marketing programs have yet to be proven, and
large advertising outlays may not turn out to be productive. Specifically, the
Company has never used TV advertising to reach customers. But starting in
January 2004, the Company proposes to run infomercial advertisements in a
national TV campaign. Whether this form of advertising will prove to be
successful remains to be determined.
Price Volatility:
Stocks in the Microcap segment of the market have many risks that are
not as prevalent in Large-cap stocks, Blue Chip stocks or even Small-cap stocks.
Often it is these risks that cause Microcap stocks to trade at discounts to
their peers. The most common of these risks is liquidity risk, which is
typically caused by small trading floats and very low trading volume, which can
lead to large spreads and high volatility in stock price. In addition, Microcaps
tend to have significant company specific risks that contribute to lower
valuations. Investors need to be aware of the higher probability of financial
default and higher degree of financial distress inherent in the microcap segment
of the market. The foregoing risks are in addition to risks relating to the
performance of the Company. Thus, if our operating results are below the
expectations of public market analyst and investors, the price of our common
stock could be materially adversely affected.
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Other:
The Company's financial results and equity values are subject to other
risks and uncertainties known and unknown, including but not limited to
competition, operations, financial markets, regulatory risk, and/or other
events. These risks may cause actual results to differ from expected results.
FORWARD LOOKING STATEMENTS
This prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Exchange Act. Any statements herein
that are not statements of historical fact may be deemed to be forward-looking
statements including. We may or may not identify these statements by the use of
words such as believe, expect, anticipate, intend, potential, strategy, plan,
and similar expressions. These forward-looking statements involve known and
unknown risks and uncertainties. Our actual results may differ materially from
those set forth in these forward-looking statements as a result of a number of
different factors, including those described under the caption "Risk Factors"
and elsewhere in this Prospectus. These forward-looking statements include,
among others, statements regarding (i) estimates relating to our cash resources,
profitability, market share and the market price of our common stock; (ii) our
ability to secure and defend intellectual property rights important to our
business; (iii) the potential success of our research, development and marketing
efforts; (iv) analyses and other information which are based on forecasts of
future results and estimates of amounts not yet determinable; and (v) our future
prospects, developments and business strategies.
All statements in this Prospectus and the Registration Statement on
Form S-3, of which this Prospectus is a part, that are not historical are
forward-looking statements and are subject to risks and uncertainties, including
those set forth in the Risk Factors section, and actual results could differ
materially from those expressed or implied in these statements. All
forward-looking statements included in this Prospectus are made as of the date
hereof. We assume no obligation to update any such forward-looking statement for
subsequent events or any reason why actual results might differ, except as
required by the Securities Act.
THE COMPANY
Medifast is engaged in the development, production, and distribution of
the Medifast Program and Medifast Products. The Medifast Program is a medically
supervised weight loss program which specializes in multidisciplinary patient
education programs and uses high quality meal replacement supplements. Medifast
offers a wide spectrum of weight management options depending on the amount of
desired weight loss. The Medifast philosophy is meal replacement. The more meals
replaced, the more weight is lost. Unlike other diets, Medifast provides life
changing behavior modification programs and products that support a weight loss
candidate through weight loss and weight maintenance. The Medifast program
attempts to teach how to lose weight and keep it off for life.
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The Medifast brand has been recommended by over several thousand
physicians nationwide and used by more than 750,000 customers. Medifast offers
more than 50 years of combined knowledge and experience, with world-class
customer service, and technical and medical support. The Medifast Products are
produced to exacting specifications in our state-of-the-art production facility
in Owings Mills, Maryland. Product labeling, quality control, and manufacturing
processes and equipment are subject to regulations and inspections mandated by
the Food & Drug Administration (FDA), the Maryland State Department of Health
and Hygiene, and Baltimore County Department of Health. Our plant strictly
adheres to all applicable good manufacturing practices and has proudly
maintained its status as an "OU" (Orthodox Union) Kosher-approved facility since
1982.
Obesity is a complex, multi-factorial chronic disease and is the second
leading cause of preventable death in the United States. According to the World
Health Organization's 2000 statistics, more than 1 Billion individuals are
overweight. The International Obesity Task Force has estimated that 60% of the
U.S. population is overweight, and a 2001 survey by market researcher NPD
Foodworld reported that 63% of U.S. people are clinically obese (defined as
having 25 to 40 pounds of excess weight), and an additional 15% are morbidly
obese (40 or more pounds of excess weight). Research has linked obesity to
serious diseases, including some forms of cancer, diabetes, infertility, liver
disease and heart disease.
MEDIFAST STRENGTHS:
CLINICALLY PROVEN. Medifast is based on clinically tested studies
conducted by the Johns Hopkins University School of Medicine and the National
Institutes of Health. In the study conducted by Dr. Cheskin and Dr. Crowell at
the Johns Hopkins School of Medicine, males lost an average of 67.41 pounds and
females lost an average of 47.5 pounds over a sixteen week period by using
Medifast. Medifast has been chosen by premier medical/ research institutions
including: Johns Hopkins Weight Management Center, The University of Vermont at
Burlington and the William A. Shands Teaching Hospital in Gainesville, Florida.
The Surgeon General estimates that over 97 million Americans are obese.
Likewise, clinical obesity is a major epidemic in the U.S. adversely affecting
over half of the population. The Company continues to expand its product line
over the health and wellness market space. In 2002, the Company manufactured and
produced four new disease management products designed to provide affordable
alternatives to traditional drug therapy. Medifast brand awareness continues to
evolve through product development, line extensions, and the Company's emphasis
on quality customer service, technical support and publications developed by the
Company's marketing staff.
BUSINESS MODEL. During the recent past, the Company has implemented a
new business model that focuses on the clinical weight management business and
leverages the potential of the Internet to market the
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Medifast Program and the Medifast Products. The change of the Company's name,
from Healthrite to Medifast, Inc., two years ago signified the Company's focus
on its branded clinical weight management business. The business model
implemented at that time has attracted medical practitioners and patients.
RECENT HIGH CONTRIBUTION MARGINS. Gross Margins increased to 70% in
fiscal 2002 from 56% in fiscal 2001, due to higher margins derived from the
Medifast Products. The increase is attributed to the increased margin of
Medifast direct and Internet sales directly to patients via the Lifestyles and
Take Shape for Life Programs.
GROWTH STRATEGY. The growing weight loss market provides us with
significant growth potential. In 2002, the Company implemented Take Shape for
Life, a comprehensive, medically supervised virtual clinic designed to assist in
long term weight loss and disease and lifestyle management. Presently, it has
over 2000 qualified health advisors and the Company plans to expand the health
advisor network to continue to grow sales. Also in 2002 the Company entered into
a joint venture with Elken International of Malaysia in which the Company will
manufacture products for the Asian Market. Additionally, the Company signed a
joint venture and distribution agreement with Hi-Tech Pharmacal to develop and
produce retail diabetic meal replacement products under the DiabetiTrim brand
name. In 2003, the Company acquired the assets of Consumer Choice Systems, Inc.
("CCS"). CCS assembles and distributes its products for women ages 14-84 to over
18,000 chain food and drug stores across the United States. CCS and Amazon.com
have an agreement to market CCS's products to Amazon's vast online customer
base, which currently exceeds 30 million customers worldwide. Last, Medifast's
advertising initiatives will continue to increase. Radio and print advertising
have been successful and cable television advertising are expected to be
launched in 2004.
Medifast's Management proposes to develop strategic marketing
relationships with third parties (i) that have existing relationships with the
medical community, in an effort to reach the significant population of Americans
who need nutritional disease management solutions, and (ii) to secure
international distribution in Europe and Asia.
GROWING PRODUCT SALES. Consolidated net sales of the Company and its
subsidiaries (Jason Pharmaceuticals, Inc., Take Shape for Life, Inc., Seven
Crondall Associates, LLC., Jason Properties, LLC, and Jason Enterprises, Inc.)
are set forth below:
Six months ended June Years ending December 31 (audited)
Parameter 30, 2003 (unaudited) 2002 2001
-------------------- ---- ----
Net sales $12,764,000 $12,345,000 5,022,000
Cost of sales $ 3,311,000 3,687,000 2,211,000
Gross profit $ 9,453,000 8,658,000 2,811,000
Net income $ 1,455,000 2,623,000 588,000
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There has been an unaudited increase of $419,000 in net sales in the first six
months of 2003 from all of 2002. This follows an unaudited increase of 146% in
net sales during 2002 as compared to the net sales in 2001. The revenue increase
for the Company is attributed to, among other things, the following: (a)
increased Direct Patient Sales via the internet's Physician Lifestyles Program;
(b) increased advertising support via national print and radio that stimulated
increased sales, and (c) the Take Shape for Life health network sales.
THE OFFERING
A total of 682,500 shares of Medifast common stock, $0.001 par value each (the
"Common Stock"), are offered by the Selling Stockholders pursuant to this
Prospectus. This includes (a) 550,000 shares of Common Stock, (b) 82,500 shares
of Common Stock issuable to the Private Placement Investors upon the exercise of
warrants, and (c) 50,000 shares of Common Stock issuable to the Asset Sellers
upon the exercise of warrants. This prospectus also covers any additional shares
of Common Stock that may be issuable to the Private Placement Investors by
reason of any stock split, stock dividend or similar transaction involving the
Common Stock.
A total of 10,642,768 shares Common Stock shall be outstanding after this
offering, including shares issuable upon exercise of warrants. The foregoing is
based on the number of shares outstanding as of July 31, 2003. This number
excludes (i) 336,161 shares of our Common Stock issuable upon exercise of
outstanding stock options, and (ii) 472,845 shares of our Common Stock reserved
for future issuance under our existing stock option plan.
USE OF PROCEEDS
The proceeds from the sale of shares, as and when made by the Selling
Stockholders, shall go entirely to the Selling Stockholders and the Company
shall receive no part of it.
The Company shall receive all proceeds from the exercise of the warrants by the
Selling Stockholders unless certain warrants are exercised on a cashless basis.
The Company shall not receive any proceeds from the sale of shares issuable upon
the exercise of the warrants and all such proceeds shall go to the Selling
Stockholders. The proceeds received from the exercise of warrants (to the extent
it is not a cashless exercise of those warrants) are expected to be used for
general corporate purposes and to fund the Company's expansion, which may
include purchasing a new distribution center, purchasing new brands, funding the
Company's export business or increase in the Company's advertising programs to
expand the Company's revenue growth.
DETERMINATION OF OFFERING PRICE
The price at which the Selling Stockholders may sell the shares will be
determined by the prevailing market for the shares or in negotiated
transactions.
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The price range within which the shares of common stock of the Company have
recently traded on the American Stock Exchange is set forth below:
Price Range of Common Stock
LOW HIGH
---- ----
Last 52 weeks, as of August 20, 2003 $1.20 $17.80
2002
Fourth Quarter................................. $1.77 $ 6.04
2003
First Quarter.................................... $3.79 $ 6.10
Second Quarter................................... $4.80 $17.21
SELLING STOCKHOLDERS
As of July 24, 2003, the Company entered into that certain Securities Purchase
Agreement (the "Securities Purchase Agreement") with two accredited investors,
namely Mainfield Enterprises, Inc. and Portside Growth & Opportunity Fund
(collectively, the "Private Placement Investors") and sold (i) an aggregate of
550,000 shares of Common Stock, $0.001 par value each, and (ii) warrants for the
issuance of 82,500 shares of Common Stock. The sales were made in reliance of
the exemption provided under Rule 506 of Regulation D promulgated under the
Securities Act.
Separately, on June 16, 2003, the Company entered into an asset purchase
agreement (the "Asset Purchase Agreement") with Consumer Choice Systems, Inc.
("CCS"), a Delaware corporation, pursuant to which the Company acquired certain
assets and business of CCS. As part of the consideration for the purchase of the
assets, the Company agreed to (i) issue to the stockholders of CCS (the "Asset
Sellers") warrants to acquire 50,000 shares of common stock of the Company and
(ii) to include those warrants in any registration statement it files after the
date thereof.
This Prospectus relates to the shares and warrants sold pursuant to the
Securities Purchase Agreement and the warrants issued pursuant to the Asset
Purchase Agreement.
The Private Placement Investors and the Asset Sellers are collectively referred
to herein as the "Selling Stockholders."
The Securities Purchase Agreement provided that the Private Placement Investors
shall be eligible to sell or dispose of any and all of the securities pursuant
to an effective registration statement under the Securities Act or pursuant to
an exemption from such registration complying with federal and state securities
laws. The Company agreed to include in any registration statement, and includes
herein, a copy of that certain Plan of Distribution setting forth the Selling
Stockholders' plan for the sale of the shares acquired pursuant to the
Securities Purchase Agreement. See "Plan of Distribution" on page 15.
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The following table sets forth certain information regarding the Selling
Stockholders as of July 24, 2003, including the names of the Selling
Stockholders, the number of share beneficially owned by each of the Selling
Stockholders, the number of shares being registered for the Selling Stockholders
and the percentage ownership of shares held by the Selling Stockholders as of
such date.
The Selling Stockholders may sell any or all of the shares, subject to
applicable federal and state securities laws, but are under no obligation to do
so.
SHARES BENEFICIALLY OWNED PRIOR TO SHARES BENEFICIALLY OWNED IF
BENEFICIAL OWNER REGISTRATION NUMBER OF ALL REGISTERED SHARES ARE
SHARES BEING SOLD
REGISTERED NUMBER OF
NUMBER OF SHARES PERCENTAGE (1) SHARES PERCENTAGE
A. PRIVATE PLACEMENT INVESTORS
------------------------------
Mainfield Enterprises, Inc. 488,750 (2) 4.59% 488,750 (2),(3) 0 0.00%
C/o Sage Capital Growth, Inc.
660 Madison Avenue
New York, New York 10022 (4)
Portside Growth & Opportunity 143,750 (5) 1.35% 143,750 (5),(3) 0 0.00%
Fund
C/o Ramius Capital Group, LLC
666 Third Avenue, 26th Floor
New York, New York 10017 (6)
TOTAL PRIVATE PLACEMENT INVESTORS 632,500 5.94% 632,500 0 0%
B. ASSET SELLERS
----------------
Evelyn Barron 720(7) * 240 480 *
3815 Carr Pl N
Seattle, WA 98103
Arnoldo Barros 4,687(8) * 1,562 3,125 *
62 West 47th Street, Room 803
New York, New York 10036
Margie Chassman 65,088(9) * 30,363 34,725 *
445 West 23rd Street, Apt. 16E
New York, New York 10011
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David Blech 810(10) * 270 540 *
445 West 23rd Street, Apt. 16E
New York, NY 10011
The Harbor Trust 34,688 (11) * 11,563 23,125 *
C/o Margie Chassman as Trustee,
445 West 23rd Street, Apt. 16E,
New York, New York 10011
Frank O'Connor 1,417(12) * 472 945 *
6 Tarman Ct. Rondolph, NJ 07869
Joseph Penner 690(13) * 230 460 *
115 East 61st Street, New York,
New York 10021
Mark Germain 1,155(14) * 385 770 *
6 Olmsted Road
Scarsdale, NY 10583
Martin Blech 427(15) * 142 285 *
205 Van Nostrand Avenue
Englewood, NJ 07631
New Millenium Biotech, Inc. 4,928(16) * 1,643 3,285 *
C/o David Blech
445 West 23rd Street, Apt. 16E
New York, NY 10011
Stanley Shapiro 1,440(17) * 480 960 *
111 John Street, Room 800
New York, NY 10038
Stelios Papadopoulos 2,392(18) * 797 1,595 *
1221 Sixth Avenue
New York, NY 10020
Tehillah Harris 428(19) * 143 285 *
205 Van Nostrand Avenue
Englewood, NJ 07631
Terry Kelly 6,130(20) * 1,710 4,420 *
8407 NE Woodland Cove Drive
Kirkland, WA 98034
TOTAL ASSET SELLERS 1.17% 50,000 75,000 *
GRAND TOTAL (A+B) 682,500
* Less than one percent (1%).
(1) A total of 10,642,768 shares Common Stock shall be outstanding after this
offering, including shares issuable upon exercise of warrants. The foregoing is
based on the number of shares outstanding as of July 31, 2003. This number
excludes (i) 336,161 shares of our Common Stock issuable upon exercise of
outstanding stock options, and (ii) 472,845 shares of our Common Stock reserved
for future issuance under our existing stock option plan.
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(2) Represents 425,000 shares of Common Stock and warrants to acquire 63,750
shares of Common Stock.
(3) This prospectus also covers any additional shares of Common Stock that may
be issuable to the Private Placement Investors by reason of any stock split,
stock dividend or similar transaction involving the common stock.
(4) DISCLAIMER OF BENEFICIAL OWNERSHIP: Pursuant to an investment management
agreement Avi Vigder has voting discretion and investment control over the
shares held by Mainfield Enterprises, Inc. Avi Vigder disclaims beneficial
ownership of such shares.
(5) Represents 125,000 shares of Common Stock and warrants to acquire 18,750
shares of Common Stock.
(6) DISCLAIMER OF BENEFICIAL OWNERSHIP: The Investment Advisor to Portside
Growth and Opportunity Fund is Ramius Capital Group, LLC. The Managing Member of
Ramius Capital Group, LLC is C4S & Co., the Managing Members of which are Peter
Cohen, Morgan Stark and Thomas Strauss. As such, Messrs. Cohen, Stark and
Strauss may be deemed beneficial owners of shares issued and issuable to
Portside Growth and Opportunity Fund. Messrs. Cohen, Stark and Strauss disclaim
beneficial ownership of all of such shares.
(7) Represents 480 shares of Common Stock and warrants to acquire 240 shares of
Common Stock.
(8) Represents 3,125 shares of Common Stock and warrants to acquire 1,562 shares
of Common Stock.
(9) Represents 34,725 shares of Common Stock and warrants to acquire 30,363
shares of Common Stock.
(10) Represents 540 shares of Common Stock and warrants to acquire 270 shares of
Common Stock.
(11) Represents 23,125 shares of Common Stock and warrants to acquire 11,563
shares of Common Stock.
(12) Represents 945 shares of Common Stock and warrants to acquire 472 shares of
Common Stock.
(13) Represents 460 shares of Common Stock and warrants to acquire 230 shares of
Common Stock.
(14) Represents 770 shares of Common Stock and warrants to acquire 385 shares of
Common Stock.
(15) Represents 285 shares of Common Stock and warrants to acquire 142 shares of
Common Stock.
(16) Represents 3,285 shares of Common Stock and warrants to acquire 1,643
shares of Common Stock.
(17) Represents 960 shares of Common Stock
and warrants to acquire 480 shares of Common Stock.
(18) Represents 1,595 shares of Common Stock and warrants to acquire 797 shares
of Common Stock.
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(19) Represents 285 shares of Common Stock and warrants to acquire 143 shares of
Common Stock.
(20) Represents 4,420 shares of Common Stock and warrants to acquire 1,710
shares of Common Stock.
PLAN OF DISTRIBUTION
The Private Placement Investors may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Private Placement Investors may use any one or
more of the following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- An exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the Private Placement Investors to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The Private Placement Investors may also sell shares under Rule 144
under the Securities Act, if available, rather than under this Prospectus.
The Private Placement Investors may also engage in short sales against
the box, puts and calls and other transactions in our securities or derivatives
of our securities and may sell or deliver shares in connection with these
trades.
Broker-dealers engaged by the Private Placement Investors may arrange
for other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Private Placement Investors (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated. The Private Placement Investors do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved. Any profits on the resale of shares of common stock by a
broker-dealer acting as principal might be deemed to be underwriting discounts
or commissions under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, attributable to the sale of shares will be
borne by a selling stockholder. The Private Placement Investors may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares if liabilities are imposed on that person under
the Securities Act.
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The Private Placement Investors may from time to time pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this Prospectus after we have filed an amendment to this
Prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act of 1933 amending the list of Private Placement Investors to include the
pledgee, transferee or other successors in interest as Private Placement
Investors under this Prospectus.
The Private Placement Investors also may transfer the shares of common
stock in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this Prospectus and may sell the shares of common stock from time to time under
this Prospectus after we have filed an amendment to this Prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
the list of Private Placement Investors to include the pledgee, transferee or
other successors in interest as Private Placement Investors under this
Prospectus.
The Private Placement Investors and any broker-dealers or agents that
are involved in selling the shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the shares of common stock purchased by them may
be deemed to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the
registration of the shares of common stock. We have agreed to indemnify the
Private Placement Investors against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
The Private Placement Investors have advised us that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their shares of common
stock, nor is there an underwriter or coordinating broker acting in connection
with a proposed sale of shares of common stock by any selling stockholder. If we
are notified by any selling stockholder that any material arrangement has been
entered into with a broker-dealer for the sale of shares of common stock, if
required, we will file a supplement to this Prospectus. If the Private Placement
Investors use this Prospectus for any sale of the shares of common stock, they
will be subject to the prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Securities
Exchange Act of 1934 may apply to sales of our common stock and activities of
the Private Placement Investors.
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EXPERTS AND COUNSELS
Wooden and Benson Chartered, independent accountants, a member of the
BDO-Siedman alliance, have audited our consolidated financial statements
included in our Annual Report on Form 10-KSB for the year ended December 31,
2002. They have also served as our auditor for our consolidated financial
statements included in our Annual Report for the year ended December 31, 2001.
Our 2002 Annual Report is incorporated herein by reference in reliance on Wooden
& Benson Charterted's report, given on their authority as experts in accounting
and auditing. The validity of shares of common stock issued pursuant to the
Securities Purchase Agreement has been passed upon by Michael P. Tanczyn, P.A.
Lazare Potter Giacovas & Kranjac LLP has served as special counsel to the
Company in connection with the Securities Purchase Agreement and the
registration statement filed in connection with this Offering.
MATERIAL INFORMATION
The Company filed its Annual Report on Form 10-KSB, as amended, on
March 25, 2003 for the year ending December 31, 2002. Thereafter the Company
filed its latest quarterly report for the period ending June 30, 2003 on August
14, 2003. There have been no material changes in the Registrant's affairs since
the date of filing of the last quarterly report. On September 12, 2003, the
Company reported that its affiliate, Seven Crondall, LLC, purchased a
distribution facility in Ridgely, Maryland, and the assets and management
expertise of an experienced distributor to operate the distribution facility.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Exchange Act.
We therefore file periodic reports, proxy statements and other information with
the Commission. Such reports may be obtained by visiting the Public Reference
Room of the Commission at 450 Fifth Street, NW, Washington, D.C. 20549, or by
calling the Commission at 1-800-732-0330. In addition, the Commission maintains
an internet site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding issuers that file
electronically.
Our internet address is www.medifast.net. The information on our
website does not constitute part of this Prospectus. We make available, free of
charge, through our internet website copies of our annual report on Form 10-K
and quarterly reports on Form 10-Q and amendments to those reports, if any,
filed or furnished pursuant to Section 13 (a) or 15 (d) of the Securities
Exchange Act, in due course after filing such material electronically or
otherwise furnishing it to the Commission.
We have filed a registration statement on Form S-3 regarding this
offering with the Commission under the Securities Act. This prospectus, which
constitutes a part of the registration statement, does not contain all the
information contained in the registration statement, which contains, in addition
to documents incorporated by reference, certain exhibits and undertakings.
Statements made in this Prospectus as to the content of any contract, agreement
or other document are not necessarily complete and you should refer to the
contracts, agreements and other documents attached as exhibits to the
registration statement or incorporated by reference for a more complete
description of the agreements, contracts and other documents.
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