Edgar Filing: EDIETS COM INC

As filed with the Securities and Exchange Commission on July 2, 2001.
Registration Statement No. 333-62046

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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Amendment No. 1 to

FORM SB-2
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933

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eDiets.com, Inc.

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Delaware 56-0952883
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
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8980
(Primary Standard Industrial
Classification Code Number)

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3467 W. Hillsboro Boulevard
Deerfield Beach, Florida 33442
(954) 360-9022
(Address and Telephone Number
of Principal Executive Offices)

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David R. Humble, Chief Executive Officer
eDiets.com, Inc.
3467 W. Hillsboro Boulevard
Deerfield Beach, Florida 33442
(954) 360-9022

(Name, Address and Telephone Number of Agent for Service)

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COPIES OF COMMUNICATIONS TO:
Mark A. Pachman, Esquire
Nason, Yeager, Gerson, White & Lioce, P.A.
1645 Palm Beach Lakes Boulevard, Suite 1200
West Palm Beach, Florida 33401
(561) 686-3307

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Approximate Date of Commencement of Proposed Sale to the Public: As
soon as practicable after this Registration Statement becomes effective.

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

===================================================================================================================

Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Unit Price Fee

===================================================================================================================

Common Stock (par value $.001 per share) 3,678,288(1) $ 2.00 $ 8,451,016 (2)

Warrants to Purchase Shares of Common Stock 1,215,625(1)(3) -0- -0- -0-

Common Stock underlying warrants 1,215,625(1)(3)(9) $ 2.50 $3,039,062.50 (2)

Placement Agent's Shares of Common Stock 150,000(1)(4) $ 2.00 $ 300,000 (2)

Common Stock underlying warrants issued
to Advertising Agency 82,500(1)(5)(9) $ 2.00 $ 165,000 (2)

Common Stock underlying warrants issued
to Placement Agent 950,000(6)(9) $1.375 $ 1,306,250 $ 326.56(10)

Warrants to purchase shares of Common Stock
issued to Consultant 400,000(7) -0- -0- -0-

Common Stock underlying warrants issued
to Consultant 400,000(7)(9) $ 0.75 $ 300,000 $ 75(10)

Warrants to purchase shares of Common Stock
issued to Private Placement Investor 450,000 (8) -0- -0- -0-

Common Stock underlying warrants issued to
Private Placement Investor 450,000 (8) $ 2.50 $ 1,125,000 $ 281.25(10)

===================================================================================================================

Total $ 682.81(10)

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(1) The resale of these shares was previously registered pursuant to the
Registration Statement on Form SB-2, as declared effective on May 12,
2000 (File No. 333-93971).

(2) In accordance with Rule 429, the filing fee for these shares was
previously paid in conjunction with the Registration Statement on Form
on SB-2, as declared effective on May 12, 2000 (File No. 333-34882).

(3) Represents warrants to purchase shares of common stock at an exercise
price of $2.50 per share issued to investors in Registrant's private
placement and the shares of common stock underlying the warrants.

(4) Represents the registration for resale of 150,000 shares of common
stock issued to the Placement Agent in the private placement in
connection with the acquisition by the Company of eDiets, Inc.
(formerly eDiets.com, Inc.) in November 1999.

(5) Represents shares of common stock issuable upon exercise of warrants
issued to an advertising agency at an exercise price of $2.00 per
share.

(6) Represents shares of common stock issuable upon the exercise of
warrants issued to the Placement Agent and its assignees at an exercise
price of $1.375 per share in March 2001.

(7) Represents warrants and shares of common stock issuable upon the
exercise of warrants issued to a consultant at an exercise price of
$0.75 per share in January 2001.

(8) Represents warrants and shares of common stock issuable upon the
exercise of warrants issued to an investor in Registrant's private
placement at an exercise price of $2.50 per share.

(9) Pursuant to Rule 416, there are also being registered such additional
shares of common stock as may become issuable so as to prevent dilution
resulting from stock splits, stock dividends or similar transactions in
accordance with the provisions contained in the warrants.

(10) Estimated solely for the purpose of calculating registration fees
pursuant to Rule 457(c) under the Securities Act of 1933, as amended.

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus
which constitutes part of this Registration Statement also relates to the resale
of an aggregate of 3,678,288 shares of the registrant's common stock registered
on Form SB-2, Registration No. 333-93971. As such, this Registration Statement
also serves as post-effective Amendment No. 1 to the Registration Statement on
Form SB-2, Registration No. 333-93971.

The Registrant hereby deregisters an aggregate of 550,220 shares
previously registered pursuant to its Registration Statement No. 333-93971.

eDiets.com, Inc.
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Cross Reference Sheet
Pursuant to Item 501 of Regulation SB

Form SB-2 Item No. and Caption Caption or Location
in Prospectus
--------------------------------------------------- ---------------------------------

1. Front of the Registration Statement and Outside Outside Front Cover Page of
Front Cover of Prospectus Prospectus

2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back
Prospectus Cover Pages of Prospectus

3. Summary Information and Risk Factors Prospectus Summary; Risk Factors

4. Use of Proceeds Use of Proceeds

5. Determination of Offering Price Not Applicable

6. Dilution Not Applicable

7. Selling Security Holders Selling Security Holders

8. Plan of Distribution Plan of Distribution

9. Legal Proceedings Business

10. Directors, Executive Officers, Promoters and Management
Control Persons

11. Security Ownership of Certain Beneficial Owners Principal Stockholders
and Management

12. Description of Securities Description of Securities

13. Interest of Named Experts and Counsel Not Applicable

14. Disclosure of Commission Position on Management
Indemnification for Securities Act Liabilities

15. Organization within Last Five Years Business

16. Description of Business Business

17. Management's Discussion and Analysis and Plan of Management's Discussion and
Operation Analysis of Financial Condition
and Results of Operations

18. Description of Property Business - Properties

19. Certain Relationships and Related Transactions Management - Certain Transactions

20. Market for Common Equity and Related Stockholder Market for Common Stock and
Matters Related Stock Matters

21. Executive Compensation Management - Executive
Compensation and Employment
Agreements

22. Financial Statements Financial Statements

23. Changes in and Disagreements with Accountants on Not Applicable
Accounting and Financial Disclosure

Subject To Completion Dated July 2, 2001

PROSPECTUS

eDiets.com, Inc.

6,926,413 shares of common stock
2,065,625 warrants to purchase common stock

The selling stockholders identified in this prospectus are offering for
sale up to 6,926,413 shares of our common stock. In addition, the warrant
holders identified in this prospectus are offering for sale up to 2,065,625
warrants to purchase shares of our common stock.

Our shares of our common stock trade on the OTC Bulletin Board under
the symbol EDET. The closing sale price of the common stock on June 26, 2001,
was $1.45 per share.

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See "Risk Factors" beginning on page 4 to read about factors you should
consider before buying our shares or our warrants.

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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.

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The date of this prospectus is ______, 2001.

TABLE OF CONTENTS

PAGE

Prospectus Summary 3

Risk Factors 4

Forward-Looking Statements 5

Use of Proceeds 5

Market for Common Stock and Related Stockholder Matters 5

Capitalization 6

Selected Financial Data 7

Management's Discussion and Analysis of Financial Condition and Results of
Operations 7

Business 13

Management 24

Principal Stockholders 31

Certain Transactions 33

Selling Security Holders 33

Plan of Distribution 38

Description of Securities 40

Legal Matters 42

Experts 42

Where You Can Find More Information 43

Historical Financial Statements F-1

PROSPECTUS SUMMARY

Our Business

We also publish eDiets News, a newsletter that is an online diet
information resource. We currently email our newsletter four times a week to a
community of over 6.1 million consumers who have completed our questionnaire,
received a personal profile and have provided us with an email address.

We are a Delaware corporation with our executive offices located at
3467 W. Hillsboro Boulevard, Deerfield Beach, Florida 33442. Our telephone
number is (954) 360-9022, and our Internet address is www.ediets.com.

The Offering

. Shares outstanding before the offering 13,578,104

. Shares offered by selling security 6,926,413, including 2,065,625
holders shares issuable upon the
exercise of warrants

. Shares to be outstanding after the 16,676,229
offering, assuming exercise of all of the
selling security holders' warrants

. Use of proceeds If all of the warrants
included in this registration
statement are exercised, we
will receive gross proceeds of
$5,935,875. We intend to use
the net proceeds we receive
upon the exercise of the
warrants primarily for working
capital and general corporate
purposes.

RISK FACTORS

OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY.

We only commenced our current business in early 1997, when we began to
market our weight-loss programs on the Internet. As a result of our limited
operating history, it is difficult to evaluate our prospects. An investor should
also consider the uncertainties and difficulties frequently encountered by
companies, such as ours, in their early stages of development, particularly
companies doing business in the rapidly evolving Internet market.

WE DEPEND ON SEVERAL MAJOR INTERNET PORTALS TO ATTRACT USERS TO OUR WEB SITE AND
OUR BUSINESS COULD SUFFER IF THERE IS A DISCONTINUANCE OF OUR ADVERTISING ON
THESE PORTALS.

A significant portion of our online traffic has come, and we believe
will continue to come from, our advertising arrangements with America Online,
iVillage, and other major Internet portals, including Women.com, Lifeminders and
Yahoo. Our agreement with iVillage ends on June 30, 2002, our agreement with
America Online ends on January 22, 2003, and our agreement with Lifeminders ends
on October 1, 2001. We recently entered into a new agreement with Yahoo which
ends in April 2002. Our other current advertising agreements are of a short term
(less than three months) basis. Our advertisers have no obligation to renew our
agreements when they expire. Our agreements with these advertisers also do not
prohibit them from carrying online sites or developing and providing content
that compete with our site. If there is a discontinuance of our advertising for
any reason on America Online, iVillage, or the other major portals on which we
currently advertise, our business could suffer.

WE DEPEND ON DAVID R. HUMBLE, OUR FOUNDER AND CHIEF EXECUTIVE OFFICER, AND OUR
OTHER KEY MANAGEMENT PERSONNEL AND THE LOSS OF THEIR SERVICES COULD HARM OUR
BUSINESS. AS OUR MAJORITY STOCKHOLDER, MR. HUMBLE ALSO CONTROLS OUR BUSINESS AND
THIS WEAKENS THE EFFECT OF OTHER STOCKHOLDERS' VOTES.

Our business is dependent on David R. Humble, our founder and Chief
Executive Officer, and other key management personnel. Although we have an
employment agreement with Mr. Humble, our business would suffer if we were to
lose his services. Under our employment agreement, Mr. Humble receives a base
salary of $250,000 per year and a bonus to be determined by our compensation
committee based on income before taxes. The employment agreement contains a
non-compete provision for the term of employment and two years after it is over,
as well as a non-disclosure provision. We have "key-man" life insurance in the
amount of $2 million covering Mr. Humble.

The success of our business will also depend on our ability to hire and
retain additional qualified key executive management personnel particularly in
the marketing, administrative and financial areas. Competition for qualified
personnel in the Internet industry is intense. If we are unable to attract and
retain additional qualified personnel, our business could suffer.

Mr. Humble owns approximately 57.8% of our common stock. Therefore, he
is able to determine the outcome of all matters requiring approval by our
stockholders, including the election of directors and the approval of mergers or
other business combination transactions. Accordingly, our other stockholders
will have little say in the outcome of these matters.

WE CAN'T BE CERTAIN THAT ADDITIONAL FINANCING WILL BE AVAILABLE TO US ON
ACCEPTABLE TERMS IF WE NEED IT.

We believe that the proceeds from our 1999 private placement, together
with our cash flows from operations, will be sufficient to meet our anticipated
capital needs through at least the next 12 months. However, due to unforeseen
circumstances, unanticipated changes in our plans or other factors beyond our
control, we may require financing sooner. Our business could suffer if financing
is not available when we may require it.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements based on our
current expectations, assumptions, estimates and projections about our business
and our industry. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors described in
this prospectus. You should not place undue reliance on the forward-looking
statements in this prospectus, which speak only as of the date the statement is
made.

USE OF PROCEEDS

We will not receive any proceeds from the sale of the shares of common
stock or warrants by the selling security holders. If all of the warrants
included in this registration statement are exercised, we will receive estimated
gross proceeds of $5,935,875. We intend to use the proceeds primarily to for
working capital and general corporate purposes. We offer no assurance that any
of the warrants will be exercised.

MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our common stock is traded over-the-counter and quoted on the OTC
Electronic Bulletin Board under the symbol "EDET." Public trading of the common
stock commenced on June 27, 2000. Prior to that time, there was no public market
for our common stock. The following table sets forth the high and the low bid
quotations for the common stock as reported on the OTC Electronic Bulletin Board
for the periods indicated. Such information reflects inter-dealer prices,
without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.

LOW BID HIGH BID
YEAR ENDED DECEMBER 31, 2001
First quarter $0.72 $1.81
YEAR ENDED DECEMBER 31, 2000:
Fourth quarter $0.69 $2.00
Third quarter $1.25 $4.00
Second quarter (from June 27, 2000) $2.00 $4.00

As of June 4, 2001, there were approximately 195 holders of record of
the Common Stock.

The Company has never declared or paid cash dividends. The Company
currently intends to retain any earnings for use in its business and does not
anticipate paying any cash dividends on its capital stock in the foreseeable
future.

CAPITALIZATION

The following table shows our capitalization as of March 31, 2001, in
thousands.

Long-term debt $ -0-

Stockholders' equity:
Preferred stock, $.01 par value
1,000,000 shares authorized, no shares issued
and outstanding -0-
Common stock $.001 par value
20,000,000 shares authorized; 13,553,104 shares
issued and outstanding 14

Additional paid-in capital 7,297

Unearned compensation (1) (7)

Accumulated deficit (6,813)
-------
Total stockholders' equity $ 491
-------
Total capitalization $ 491
=======

(1) Represents deferred compensation expenses in connection with unvested
stock options we granted at an exercise price lower than the fair
market value at the date of grant.

SELECTED FINANCIAL DATA

You should read the selected financial information below in conjunction
with the historical financial statements and related notes in this prospectus.

Statement of Operations Data (in thousands, except per share data):

Year ended December 31, Three Months Ended March 31,
----------------------- ----------------------------
2000 1999 2001 2000
-------- -------- ------- --------

Revenue $ 11,434 $ 2,385 $ 4,370 $ 1,134

Cost of revenue 544 427 295 128
Product development 238 92 81 43
Sales and marketing 12,747 1,145 3,114 1,581
General and administrative 3,202 1,096 760 642
Depreciation and amortization 314 120 98 58
Other income, net 161 33 4 74
Net (loss) income (5,450) (462) 26 (1,244)
(Loss) earnings per common
share-basic and diluted $ (0.41) $ (0.06) $ 0.00 $ (0.10)

Balance Sheet Data (in thousands):

March 31, 2001
--------------------
Working capital deficit $ (1,432)
Total assets 4,913
Total liabilities 4,422
Stockholders' equity 491

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We were originally formed in 1992 to acquire a predecessor company that
was formed in 1970. Our original business was the design, manufacture and
marketing of top-weight fabrics for use in the production of sportswear,
swimwear and activewear. In 1995, we sold substantially all of our operating
assets and until 1999 we did not have an operating business.

In November 1999, we acquired eDiets.com, Inc., a Delaware corporation
through the merger of a newly created subsidiary into eDiets.com, Inc. Upon the
merger, eDiets.com, Inc.

became our wholly-owned subsidiary and we changed our name to eDiets.com, Inc.
We changed our subsidiary's name to eDiets, Inc.

eDiets, Inc. was incorporated in March 1996. By the end of 1997, we
had:

. completed development of our original personalized diet program
software;
. conducted a proof-of-concept test;
. established price points;
. created an Internet direct marketing campaign; and
. begun to generate revenues.

In January 1998, we became the first company to market customized
fee-based diet programs exclusively on the Internet.

Thus far, we have derived more than 90% of our revenues from the sale
of our customized diet programs. Beginning in the third quarter of 1999, we
began to generate some revenues from the sale of email addresses of visitors to
our web site who have authorized us to allow third party solicitations. During
1999, we also began to generate advertising revenues in addition to commission
revenue from the sale of third-party vendor products advertised on our web site.

During 2000, there was a significant increase in our business. At the
end of the year, we had over 150,000 paying subscribers to our personalized diet
program. Our total online community grew to over 3.4 million consumers who have
completed our questionnaire, received a personal profile and have provided us
with an email address. At March 31, 2001, we had approximately 185,000 paying
subscribers and our total online community exceeded 4.8 million consumers.

We recognize revenues from customer subscriptions to our program on a
straight-line basis over the term of the subscription. Our present subscription
term is either three or twelve months. We currently offer, and have in the past
offered, subscribers various payment options, including periodic payments over
the term of the subscription. Because revenues from customer subscription are
recognized over the term of the subscription, we may incur the related marketing
expenses in a quarterly term prior to the recognition of the corresponding
revenue.

RESULTS OF OPERATIONS

Comparison of years ended December 31, 2000 and December 31, 1999

The following table shows our results of operations expressed as a
percentage of total revenues:

YEAR ENDED DECEMBER 31,
2000 1999
------------ -----------
Revenue 100 % 100 %

Cost of revenue 5 18
Product development 2 4
Sales and marketing 111 48
General and administrative 28 45
Depreciation and amortization 3 5
Other income, net 1 1
Net loss (48) % (19) %

Our revenue for the year ended December 31, 2000 was $11,434,000 as
compared to $2,385,000 for the year ended December 31, 1999. The increase in
revenue was mainly due to the increase in the number of subscribers to our diet
program. Paying members at December 31, 2000 were approximately 151,000 compared
to 33,000 in the prior year. The principal reason for increase in the number of
our members was the expansion of our advertising efforts in 2000, and to a
lesser extent the fact that we had a lower priced membership compared to the
prior year. Approximately 9.3% of our revenues in 2000 came from two additional
sources of revenue:

. advertising and commission revenue of $688,000 derived from the sale of
third-party vendor products and the sale of advertising on our web
site; and

. opt-in email revenue of $371,000, which we derive from the sale of
email addresses of visitors to our web site who have authorized us to
allow third-party solicitations;

As of December 31, 2000, we had deferred revenue of $1,352,000 relating
to membership payments for which services had not yet been provided.

Our cost of revenue includes:

. Internet access and service charges;

. revenue sharing costs; and

. salary payments to our nutritional staff;

Cost of revenue increased to $544,000 or 5% of revenues for the year
ended December 31, 2000 from $427,000 or 18% of revenues for the year ended
December 31, 1999. We attribute the dollar increase primarily to increased
Internet access and service charges and revenue sharing costs incurred in
connection with the expansion of our operations, and increased compensation
payments to our nutritional staff.

Product development costs consist primarily of salary payments to our
development staff and related expenditures for technology and software
development. These expenses increased to $238,000 or 2% of revenues for the year
ended December 31, 2000 from $92,000 or 4% of revenues for the year ended
December 31, 1999. The dollar increase for the year ended December 31, 2000 as
compared to the prior year was primarily due to additional personnel costs
related to creating and testing new design concepts and tools to be used
throughout our web site.

Sales and marketing expenses consist primarily of Internet advertising
expenses which we generally incur prior to the recognition of revenues from
sales generated from those efforts. These expenses increased to $12,747,000 or
111% of revenues for the year ended December 31, 2000 from $1,145,000 or 48% of
revenues for the year ended December 31, 1999. The dollar and percentage
increases in sales and marketing expenses were primarily due to our more
aggressive advertising placements with several major Internet portals, including
several of the America Online websites, Yahoo, iVillage and Women.com. Included
in sales and marketing expenses is a $3.0 million expense related to the offline
advertising campaign that began in the second quarter of 2000. This campaign,
which was the first offline advertising campaign for the Company, consisted of
radio commercials and print advertisements in magazines targeted to potential
members. New members from the campaign were less than expected and as a result
the Company terminated its agreement with its advertising agency in June 2000
and halted any future offline advertising spending not already committed.

General and administrative expenses consist primarily of salaries,
overhead and related costs for general corporate functions, including
professional fees. General and administrative expenses increased to $3,202,000
or 28% of revenues for the year ended December 31, 2000 from $1,096,000 or 45%
of revenues for the year ended December 31, 1999. The dollar increase was
primarily due to the increases in salaries due to additional personnel, general
overhead and increases in professional fees. General and administrative
expenses, as a percentage of revenues, decreased primarily due to a
significantly higher customer base and related revenue compared to the prior
year.

Depreciation and amortization expenses increased to $314,000 or 3% of
revenues for the year ended December 31, 2000 from $120,000 or 5% of revenues
for the year ended December 31, 1999. The dollar increase was primarily
attributable to the larger asset base subject to depreciation and amortization.

We had interest income of $161,000 in the current year because we
invested the proceeds of our private placement financing which we completed in
the fourth quarter of 1999.

Comparison of the three months ended March 31, 2001 to the three months ended
March 31, 2000

The following table sets forth the results of operations for the
Company expressed as a percentage of total revenue:

THREE MONTHS ENDED MARCH 31,
2001 2000
----------- -----------
Revenue 100 % 100 %

Cost of revenue 7 11
Product development 2 4
Sales and marketing 71 140
General and administrative 17 57
Depreciation and amortization 2 5
Other income, net * 7
Net loss 1 % (110) %

* less than 1%

Revenue increased 285% to $4,370,000 for the three months ended March
31, 2001 compared to $1,134,000 for the three months ended March 31, 2000. The
increase in revenue was mainly due to the increase in the number of subscribers
to our diet program and to a lesser extent an increase in membership prices in
the current period. Paying members at March 31, 2001 were approximately 185,000
compared to 66,000 in the comparable period a year ago. The principal reason for
the increase in the number of our members was the expansion of our advertising
efforts and the continued success in the Company's internal marketing efforts
via its newsletters. Approximately 6% of our revenues in the three months ended
March 31, 2001 came from two additional sources of revenue: opt-in email revenue
and advertising and affiliate revenue.

Opt-in email revenue increased 14% to $126,000 for the three months
ended March 31, 2001 compared to $111,000 for the same period in the prior year.
Such revenue is from the sale of email addresses of visitors to our web site who
have authorized us to allow third party solicitations and is included in total
revenues.

Advertising and affiliate revenue increased 163% to $137,000 for the
three months ended March 31, 2001 compared to $52,000 for the same period in the
prior year. Such revenue is from the sale of advertising on our web site and is
included in total revenues.

As of March 31, 2001, we had deferred revenue of $2,477,000 relating to
membership payments for which services had not yet been provided.

Cost of revenue consists primarily of Internet access and service
charges, revenue sharing costs, consulting costs for professionals that provide
online meetings, and salary payments to our nutritional staff. Cost of revenues
increased to $295,000 or 7% of revenues for the three months ended March 31,
2001 from $128,000 or 11% of revenues for the three months ended March 31, 2000.
The dollar increase was primarily attributable to increased revenue sharing
costs and additional personnel costs incurred for our nutritional staff.

Product development costs consist primarily of salary payments to our
development staff and related expenditures for technology, and software
development. Product development expenses increased to $81,000 or 2% of revenues
for the three months ended March 31, 2001 from $43,000 or 4% of revenues for the
three months ended March 31, 2000. The dollar increase was primarily due to
additional personnel costs related to creating and testing new design concepts
and tools to be used throughout our web site.

Sales and marketing expenses consist primarily of Internet advertising
expenses and are generally incurred prior to the recognition of revenues from
sales generated from those efforts. Sales and marketing expenses increased to
$3,114,000 or 71% of revenues, for the three months ended March 31, 2001 from
$1,581,000 or 140% of revenues for the three months ended March 31, 2000. The
dollar increase in sales and marketing expenses was primarily due to more
extensive advertising with several major Internet portals, including several of
the American Online websites, Women.com, and eUniverse. At March 31, 2001, the
Company had approximately $1,288,000 of prepaid advertising primarily
representing future communication costs.

Depreciation and amortization expenses increased to $98,000 or 2% of
revenues, for the three months ended March 31, 2001, from $58,000 or 5% of
revenues, for the three months ended March 31, 2000. The dollar increase was
primarily attributable to a greater amount of property and equipment subject to
depreciation and amortization as compared to the same period in the prior year.

Other income, net, which consists primarily of interest income, decreased
to $4,000 in the current quarter from $74,000 in the prior year's comparable
quarter. The decrease was primarily due to a lower average invested cash balance
for the current period as compared to the same period in the prior year.

As a result of the factors discussed above, we recorded net income of
$26,000 for the three months ended March 31, 2001 compared to a net loss of
$1,244,000 for the three months ended March 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2001, we had cash and cash equivalents of $2,122,000. For
the three months ended March 31, 2001, net cash provided by operating activities
was $1,167,000 and was primarily due to an increase in deferred revenue and a
decrease in accounts receivable. Net cash used in investing activities was
$113,000 and related to purchases of computer equipment. Net cash used in
financing activities was $19,000 for the period.

We have online advertising commitments with major Internet portals totaling
approximately $9.1 million over the next two years, of which approximately $6.0
million is payable over the next twelve months.

In December 2000, we obtained an irrevocable standby letter of credit from
a bank in the amount of $75,000 that expires in January 2002. In March 2001, we
increased the letter of credit to $200,000. The letter of credit is collaterized
by our cash equivalents and is being used to

guarantee the obligations under capital leases for computer servers. As of March
31, 2001 we had approximately $18,000 in leased equipment against the letter of
credit.

Management believes that cash on hand and cash flows from operations will
be sufficient to fund its working capital and capital expenditures for at least
the next twelve months. To the extent the Company requires additional funds to
support its operations or the expansion of its business, the Company may seek to
undertake additional equity financing. There can be no assurance that additional
financing, if required, will be available to the Company in amounts or on terms
acceptable to the Company.

NEW ACCOUNTING PRONOUNCEMENTS

As of January 1, 2001, the Company adopted Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133") which was issued in June 1998, and its amendments, Statements 137,
"Accounting for Derivative Instruments and Hedging Activities -Deferral of the
Effective Date of FASB Statement No. 133" and 138, "Accounting for Derivative
Instruments and Certain Hedging Activities" issued in June 1999 and June 2000,
respectively (collectively referred to as SFAS 133). The Statement will require
the Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
fair value of derivatives will either be offset against the change in fair value
of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The impact of adopting SFAS 133 did not have
a material impact on the Company's financial position, results of operations or
cash flows.

BUSINESS

We are the leading subscription-based online diet and fitness center, with
a current base of over 200,000 paying customers and a total online community of
over 6.1 million consumers. We were named a Forbes Best of the Web Fitness and
Nutrition Website by Forbes Magazine for the Year 2000.

We are one of the original marketers of customized fee-based diet programs
exclusively online. We have developed a proprietary software engine that enables
us to create a diet program, which we call our eDiets program, that is unique to
each consumer and then deliver it directly to the consumer's home or office via
the Internet. We believe our personalization features, low cost and centralized
Internet distribution create a unique competitive advantage in a market where
the market leader, Weight Watchers International, operates a decentralized
network of brick and mortar storefronts.

We were formed in 1992 to acquire a predecessor company that was formed in
1970. Our original business was the design, manufacture and marketing of top-
weight fabrics for use in the production of sportswear, swimwear and activewear.
In 1995, we sold substantially all of our operating assets and until November
1999 had not had an operating business.

In November 1999, we acquired eDiets.com, Inc., a Delaware corporation
through the merger of a newly created subsidiary into eDiets.com, Inc. Upon the
merger, eDiets.com, Inc. became our wholly owned subsidiary and we changed our
name to eDiets.com, Inc. We changed our subsidiary's name to eDiets, Inc.

At our Online Diet Center, we offer programs for both women and men. Women
currently represent approximately 90% of our customers. To enroll in a program,
a consumer completes a questionnaire and their personal profile is automatically
generated. We use this profile to create a private Internet diet site for the
consumer to access for meal plans and other professional advice and information.

We also publish eDiets News, an online diet information resource. We
currently email our newsletter four times a week to a community of over 6.1
million consumers who have completed our questionnaire, received a personal
profile and have provided us with an email address.

In January 2001, we launched a personalized exercise and fitness program to
supplement our basic diet program. Our fitness module contains personalized
workout schedules, complete with animated exercise instruction.

During 2000, our web site had 13.7 million visitors and over 250,000
consumers from over 33 countries purchased subscriptions to our personalized
diet program. Based on our internally developed numbers, we believe that our
members spend on the average 105 minutes per month on our site and have
approximately 114 page-views a month.

In November 2000, we entered into a joint venture with Unislim Ireland,
Limited, the leading weight loss center business in Ireland, to market our
online weight loss programs in Europe, Australia and New Zealand. Under the
terms of our joint venture agreement, we received a 60% interest in the joint
venture primarily in return for the license of our international technology
rights to the joint venture. The initial international launch occurred in the
United Kingdom in March 2001.

Our revenues in 2000 were $11,434,000. The majority, or 90.7%, of our
revenues came from the sale of our programs. The remaining revenue came from our
sale of email addresses of visitors to our web site who have authorized us to
allow third party solicitations and from commissions from the sale of
third-party vendor products and advertising on our web site.

INDUSTRY OVERVIEW

According to federal clinical guidelines on obesity issued by the National
Heart, Lung and Blood Institute, in cooperation with the National Institute of
Diabetes and Digestive and Kidney Diseases, approximately 60% of adults in the
United States are overweight or obese. Recent studies reported in the Journal of
American Medical Association indicate that in excess of $33 billion per year is
spent on weight-control products and services.

The weight-management industry consists of commercial weight-loss centers
and physician-directed programs. Programs that are provided by physicians using
prescription medication serve a relatively small segment of the market and are
relatively expensive.

Magazines, books, periodicals and public services offer unsupervised programs.
The cost of these unsupervised programs range from free to the cost of a book or
tape. Supervised programs offered by weight-loss clinics provide personal
guidance and supervision, and cost substantially more than the eDiets program.
Typically, the cost to the consumers for a program that provides personal
guidance similar to the eDiets program ranges from $10-$14 per week, excluding
the cost of food. Specialty foods offered by some weight-loss clinics cost
approximately $60 per week.

EVOLUTION OF OUR BUSINESS

eDiets was formed in March of 1996. In 1997:

. we completed development of our proprietary software;
. conducted a proof-of-concept test;
. established price points;
. created an Internet direct marketing campaign; and
. began to generate revenue.

In January 1998, we became the first company to market a customized
fee-based diet program exclusively on the Internet. We tested new site formats,
marketing messages and pricing options designed to increase the number of site
visitors and improve the ratio of subscribers to site visitors. During this
period, we also increased our Internet server and communications network
capacity to support a higher level of operations.

In mid-1998, we created eDiets News, our online diet, fitness and nutrition
newsletter. During the second half of 1998, we began placing advertisements with
several major Internet portals, including several of the America Online web
sites, Yahoo and iVillage, to determine the most productive media buys.

In February 1999, we completed development of proprietary software to
measure consumer response in real time to marketing, pricing and other elements
of a direct marketing campaign. This software uses certain elements of an
in-store marketing system. David Humble, our founder and Chief Executive
Officer, has filed a patent application covering this system and licensed the
rights to the invention covered by the patent application to us for use in the
scope of our current business. Our system has allowed us to significantly
improve the yield on advertising expenditures.

In November and December 1999, we completed a private placement financing
raising approximately $6 million of net proceeds. Primarily utilizing proceeds
from the financing, we significantly increased our advertising placements with
several major Internet portals in 2000. With the significant growth in our
paying members and our total online community, we have become the leading
subscription-based online diet and fitness center.

OUR MARKET OPPORTUNITY

We believe consumers are becoming more interested in their general health
and appearance today. We see a growing trend towards natural solutions for
nutritional well-being

and, accordingly, the potential to increase sales of our current and future
nutritional programs, products and services. We also believe that many consumers
find the conventional diet center experience to be inconvenient and costly
because of factors such as:

. lack of privacy;
. travel time to the diet center;
. special food requirements; and
. scheduling demands.

We created our online nutrition management center and personalized diet
programs to provide consumers with a convenient and productive experience in a
private and accessible online environment. The Internet provides a unique
opportunity for us to deliver our programs and services faster, more
conveniently and at less cost than Weight Watchers International, Jenny Craig,
Inc. and our other offline competitors. The key components of our solution
include:

. PERSONALIZATION. Consumers benefit from a diet program that is
personalized. Our system generates a custom diet for individuals based on
their individual characteristics, needs, likes and goals. Our program
allows the individual to make modifications and provides a way for the
individual to communicate their progress so that their program can be
updated periodically.

. CONVENIENCE. Our Online Diet Center and customer service is available to
consumers 24 hours a day, 7 days a week, from their home or office. It
provides a range of services that is comparable to conventional offline
centers that have limited hours of operation and require travel to and from
their centers.

. PRIVACY. Diet and weight-loss can be a sensitive subject that often
requires frank discussions regarding solutions. Our online meetings and
bulletin boards allow members to choose the option of being anonymous. This
leads to more open and productive discussions between members and our
staff, and within the eDiets community.

OUR STRATEGY

We believe there is an established need for conventional weight management
services internationally. Our primary positioning objective is to establish
personalization as a new and essential component of this service in the mind of
the consumer, and to identify eDiets as the originator of the concept. In
addition, we intend to establish nutrition management as a new online category
that includes not only consumers interested in weight management, but also those
interested in fitness, healthy living and the aging process. We also intend to
establish eDiets as a vertical Internet portal for diets and the leading online
provider of personalized nutrition management services. The key elements of our
strategy to reach these objectives include:

. FOCUS ON ONLINE MARKETING AND DISTRIBUTION. Our primary advantage in the
market is the economics of the Internet, including the relative low cost of
customer acquisition, program distribution and customer communications
compared to offline weight management programs. We plan to accelerate the
online marketing of our current offerings and add additional programs,
services and products to become the primary online destination for
personalized diet-related advice, information and products.

. REACH MORE CONSUMERS. We believe the growth of the Internet will provide us
with opportunities to expand our marketing and reach consumers in markets,
such as:

- medical offices;
- fitness centers;
- company intranets;
- nutrition stores; and
- related outlets at the retail level.

. PROMOTE REPEAT PURCHASES. We recognize the value of an acquired customer.
Therefore we plan to implement long-term nutritional management programs to
encourage the continued participation of eDiets members.

. EMPLOY NEW TECHNOLOGIES. As Internet streaming audio and video become
mainstream, we will seek to utilize these technologies to feature
recognized personalities to broadcast their advice, information and
motivational messages to our customer base.

. EXPAND OUR BUSINESS INTERNATIONALLY. Through our joint venture with Unislim
Ireland, Limited we plan to expand our business internationally, first in
Ireland and the United Kingdom and then throughout Europe, Australia and
New Zealand.

THE EDIETS PROGRAM

Our eDiets program is a customized diet program based on a profile provided
by the user utilizing our proprietary software. To create an eDiets program for
the user, the software system analyzes personal goals, food preferences and
lifestyle, with nutrition content. It then creates a program that varies by
individual and by changes in the individual's needs. The personalization feature
eases the transition from the individual's current diet to the eDiets diet,
because it includes familiar food groups and is in a format that fits the
individual's lifestyle. The program includes a list of the "100 Best Supermarket
Products", a personalized supermarket shopping list and weekly email tips,
advice and information.

To begin the program, consumers answer a series of profile questions and
select a food plan. The program offers three different food plans:

. A convenience food plan, comprised of pre-packaged food products;

. A recipe plan, which primarily contains food recommendations requiring
preparation; or

. A combination convenience and recipe food preparation format.

This information forms the individual's personal profile. Most customers
use a credit card on our secure server to subscribe, while a limited number
choose to subscribe by phone or fax and pay by check. Their first week's program
is delivered immediately after their credit card submission or check payment has
been received.

Each new member has a personal homepage we call "My eDiets". With their
My eDiets custom page, members can visit their site at any time to receive
progress reports, access meal plans, shopping lists and hundreds of diet
resources.

The current subscription term for the eDiets program is three months, and
the cost of the subscription is approximately $35 - $45. After the three months,
members may continue their subscription on a monthly basis at a cost of $10 per
month. Members have unlimited access to services during this period. We
continually evaluate the cost of our program and expect price changes in the
future.

Members are encouraged to attend regular online motivation meetings and
have access to chat rooms where they can receive community support 24 hours a
day, seven days a week. They receive guidance, have the opportunity to ask
questions and learn from others with the same goals. We believe that the online
meetings provide a more convenient and private means of sharing ideas and
experiences than traveling to conventional weight management storefronts, and
attending open meetings with strangers.

The eDiets program consists exclusively of professional advice and
information and uses nutrition standards established by the federal government.
The program is designed around caloric intake. In our program we only specify
foods that can be purchased at the supermarket. We do not recommend or market
diet pills or other controversial products.

In January 2001, we launched our new fitness program which we offer to
paying subscribers of our weight loss program at an additional fee ranging from
$5 - $10 per month. The fitness program contains personalized workout schedules
with animated exercise instruction. We believe that with the addition of the
fitness module, we will be able to attract more male subscribers who are
generally interested in exercise and fitness in addition to dieting programs.

MARKETING AND PROMOTION

Our marketing plan to generate traffic to our web site and attract
customers consists of:

. INTERNET ADVERTISING. A majority of our sales are generated from direct
response advertising on the Internet. We place advertising banners on
several major Internet online portals and sites that target female
audiences with health and nutrition interests. We estimate that from 1% to
15% of the consumers who visit the sites on which we advertise on a regular
basis, and viewed our advertising banners, responded by "clicking through"
to the eDiets site. We have an advertising agreement with America Online,
which runs through January 2003. Our agreement with America Online consists
of traditional banner advertising as well as the integration of our
proprietary co-branded content throughout the America Online network and
its affiliated properties. We have entered into an advertising agreement
with iVillage which runs through June 2002 and have entered into an
advertising agreement with Yahoo which runs through April 2002. We also
advertise on other web sites including Women.com, Lifeminders and On-
Health.

. eDIETS NEWS. Our newsletter eDiets News, an online diet, fitness and
nutrition resource is offered free to consumers. Currently, eDiets News
generates over 15 million

page views per month and is mailed to a community of over 6.1 million
consumers who have completed our questionnaire, received a personal
profile and provided us with an email address. The newsletter is delivered
four times a week to each subscriber. We obtain information for the
newsletter from other Internet medical and health information providers
and we write and edit all material. The newsletter also contains reference
to certain health and nutrition related web sites of other companies with
which we have revenue sharing arrangements.

. REVENUE SHARING. In December 1998, we signed an agreement with Microsoft's
Link-Share, an Internet company that arranges affiliate programs. These
affiliate programs allow other Internet sites to offer the eDiets program
on their sites in exchange for a specified commission. We also pay an
annual fee and a commission for each sale to Link-Share. As of December 31,
2000, we had 16,957 affiliates under the Link-share program. In addition to
this affiliate program, we have arrangements with other web sites for the
display of the eDiets banner in exchange for a share of the revenue from
sale of subscriptions. Among the sites that we currently have revenue
sharing arrangements with are Cybergold and ClickTrade.

. OFFLINE MARKETING CAMPAIGN. In the second quarter of 2000, we commenced an
offline marketing campaign. This campaign, which was our first offline
advertising campaign, consisted of radio commercials and print
advertisements in magazines targeted to potential members. The results of
the offline campaign did not meet our sales expectations and as a result we
terminated our agreement with the advertising agency and halted any
remaining uncommitted offline advertising spending. However, we believe we
will utilize some level of offline advertising in 2001.

COMPETITION

We currently compete with several non-Internet weight-loss companies. Our
major offline competitors are Weight Watchers International and Jenny Craig,
Inc.

We were one of the original marketers of customized fee-based diet programs
exclusively online. We believe we can successfully capture market share from the
established offline competitors for the following reasons:

. CENTRAL POINT OF OPERATIONS. We market and distribute our programs from a
single facility via the Internet. This is a more efficient system than
operating a network of storefronts with fixed costs and staffing.

. GEOGRAPHIC REACH. Conventional diet centers are typically located in areas
where the population is concentrated and their use is limited by many
convenience factors. As use of the Internet expands, eDiets will be able to
reach more consumers.

. FRANCHISEES. Most conventional diet center companies have sold territorial
rights to their products and services to franchisees, and may face
difficulties adopting a direct-to-consumer sales strategy.

We believe that for our major offline competitors the challenge of an
Internet entry is their current investment in hard assets, lease commitments
and, more importantly, their franchised outlets. An Internet offer could
cannibalize sales from existing storefronts, including those of franchisees. At
this time, the non-Internet leaders have web sites, but they are limited to
providing information, or driving traffic to their conventional storefronts.

We also compete with a number of Internet sites, such as iVillage, Thrive
and America Online Health Channel, which provide free health and nutrition
information, including diet information. However, these major sites utilize an
advertising model and do not currently offer a fee-based program or provide any
personalization features.

We know of four other online competitors aggressively marketing an online
program with similarities to our program. Cyberdiet.com, has had an Internet
presence for approximately three years offering free programs. It had introduced
a subscription fee-based diet program comparable to ours, but has recently
returned to a free program. In addition, we compete with Nutrisystem.com, an
online weight-loss program by NutriSystem, Inc. The NutriSystem program requires
the purchase of the NutriSystem pre-packaged product line, which is only
available through the Nutrisystem.com web site. There are also two newer
companies that have developed personalized, fee-based diet programs, Asimba and
Diet Smart. Asimba's program is primarily a personalized fitness program that
provides a daily meal plan as well as nutritional information. Asimba recently
switched to a subscription-based model diet program. Diet Smart provides a
choice of meal plans and is also fee-based. We believe that there are also
several additional websites under construction that will offer weight-loss
programs that are very similar in design to our program.

Due to the success of our program and the development of other competitive
online weight loss programs, we anticipate that the industry leaders can be
expected to mount a meaningful form of Internet response. In addition, given the
rapid expansion of the Internet, other companies may develop similar programs or
health-related sites that compete vigorously with our programs and services.
Accordingly, we could experience increasingly intense competition in our
marketplace and our business and operations could suffer.

INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND DOMAIN NAMES

Our success depends on the protection of our original interactive
proprietary software and systems and the goodwill associated with our trademarks
and other proprietary intellectual property rights. Our interactive personalized
diet programs are based on proprietary software that we have developed.

David R. Humble, our founder and Chief Executive Officer, has filed a
patent application covering the means of using the Internet to provide an
interactive link in a store for the purpose of providing retailers and
manufacturers with information to measure the response of the consumers to sales
and marketing information. He has granted us a royalty-free exclusive perpetual
license to use the aspects of the invention under the patent, if a patent is
issued, that relate to our Internet marketing program. We have incorporated
limited aspects of this software into our software to measure consumer response
in real time to marketing, pricing and other elements of our program. For
example, we can measure consumer response to changes in our

page format or the attractiveness of various payment options. We can receive
real time responses to these modifications and options.

We attempt to protect our intellectual property and proprietary rights
through a combination of trademark and copyright law, trade secret protection,
and confidentiality agreements with our employees, and marketing and advertising
partners. We pursue the registration of our domain names, trademarks and service
marks in the United States. A substantial amount of uncertainty exists
concerning the application of copyright and trademark laws to the Internet and
there can be no assurance that existing laws provide adequate protection of our
proprietary intellectual property or our domain names. The steps we take to
protect our proprietary rights may not be adequate and third parties may
infringe or misappropriate our copyrights, trademarks, service marks and similar
proprietary rights.

INFRASTRUCTURE OPERATIONS AND TECHNOLOGY

We have designed our infrastructure to provide reliability and scalability
as it supports our operations. Our architecture currently consists of an array
of Dell Power Edge Servers running the Microsoft Windows NT Server Operating
System and Web Server Software from Microsoft and Allaire. The servers are
located in a secure third-party web hosting facility in Herndon, Virginia. This
facility provides us with:

. ready access to increased network bandwidth;

. improved redundancy and disaster recovery;

. 24-hour onsite management and support; and

. the security and protection of a reliable data center.

Although this facility provides us with increased security and
reliability, we can't assure you that there will be no interruption in service.
To the extent that service is interrupted or delayed, we could experience a
decrease in traffic, loss of customers, and harm to our reputation.

GOVERNMENT REGULATION

There are an increasing number of laws and regulations pertaining to the
Internet. In addition, a number of legislative and regulatory proposals are
under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to:

. liability for information retrieved from or transmitted over the
Internet;
. online content regulation;
. visitor privacy; and
. taxation and quality of products and services.

Moreover, the applicability to the Internet of existing laws governing issues
such as:

. intellectual property ownership and infringement;

. copyright;
. trademark;
. trade secret;
. obscenity;
. libel;
. employment; and
. personal privacy

is uncertain and developing. Any new legislation or regulation, or the
application or interpretation of existing laws may have an adverse effect on our
business.

LIABILITY FOR INFORMATION RETRIEVED FROM OUR WEB SITE AND FROM THE INTERNET

Content may be accessed on our web site and this content may be
downloaded by visitors and subsequently transmitted to others over the Internet.
This could result in claims against us based on a variety of theories, including
negligence, copyright or trademark infringement. We could also be exposed to
liability with respect to third-party content that may be posted by visitors in
our chat rooms or bulletin boards. It is also possible that if any information
contains errors or false or misleading information, third parties could make
claims against us for losses incurred in reliance on such information. In
addition, we may be subject to claims alleging that, by directly or indirectly
providing links to other web sites, we are liable for copyright or trademark
infringement or the wrongful actions of third parties through their respective
web sites. The Communications Decency Act of 1996 provides that, under certain
circumstances, a provider of Internet services shall not be treated as a
publisher or speaker of any information provided by a third-party content
provider. This safe harbor has been interpreted to exempt certain activities of
providers of Internet services. Our activities may prevent us from being able to
take advantage of this safe harbor provision. Any claims brought against us in
this respect may have a material and adverse effect on our business.

PRIVACY CONCERNS

The Federal Trade Commission has adopted regulations and guidelines
regarding the collection and use of personal identifying information obtained
from individuals when accessing web sites, with particular emphasis on access by
minors. Such regulations include requirements that companies establish certain
procedures to, among other things:

. give adequate notice to consumers regarding information collection and
disclosure practices;

. provide consumers with the ability to have personally identifiable
information deleted from a company's database;

. provide consumers with access to their personal information and with
the ability to rectify inaccurate information;

. clearly identify affiliations with third parties that may collect
information or sponsor activities on a company's web site; and

. obtain express parental consent prior to collecting and using personal
identifying information obtained from children under 13 years of age.

These regulations also include enforcement and redress provisions. We
have implemented and intend to continue to implement programs designed to
enhance the protection of the privacy of our visitors and comply with these
regulations. However, the FTC's regulatory and enforcement efforts may adversely
affect our ability to collect personal information from visitors and customers
and therefore limit our marketing efforts.

TRADE PRACTICES REGULATIONS

The FTC and certain states regulate advertising and consumer matters
such as unfair and deceptive trade practices. The State of Florida, where our
corporate offices and operations center are located, regulates certain marketing
and disclosure requirements for weight loss providers. In addition, the nature
of our interactive Internet activities may subject us to similar legislation in
a number of other states. Although we intend to conduct our operations in
compliance with applicable regulatory requirements and continually review our
operations to verify compliance, we can't assure you that aspects of our
operations will not be reviewed and challenged by the regulatory authorities and
that if challenged that we would prevail. Furthermore, we can't give any
assurance that new laws or regulations governing weight loss and nutrition
services providers will not be enacted, or existing laws or regulations
interpreted or implied in the future in such way as to cause harm to our
business.

REGULATIONS OF OTHER JURISDICTIONS

Due to the global nature of the Internet, it is possible that, although
transmissions by us over the Internet originate primarily in the United States,
the governments of other foreign countries might attempt to regulate our
transmissions or prosecute us for violations of their laws. These laws may be
modified, or new laws enacted, in the future. Any of these developments could
cause our business to suffer. In addition, as our service is available over the
Internet in multiple states and foreign countries, these jurisdictions may claim
that we are required to qualify to do business as a foreign corporation in each
state or foreign country. We have not qualified to do business as a foreign
corporation in any jurisdiction, except Florida. This failure by us to qualify
as a foreign corporation in a jurisdiction where we are required to do so could
subject us to taxes and penalties and could result in our inability to enforce
contracts in such jurisdictions.

EMPLOYEES

As of June 26, 2001, we had 62 employees. We have an arrangement with a
third-party professional employer service which provides services, including
payroll, human resources benefits and workers compensation administration, for
all of our employees. We believe our relationship with our employees is
good.

PROPERTIES

We currently lease approximately 2,600 square feet of office space in
Deerfield Beach, Florida, under a lease expiring on September 30, 2004. The
current monthly rental, including lessor leasehold improvements repayment
obligation and pro-rated share of common area facilities expenses, is $3,782.

LEGAL PROCEEDINGS

We are not a party to any pending legal proceedings.

MANAGEMENT

Directors And Executive Officers

Our Directors and Executive Officers are as follows:

NAME AGE POSITION
---- --- --------

David R. Humble 65 Chairman of the Board and Chief
Executive Officer

Robert T. Hamilton 37 Chief Financial Officer

Steven Johnson 36 Chief Technology Officer

Christine M. Brown 43 Vice President of Operations

Ronald Caporale 35 Executive Vice President of Business
Development

Isaac Kier 48 Director

Matthew A. Gohd 44 Director

James M. Meyer 64 Director

Lee S. Isgur 63 Director

DAVID R. HUMBLE has served as our Chairman of the Board since the closing of our
merger in November 1999. He has also served as our Chief Executive Officer
during this period except for the period from August through December 2000 when
David J. Schofield was our Chief Executive Officer. Mr. Humble has also served
as Chairman of the Board, President and Chief Executive Officer of eDiets, Inc.
since he founded that company in March 1996. From July 1995 to August 1996, he
was a consultant to Advanced Promotion Technologies, Inc., which was engaged in
the development and marketing of interactive electronic point of sale marketing
systems in supermarkets. From 1987 to July 1995, he had served as Chairman of
the Board of Advanced Promotion Technologies, Inc. and additionally as the Chief
Executive Officer until 1993. Advanced Promotion Technologies, Inc. filed for
bankruptcy protection in August 1996. From 1985 to 1987, he was the President,
Chief Executive Officer and Director of CheckRobot, Inc., which developed a
self-service checkout system for supermarkets. From 1968 to 1985, he served in a
number of marketing and operations capacities with Sensormatic Electronics
Corporation, which develops and markets electronic security and surveillance
products, including Vice President/Manufacturing and Vice President/Future
Products and was a member of its board of directors. Mr. Humble holds a number
of technology patents, including the original electronics security tag found on
garments in retail stores worldwide to protect against shoplifting.

ROBERT T. HAMILTON has served as our Chief Financial Officer and Treasurer since
November 1999. From July 1995 to November 1999 he was Manager, Financial
Reporting for Equinox Systems Inc., a public company engaged in the design and
development of serial input/output communication devices. Prior to July 1995,
Mr. Hamilton was an audit manager with Arthur Andersen LLP. Mr. Hamilton is also
a certified public accountant.

STEVEN JOHNSON has served as our Chief Technology Officer since November 1999.
Mr. Johnson had served as the Chief Technology Officer of eDiets, Inc. since
November 1998 and prior to that had been its Director of Software Development on
a part-time basis. From November 1996 through November 1998, he served as a
Senior Principal Engineer for Sensormatic Electronics Corporation. From April
1991 to November 1996, he was the Manager for Software Development for Advanced
Promotion Technologies, Inc.

CHRISTINE M. BROWN has served as our Vice President of Operations since August
2000. Previously, she held the Director of Operations position from November
1999 to August 2000. From February 1999 to July 1999, she was a financial
consultant to eDiets, Inc. From March

1997 through June 1999 she was the Manager for Financial Reporting for Iron
Mountain Records Management, Inc., a company engaged in the management of off-
site record storage. From June 1995 to March 1997, she was the Director of
Business Development of the Family Behavioral Center in Delray Beach, Florida.
From March 1988 through April 1995, she was the Director of Operations for
Advanced Promotion Technologies, Inc.

RONALD CAPORALE has served as our Executive Vice President of Business
Development since January 2001. Mr. Caporale helped launch eDiets, Inc. in 1996
and served as its Director of Marketing and Business Development through
September 1999 when he left our company to join iVillage, Inc., operator of
iVillage.com. While at iVillage, Mr. Caporale's positions included Vice
President and General Manager of Sales.

ISAAC KIER served as our President, Chief Executive Officer and Chairman of the
Board from 1992 until November 1999. He was the President and Chief Executive
Officer since 1981 and Chairman of the Board since 1987 of Lida, Inc., a
predecessor company we acquired by merger in 1992. He was the Vice President of
Lida, Inc. from 1978 to 1981. Since our merger with eDiets, Inc. in November
1999, he has served as a member of our board of directors and a member of our
audit committee. He was also a member of our executive committee until December
2000. Since February 2000, Mr. Kier has been a general partner of Coqui Capital
Patterns, a venture capital firm licensed by the SBA as an SBIC. Coqui has
approximately $50 million under management and has minority investments in 10
new media companies. Mr. Kier also serves on the board of directors of
SecureLogix, Inc, Montebello Brand Liquors, Inc, and Islanet, Inc. From April
1997, he has been a principal of First Americas Partners, LLC, a $50 million
investment partnership focusing on investments in North and South America. From
1987 to 1997, he also served as the Managing Partner of Dana Communications
Limited, a non-wireline cellular licensee.

MATTHEW A. GOHD has served as a member of our board of directors and a member of
our executive committee since November 1999. Since 1989, Mr. Gohd served as
Senior Managing Director, Capital Markets of Whale Securities Co., L.P., our
Placement Agent and Blue Stone Capital Corp., the successor to the business of
Whale Securities. Mr Gohd was recently elected to the post of co-chairman of
Blue Stone. Mr. Gohd is also a Director of OnStage Entertainment, Inc. a
publicly-held company engaged in concert promotions.

JAMES M. MEYER has served as a member of our board of directors since December
1999. Although currently retired, Mr. Meyer was the Agency Manager of James M.
Meyer Agency, a corporate planning and insurance agency he founded in 1967. The
agency, which offered sales and services provided by The Equitable Company/AXA,
grew into one of the top ten agencies in the insurance industry, with almost 400
employees. He is also a member of our audit and compensation committees.

LEE S. ISGUR has served as a member of our board of directors since December
1999. He is also a member of our executive committee, audit committee and
compensation committee. Mr. Isgur has been the Managing Partner of Corporate
Counselors, a research and investment banking consulting firm since 1997. From
1994 to 1997, he was Managing Director of Jeffries & Company, an investment-
banking firm. From 1991 to 1994, he was a partner at Volpe Welty Company, an
investment-banking firm. From 1977 to 1991, he was employed by Paine Webber, an
investment-banking firm, where he became a First Vice President. As an analyst
and banker on Wall Street for over 30 years, Mr. Isgur has participated in
numerous public and private offerings for both domestic and international
companies over a broad array of consumer, entertainment and technology
industries.

Directors are elected at each annual meeting of our stockholders and
hold office until the next annual meeting of stockholders and the election and
qualification of their successors. Our executive officers serve at the
discretion of the board of directors. There are no family relationships among
any of our directors or executive officers.

Committees Of The Board

We have established three committees of the board of directors. They
are:

. an executive committee which has all the authority which may be delegated
to such committee under Delaware Corporation Law. The executive committee
currently consists of David R. Humble, Isaac Kier and Lee S. Isgur.

. an audit committee which reviews our internal accounting procedures and
consults with and reviews the services provided by our independent
accountants. The audit committee currently consists of Isaac Kier, James M.
Meyer and Lee S. Isgur.

. A compensation committee which reviews and recommends to the board the
compensation and benefits of all of our executive officers, administers our
stock option plan and establishes and reviews general policies relating to
compensation and benefits of our employees. The compensation committee
currently consists of Lee S. Isgur and James M. Meyer.

Director Compensation

Our directors do not currently receive any cash compensation from us
for their services as members of the board of directors, although they are
reimbursed for travel and lodging expenses in connection with attendance at
board and committee meetings. Under our 1999 Stock Option Plan, non-employee
directors are eligible to receive non-discretionary automatic grants of vested
options to purchase 25,000 shares of common stock per year at an exercise price
equal to the market price of our common stock on the date of grant. Upon their
appointment to the board, each of the current directors, except for Mr. Humble,
received 25,000 vested options exercisable at $2.00 per share. In addition,
Messrs. Humble, Gohd and Kier, the members of our Executive Committee, each
received on their appointment a one-time grant of options to purchase 100,000
shares of common stock at an exercise price of $2.00 per share.

In February 2000, each member of the audit committee and compensation
committee received a grant of an option for 25,000 shares at an exercise price
of $2.00 per share. These options vest on a quarterly basis over a period of two
years from the date of grant.

During 2000, Mr. Meyer provided consulting services to the Company
beyond his duties as a member of the Board of Directors. As compensation for
these services the Company granted him vested options to purchase 50,000 shares
of common stock at an exercise price of $1.87 per share in September 2000. Mr.
Meyer has continued to provide consulting services to the Company in 2001, and
in June 2001 the Company granted him 25,000 additional vested options at an
exercise price of $1.38 per share.

As an annual automatic grant under our Plan for service on the Board,
in November 2000, Mr. Gohd and Mr. Kier received 25,000 vested options
exercisable at a $1.38 per share, and in December 2000, Mr. Meyer and Mr. Isgur
received 25,000 vested options exercisable at $0.77 per share.

Executive Compensation

Cash Compensation

The following table summarizes all compensation paid by us during our
fiscal years ended December 31, 2000, December 31, 1999 and December 31, 1998 to
our Chief Executive Officer, our former Chief Executive Officer and each other
executive officer whose annual compensation exceeded $100,000 during the fiscal
year ended December 31, 2000.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION LONG TERM AWARDS
-------------------------------------------------------------------------
NAME AND OTHER SECURITIES
PRINCIPAL ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) COMP ($) OPTIONS (#) COMPENSATION
-------------------------------------------------------------------------------------------------------------

David R. Humble,
Chairman and 2000 $157,203 - - - -
Chief Executive 1999 17,309 - - 100,000 -
Officer 1998 - - - - -

David J. Schofield, 2000 $ 78,846 - - 83,333 $150,000(1)
former Chief 1999 - - - - -
Executive Officer 1998 - - - - -

Steven Johnson, 2000 $124,670 $10,000 $1,346(2) 62,998 -
Chief Technology 1999 86,899 - - 159,993 -
Officer (3) 1998 8,175 - - 75,429 -

Robert T. Hamilton, 2000 $100,000 - $2,500(2) 32,000 -
Chief Financial 1999 8,462 - - 100,000 -
Officer (4) 1998 - - - - -

__________________________

(1) Represents a severance payment we accrued in December 2000 and paid in
January 2001 to Mr. Schofield in connection with the termination of his
employment.
(2) Represents 401 (k) contributions made by us on behalf of Mr. Johnson and
Mr. Hamilton.
(3) Mr. Johnson joined our subsidiary eDiets, Inc. in November 1998.
(4) Mr. Hamilton joined us in November 1999.

Option Grants In The Last Fiscal Year

The following table sets forth each grant of stock options we made
during the year ended December 31, 2000 pursuant to our 1999 Stock Option Plan
to each of the executive officers named in the Summary Compensation Table:

OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)

NUMBER OF % OF TOTAL EXERCISE
SECURITIES OPTIONS/SARS OR
UNDERLYING GRANTED TO BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE
--------------------------------------------------------------------------------
David R. Humble - - - -

David J. Schofield 500,000(1) 44.4% $1.94 08/21/05

Steven Johnson 45,998 4.1% $2.00 01/26/05
17,000 1.5% $0.77 12/27/05

Robert T. Hamilton 32,000 2.8% $0.77 12/27/05

____________________

(1) In connection with the mutually agreed termination of his employment in
December 2000, 416,667 of the options forfeited.

Option Exercises And Holdings

The following table sets forth information regarding option exercises
during 2000 by each of the executive officers named in the Summary Compensation
Table.

AGGREGATE OPTION EXERCISES FOR FISCAL 2000 AND YEAR END OPTION VALUES

VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, DECEMBER 31,
SHARES 2000($) 2000($)
ACQUIRED VALUE($) EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
-------------------------------------------------------------------------------
David R. Humble - - 100,000/- -

David J. Schofield - - 83,333/- -

Steven Johnson - - 254,376/94,330 $89,107/-(1)

Robert T. Hamilton - - 50,000/82,000 -

___________________

(12) The total value of unexercised in-the-money options is based upon the
difference between $0.7188, the closing price of our common stock on the
OTC Electronic Bulletin Board on December 29, 2000 and the exercise price
of $0.01 of 125,715 of Mr. Johnson's options.

Employment Agreements

In November 1999, we entered into a three-year employment agreement
with Mr. Humble. He currently receives a base salary of $250,000 per year, which
was increased from $150,000 in December of 2000. He is also entitled to receive
a bonus to be determined by the Compensation Committee, based on income before
taxes. The employment agreement contains a non-competition provision for the
term of employment and two years thereafter and a non-disclosure provision.

In November 1999, Mr. Hamilton became our Chief Financial Officer. We
currently pay him an annual base salary of $110,000. In November of 1999, we
granted him 100,000 five-year stock options which vest in four semi-annual
installments over a two year period and are exercisable at $2.00 per share. In
December of 2000, we granted him 32,000 stock options at an exercise price of
$0.77 per share vesting in four semi-annual installments over a two year period.
While Mr. Hamilton does not have an employment agreement for a fixed term, we
have agreed that if we chose to terminate his employment without cause, we shall
provide him with four months of severance at his then current salary.

In August 2000, we entered into a three-year employment agreement with
David J. Schofield, to serve as our Chief Executive Officer, with an annual base
salary of $250,000. We also granted him 500,000 five-year stock options, which
were to vest in six semi-annual installments over a three-year period and are
exercisable at $1.94 per share. The employment agreement contains a non-
competition provision for the term of employment and two years thereafter and a
non-disclosure provision. In December 2000, we mutually agreed with Mr.
Schofield to a termination of his employment. Mr. Schofield received a severance
payment of $150,000, and he retained 83,333 stock options.

Limitation of liability and indemnification matters

Our certificate of incorporation contains provisions eliminating the
personal liability of our directors for monetary damages for breach of fiduciary
duty as a director, except for liability

. for any breach of such director's duty of loyalty to our company or
its stockholders; or

. for acts or omissions not in good faith or that involve intentional
misconduct or knowing violation of law; or

. under Section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or

. for any transaction from which the director derived an improper
personal benefit.

These provisions offer our directors protection against awards of
monetary damages resulting from breaches of their duty of care, except as
indicated above, including grossly negligent business decisions made in
connection with takeover proposals. As a result of these provisions, our
stockholders' ability to successfully sue a director for a breach of his duty of
care

has been limited. The Securities and Exchange Commission has taken the position
that the provisions will have no effect on claims arising under the federal
securities laws.

Section 145 of the Delaware Corporation Law permits indemnification of
directors, officers and employees of corporations under certain conditions
subject to certain limitations. Our certificate of incorporation provides that
we shall indemnify and shall advance expenses on behalf of our officers,
directors, employees and agents to the fullest extent permitted by law. In
addition, we are also a party to indemnification agreements with each of our
directors and officers.

To the extent we have the power to indemnify our directors, officers
and controlling persons under the provisions described above, we have been
advised that in the opinion of the SEC such indemnification is against public
policy and is, therefore, unenforceable.

PRINCIPAL STOCKHOLDERS

The following table presents certain information as of June 4, 2001
regarding beneficial ownership of our common stock by:

. each person or entity known by us to own beneficially 5% or more
of our outstanding common stock;

. each of our directors;

. each executive officer we have named in our executive compensation
discussion presented earlier in the prospectus

. all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. The address for each listed director is: c/o
eDiets.com, Inc., 3467 W. Hillsboro Boulevard, Suite 2, Deerfield Beach, Florida
33442. Except as indicated by footnote, the persons named in the table have sole
voting and investment power with respect to all shares of common stock shown as
beneficially owned by them. The number of shares of common stock outstanding
used in calculating the percentage for each listed person includes the shares of
common stock underlying options or warrants held by such person that are
exercisable within 60 days of June 4, 2001, but exclude shares of common stock
underlying options or warrants held by any other person. The percentage of
beneficial ownership is based on 13,578,104 shares of common stock outstanding
as of June 4, 2001, before any consideration is given to outstanding options,
warrants or convertible securities.

Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned of Class
------------------- ------------------ --------

David R. Humble 7,905,065(1) 57.8%

Isaac Kier 1,018,053(2) 7.3%

Matthew Gohd 908,220(3) 6.4%

James M. Meyer 283,750(4) 2.1%

Lee S. Isgur 148,625(5) 1.1%

David J. Schofield 93,333(6) *

Robert T. Hamilton 83,000(7) *

Steven Johnson 340,956(8) 2.5%

All directors and executive 10,974,241(9) 70.6%
officers as a group (10 persons)
----------------------------------------------------------------------------------------------------------------

*Less than 1%

(1) Includes 100,000 shares issuable upon exercise of vested stock options.

(2) Includes 198,125 shares issuable upon exercise of stock options that are
vested or exercisable within 60 days; 62,500 shares issuable upon exercise
of warrants issued in our private placement; 65,211 shares held by a
charitable remainder trust of which Mr. Kier and his wife are the trustees;
and 156,250 shares and 62,500 shares issuable upon the exercise of warrants
issued in the private placement to Coqui Capital Partners, L.P., of which
Mr. Kier is the general partner. Mr. Kier disclaims beneficial ownership of
shares held by Coqui Capital Partners, L.P. except for his proportional
interest therein.

(3) Includes 280,000 shares issuable upon the exercise of warrants issued to the
placement agent Whale Securities Co., LP in the 1999 private placement and
transferred to Mr. Gohd; 150,000 shares issuable upon exercise of vested
stock options; and 62,500 shares issuable upon the exercise of warrants
issued in the private placement. Also includes 135,220 shares issuable upon
the exercise of additional warrants issued to Mr. Gohd in March 2001 as an
anti-dilution adjustment in connection with the Company's agreement with the
placement agent. Does not include 31,250 shares and 12,500 shares issuable
upon the exercise of warrants issued in the private placement to Porpoise
Investors I, L.P. Mr. Gohd is the President of the general partner of the
general partner of Porpoise Investors I, L.P. and disclaims beneficial
ownership of these shares.

(4) Includes 131,250 shares issuable upon the exercise of stock options that are
vested or exercisable within 60 days; and 25,000 shares issuable upon the
exercise of warrants issued in the private placement.

(5) Includes 83,000 shares held by a revocable trust of which Mr. Isgur and his
wife are the trustees and beneficiaries and 65,625 shares issuable upon the
exercise of stock options that are vested or exercisable within sixty (60)
days.

(6) Includes 83,333 shares issuable upon the exercise of vested stock options.

(7) Includes 83,000 shares issuable upon the exercise of vested stock options.

(8) Includes 335,956 shares issuable upon the exercise of stock options that are
vested or exercisable within sixty days.

(9) Includes an aggregate of 269,072 additional shares issuable upon exercise of
stock options that are vested or exercisable within 60 days held by three
executive officers.

CERTAIN TRANSACTIONS

Loan By Stockholder

Through the end of 1997, David R. Humble, our Chief Executive Officer,
advanced loans to us to finance our start-up development cost. The loans were
non-interest bearing and did not have a fixed due date. In 1998, we repaid
approximately $54,000 to Mr. Humble, and in 1999, we repaid approximately
$53,000 to him. In 1999, he also forgave $110,000 which was treated as an
additional equity investment.

In addition, during the second half of 1999, we advanced approximately
$88,000 to Mr. Humble. He had agreed to repay these advances by March 1, 2001
with interest at an annual rate of 7%. In 2000, we forgave the note receivable
and it was charged to equity.

Patent License

Mr. Humble has filed a patent application covering the means of using
the Internet to provide an interactive link for the purpose of providing
retailers and manufacturers with information to measure the response of the
consumers to the sales and marketing information. He has granted us an exclusive
royalty-free perpetual license to use the aspects of the invention and
improvements under the patent, if a patent is issued, as it relates to our
Internet marketing program.

SELLING SECURITY HOLDERS

The following table presents certain information regarding the
beneficial ownership of our shares of common stock and warrants by the selling
security holders as of June 4, 2001,

and the number of shares of common stock and warrants covered by this
prospectus. None of the selling security holders has, or within the past three
years has had, any position, office or other material relationship with us,
except as noted below. Also, as noted below, following the offering, and
assuming all of the common stock offered by the selling stockholders has been
sold, none of the selling security holders will beneficially own 1% or more of
our common stock.

Number of Number of Beneficial
Shares Warrants Owned Ownership
Beneficially Number of Prior to the of Shares After
Name of Owned Prior to Shares Being Offering and Offering
----------------------
Selling Security Holder the Offering (1) Offered Being Offered Number Percent
---------------------- --------------- ------- ------------- ----- -------

Warrants issued to our
advertising agency:

DiMassimo Brand Advertising,
Inc. (2) 82,500 82,500 -0- -0-

Warrant issued to a Consultant:

Mallory Factor (3) 400,000 400,000 400,000 -0-
------- ------- -------

Total 482,500 482,500 400,000 -0-

Shares issued to our founder in
the merger (4)

David R. Humble (4) 7,905,065 555,800 -0- 7,349,265 54.2
--------- ------- --- ---------

Total 7,905,065 555,800 -0- 7,349,265

Shares and warrants issued in
our private placement completed
in November and December
1999 and shares issued to our
private placement investors in
June 2000(5)

Isaac Kier (6)(8) 1,018,053 69,475 -0- 948,578 7.0

Matthew Gohd (7)(8)(13) 908,220 526,380 -0- 381,840 2.8

Murray & Renee Silverstein (8) 21,875 21,875 6,250 -0-

Chet & Denise Gohd (8) 21,875 21,875 6,250 -0-

Dr. Gabriel Golan (8) 43,750 43,750 12,500 -0-

Robert Horwitz (8) 87,500 87,500 25,000 -0-

Ricardo Koenigsberger (8) 21,875 21,875 6,250 -0-

Robert A. Farmer (8) 43,750 43,750 12,500 -0-

Raz Alon (8) 43,750 43,750 12,500 -0-

Howard Park & June Y. Park (8) 43,750 43,750 12,500 -0-

Ralph Kier (8) (9) 122,010 43,750 12,500 78,260

Ilene Robbins (8) 21,875 21,875 6,250 -0-

Jeffrey Davidson (8) (10) 167,500 87,500 25,000 80,000

Edmondo Schwartz (8) 43,750 43,750 12,500 -0-

James Meyer (8) (11) 283,750 27,790 -0- 255,960 1.8

David E. Farber (8) 21,875 21,875 6,250 -0-

Michael & Lynn Steinberg (8) 43,750 43,750 12,500 -0-

Roger N. Gladstone (8) 43,750 43,750 12,500 -0-

Mark Siegel (8) 21,875 21,875 6,250 -0-

James A. Quella (8) 65,625 65,625 18,750 -0-

Lawrence S. Coben (8) 43,750 43,750 12,500 -0-

Moshe Bamberger (8) 43,750 43,750 12,500 -0-

Ronald Rotter (8) 21,875 21,875 6,250 -0-

Elliott Broidy, IRA (8) 350,000 350,000 100,000 -0-

Gross Foundation, Inc. (8) 175,000 175,000 50,000 -0-

Ellis Enterprises (8) 87,500 87,500 25,000 -0-

Marvin Weissman (8) 21,875 21,875 6,250 -0-

David Weiss (8) 32,813 32,813 9,375 -0-

BNY Clearing Services LLC Cus FBO 278,260 218,750 62,500 59,510
William G. Walters, IRA (12)

Martin Chopp (8) 87,500 87,500 25,000 -0-

Shimshon Mandel (8) 43,750 43,750 12,500 -0-

Talbiya B. Investments, Ltd. (8) 43,750 43,750 12,500 -0-

Nesher, Ltd. (8) 43,750 43,750 12,500 -0-

Balmore Funds, S.A. (8) 437,500 437,500 125,000 -0-

Coqui Capital Partners, L.P.(6) 218,750 218,750 62,500 -0-
(8)

Jay T. Snyder (8) 21,875 21,875 6,250 -0-

John F. Cappiello (8) 43,750 43,750 12,500 -0-

Overdrive Capital Corporation (8) 87,500 87,500 25,000 -0-

John Pappajohn (8) 87,500 87,500 25,000 -0-

Peter S. Knight (8) 43,750 43,750 12,500 -0-

Lawrence W. Ruvo Living Trust (8) 43,750 43,750 12,500 -0-

Vulcan Properties, Inc. (8) 65,625 65,625 18,750 -0-

Mark Green (8) 43,750 43,750 12,500 -0-

Porpoise Investors I, L.P. (7) 43,750 43,750 12,500 -0-
(8)

Magellan Acq. & Investment Co. 87,500 87,500 25,000 -0-
(8)

Fred & Wendy Ordower (8) 21,875 21,875 6,250 -0-

Sherleig Assoc., Inc. Profit 262,500 262,500 75,000 -0-
Sharing, Jack Silver, Trustee
(8)

Leopard Aggressive Fund (8) 87,500 87,500 25,000 -0-

Lewis Mitchell (8) 43,750 43,750 12,500 -0-

Zakeni Limited (8) 131,250 131,250 37,500 -0-

David F. Chazen (8) 87,500 87,500 25,000 -0-

Harry Mittelman (8) 21,875 21,985 6,250 -0-

Fred and Wendy Ordower (8) (9) 21,875 21,875 6,250 -0-

Peter Vita (8) 43,750 43,750 12,500 -0-

Robert Kaplan (8) 21,875 21,875 6,250 -0-

Allison Koffman (8) 21,875 21,875 6,250 -0-

PC Consulting, Inc. (8) 43,750 43,750 12,500 -0-

Akhil Gupta (8) 87,500 87,500 25,000 -0-

Jonathan D. Eilian (8) 37,500 37,500 25,000 -0-

Barry S. Sternlicht (8) 43,750 43,750 12,500 -0-

Robert Torricelli (8) 21,875 21,875 6,250 -0-

Harmonie Capital Group, Inc. (8) 21,875 21,875 6,250 -0-

Eugene Minsky (8) 21,875 21,875 6,250 -0-

FG II Management Co., LLC (13) 450,000 450,000 450,000 -0-

--------- --------- --------- ---------
Total 7,082,481 5,278,443 1,665,625 1,804,148

Warrants issued to the Placement
Agent and its assignees in March
2001(14)

Whale Securities Co., L.P.(14) 535,634 535,604 -0- (14)

Matthew A. Gohd(7)(14) (14) (14)

Leslie Wilson 22,244 22,244 -0- -0-

Craig Schwabe 22,244 22,244 -0- -0-

Matthew Drillman 14,829 14,829 -0- -0-

Renae Russnok 14,829 14,929 -0- -0-
--------- ---------

Total (14) 609,750 609,750

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to the securities, and includes any
shares of common stock which a person has the right to acquire within
60 days of June 4, 2001.

(2) DiMassimo Brand Advertising, Inc. served as our advertising agency
from November 1999 to June 2000. Under our agreement with DiMassimo,
we issued 82,500 warrants to the agency which are vested.

(3) In January 2001, we entered into a Consulting Agreement with Mallory
Factor, Inc., which was to work with our management to strategize and
coordinate all public, media

and investor relations efforts of the Company for a one-year period.
As compensation, we issued a warrant to Mallory Factor to purchase
400,000 shares with an exercise price of $0.75 per share. The warrant
immediately vested and is exercisable through January 2004.

(4) David R. Humble has served as our Chairman of the Board and Chief
Executive Officer since November 1999. He has also served as our Chief
Executive Officer during this period except for the period from August
through December 2000 when David J. Schofield was our Chief Executive
Officer. He has also served as Chairman of the Board, President and
Chief Executive Officer of eDiets, Inc. since March 1996. The number
of shares he currently owns includes 100,000 shares issuable upon
exercise of vested stock options.

(5) Includes 907,813 shares issued to the investors in the private
placement in June 2000 because our Registration Statement on Form SB-2
had not become effective and our common stock listed for trading on
the Nasdaq Small Cap by May 17, 2000. Also includes shares underlying
stock options granted to certain investors who are our directors.

(6) Isaac Kier is a director of our company. He served as our President,
Chief Executive Officer and Chairman of the Board from 1992 until
November 1999. The shares he currently owns include 198,125 shares
issuable upon exercise of vested stock options and 62,500 issuable
upon exercise of warrants he acquired in the private placement.
Included in the shares he currently owns are 156,250 shares and 62,500
shares issuable upon the exercise of warrants issued in the private
placement to Coqui Capital Partners, L.P., of which Mr. Kier is the
general partner. These shares are being offered under this prospectus
by Coqui Capital Partners, L.P. Mr. Kier disclaims beneficial
ownership of these shares, except for his proportional interest in
Coqui Capital Partners, L.P.

(7) Matthew Gohd has been a director of our company since November 1999.
The shares he owns include 100,000 shares issuable upon exercise of
vested stock options and 62,500 shares issuable upon the exercise of
warrants he acquired in the private placement. The shares he owns and
will offer under this prospectus also include 75,000 shares which
Whale Securities Co., L.P. received as an advisory fee in connection
with our merger and distributed to Mr. Gohd and 415,220 shares
issuable upon exercise of warrants. Mr. Gohd is the President of the
general partner of the general partner of Porpoise Investors I, L.P.
Mr. Gohd is also the Co-Chairman of Blue Stone Capital Corp., the
successor to the business of Whale Securities Co., L.P., the placement
agent in our private placement.

(8) The number of shares beneficially owned prior to the Offering and
being offered include the shares issuable upon exercise of the
warrants owned by the shareholder, except for Isaac Kier and James
Meyer where the shares issuable upon exercise of their warrants are
included only in the number of shares beneficially owned prior to the
Offering.

(9) Ralph Kier served as a director and Secretary of our company from its
organization in 1992 until November 1999.

(10) Jeffrey Davidson has served as a consultant to our company from
November 1999 to February 2000. The shares currently owned by Mr.
Davidson include 80,000 shares issuable upon the exercise of stock
options that are vested.

(11) James Meyer became a director of our company in December 1999. The
shares he owns include 25,000 shares issuable upon the exercise of
warrants he acquired in the private placement.

(12) William G. Walters is the Co-Chairman of Blue Stone Capital Corp., the
successor to the business of Whale Securities Co., L.P., the placement
agent in our private placement. The shares he owns and those to be
offered under this prospectus include 62,500 shares issuable upon the
exercise of warrants he acquired in the private placement.

(13) Represents 450,000 shares issuable upon the exercise of warrants
issued in our private placement. FG II Management Co., LLC is the
manager of FG-ED, LLC and holds the warrants as nominee for FG-ED,
LLC. Cary S. Fitchey, a member of FG-ED, LLC was a member of our Board
of Directors from December 1999 through September 2000.

(14) Represents securities held in the name of Whale Securities Co., LP for
the account of certain equity owners, former equity owners, lenders
and employees of Blue Stone Capital Corp., the successor to the
business of Whale. Whale was the placement agent in our private
placement. The shares owned by Whale include 75,000 shares Whale
received as an advisory fee in connection with our merger. In
connection with our private placement, we had issued 640,625 warrants,
each to purchase one share of common stock at an exercise price of
$2.50 per share to Whale and its assignees. The quantity and price of
the warrants was subject to adjustment and certain events. In March
2001, we agreed with Whale and its assignees to an amendment of the
Warrant Agreement and under the terms of the Amendment issued 950,000
warrants with an exercise price of $1.375 to Whale and its assignees
in replacement of the 640,625 warrants as a result of anti-dilution
adjustments. Whale holds 460,634 of the warrants and Matthew Gohd, one
of the assignees of the Whale warrants, holds 415,220 warrants. As Mr.
Gohd was an investor in our private placement, the number of shares he
beneficially owns prior to the offering, number of shares he is
offering and his beneficial ownership after the offering are included
in the table above describing information regarding our private
placement investors.

PLAN OF DISTRIBUTION

The selling security holders have advised us that they may offer the
shares of common stock and warrants registered under this prospectus to
purchasers from time to time:

. in transactions on the Nasdaq SmallCap Market System or in any other market
on which the common stock and warrants may be quoted, in negotiated
transactions, or by a combination of these methods;

. at fixed prices that may be changed;

. at market prices prevailing at the time of the resale;

. at prices related to such market prices; or

. at negotiated prices.

At the date of this prospectus, the selling security holders have not entered
into any underwriting arrangements. The selling security holders may sell the
shares and warrants registered under this prospectus to or through:

. ordinary brokers' transactions;

. transactions involving cross or block trades;

. purchases by brokers, dealers or underwriters as principal and resale by
such purchasers for their own accounts pursuant to this prospectus;

. "at the market" to or through market makers or into an existing market for
our common stock and warrants;

. in other ways not involving market makers or established trading markets,
including direct sales to purchasers;

. through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise);

. privately negotiated transactions;

. to cover short sales; or

. combination of the foregoing.

From time to time, one or more of the selling security holders may
pledge, hypothecate or grant a security interest in some or all of the shares of
common stock registered under this prospectus owned by them, and the pledgees,
secured parties or persons to whom such shares have been hypothecated shall,
upon foreclosure in the event of default, be deemed to be selling security
holders under this prospectus. The number of shares of common stock registered
under this prospectus and beneficially owned by those selling security holders
who so transfer, pledge, donate or assign those shares will decrease as and when
they take such actions. The plan of distribution for shares sold under this
prospectus will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be selling security holders under this
prospectus. In addition, a selling security holder may, from time to time, sell
short shares of common stock. In such instances, this prospectus may be
delivered in connection with such short sales and the shares of common stock
offered hereby may be used to cover such short sales.

A selling security holder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the common
stock in the course of hedging the positions they assume with that selling
security holder, including, without limitation, in connection with distributions
of the common stock by the broker-dealers. A selling security holder also may
enter into option or other transactions with broker-dealers that involve the
delivery of the shares of common stock registered under this prospectus to the
broker-dealers, who then may resell or otherwise transfer these shares. A
selling security holder also may loan or pledge the shares of common stock
registered under this prospectus to a broker-dealer and the

broker-dealer may sell the shares so loaned or upon a default may sell or
otherwise transfer the pledged shares.

Selling security holders may also resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
rather than pursuant to this prospectus.

Brokers, dealers, underwriters or agents participating in the
distribution of the shares of common stock or warrants registered under this
prospectus as agents may receive compensation in the form of commissions,
discounts or concessions from the selling security holders or purchasers of the
common stock or warrants for whom the broker-dealers may act as agent, or to
whom they may sell as principal, or both. The compensation a particular
broker-dealer may receive may be less than or more than the customary
commissions.

The selling security holders and any broker-dealers who act in
connection with the sale of the shares of common stock or warrants under this
prospectus may be deemed to be "underwriters" within the meaning of the
Securities Act. In such event, any commissions they receive and proceeds of any
sale of the shares of common stock or warrants may be deemed to be underwriting
discounts and commissions under the Securities Act. Neither we nor any of the
selling security holders can presently estimate the amount of this compensation.
We know of no existing arrangements between any of the selling security holders
and any other shareholder, broker, dealer, underwriter or agent relating to the
sale or distribution of the shares of common stock or warrants registered under
this prospectus.

We will pay substantially all of the expenses relating to the
registration, offer and sale of the shares of common stock or warrants
registered under this prospectus to the public other than commissions or
discounts of underwriters, broker-dealers or agents. We also have agreed to
indemnify the selling security holders and certain related persons against any
losses, claims, damages or liabilities under the Securities Act that arise out
of, or are based upon, any untrue or alleged untrue statement of a material fact
or the omission or alleged omission in stating a material fact under this
registration statement or prospectus. To the extent that indemnification for
liabilities arising under the Securities Act may be permitted to our directors,
officers and controlling persons, we have been advised that, in the opinion of
the Securities and Exchange Commission, this indemnification is against the
public policy as expressed in the Securities Act and is therefore,
unenforceable.

DESCRIPTION OF SECURITIES

We are authorized to issue 21,000,000 shares of capital stock,
comprised of 20,000,000 shares of common stock, with a par value of $.001 per
share, and 1,000,000 shares of preferred stock, with a par value of $ 0.01 per
share. As of June 4, 2001, there were 13,578,104 shares of common stock
outstanding and no shares of preferred stock outstanding.

Common Stock

Each holder of our common stock is entitled to one vote for each share
held of record on all matters we presented for a vote of stockholders, including
the election of directors. Holders of common stock have no cumulative voting
rights or preemptive rights to purchase or subscribe for any stock or other
securities, and there are no conversion rights or redemption or sinking fund
provisions with respect to the stock. All shares of common stock are entitled to
share equally in dividends from sources legally available when, as and if
declared by the board of directors. In addition, in the event of our liquidation
or dissolution, all shares of our common stock are entitled to share equally in
our assets available for distribution to stockholders.

Preferred Stock

Our board of directors, without further approval of our stockholders,
is authorized to provide for the issuance of shares of preferred stock in one or
more series. In exercising its powers to provide for preferred stock, the board
has the power to fix:

. the dividend rights and terms,

. conversion rights,

. voting rights,

. redemption rights,

. liquidation rights, and

. other rights and restrictions relating to any series.

The issuances of shares of preferred stock, while providing us with
flexibility in connection with possible financings, acquisitions and other
corporate purposes, could, adversely affect the voting power of the holders of
our other securities. Also, issuance of preferred stock could and may, under
certain circumstances, have the effect of deterring hostile takeovers or
delaying changes in control of our management.

Warrants

In connection with our private placement, we issued 1,815,625 warrants
to investors in the offering. The warrants may be exercised at any time during a
period of three years ending on November 17, 2002. Each warrant entitles the
holder to purchase one share of common stock at a price of $2.50 per share,
subject to adjustment in certain circumstances. We may redeem the warrants on 30
days' prior written notice if certain conditions have occurred. The first
condition is that the closing sale price of our common stock on the Nasdaq
SmallCap Market on all 20 trading days ending on the third trading day prior to
the date on which we gave notice of redemption has been at least 200% of the
then-effective exercise price of the warrants. The second condition is that the
warrant shares are publicly tradable under a registration statement filed with
and declared effective by the Securities and Exchange Commission.

Under our placement agent agreement and warrant agreement with Whale
Securities Co., L.P., we issued a total of 640,625 warrants to the placement
agent. These warrants were exercisable at any time until November 17, 2004 at a
price of $2.50 per share, subject to adjustment under certain circumstances. In
March 2001 we agreed with the placement agent to amend the warrant agreement and
increase the number of warrants to 950,000 and reduce the

exercise price to $1.375 as a result of anti-dilution adjustments. In our
amendment, the placement agent and its assignees agreed that the warrants may be
redeemable by us if the conditions enabling us to redeem our investors' warrants
are met. We have agreed with the placement agent that immediately prior to the
listing of the warrants on the Nasdaq SmallCap Market, a securities exchange or
the OTC Bulletin Board, we shall offer the holders of the placement agent
warrants the option to exchange these warrants for an equal number of warrants
which will be listed with the warrants.

Delaware Anti-Takeover Law

Provisions of Delaware law could make our acquisition by a third-party
and the removal of our officers and directors more difficult. We are subject to
Section 203 of the Delaware General Corporation Law, which regulates corporate
acquisitions. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a business combination with an interested
stockholder for a period of three years following the date the person became an
interested stockholder, unless:

. the board of directors approved the transaction in which such stockholder
became an interested stockholder prior to the date the interested
stockholder attained such status;

. upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or

. on or subsequent to such date the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders.

Transfer Agent

The transfer agent is American Stock Transfer and Trust Company, 40
Wall Street, New York, New York 10005.

LEGAL MATTERS

The validity of the shares of common stock and warrants offered by
selling security holders will be passed upon by the law firm of Nason, Yeager,
Gerson, White & Lioce, P.A., West Palm Beach, Florida.

EXPERTS

Ernst & Young LLP, independent certified public accountants, have
audited our consolidated financial statements at December 31, 2000 and for each
of the two years in the period ended December 31, 2000, as set forth in their
report. We have included our financial statements in the prospectus and
elsewhere in the registration statement in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a
registration statement under the Securities Act with respect to the common stock
and warrants offered. This prospectus is part of that registration statement and
does not contain all the information included in the registration statement. For
further information with respect to us and our common stock and warrants, you
should refer to the registration statement and its exhibits. Portions of the
exhibits have been omitted as permitted by the rules and regulations of the
Securities and Exchange Commission. Statements made in this prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. In each instance, we refer you to the copy of the contacts
or other documents filed as an exhibit to the registration statement, and these
statements are hereby qualified in their entirety by reference to the contract
or document.

The registration statement may be inspected and copied at the public
reference facilities maintained by the Securities and Exchange Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
the Regional Offices at the Commission located in the Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and at 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of those filings can be
obtained from the Commission's Public Reference Section, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates and may also be
obtained from the web site that the Commission maintains at http://www.sec.gov.
You may also call the Commission at 1-800-SEC-0330 for more information.

We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information on file at the Commission's
public reference room in Washington, D.C. You can request copies of those
documents upon payment of a duplicating fee, by writing to the Commission.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Certified Public Accountants.................................. F-2

Consolidated Balance Sheet - December 31, 2000...................................... F-3

Consolidated Statements of Operations - Years ended
December 31, 2000 and 1999..................................................... F-4

Consolidated Statements of Stockholders' Equity (Deficit)
- Years ended December 31, 2000 and 1999....................................... F-5

Consolidated Statements of Cash Flows - Years ended
December 31, 2000 and 1999..................................................... F-6

Notes to Consolidated Financial Statements - December 31, 2000...................... F-7

Condensed Consolidated Balance Sheet - March 31, 2001 (Unaudited)................... F-19

Condensed Consolidated Statements of Operations - Three months
ended March 31, 2001 and 2000 (Unaudited)...................................... F-20

Condensed Consolidated Statements of Cash Flows - Three months
ended March 31, 2001 and 2000 (Unaudited)...................................... F-21

Notes to Condensed Consolidated Financial Statements - March 31, 2001............... F-22

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
eDiets.com, Inc.

We have audited the accompanying consolidated balance sheet of eDiets.com, Inc.
as of December 31, 2000, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the two years in the
period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of eDiets.com, Inc.
at December 31, 2000 and the consolidated results of its operations and its cash
flows for each of the two years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.

/s/ ERNST & YOUNG LLP

West Palm Beach, Florida
January 30, 2001, except for the
fourth paragraph of Note 7, as to
which the date is March 28, 2001

F-2

EDIETS.COM, INC.
CONSOLIDATED BALANCE SHEET
December 31, 2000
(In thousands)

ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 1,087
Accounts receivable, net 654
Prepaid advertising costs 147
Prepaid expenses and other current assets 48
-----------------
Total current assets 1,936

Restricted cash 120
Prepaid advertising costs 915
Property and equipment, net 746
-----------------
Total assets $ 3,717
=================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable $ 915
Accrued liabilities 986
Current portion of capital lease obligations 66
Deferred revenue 1,352
----------------
Total current liabilities 3,319

Capital lease obligations, net of current portion 92

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value - 1,000 shares authorized, no -
shares issued and outstanding
Common stock, $.001 par value - 20,000 shares authorized, 13,553 14
shares issued and outstanding
Additional paid-in capital 7,140
Unearned compensation (9)
Accumulated deficit (6,839)
----------------
Total stockholders' equity 306
----------------
Total liabilities and stockholders' equity $ 3,717
================

The accompanying notes are an integral part of these consolidated financial
statements.

F-3

EDIETS.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Year Ended December 31,
--------------------------------------
2000 1999
---------------- ----------------

REVENUE $ 11,434 $ 2,385

COSTS AND EXPENSES:

Cost of revenue 544 427

Product development 238 92

Sales and marketing 12,747 1,145

General and administrative 3,202 1,096

Depreciation and amortization 314 120
--------------- ----------------
Total costs and expenses 17,045 2,880
--------------- ----------------

Loss from operations (5,611) (495)

Other income, net 161 33
--------------- ----------------

Net loss $ (5,450) $ (462)
=============== ================

LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.41) $ (0.06)
=============== ================

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 13,215 8,345
=============== ================

The accompanying notes are an integral part of these consolidated financial
statements.

F-4

EDIETS.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands)

COMMON STOCK ADDITIONAL TOTAL
------------------ PAID-IN UNEARNED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY (DEFICIT)
----------------------------------------------------------------------------------------

Balance at January 1, 1999 7,814 $ 8 $ 372 $ (55) $ (927) $ (602)
Stock options granted - - 206 (113) - 93
Stock options vested or forfeited - - - 161 - 161
In-kind services provided by - - 119 - - 119
stockholder
Contribution by stockholder - - 110 - - 110
Common stock issued in reverse 1,050 1 349 - - 350
merger, net of transaction costs
Common stock issued to placement agent 150 - - - - -
Common stock issued in private 3,631 4 6,039 - - 6,043
placement, net of issuance costs
Net loss - - - - (462) (462)
--------------------------------------------------------------------------------
Balance at December 31, 1999 12,645 13 7,195 (7) (1,389) 5,812
Stock options granted - - 178 (8) - 170
Stock options vested or forfeited - - - 6 - 6
Common stock issued as penalty shares 908 1 (1) - - -
Receivable from stockholder forgiven - - (93) - - (93)
Common stock issuance and - - (139) - - (139)
registration costs
Net loss - - - - (5,450) (5,450)
--------------------------------------------------------------------------------
Balance at December 31, 2000 13,553 $ 14 $ 7,140 $ (9) $ (6,839) $ 306
================================================================================

The accompanying notes are an integral part of these consolidated financial
statements.

F-5

EDIETS.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Year Ended December 31,
-------------------------------------------
2000 1999
------------------- ------------------

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ (5,450) $ (462)
Adjustments to reconcile net loss to net cash (used in) provided by operating
activities:
Depreciation and amortization 314 120
Provision for bad debt 34 25
Non-cash compensation 212 337
Changes in operating assets and liabilities:
Accounts receivable (564) (115)
Prepaid expenses and other current assets (809) (303)
Restricted cash (101) (2)
Accounts payable and accrued liabilities 982 692
Deferred revenue 900 5
----------------- ----------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (4,482) 297

CASH FLOWS FROM INVESTING ACTIVITY:
Purchases of property and equipment (510) (310)
----------------- ----------------
NET CASH USED IN INVESTING ACTIVITY (510) (310)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock - 7,263
Common stock issuance and registration costs (150) (1,220)
Net assets received from issuance of common stock - 350
Repayments to shareholder - (141)
Repayment of capital lease obligations (54) -
----------------- ----------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (204) 6,252
----------------- ----------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (5,196) 6,239
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 6,283 44
----------------- ----------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,087 $ 6,283
================= ================

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Equipment acquired under capital leases $ 55 $ 156
================= ================
Receivable from stockholder charged to equity $ 93 $ -
================= ================
Obligation to stockholder converted to equity $ - $ 110
================= ================

The accompanying notes are an integral part of these consolidated financial
statements.

F-6

EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000

1. ORGANIZATION

eDiets.com, Inc. (the Company) was incorporated in the State of Delaware on
March 18, 1996 for the purpose of developing and marketing an Internet-based
diet and nutrition program. In addition to a personalized and regularly updated
plan, subscribers to the Company's program can also purchase related items and
attend online motivational meetings. The Company markets its program primarily
through advertising and other promotional arrangements on the World Wide Web.

On February 23, 1999, the Company's name was changed from Self/Help
Technologies, Inc. to eDiets.com, Inc. (Original eDiets).

On November 17, 1999, Original eDiets merged with a wholly-owned subsidiary of
Olas, Inc. (Olas), a public "shell". In connection with the merger, Original
eDiets changed its name to eDiets, Inc. and became a wholly-owned subsidiary of
Olas, whose name was changed to eDiets.com, Inc. The transaction was executed as
a reverse merger whereby all of the issued and outstanding shares of common
stock and stock options of Original eDiets were exchanged for shares of common
stock and options representing 88% of the fully-diluted common stock of the
shell. For accounting purposes, the reorganization of Original eDiets and Olas
is regarded as an acquisition by Olas of all of the outstanding stock of
Original eDiets and was accounted for as a recapitalization of the Company with
Original eDiets as the acquirer (a reverse acquisition). See Note 7.

As a result, the historical financial statements presented for periods prior to
the date of the transaction are those of Original eDiets. The capital structure
has been retroactively restated to reflect the equivalent number of shares
received by Original eDiets in the acquisition.

In November 2000, the Company entered into a joint venture with Unislim Ireland,
Limited, the leading weight loss center business in Ireland, to market the
Company's online weight loss programs in Europe, Australia and New Zealand.
Under the terms of the joint venture agreement, the Company received a 60%
interest in the joint venture primarily in return for the license of its
international technology rights to the joint venture. It is anticipated that the
initial international launch will occur in the United Kingdom in March 2001.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All intercompany transactions and
balances have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Cash equivalents at
December 31, 2000 include U.S. treasury note securities with a fair value of
approximately $500,000 and a maturity date of January 17, 2001. The Company has
classified these investments as held-to-maturity securities and considers the
interest rate risk to be low due to the short-term nature of the investments.

RESTRICTED CASH

Restricted cash on the accompanying consolidated balance sheet consists of funds
held by financial institutions as collateral for chargebacks related to credit
card transactions and as collateral for a letter of credit established pursuant
to certain capital lease agreements.

F-7

EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets,
which is approximately three years for equipment and computer hardware and
software, including internal use software, and approximately seven years for
furniture and fixtures.

Expenditures for maintenance and repairs are charged to operations as incurred,
while major renewals and betterments are capitalized. The assets and related
depreciation are adjusted for asset retirements and disposals with the resulting
gain or loss included in operations. Capitalized leases are initially recorded
at the present value of the minimum payments at the inception of the lease.

AICPA Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed for or Obtained for Internal Use, requires capitalization of
certain costs incurred in connection with developing or obtaining internal use
software. Costs capitalized pursuant to SOP 98-1 are included in property and
equipment in the accompanying consolidated balance sheet.

In March 2000, the Emerging Issues Task Force issued its consensus on Issue No.
00-2, "Accounting for Web Site Development Costs." ("EITF 00-2"). The Company
accounts for the development and maintenance of its website in accordance with
EITF 00-2.

EQUITY INVESTMENTS

The Company has an investment in a foreign joint venture that is accounted for
under the equity method of accounting. Under the equity method of accounting,
the Company's share of the investee's earnings or loss is included in
consolidated operating results. To date, the Company's basis and current
commitment in its investment accounted for under the equity method of accounting
have not been significant. As a result, this investment has not significantly
impacted the Company's results of operations or its financial position.

REVENUE RECOGNITION

The Company offers memberships to the proprietary content contained in its web
site. Revenues from customer subscriptions to the Company's program and paid in
advance are deferred and recognized on a straight-line basis over the period of
the subscription. Registration fees paid in advance are deferred and recognized
over the expected term of service.

Commission revenue is derived from third party vendors on sales of products and
services advertised on the Company's web site, while advertising revenue is
derived from the sale of advertising on the Company's web site. Advertising
revenue is recognized in the period the advertisement is displayed, provided
that no significant Company obligation remains and collection is probable.
Company obligations typically include guarantees of a minimum number of
"impressions" or times that visitors to the Company's web site view an
advertisement. Amounts received or billed for which impressions have not yet
been delivered are reflected as deferred revenue.

Opt-in email revenue is derived from the sale of email addresses of visitors to
the Company's web site who have authorized the Company to allow third party
solicitations. Revenues from the sale of email addresses are recognized when no
significant Company obligation remains and collection is probable.

F-8

EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Revenue by type for the years ended December 31, 2000 and 1999 is as follows (in
thousands):

2000 1999
------------ ------------

Membership $ 10,375 $ 2,189
Advertising and commissions 688 41
Sale of opt-in email addresses 371 155
------------ ------------
$ 11,434 $ 2,385
============ ============

COST OF REVENUE

Cost of revenue consists primarily of internet access and service charges,
revenue sharing costs, and compensation expenses related to the Company's
nutritional staff.

STOCK-BASED COMPENSATION

Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, defines a fair value method of accounting or issuance
of stock options and other equity investments. Under the fair value method,
compensation cost is measured at the grant date based on the fair value of the
award and is recognized over the service period, which is usually the vesting
period. Pursuant to SFAS No. 123, companies are encouraged, but not required, to
adopt the fair value method of accounting for employee stock-based transactions.
Companies are also permitted to continue to account for such transactions under
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, but are required to disclose in a note to the financial statements
pro forma net income amounts as if the Company had applied the fair value method
of accounting.

The Company accounts for employee stock-based compensation under APB No. 25 and
has complied with the disclosure requirements of SFAS No. 123.

In March 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 44, "Accounting for Certain Transactions involving Stock
Compensation" ("FIN 44"), which contains rules designed to clarify the
application of APB 25 and was effective on July 1, 2000. Adoption of FIN 44 had
no material impact on the Company's financial position, results of operations or
cash flows.

LONG-LIVED ASSETS

The Company accounts for long-lived assets pursuant to SFAS No. 121, Accounting
for the Impairment of Long-Lived Asets and for Long-Lived Assets to be Disposed
Of, which requires impairment losses to be recorded on long-lived assets used in
operations when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Management reviews long-lived assets
and the related intangible assets for impairment whenever events or changes in
circumstances indicate the assets may be impaired. An impairment loss is
recorded when the net book value of the assets exceeds their fair value, as
determined by projected undiscounted future cash flows.

INCOME TAXES

The Company accounts for income taxes under SFAS No. 109, Accounting for Income
Taxes. Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. A valuation allowance is recorded
when it is more likely than not that some portion or all of a deferred tax asset
will not be realized.

F-9

EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

ADVERTISING EXPENSE

The Company expenses advertising costs as incurred. Advertising expenses
incurred for the years ended December 31, 2000 and 1999 totaled approximately
$11,689,000 and $816,000, respectively.

At December 31, 2000, the Company had approximately $1,062,000 of prepaid
advertising costs representing future communication costs. Such costs are
reflected as prepaid advertising expenses in the accompanying consolidated
balance sheet.

BARTER TRANSACTIONS

Advertising barter transactions are recorded at the estimated fair value of the
advertising services received or given. Revenue from barter transactions is
recognized when advertising is provided, and services received are charged to
expense when used. The Company did not recognize any barter transactions for the
years ended December 31, 2000 and 1999. In 2000, the Company entered into barter
transactions that did not result in revenue recognition, because the fair value
was not determinable under the criteria established by the EITF, for
approximately 110 million impressions on its website.

LOSS PER COMMON SHARE

Loss per common share is computed using the weighted average number of common
shares outstanding during the period. Potential common shares consist of the
incremental common shares issuable upon exercise of stock options and warrants
(using the treasury stock method). Potential common shares outstanding have not
been included in the computation of diluted loss per share for all periods
presented, as their effect is anti-dilutive.

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash and cash equivalents, including
investments, accounts receivable from credit card transaction processing
companies, and receivables from third parties related to advertising and opt-in
email revenue. The Company has policies that limit its investments as to
maturity, liquidity, credit quality, concentration and diversification of
issuers and types of investments. The credit risk associated with cash and cash
equivalents and credit card receivables is considered low due to the credit
quality of the financial institution and issuers. The Company performs credit
evaluations of the third parties from which advertising and opt-in email revenue
is earned and generally does not require collateral. The Company maintains
allowances for potential credit losses for such event.

COMPREHENSIVE LOSS

There was no difference between the Company's net loss and its total
comprehensive loss for the periods presented.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

RECLASSIFICATIONS

Certain reclassifications of the prior year's consolidated financial statements
have been made to conform to the current year's presentation.

F-10

sss EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. ACCOUNTS RECEIVABLE

Accounts receivable are shown in the accompanying consolidated balance sheet net
of an allowance for doubtful accounts of $32,000 at December 31, 2000.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

Office and computer equipment $ 704
Software 520
Furniture and fixtures 37
Leasehold improvements 21
----------
1,282
Less accumulated depreciation and amortization (536)
----------
$ 746
==========

Software includes approximately $474,000 of costs associated with internal-use
software projects that have been capitalized pursuant to SOP 98-1 as of December
31, 2000. Included in property and equipment is equipment under capital leases
of approximately $206,000 as of December 31, 2000, less accumulated amortization
of $63,000. Depreciation expense includes amortization of equipment under
capital leases.

5. ACCRUED LIABILITIES

Accrued liabilities consist of the following (in thousands):

Advertising $ 533
Accrued compensation and employee benefits 254
Professional fees 118
Other 81
----------
$ 986
==========

6. EMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution benefit plan (401(k) salary
deferral program) covering substantially all employees. Employees may elect to
contribute to the plan amounts not to exceed a specified percentage of annual
compensation, subject to the current limit imposed by Internal Revenue Service
guidelines. The Company, at its discretion, may match the participant's
contributions at a specified percentage, limited by a stated maximum amount. An
unrelated investment company administers the assets of the plan. The total
employer contributions charged to expense were approximately $20,000 and $0 in
2000 and 1999, respectively.

7. STOCKHOLDERS' EQUITY

COMMON STOCK

The Company was initially capitalized through the issuance of 100 shares of
common stock, no par value, to its founder. In July 1999, the Company's Articles
of Incorporation were amended, increasing the number of authorized shares of the
Company's common stock from 1,500 shares to 10,000,000 shares with a par value
of $.001 per share. In connection with the change in capital structure, a
62,157.33-for-1 stock split was declared, pursuant to which the founder's shares
were converted to an aggregate of 6,215,733 shares of the Company's new common
stock, which continued to represent 100% ownership of the Company at such time.

F-11

EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In connection with the reverse merger transaction discussed in Note 1, a total
of 7,814,065 shares of the Company's common stock were issued in exchange for
all of the outstanding common stock of Original eDiets. All share and per share
amounts in the consolidated financial statements have been retroactively
adjusted to reflect the new capital structure. After the merger, the Company's
capital structure consisted of 20,000,000 authorized shares of common stock,
with a par value of $0.001 per share, and 1,000,000 shares of preferred stock,
with a par value of $0.01 per share.

In connection with the reverse merger a total of 1,050,000 shares of common
stock were issued to the stockholders of Olas. The shares were recorded at a
value of approximately $385,000, representing the fair value of the net assets
of Olas at the date of the merger, net of cash transaction costs of $35,000. In
connection with the merger, options to purchase 32,500 shares of common stock at
an exercise price of $1.425 per share and with a fair value of approximately
$32,000 were granted to a stockholder of Olas and current Director of the
Company. In addition, a total of 150,000 shares of common stock, with a fair
value of $300,000, were issued to the placement agent in connection with the
transaction. The total transaction costs of $367,000 associated with the merger
have been charged directly to equity to the extent of cash received from Olas in
the merger.

Concurrent with the merger transaction discussed above, the initial closing of
an equity private placement by the Company was completed, and, in December 1999,
the final closing of the private placement took place. The private placement
totaled approximately $7.3 million and consisted of 145.25 units of 25,000
shares of common stock and 12,500 warrants, each to purchase one share of common
stock at an exercise price of $2.50 per share, subject to adjustment in certain
events. The warrants are exercisable through November 2002 and are redeemable at
the option of the Company upon the occurrence of certain events. Net proceeds to
the Company after placement commissions and other issuance costs totaled
approximately $6.0 million. In connection with the transaction, a total of
640,625 warrants, each to purchase one share of common stock at an exercise
price of $2.50 per share and with an aggregate fair value of approximately
$122,000, were issued to the placement agent. The quantity and price of such
warrants were subject to adjustment in certain events. On March 28, 2001 an
adjustment was made to the quantity and price of the placement agent warrants.
Under the terms of the modified warrant agreement, the placement agent and its
designees now hold 950,000 warrants, each to purchase one share of common stock
at an exercise price of $1.38 per share. Such warrants remain exercisable
through November 2004 and under the modified agreement are now redeemable at the
option of the Company upon the occurrence of certain events. The excess of the
fair value of the new warrant over the value of the original warrants at the
date of modification will be charged to equity in the first quarter of 2001.

The issuance costs related to the private placement, including the fair value of
the placement agent warrants, and related registration costs, have been treated
as a reduction of the proceeds from the transaction and charged directly to
equity.

In November 1999, the Company issued 82,500 warrants to an advertising agency
with an exercise price of $2.00 per share in exchange for services. The warrants
are fully vested and are exercisable through November 2002. In connection with
this transaction, approximately $76,000 and $3,000 has been recognized as sales
and marketing expense in the accompanying consolidated statements of operations
for the years ended December 31, 2000 and 1999, respectively.

In connection with the private placement financing discussed above, the Company
agreed to issue to investors in the private placement an aggregate of 907,813
shares of common stock in the event that the Company's Registration Statement on
Form SB-2 had not become effective and its common stock listed for trading on
the Nasdaq Small Cap Market by May 17, 2000. The Company issued those shares in
June 2000 since the common stock was not yet listed on the Nasdaq Small Cap
Market. No proceeds were received in connection with the issuance of the shares.

F-12

EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At December 31, 2000, common shares reserved for future issuance are as follows:

Stock Options 3,748,436
Warrants 2,538,750
---------
Total 6,287,186
=========

The common shares reserved for future issuance exclude the common shares
underlying the additional warrants issued pursuant the modification of the
placement agent warrant agreement as described above.

STOCK OPTIONS

In May 1996, the Company adopted the "Startup Equity Program" (the Startup
Program), pursuant to which the Company granted non-qualified stock options to
certain employees and consultants during the company's start-up phase. Options
granted under the Start-up Program are exercisable over a five or ten-year
period from the date of grant at an exercise price of $0.01 per share and vested
in equal monthly installments over a period of 12 months from the date of grant.
In addition, through the first half of 1999, the Company granted additional
stock options to certain employees and non-employees, which were issuable at the
discretion of the Company's Board of Directors. All such additional options are
exercisable over a five-year period from the date of grant at an exercise price
of $0.01 per share and vested in equal monthly installments over a period of 12
months from the date of grant. A total of 917,714 options were granted under
these programs, of which 825,943 options remained outstanding as of December 31,
2000.

In July 1999, the Company granted an aggregate of 159,993 options to a key
employee exercisable over a period of ten years at an exercise price of $2.00
per share. The options vest in equal monthly installments over a period of two
years from the date of grant.

In connection with the merger transaction in 1999, the eDiets.com, Inc. 1999
Stock Option Plan (the Plan) was adopted. The Plan, as amended, provides for the
grant of incentive stock options and non-qualified stock options to purchase up
to 2,730,000 shares of the Company's common stock to employees, directors and
consultants to the Company. Options granted to employees under the Plan
generally vest ratably over a two-year period and expire five years from the
date of grant. The Plan also provides for the automatic issuance of options to
non-employee directors of the Company on an annual basis. Such options have an
exercise price equal to the fair market value of the underlying common stock at
the grant date and are fully exercisable on the date of grant for a period of up
to ten years. Through December 31, 2000, 2,209,798 options have been granted
under the Plan.

Certain options granted to employees were at an exercise price lower than the
estimated fair market value of the underlying common stock at the grant date.
Compensation expense has been recognized pro-rata on a straight-line basis for
the excess of the estimated fair market value over the exercise price and
totaled approximately $24,000 and $161,000 for the years ended December 31, 2000
and 1999, respectively.

F-13

EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A summary of the activity relating to the Company's stock options for the years
ended December 31, 2000 and 1999 is presented below (shares in thousands):

2000 1999
-------------------------------- ------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------------------------------------------------------------------

Outstanding at beginning of year 1,770 $ 1.06 662 $ 0.01
Granted 1,458 1.74 1,108 1.69
Exercised - - - -
Forfeited (506) 1.88 - -
----------- ----------
Outstanding at end of year 2,722 1.27 1,770 1.06
=========== ==========

Options exercisable at end of year 1,996 $ 1.12 1,370 $ 0.79
============================== ===============================

Weighted average exercise price of options
granted during the year:

Issued at market price $ 1.72 $ 2.00
============= ===============
Issued below market price $ 2.00 $ 0.24
============= ===============
Weighted average fair value of options
granted during the year:

Issued at market price $ 0.83 $ 0.55
============= ================
Issued below market price $ 1.45 $ 0.78
============= ================

The following table summarizes information about stock options outstanding at
December 31, 2000 (shares in thousands):

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
EXERCISE DECEMBER 31, 2000 CONTRACTUAL LIFE EXERCISE DECEMBER 31, EXERCISE PRICE
PRICE ($) (IN YEARS) PRICE 2000
------------------------------------------------------------------------------------------------------------------------

$0.01 826 4.3 0.01 826 $ 0.01
0.77 to 1.50 372 4.9 1.08 132 1.16
1.51 to 2.50 1,524 4.1 2.00 1,038 1.99
----------- ----------
2,722 4.2 1.27 1,996 1.12
=========== ==========

F-14

EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Pro forma information is required by SFAS No. 123 and has been determined as if
the Company had accounted for its stock-based compensation plans under the fair
value method. The fair value of each option grant was estimated at the date of
grant using the Black-Scholes option-pricing model for 2000 grants and the
minimum value method for 1999 grants with the following weighted average
assumptions: expected volatility factor of 60% for 2000, risk free interest
rates of 6.2% for 2000 and 6.4% for 1999; dividend yield of 0%; and expected
life of 4.0 years for 2000 and 5.0 years for 1999. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period. Because the determination of the fair value of
the Company's options is based on the assumptions described above, and because
additional option grants are expected to be made in future periods, this pro
forma information is not likely to be representative of the pro forma effects on
reported net income or loss for future years.

The Company's pro forma information for the years ended December 31, 2000 and
1999 is as follows (in thousands, except per share data):

2000 1999
------------ -------------

Net loss-as reported $ (5,450) $ (462)
============ =============
Pro forma net loss $ (5,947) $ (896)
============ =============
Loss per share-as reported $ (0.41) $ (0.06)
============ =============
Pro forma loss per share $ (0.45) $ (0.11)
============ =============

8. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS

The Company leases its office space under a non-cancelable operating lease,
which expires in September 2004. The Company also leases certain office and
computer equipment under non-cancelable capital leases expiring through 2004.
Commitments for minimum rentals under non-cancelable leases at the end of 2000
are as follows (in thousands):

CAPITAL OPERATING
YEAR LEASES LEASES
-------------------------------------------------------------------------

2001 $ 76 $ 47
2002 76 49
2003 15 49
2004 9 37
------------- -------------
Total minimum lease payments 176 $ 182
=============
Less amount representing interest (18)
-------------
Present value of minimum lease payments $ 158
=============

Rental expense under operating leases was approximately $46,000 and $28,000 for
the years ended December 31, 2000 and 1999, respectively.

F-15

EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company has an online advertising commitment with America Online totaling
approximately $10.8 million over the next two years, of which approximately $5.2
million is payable over the next twelve months.

From time to time, the Company may be subject to legal proceedings and other
claims in the ordinary course of its business. The Company is not currently
party to any litigation, the outcome of which would have a material adverse
effect on its business or operations.

The Company has a $75,000 letter of credit established for the benefit of a
computer equipment manufacturer, which expires in January 2002. At December 31,
2000, no amounts had been drawn against the letter of credit.

During 2000, the Company entered into an agreement with an investment advisor
which provides for a monthly retainer of $8,000 per month. In addition, the
agreement provides for a cash fee totaling 8% of the gross proceeds of any
financing, subject to a minimum of $500,000, with up to 25% of the total
financing fee being payable in warrants at the option of the advisor.

Through the end of 1997, the Company financed its cash requirements primarily
through advances from its Chief Executive Officer (the Original eDiets
stockholder). The obligation represented by the advances was non-interest
bearing and did not have a fixed or determinable due date. During 1999, net
repayments to the stockholder totaled approximately $53,000. In connection with
the merger transaction discussed in Note 1, the remaining outstanding obligation
to the stockholder, totaling approximately $110,000, was converted to equity.

During the second half of 1999, the Company advanced approximately $88,000 to
the Original eDiets stockholder. These advances were represented by a note
receivable entered into on February 22, 2000, which bore interest at 7% per
annum and was due on March 1, 2001. During the third quarter of 2000, the
Company forgave the note receivable and accrued interest totaling approximately
$93,000. The forgiveness of the note has been charged to equity.

Since the Company's inception through the date of the reverse merger, the
Original eDiets stockholder did not receive compensation for his services as the
Company's Chief Executive Officer. The Company has recorded compensation expense
for the estimated fair market value of the in-kind services received and
reflected such amounts as a contribution to capital for the respective periods.
Compensation expense totaling $119,000 related to the value of the in-kind
services received has been included in general and administrative expenses in
the accompanying consolidated statements of operations for the year ended
December 31, 1999.

During 2000, a member of the Company's Board of Directors provided consulting
services to the Company beyond his duties as a Board member. As compensation for
these services, in September 2000 the Company granted the Board member vested
options to purchase 50,000 shares of common stock at an exercise price of $1.87
per share. Compensation expense of approximately $54,000 has been recognized for
the fair value of the options and is reflected in general and administrative
expenses in the accompanying consolidated statements of operations for the year
ended December 31, 2000.

F-16

EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

9. INCOME TAXES

The significant components of the Company's net deferred income taxes as of
December 31, 2000 are as follows (in thousands):

Deferred tax assets:
Net operating loss carryforwards $ 2,316
Deferred compensation 128
Allowance for doubtful accounts and sales returns 18
Start-up and organizational costs 2
---------

2,464
Valuation allowance (2,453)
---------
Total deferred tax assets 11

Deferred tax liabilities:
Fixed assets and software (11)
---------

Net deferred income taxes $ -
=========

Realization of the Company's deferred tax assets is not reasonably assured;
therefore, they are fully reserved with a valuation allowance. The change in the
valuation allowance for the years ended December 31, 2000 and 1999 was an
increase of approximately $2,094,000 and $121,000, respectively, resulting
primarily from the net operating losses generated during the periods.

The Company has incurred net losses since inception. At December 31, 2000, the
Company had approximately $6,153,000 in net operating loss carryforwards for
U.S. federal income tax purposes that expire in various amounts through 2020.

The reconciliation of income tax computed at the U.S federal statutory rate to
income tax expense for the years ended December 31, 2000 and 1999 is as follows:

2000 1999
-----------------------

Tax at U.S. statutory rate (34.00)% (34.00)%
State taxes, net of federal benefit (3.61) (2.44)
Non-deductible items 0.22 11.19
Changes in valuation allowance 37.39 25.25
----------------------
- % - %
======================

F-17

EDIETS.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

10. RECENT ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). This bulletin summarizes certain views of the staff of the Securities and
Exchange Commission on applying generally accepted accounting principles to
revenue recognition in financial statements. The staff of the Securities and
Exchange Commission believes that revenue is realized or realizable and earned
when all of the following criteria are met: persuasive evidence of an
arrangement exists; delivery has occurred or services have been rendered; the
seller's price to the buyer is fixed or determinable; and collectibility is
reasonably assured. In June 2000, the Staff issued Staff Accounting Bulletin No.
101B, "Second Amendment: Revenue Recognition in Financial Statements," ("SAB
101B"). SAB 101B delayed the implementation of SAB 101 until the fourth quarter
of the Company's fiscal year 2000. The adoption of SAB 101, as amended, did not
have a material impact on the Company's financial position, results of
operations or cash flows.

As of January 1, 2001, the Company adopted Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133")
which was issued in June, 1998 and its amendments Statements 137, Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133 and 138, Accounting for Derivative Instruments and
Certain Hedging Activities issued in June 1999 and June 2000, respectively
(collectively referred to as Statement 133). The Statement will require the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
fair value of derivatives will either be offset against the change in fair value
of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company expects the adoption of SFAS 133
in fiscal 2001, as well as the effect on subsequent periods, to be immaterial.

11. FOURTH QUARTER ADJUSTMENTS - UNAUDITED

During the fourth quarter of 2000, the Company recorded certain adjustments,
including an adjustment to decrease its allowance for doubtful accounts due to
the subsequent collection of an account receivable that was previously reserved
and an adjustment to decrease accrued year-end bonuses. These adjustments
increased net income for the fourth quarter of 2000 by approximately $250,000.

F-18

EDIETS.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 2001
(In thousands)
(Unaudited)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,122
Accounts receivable, net 302
Prepaid advertising costs 293
Prepaid expenses and other current assets 186
----------
Total current assets 2,903

Restricted cash 236
Prepaid advertising costs 995
Property and equipment, net 779
----------
Total assets $ 4,913
==========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 612
Accrued liabilities 1,176
Current portion of capital lease obligations 70
Deferred revenue 2,477
----------
Total current liabilities 4,335

Capital lease obligations, net of current portion 87

STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value - 1,000 shares authorized, no -
shares issued and outstanding
Common stock, $0.001 par value - 20,000 shares authorized, 14
13,553 shares issued and outstanding
Additional paid-in capital 7,297
Unearned compensation (7)
Accumulated deficit (6,813)
----------
Total stockholders' equity 491
----------
Total liabilities and stockholders' equity $ 4,913
==========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-19

EDIETS.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

Three Months Ended March 31,
----------------------------------------
2001 2000
---------------- ----------------

REVENUE $ 4,370 $ 1,134

COSTS AND EXPENSES:

Cost of revenue 295 128
Product development 81 43
Sales and marketing 3,114 1,581
General and administrative 760 642
Depreciation and amortization 98 58
---------------- ----------------
Total costs and expenses 4,348 2,452
---------------- ----------------
Income (loss) from operations 22 (1,318)
Other income, net 4 74
---------------- ----------------
Net income (loss) $ 26 $ (1,244)
================ ================

Earnings (loss) per common share
Basic $ 0.00 $ (0.10)
================ ================
Diluted $ 0.00 $ (0.10)
================ ================
Weighted average common shares outstanding
Basic 13,553 12,645
================ ================
Diluted 14,659 12,645
================ ================

The accompanying notes are an integral part of these condensed
consolidated financial statements.

F-20

EDIETS.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Three Months Ended March 31,
-----------------------------------------
2001 2000
------------------ -----------------

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ 26 $ (1,244)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 98 58
(Recovery) provision for bad debt (24) 14
Non-cash compensation 42 57
Changes in operating assets and liabilities:
Accounts receivable 374 (115)
Prepaid expenses and other current assets (247) (1,597)
Restricted cash (116) -
Accounts payable and accrued liabilities (112) 561
Deferred revenue 1,126 372
------------------ -----------------
Net cash provided by (used in) operating activities 1,167 (1,894)

CASH FLOWS FROM INVESTING ACTIVITY:

Purchases property and equipment (113) (260)
------------------ -----------------
Net cash used in investing activity (113) (260)

CASH FLOWS FROM FINANCING ACTIVITIES:

Issuance costs of common stock - (169)
Repayment of capital lease obligations (19) (10)
------------------ -----------------
Net cash used in financing activities (19) (179)
------------------ -----------------
Net increase (decrease) in cash and cash equivalents 1,035 (2,333)

Cash and cash equivalents, beginning of period 1,087 6,283
------------------ -----------------
Cash and cash equivalents, end of period $ 2,122 $ 3,950
================== =================

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Equipment acquired under capital leases $ 18 $ 55
================== =================
Value of warrants issued for services $ 158 $ -
================== =================

The accompanying notes are an integral part of these condensed
consolidated financial statements.

F-21

EDIETS.COM, INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001
(Unaudited)

1. Nature of Operations

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements included
herein have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to those rules and regulations. The Company believes that the disclosures made
are adequate to make the information presented not misleading. All the
adjustments which, in the opinion of management, are considered necessary for a
fair presentation of the results of operations for the periods shown are of a
normal recurring nature and have been reflected in the unaudited condensed
consolidated financial statements. Results of operations for the three months
ended March 31, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. The information included in
these unaudited condensed consolidated financial statements should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in this report and the consolidated financial
statements and accompanying notes included in the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2000.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the condensed consolidated financial statements
and accompanying notes. While the Company believes that such estimates are fair
when considered in conjunction with the condensed consolidated financial
position and results of operations taken as a whole, the actual amount of such
estimates, when known, may vary from these estimates.

Certain reclassifications have been made for consistent presentation.

3. Stockholders' Equity

In connection with the Company's 1999 Private Placement, the Company had issued
640,625 warrants, each to purchase one share of common stock at an exercise
price of $2.50 per share, to the placement agent. The quantity and price of such
warrants were subject to adjustment in certain events. On March 28, 2001 an
adjustment was made to the quantity and price of the placement agent warrants.
Under the terms of the modified warrant agreement, the placement agent and its
designees now hold 950,000 warrants, each to purchase one share of common stock
at an exercise price of $1.38 per share. Such warrants remain exercisable
through November 2004 and under the modified agreement are now redeemable at the
option of the Company upon the occurrence of certain events. The excess of the
fair value of the new warrants over the value of the original warrants at the
date of modification has been charged to equity during the quarter ended March
31, 2001.

In January 2001, the Company entered into a consulting agreement whereby a
consultant was to work with management to strategize and coordinate all public,
media and investor relations efforts of the Company for a one-year period. As
compensation to the consultant, the Company issued 400,000 warrants with an
exercise price of $0.75 per share. The warrants had immediate vesting and are
exercisable through January 2004. The fair value of the warrants totaled
approximately $160,000, of which approximately $40,000 has been recognized as
compensation expense in the condensed consolidated statement of operations for
the three months ended March 31, 2001. From the outset of the agreement, the
services it would cover have been in dispute. The Company is assessing what
course to take with respect to the matter.

F-22

EDIETS.COM, INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. Equity Investment

5. Earnings (Loss) Per Common Share

Basic earnings (loss) per common share is computed using the weighted average
number of common shares outstanding during the period. Diluted earnings (loss)
per share is computed using the weighted average number of common and dilutive
potential common shares outstanding during the period. Dilutive potential common
shares consist of the incremental common shares issuable upon exercise of stock
options and warrants (using the treasury stock method).

The following table sets forth the computation of basic and diluted earnings
(loss) per common share (in thousands, except per share information):

Three Months Ended March 31,
-----------------------------------------
2001 2000
------------------ -----------------

Basic earnings (loss) per common share:
Net income (loss) $ 26 $ (1,244)
Weighted average common shares outstanding 13,553 12,645
Basic earnings (loss) per common share $ 0.00 $ (0.10)
================== =================

Diluted earnings (loss) per common share:
Net income (loss) $ 26 $ (1,244)
Weighted average common shares outstanding 13,553 12,645
Effect of dilutive potential common shares:
Stock options and warrants 1,106 -
------------------ -----------------
Adjusted weighted average shares and assumed conversions 14,659 12,645
================== =================
Diluted earnings (loss) per common share $ 0.00 $ (0.10)
================== ==================

6. Income Taxes

No provision for income taxes has been recorded for the quarter ended March 31,
2001 as the Company expects to be able to offset substantially all taxable
income for the period with available net operating loss carryforwards from prior
years.

F-23

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the General Corporation Law of Delaware provides for the
indemnification of officers and directors under certain circumstances against
expenses incurred successfully defending against a claim and authorizes Delaware
corporations to indemnify their officers and directors under certain
circumstances against expenses and liabilities incurred in legal proceedings
involving such persons because of their being or having been an officer or
director. The Restated Certificate of Incorporation of the Company provides for
indemnification of its officers and directors to the full extent authorized by
law. The Company is also a party to indemnification agreements with each of its
directors and officers.

II-1

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses payable by the
Company in connection with the issuance and distribution of the securities being
registered hereunder. No expenses shall be borne by the selling security
holders. All of the amounts shown are estimates, except for the SEC registration
fees.

SEC Registration Fee $ 682.81

Printing and Engraving Expenses* 5,000.00

Accounting Fees and Expenses* 15,000.00

Legal Fees and Expenses* 15,000.00

Fees and Expenses for Qualification Under State Securities Laws* 3,500.00

Miscellaneous* 1,500.00

TOTAL $ 40,682.81

*Estimated

RECENT SALES OF UNREGISTERED SECURITIES.

From January through November 1998, the Company's Subsidiary, eDiets,
Inc. acquired by the Company in November 1999 ("Original eDiets") granted an
aggregate of 194,857 stock options to five employees in consideration of their
employment. These options are exercisable at a price of $0.01 per share and
expire in five years. The grant of the options was exempt from the registration
requirements of the Securities Act pursuant to either Section 4(2) of the
Securities Act or Rule 701 under the Securities Act. By virtue of their
relationship to Original eDiets, the employees had access to all relevant
information regarding Original eDiets. In addition, the options granted to the
employees were pursuant to a written compensatory benefit plan or contract as
provided under Rule 701.

In January and February 1999, Original eDiets granted an aggregate of
163,428 stock options to three employees in consideration of their employment.
These options are exercisable at a price of $0.01 per share and expire in five
years. The grant of these options was exempt from the registration requirements
of the Securities Act pursuant to Section 4(2) of the Securities Act or Rule 701
under the Securities Act. By virtue of their relationships to Original eDiets,
the employees had access to all available information regarding Original eDiets.
In addition, the grant of the options to each employee was made pursuant to a
written compensatory benefit plan or contract relating to compensation as
provided under Rule 701.

In July 1999, Original eDiets issued 159,993 stock options to its Chief
Technology Officer, Steven Johnson as compensation for his services to Original
eDiets. The options are exercisable at a price of $2.00 per share and expire in
10 years. The issuance of the options were exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) of the

II-2

Securities Act or Rule 701 under the Securities Act. By virtue of his
relationships to Original eDiets, Mr. Johnson had access to all available
information regarding Original eDiets. In addition, the options granted to Mr.
Johnson were made pursuant to a written compensatory benefit plan or contract
relating to compensation as provided under Rule 701.

In November 1999, the Company issued 32,500 options to Isaac Kier, the
Company's former chief executive officer and a current director in consideration
of services rendered to the Company in connection with finding, structuring and
negotiating the merger with Original eDiets. The options are exercisable at a
price of $1.425 per share and expire in 5 years. The issuance of the options was
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) of the Securities Act. Mr. Kier is a sophisticated and accredited
investor who by virtue of his relationship to the Company had access to all
relevant information regarding the Company.

In November 1999, we acquired Original eDiets through the merger of our
wholly-owned subsidiary, eDiets Acquisition Corp., with and into Original
eDiets. Under the terms of the merger agreement, the Company issued 7,814,065
shares of common stock to David R. Humble, the sole stockholder of Original
eDiets. In connection with this issuance, the Company relied upon the exemption
from the registration requirements pursuant to the provisions of Section 4(2) of
the Securities Act as a transaction by an issuer not involving any public
offering. Mr. Humble had access to all relevant information relating to the
Company and represented that he had the required investment intent. In addition,
the securities issued to him bore an appropriate restrictive legend.

In November 1999, the Company issued 150,000 shares of common stock to
Whale Securities Co., L.P. in consideration of its services to the Company in
connection with the merger. In connection with the issuance, the Company relied
on Section 4(2) under the Securities Act as a transaction by an issuer not
involving any public offering. Whale Securities Co., L.P. is a sophisticated and
accredited investor and had access to all relevant information relating to the
Company and represented to the Company that it had the required investment
intent.

In November and December 1999, the Company issued an aggregate of
3,631,250 shares of common stock and 1,815,625 warrants to purchase common stock
to 64 investors, pursuant to the terms of a confidential private placement
memorandum dated September 1, 1999 (the "Private Placement"). Each investor
warranted and represented to the Company in connection with their subscriptions
that they were purchasing the securities for investment and not with a view
towards distribution. The offering was conducted without a general solicitation
or advertisement, was made solely to accredited investors (as defined in Rule
501 of Regulation D) and accordingly, the Company relied upon the exemption from
the registration requirements of Section 5 of the Securities Act, pursuant to
the provisions of Section 4(2) of the Securities Act and Regulation D.

In connection with the Private Placement, Whale Securities Co., L.P.
acted as the placement agent on a best efforts basis. The Company raised gross
proceeds of $7,262,500, paid the placement agent commissions of $726,250.

In November and December 1999, as additional compensation for acting as
the placement agent in the Private Placement, the Company issued to the
placement agent an aggregate of

II-3

640,625 warrants to purchase shares of the Company's common stock. The warrants
are exercisable during a period of five years at an exercise price of $2.50 per
share. In connection with the issuance, the Company relied on Section 4(2) under
the Securities Act as a transaction by an issuer not involving any public
offering. Whales Securities Co., L.P. was a sophisticated and accredited
investor with access to all relevant information relating to the Company and
represented to the Company that it had the required investment intent.

In November and December 1999, the Company issued an aggregate of
150,000 stock options to six members of its board of directors and 300,000
options to members of its executive committee in return for service on the board
and the committee. The options are exercisable at a price of $2.00 per share and
expire in five years. The issuance of the shares was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act. By virtue of their relationship to the Company, each board and
committee member had access to all relevant information relating to the Company.

In November 1999, the Company issued 82,500 warrants to its advertising
agency, DiMassimo Brand Advertising, Inc. pursuant to an advertising agency
agreement, amended in January 2000. The warrants are exercisable through
November 2002 at an exercise price of $2.00 per share. The issuance of the
warrants was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act. The agency was a sophisticated
and accredited investor which had access through its relationship to the Company
to all relevant information about the Company.

In November and December 1999, the Company granted an aggregate of
221,500 stock options to 11 officers and employees in consideration of their
employment. The options are exercisable at a price of $2.00 per share and expire
in five years. The issuance of the options was exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act or Rule 701 under the Securities Act. By virtue of their relationship to the
Company, each of the optionees had access to all relevant information about the
Company. In addition, each grant was pursuant to a written compensatory benefit
plan or contract relating to compensation as provided under Rule 701.

In December 1999, the Company granted 80,000 stock options to a
consultant in consideration of consulting services. The options are exercisable
over a period of five years at an exercise price of $2.00 per share. The
issuance of the options was exempt from the registration of the Securities Act
pursuant to Section 4(2) of the Securities Act or Rule 701 under the Securities
Act. The consultant was a sophisticated and accredited investor and by virtue of
his relationship to the Company had access to all relevant information about the
Company. In addition, the options were granted pursuant to a written
compensatory benefit plan or contract relating to compensation as provided under
Rule 701.

From January through March 2000, the Company granted an aggregate of
139,998 stock options to 12 officers and employees in consideration of their
employment. The options are exercisable at a price of $2.00 per share and expire
in five years. The issuance of the options was exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act or Rule 701 under the Securities Act. By virtue of their relationship to the
Company, each of the optionees had access to all relevant information about the
Company. In

II-4

addition, each grant was pursuant to a written compensatory benefit plan or
contract relating to compensation as provided under Rule 701.

In February 2000, the Company granted an aggregate of 150,000 stock
options to members of its audit committee and compensation committee in
consideration of services to be provided as committee members. The options are
exercisable at a price of $2.00 per share and expire in five years. The issuance
of the options was exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) of the Securities Act. Each of the members were
sophisticated persons who by virtue of their relationship to the Company had
access to all relevant information about the Company.

In June 2000, we issued 907,813 shares of common stock to investors in
our 1999 private placement. The shares were issued pursuant to the terms of the
private placement because our common stock had not been listed for trading on
the NASDAQ Small Cap Market by May 17, 2000. 531,250 of the shares were
registered on our May 2000 registration statement. 376,563 of the shares were
not registered. Each recipient of the unregistered shares was an accredited
investor that represented to us in connection with their initial subscriptions
that they were purchasing the securities for investment and not with a view
towards distributions. Accordingly, the issuance of the shares was exempt under
Section 4(2) of the Securities Act and Regulation D thereunder.

During fiscal 2000 we granted stock options to 39 employees, 5
directors and 3 consultants under our 1999 Stock Option Plan to purchase an
aggregate of 1,458,298 shares at exercise prices ranging from $0.77 to $2.50 per
share. The issuance of the options was exempt from the registration requirements
of the Securities Act pursuant to Section 4(2) of the Securities Act or Rule 701
under the Securities Act. By virtue of their relationship to us, each of the
optionees had access to all relevant information about us. In addition, each
grant was pursuant to a written compensatory benefit plan or contract relating
to compensation as provided under Rule 701.

In January 2001 the Company issued 400,000 warrants to a consultant,
Mallory Factor, Inc. The warrants are exercisable through January 2004 at an
exercise price of $0.75 per share. The issuance of the warrants was exempt from
the Registration Requirements of the Securities Act pursuant to Section 4(2) of
the Securities Act. The consultant was a sophisticated and accredited investor
which had access through its relationship to the Company to all relevant
information about the Company.

In March 2001, the Company issued 950,000 warrants to the Placement
Agent and its assignees in replacement of the 640,625 warrants previously issued
to the Placement Agent as a result of anti-dilution adjustments. The new
warrants are exercisable during a period of five years at an exercise price of
$1.375 per share. In connection with the issuance, the Company relied on Section
4(2) under the Securities Act as a transaction by an insurer not involving any
public offering. Whale Securities Co., L.P. and its designees were sophisticated
and accredited investors with access to all relevant information relating to the
Company and represented to the Company that it had the required investment
intent.

From January 1, 2001 through June 4, 2001, we granted stock options to 13
employees and one consultant under our 1999 Stock Option to purchase an
aggregate of 250,000 shares at exercise prices ranging

II-5

from $0.91 to $1.72 per share. The issuance of the options was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act. By virtue of their relationship to us, each of the optionees had
access to all relevant information about us.

II-6

EXHIBITS.

EXHIBIT NO. DESCRIPTION OF DOCUMENT

3.1 Restated Certificate of Incorporation (1)

3.2 By-Laws (1)

4.1 Form of Investors Warrant (1)

4.1.1 Warrant dated January 8, 2001 issued to Mallory Factor (4)

4.2 Warrant Certificate dated November 17, 1999 issued to Whale
Securities Co., L.P. for 570,625 warrants (1)

4.2.2 Warrant Certificate dated December 23, 1999 issued to Whale
Securities Co., L.P. for 70,000 warrants (1)

4.3 Form of Registrant's common stock Certificate (1)

4.4 Form of Registration Rights Agreement (1)

4.5 Warrant Agreement dated November 17, 1999 between Registrant and
Whale Securities Co., L.P. (1)

4.6 Warrant Certificate dated March 28, 2001 issued to Whale
Securities Co. LP for 460,634

4.7 Warrant Certificate dated March 28, 2001 issued to Matthew A.
Gohd for 415,220 warrants.

4.8 Warrant Certificate dated March 28, 2001 issued to Leslie Wilson
for 22,244 warrants.

4.9 Warrant Certificate dated March 28, 2001 issued to Craig Schwabe
for 22,244 warrants.

4.10 Warrant Certificate dated March 28, 2001 issued to Matthew
Drillman for 14,829 warrants.

4.11 Warrant Certificate dated March 28, 2001 issued to Renee Russnok
for 14,829 warrants.

5.1 Opinion of Nason, Yeager, Gerson, White & Lioce, P.A.

10.1 1999 Stock Option Plan (1)

10.2 Amendment No. 1 to Stock Option Plan dated August 9, 2000 (2)

10.3 Amendment No. 2 to Stock Option Plan dated September 18, 2000 (2)

10.4 Employment Agreement dated November 17, 1999 between Registrant
and David R. Humble (1)

10.5 Revised Form of Indemnification Agreement between the Registrant
and each of its Directors and Executive Officers (1)

10.6 Agreement and Plan of Merger and Reorganization dated as of August
30, 1999 among the Registrant, eDiets Acquisition Corp. and David
R. Humble (1)

10.7 Form of Indemnification Agreement between the Registrant and each
of its Directors and Executive Officers (1)

10.8 License Agreement dated August 3, 1999 between eDiets, Inc.
(formerly eDiets.com, Inc.) and David R. Humble (1)

II-7

10.9 Lease Agreement dated December 2, 1999 between The 3467
Partnership and Registrant (1)

10.10 Placement Agent Agreement dated November 17, 1999 between the
Registrant and Whale Securities Co., L.P. (1)

10.11 Co-Locate Service Agreement dated October 1999 between PSIWeb,
Inc. and Registrant (1)

10.12 Equipment Lease Agreement between First Sierra Financial, Inc.
and Registrant (1)

10.13 Agreement dated December 22, 1999 between Registrant and
iVillage, Inc. (1)

10.14 Advertising Insertion Order Agreement dated September 29, 1999
between Registrant and Yahoo!, Inc. (1)

10.15 Database Management and Direct Marketing Agreement dated August,
1999 between 24/7 Media, Inc. and Registrant (1)

10.16 Confidential Alliance Member Cancellation Agreement dated August
3, 1999 between 24/7 Media, Inc. and Registrant (1)

10.17 E-Mail Newsletter Management Agreement dated August 22, 1999
between 24/7 Media, Inc. and Registrant (1)

10.18 Agreement dated as of November 15, 1999 between DiMassimo Brand
Advertising, Inc. and Registrant (1)

10.19 Letter Agreements dated November 1, 1999 and November 9, 1999
between Robert T. Hamilton and Registrant (1)

10.20 Advertising Insertion Order Agreement dated August 16, 1999
between Registrant and America Online, Inc. (1)

10.21 Advertising Insertion Order Agreement dated March 20, 2000
between Registrant and America Online, Inc. (1)

10.22 Employment Agreement dated August 21, 2000 between Registrant and
David J. Schofield (2)

10.23 Letter Agreement dated December 19, 2000 between Registrant and
David J. Schofield (3)

10.24 Joint Venture Agreement dated November 28, 2000 between
Registrant, Unislim Ireland, Ltd. and eDiets Europe, Ltd. (3)

10.25 Technology License Agreement dated November 28, 2000 between
eDiets British Virgin Islands, Inc. and eDiets Europe, Ltd. (3)

II-8

10.26 Purchase and Sale Agreement dated November 22, 2000 between
Registrant and eDiets, BVI, Inc. (3)

10.27 Agreement for Services dated February 16, 2000 between
Registrant and Professional Employee Management, Inc. (3)

10.28 Advertising Insertion Order dated October 13, 2000 between
Registrant and Lifeminders, Inc. (3)(5)

10.29 Licensing Agreement dated August 29, 2000 between Registrant and
eDirect, Inc. (3)

10.30 Sponsorship Agreements dated July 1, 2000 between Registrant and
iVillage.com (2)

10.31 First Amendment dated November 1, 2000 to the Sponsorship
Agreement between Registrant and iVillage.com (3)(5)

10.32 Termination and Release Agreement dated December 1, 2000 between
Registrant and iVillage.com (3)

10.33 Interactive Services Agreement dated November 23, 2000 between
Registrant and America Online, Inc. (3)(5)

10.34 License and Marketing Agreement dated July 19, 2000 between
Registrant and Intel Corporation (3)

10.35 Internet Advertising and Ad Serving Agreement dated October 10,
2000 between Registrant and L90, Inc. (3)

10.36 Agreement dated November 3, 2000 between Registrant and Laurel
Advisors, L.L.C. (3)

10.37 Agreement dated March 29, 2001 between the Registrant and
Microsoft Corporation (4)(5)

10.38 Agreement dated March 21, 2001 between the Registrant and
LifeMinders, Inc. (4)(5)

10.39 Agreement dated March 21, 2001 between the Registrant and
Sportsline USA, Inc. d/b/a CBS SportsLine.com (4)(5)

10.40 Agreement dated February 28, 2001 between the Registrant and
Women.com networks (4)(5)

10.41 Agreement dated March 28, 2001 between the Registrant, Whale
Securities Co., L.P., Matthew Gohd, Matthew Drillman, Leslie
Wilson, Craig Schwabe, and Renee Russnok (4)

II-9

10.42 Agreement dated March 19, 2001 between the Registrant and
eUniverse, Inc. (4)(5)

10.43 Arrangement Letter dated January 29, 2001 between the
Registrant and Mallory Factor, Inc. (4)

10.44 Agreement dated April 4, 2001 between Yahoo! Inc. and the
Registrant (*)(6)

10.45 First Amendment to Content License Agreement dated April
10, 2001 between the Registrant and Yahoo, Inc.
(*)(6)

10.46 Agreement dated May 22, 2000 between the Registrant and
Women.com networks (2)

21.1 Subsidiaries of the Registrant

23.1 Consent of Ernst & Young LLP (*)

23.2 Consent of Nason, Yeager, Gerson, White & Lioce, P.A.
(included in its opinion filed as Exhibit 5.1)
----------------------

(1) Incorporated by reference to the Registration Statement on Form SB-2 as
filed with the SEC on December 30, 1999 or Amendment No. 1 thereto filed on
March 20, 2000 or Amendment No. 2 thereto filed on April 17, 2000 (File No.
333-93971).

(2) Incorporated by reference to the Registrant's Form 10-QSB for the quarterly
period ended September 30, 2000 and filed with the SEC on October 30, 2000

(3) Incorporated by reference to the Registrant's Form 10-KSB for the year
ended December 31, 2000 and filed with the SEC on April 2, 2001.

(4) Incorporated by reference to the Registrant's Form 10-QSB for the quarterly
period ended March 31, 2001 and filed with the SEC on May 14, 2001.

(5) Confidential treatment requested pursuant to Rule 24B-2 promulgated under
the Securities Exchange Act of 1934. Confidential portions of this document
have been redacted and have been filed separately with the SEC.

(6) Confidential treatment requested pursuant to Rule 406 promulgated under the
Securities Act of 1933. Confidential portions of this document have been
redacted and have been filed separately with the SEC.

(*) Filed herewith.

II-10

UNDERTAKINGS.

The Company hereby undertakes that it will:

1. File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and

(iii) Include any additional or changed material information on the
plan of distribution.

2. For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.

3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

4. File a prospectus supplement if over 5% of the securities subject to
the lock-ups described in the section "Plan of Distribution" in the prospectus
are released early and a post-effective amendment to this Registration Statement
if over 10% are released early.

5. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.

II-11

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereto duly authorized, in the City
of Deerfield Beach, Florida on July 2, 2001.

eDiets.com, Inc. a Delaware corporation

By: /s/ David R. Humble
-------------------------------
David R. Humble
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates stated:

SIGNATURE TITLE DATE
--------- ----- ----

/s/ David R. Humble
----------------------------------------
David R. Humble Chairman of the Board, Chief Executive Officer July 2, 2001
(Principal Executive Officer)

/s/ Robert T. Hamilton
----------------------------------------
Robert T. Hamilton Chief Financial Officer (Principal Financial July 2, 2001
Accounting Officer)

/s/ *
----------------------------------------
Isaac Kier Director July 2, 2001

----------------------------------------
Matthew Gohd Director July __, 2001

/s/ *
----------------------------------------
James M. Meyer Director July 2, 2001

/s/ *
----------------------------------------
Lee S. Isgur Director July 2, 2001

II-12

*By: /s/ David R. Humble
-----------------------
David R. Humble
Attorney-in-Fact

II-13

Exhibit Index

EX# Exhibit Description

10.44 Agreement dated April 4, 2001 between Yahoo! Inc. and the
Registrant

10.45 First Amendment to Content License Agreement dated April 10, 2001
between the Registrant and Yahoo! Inc.

23.1 Consent of Ernst & Young LLP