________________________________________________________________________________
________________________________________________________________________________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002 Commission File Number 0-30559
eDiets.com, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 56-0952883
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3801 W. Hillsboro Boulevard
Deerfield Beach, Florida 33442
(Address of principal executive offices)
(954) 360-9022
(Issuer's telephone number, including area code)
---------------
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No __
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
At July 26, 2002, there were 15,767,017 shares of common stock, par value $.001
per share, outstanding.
Transitional Small Business Disclosure Format (check one): ____Yes X No
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________________________________________________________________________________
Index to Items
Page
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Part I - Financial Information
------------------------------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet as of June 30, 2002 3
Condensed Consolidated Statements of Operations - Three and six months
ended June 30, 2002 and 2001 4
Condensed Consolidated Statements of Cash Flows - Three and six months
ended June 30, 2002 and 2001 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Part II - Other Information
---------------------------
Item 6. Exhibits and Reports on Form 8-K 13
Signature Page 14
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EDIETS.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2002
(In thousands)
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,898
Accounts receivable, net 453
Prepaid advertising costs 113
Prepaid expenses and other current assets 403
--------
Total current assets 5,867
Restricted cash 753
Property and equipment, net 1,072
Intangibles, net 1,105
Goodwill 5,191
Other assets 29
--------
Total assets $ 14,017
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,196
Accrued liabilities 2,244
Current portion of capital lease obligations 155
Current portion of notes payable 1,501
Deferred revenue 3,421
--------
Total current liabilities 8,517
Capital lease obligations, net of current portion 124
Notes payable, net of current portion 3
Deferred tax liability 416
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Common stock 16
Additional paid-in capital 9,672
Accumulated deficit (4,731)
--------
Total stockholders' equity 4,957
--------
Total liabilities and stockholders' equity $ 14,017
========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
EDIETS.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- ------------------------------
2002 2001 2002 2001
--------- --------- ---------- ---------
REVENUE $ 7,715 $ 5,774 $ 14,713 $ 10,144
COSTS AND EXPENSES:
Cost of revenue 738 412 1,460 879
Product development 269 127 630 208
Sales and marketing 4,169 4,586 7,840 7,705
General and administrative 1,425 750 2,894 1,333
Depreciation and amortization 327 118 651 216
--------- --------- ---------- ---------
Total costs and expenses 6,928 5,993 13,475 10,341
--------- --------- ---------- ---------
Income (loss) from operations 787 (219) 1,238 (197)
Other (expense) income, net (19) 3 (51) 7
Income tax benefit (expense) 74 (4) 127 (4)
--------- --------- ---------- ---------
Net income (loss) $ 842 $ (220) $ 1,314 $ (194)
========= ========= ========== =========
Earnings (loss) per common share:
Basic and Diluted $ 0.05 $ (0.02) $ 0.08 $ (0.01)
========= ========= ========== =========
Weighted average common and common
equivalent shares outstanding:
Basic 15,742 13,562 15,734 13,557
========= ========= ========== =========
Diluted 17,191 13,562 17,491 13,557
========= ========= ========== =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
EDIETS.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
------------------------------------------
2002 2001
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,314 $ (194)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 320 216
Amortization of intangibles 331 -
Net recoveries of bad debts and sales returns (32) (6)
Stock based compensation 79 121
Deferred tax benefit (125) -
Changes in operating assets and liabilities:
Accounts receivable (169) 224
Prepaid expenses and other current assets 551 (415)
Restricted cash (484) (118)
Other assets 16 -
Accounts payable and accrued liabilities 851 60
Deferred revenue 1,228 1,197
---------------- ----------------
Net cash provided by operating activities 3,880 1,085
CASH FLOWS FROM INVESTING ACTIVITY:
Purchases of property and equipment (174) (249)
---------------- ----------------
Net cash used in investing activity (174) (249)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 71 -
Repayment of capital lease obligations (80) (46)
Repayment of notes payable (520) -
Repurchase of common stock (67) -
Issuance costs of common stock (54) (10)
---------------- ----------------
Net cash used in financing activities (650) (56)
---------------- ----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,056 780
Cash and cash equivalents, beginning of period 1,842 1,087
---------------- ----------------
Cash and cash equivalents, end of period $ 4,898 $ 1,867
================ ================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 17 $ 13
================ ================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Equipment acquired under capital leases $ 113 $ 149
================ ================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
EDIETS.COM, INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
(Unaudited)
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.
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
accounting principles generally accepted in the United States 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 and six months ended June 30, 2002 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2002. 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, 2001.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
3. STOCKHOLDERS' EQUITY
In connection with the Company's 1999 Private Placement, the Company had issued
a warrant to purchase 640,625 shares 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 warrant. Under the
terms of the modified warrant agreement, the placement agent and its designees
held warrants to purchase 950,000 shares 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 warrant at the date of modification was
charged to equity during the quarter ended March 31, 2001.
In January 2001, the Company entered into a consulting agreement whereby the
consultant worked 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 a warrant to purchase 400,000
shares of common stock with an exercise price of $0.75 per share. The warrant
had immediate vesting and is exercisable through January 2004. The fair value of
the warrant totaled approximately $158,000 and has been recognized as consulting
expense over the term of the agreement.
6
In January 2002, the Company issued an option to purchase 25,000 shares of
common stock to a member of the Company's Board of Directors for services
provided to the Company beyond his duties as a Board Member. The fair value of
the option totaled approximately $24,000 and was recognized as consulting
expense in the quarter ended March 31, 2002.
In addition to the options discussed above, the Company issued options to
purchase a total of 61,000 shares of common stock to non-employees for the three
months ended March 31, 2002. There were no option grants to non-employees for
the three months ended June 30, 2002. The fair value of these options totaled
approximately $53,000 and was recognized as general and administrative expense
in the six months period ended June 30, 2002.
4. EQUITY INVESTMENT
The Company has a 60% interest in a foreign joint venture, eDiets Europe
Limited, that is accounted for under the equity method of accounting. The
investment recorded to date is zero as it has been limited to the license of the
Company's international technology rights. Accordingly, since the Company has
not invested any funds, nor is it committed to do so, the Company has not
recorded its share of the joint venture's losses since inception. eDiets Europe
Limited's losses since inception have totaled approximately $260,000 through
June 30, 2002. In the event that the Company makes a cash investment or
commitment to the joint venture, the Company will record its share of the losses
to date, up to the amount funded or committed.
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 Six Months Ended
June 30, June 30,
---------------------------------- --------------------------------
2002 2001 2002 2001
-------------- ---------------- ------------- ---------------
Basic earnings (loss) per common share:
Net income (loss) $ 842 $ (220) $ 1,314 $ (194)
============ =============== ============ ===============
Weighted average common shares outstanding 15,742 13,562 15,734 13,557
============ =============== ============ ===============
Basic earnings (loss) per common share $ 0.05 $ (0.02) $ 0.08 $ (0.01)
============ =============== ============ ===============
Diluted earnings (loss) per common share:
Net income (loss) $ 842 $ (220) $ 1,314 $ (194)
============ =============== ============ ===============
Weighted average common shares outstanding 15,742 13,562 15,734 13,557
Effect of dilutive potential common shares:
Stock options and warrants 1,449 - 1,757 -
------------ --------------- ------------ ---------------
Adjusted weighted average shares and assumed
conversions 17,191 13,562 17,491 13,557
============ =============== ============ ===============
Diluted earnings (loss) per common share $ 0.05 $ (0.02) $ 0.08 $ (0.01)
============ =============== ============ ===============
7
6. INCOME TAXES
The Company recorded approximately $74,000 and $127,000 of income tax benefit
for the three and six months ended June 30, 2002, respectively, primarily
related to the amortization of intangible assets resulting from the DietSmart
acquisition in October 2001. The Company expects to be able to offset
substantially all taxable income for the current year with available net
operating loss carryforwards from prior years.
7. NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 142 (SFAS
No. 142), "Goodwill and Other Intangible Assets," as of January 1, 2002. The
Company performed the transitional impairment test required upon the adoption of
SFAS No. 142 and has determined that no impairment exists. As of June 30, 2002,
the Company had goodwill of approximately $5.2 million.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information contained in this Current Report on Form 10-QSB, other than
historical information may include forward-looking statements as defined in the
Private Securities Reform Act of 1995. Words such as "may," "will," "expect,"
"intend," "anticipate," "believe," "estimate," "continue," "plan" and similar
expressions in this report identify forward-looking statements. The
forward-looking statements are based on current views with respect to future
events and financial performance. Actual results may differ materially from
those projected in the forward-looking statements. The forward-looking
statements are subject to risks, uncertainties and assumptions, including, among
other things those:
. associated with our ability to meet our financial obligations;
. associated with the relative success of marketing and advertising;
. associated with the continued attractiveness of our diet and fitness
programs;
. competition, including price competition and competition with self-help
weight loss and medical programs;
. adverse results in litigation and regulatory matters, more aggressive
enforcement of existing legislation or regulations, a change in the
interpretation of existing legislation or regulations, or promulgation
of new or enhanced legislation or regulations; and
. general economic and business conditions.
The factors listed in the section entitled "Certain Factors Which May Affect
Future Results" in the section "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of our Annual Report on form
10-KSB for the year ended December 31, 2001, as well as any other cautionary
language in this report, provide examples of risks, uncertainties and events
which may cause our actual results to differ materially from the expectations we
described in our forward-looking statements. All forward-looking statements are
current only as of the date on which such statements are made. We do not
undertake any obligation to release publicly the result of any revisions to
these forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
OUR BUSINESS
We are the leading subscription-based online diet and fitness center, with a
current base of approximately 187,000 paying customers and a total online
community of over 10 million consumers. We were named a Forbes Best of the Web
Fitness and Nutrition Website by Forbes(TM) Magazine in 2000 and 2001.
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 that is unique to each individual and then deliver
it directly to the individual's home or office via the Internet. We believe our
personalization features, low cost and centralized Internet distribution creates
a unique competitive advantage in a market where the market leader, Weight
Watchers(R) International, Inc., primarily operates a decentralized network of
brick and mortar storefronts.
9
RESULTS OF OPERATIONS
The following table sets forth our results of operations expressed as a
percentage of total revenue:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- -----------------------------------
2002 2001 2002 2001
--------------------------- -----------------------------------
Revenue 100% 100% 100% 100%
Cost of revenue 10 7 10 9
Product development 3 2 4 2
Sales and marketing 54 79 53 76
General and administrative 18 13 20 13
Depreciation and amortization 4 2 4 2
Other income, net * * * *
Income tax benefit 1 * 1 *
Net income 11% (4)% 9% (2)%
* less than 1%
THREE AND SIX MONTHS ENDED JUNE 30, 2002 AS COMPARED TO THREE AND SIX MONTHS
ENDED JUNE 30, 2001
Our revenue for the three and six months ended June 30, 2002 was $7,715,000 and
$14,713,000 as compared to $5,774,000 and $10,144,000 for the three and six
months ended June 30, 2001, respectively. The 34% and 45% increase in revenue
for the three and six months ended June 30, 2002, respectively, was mainly due
to price increases over the prior year in the form of a shorter initial
membership period combined with a higher absolute price for our program. Paying
members as of June 30, 2002 were approximately 187,000 compared to approximately
182,000 as of June 30, 2001. Approximately 8% of our revenues in the three and
six months ended June 30, 2002, came from other sources of revenue, such as
opt-in email revenue, advertising revenue, commission revenue and e-commerce
revenue.
As of June 30, 2002, we had deferred revenue of $3,421,000 relating to payments
for which services had not yet been provided.
Cost of revenue consists primarily of Internet access and service charges,
credit card fees, revenue sharing costs, consulting costs for professionals that
provide online meetings, advertising servicing fees, product and shipping costs
associated with our e-commerce revenue and salary payments to our nutritional
staff. Cost of revenue increased to $738,000 and $1,460,000 for the three and
six months ended June 30, 2002, respectively, as compared to $412,000 and
$879,000 for the comparable periods in the prior year. We attribute the dollar
increase primarily to increased Internet access and service charges, credit card
fees, and product and shipping costs related to the sale of our proprietary
products.
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 $269,000 and $630,000 for
the three and six months ended June 30, 2002, respectively, from $127,000 and
$208,000 for the comparable periods in the prior year. The dollar increase for
the three and six months ended June 30, 2002 as compared to the corresponding
periods in 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 Website.
10
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. Sales and marketing expenses decreased to
$4,169,000 for the three months ended June 30, 2002 from $4,586,000 for the
corresponding period in the prior year. The decrease in sales and marketing
expenses was due to a decrease in Internet advertising costs offset by an
increase in offline marketing and compensation costs due to an increase in
personnel and marketing efforts. Sales and marketing expenses for the six
months ended June 30, 2002 and 2001 were approximately $7,840,000 and
$7,705,000, respectively.
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 $1,425,000 and $2,894,000 for
the three and six months ended June 30, 2002 from $750,000 and $1,333,000 for
the corresponding periods in the prior year. The increase was primarily due to
increases in salaries for additional personnel, general overhead and
professional fees.
Depreciation and amortization expenses increased to $327,000 and $651,000 for
the three and six months ended June 30, 2002, respectively, from $118,000 and
$216,000 for the corresponding periods in the prior year. The increase was
primarily attributable to the larger asset base subject to depreciation and
amortization and amortization of intangibles.
Other (expense) income, net, which consists of interest income and interest
expense, decreased by $22,000 and $58,000 for the three and six months ended
June 30, 2002, respectively, from the corresponding periods in the prior year.
The decrease was primarily due to interest expense incurred in connection with
the notes payable issued as a part of the acquisition of DietSmart, Inc.
(DietSmart) in October 2001.
Income tax benefit for the three and six months ended June 30, 2002 mainly
relates to the tax benefit from the amortization of intangible assets resulting
from the DietSmart acquisition. We expect to be able to offset substantially
all taxable income for the current year with available net operating loss
carryforwards from prior years.
As a result of the factors discussed above, we recorded net income of $842,000
and $1,314,000 for the three and six months ended June 30, 2002, respectively,
compared to net losses of $220,000 and $194,000 in the corresponding periods in
the prior year.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2002, we had unrestricted cash and cash equivalents of
$4,898,000. For the six months ended June 30, 2002, net cash provided by
operating activities was $3,880,000, and was primarily due to net income during
the period and an increase in deferred revenue, accounts payable and accrued
liabilities offset by an increase in restricted cash. Net cash used in
investing activities was $174,000 and related to our purchases of property and
equipment. Net cash used in financing activities was $650,000 for the period
and was primarily related to the repayment of capital lease obligations and
notes payable issued in connection with the acquisition of DietSmart.
The following summarizes future cash outflow related to our contractual
obligations at June 30, 2002 (in thousands):
Total Less than 1 year 1-3 years After 3 years
-------------- ------------------ ---------------- ------------------
Contractual obligations:
Long term debt (1) $ 1,504 $ 1,501 $ 3 $ -
Capital lease obligations 319 186 122 11
Operating leases 755 226 346 183
Online advertising 9,230 9,230 - -
------------ ------------ ---------- ------------
Total contractual cash obligations $ 11,808 $ 11,143 $ 471 $ 194
============ ============ ========== ============
11
(1) Long term debt represents amounts owed in connection with the DietSmart
acquisition. In accordance with the merger agreement, payments may be
accelerated under the following situations:
a) If we have cash and cash equivalents in excess of a certain amount at
October 31, 2002, we will be required to make the final installment
within ten (10) days after the availability of the monthly financial
statements.
b) If we have cash and cash equivalents in excess of a certain amount at
the end of any month subsequent to the filing of our Annual Report on
Form 10-KSB for the year ended December 31, 2001, we will be required
to pay to the DietSmart Stockholders 25% of the outstanding balance
owed and apply such amount against future installments in reverse
order of maturity.
c) If there is a change in control which results in beneficial owners
(excluding the current beneficial owners) owning an interest of at
least 51% of our outstanding common shares, all of the scheduled
payments, including interest, are payable within thirty (30) days of
the change in control.
d) If we raise equity in excess of $1,000,000, then 20% of those proceeds
will be used as a prepayment towards future scheduled payments.
We currently have online advertising commitments with major Internet portals
totaling approximately $9,230,000 through March 31, 2004.
We have an irrevocable standby letter of credit from a bank in the amount of
$200,000 that expires in January 2003. The letter of credit is collateralized by
certain cash equivalents and is being used to guarantee our obligations under
our capital leases for computer servers. As of June 30, 2002 we had
approximately $219,000 in leased equipment against the letter of credit.
We have an irrevocable standby letter of credit from a bank in the amount of
$500,000 that expires in July 2003. The letter of credit is collateralized by
certain cash equivalents and is being used to guarantee our obligations under
our advertising agreement with Microsoft Corporation.
We are committed to loan the three founders of DietSmart funds to satisfy their
tax obligations if the acquisition of DietSmart is determined not to be a
tax-free reorganization by the Internal Revenue Service. Such commitment is
outstanding as long as we have not yet fully paid the scheduled debt payments to
the former DietSmart shareholders. If we grant loans, such loans granted by us
would be interest bearing and secured by an equal value of shares of our common
stock and due no later than three years after the loans were made. Management
does not expect the loans to be required but to the extent they are granted,
they could have a material impact on the Company's liquidity.
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 we require additional funds to support our
operations or the expansion of our business, we may seek to undertake additional
equity or debt financing. There can be no assurance that additional financing,
if required, will be available to us in amounts or on terms acceptable to us or
at all.
NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations," and No. 142,
"Goodwill and Other Intangible Assets," effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives. The Company
adopted SFAS No. 141 effective July 1, 2001 and SFAS No. 142 as of January 1,
2002. The Company performed the transitional impairment test required upon the
adoption of SFAS No. 142 and has determined that no impairment of its goodwill
exists. As such, there was no impact as a result of the adoption of SFAS No. 142
on the Company's financial position, results of operations or cash flows.
12
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(c) During the period from January 1, 2002 to June 6, 2002, inclusive, we
granted options to purchase an aggregate of 802,000 shares of our common stock
under our 1999 Stock Option Plan to 25 employees, three directors and one
consultant at exercise prices ranging from $1.65 to $2.50 per share that expire
after five years. The offer and sale of the options was exempt from the
registration requirements of the Securities Act of 1933, as amended (the "Act"),
pursuant to Section 4(2) of the Act. On June 7, 2002, we filed a Registration
Statement on Form S-8 with the Securities and Exchange Commission, effective
immediately, registering an additional 4,100,000 shares of our common stock
under our Stock Option Plan (As Amended and Restated Effective April 1, 2002).
Accordingly, the shares underlying stock options we granted to employees,
directors and consultants beginning June 7, 2002 are registered securities.
Item 4. Submission of Matters to a Vote of Security Holders.
On May 15, 2002 proxy materials were mailed to our stockholders requesting
approval of the eDiets.com, Inc. Stock Option Plan (As Amended and Restated
Effective April 11, 2002) (the "Plan"). The Plan was approved by written consent
of a majority of stockholders as of May 23, 2002. The holders of at least
7,903,058 shares consented to the Plan, constituting 50.26% of the 15,725,263
shares of our common stock outstanding on May 23, 2002.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are included herein:
10.1 Employment Agreement dated as of June 1, 2002 between eDiets.com,
Inc. and Robert T. Hamilton
10.2 Employment Agreement dated as of June 1, 2002 between eDiets.com,
Inc. and Christine M. Brown
10.3 Employment Agreement dated as of June 1, 2002 between eDiets.com,
Inc. and Steven E. Johnson
10.4 Employment Agreement dated as of June 1, 2002 between eDiets.com,
Inc. and Ronald L. Caporale
10.5 Employment Agreement dated as of June 1, 2002 between eDiets.com,
Inc. and M. Roshelle Jones
10.6 Amended Revenue Share Program Agreement dated May 19, 2002 between
eDiets.com and eUniverse, Inc. (1)
10.7 Amendment No. 2 to Master Advertising Agreement dated April 5, 2002
between eDiets.com and Microsoft Corporation (1)
10.8 Schedule No. 2 to Master Advertising Agreement dated July 1, 2002
between eDiets.com and Microsoft Corporation (1)
(1) Confidential treatment requested pursuant to Rule 24B-2 promulgated
under the Securities and Exchange Act of 1934. Confidential portions
of this document have been redacted and have been filed separately
with the SEC.
(b) Reports on Form 8-K:
1. A report on Form 8-K was filed with the Securities and Exchange
Commission on April 26, 2002 reporting one event under Item 5, Other
Events, and filing one exhibit under Item 7, Exhibits.
2. A report on Form 8-K was filed with the Securities and Exchange
Commission on June 18, 2002 reporting one event under Item 5, Other
Events, and filing one exhibit under Item 7, Exhibits.
13
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
eDiets.com, Inc.
/s/ ROBERT T. HAMILTON
----------------------------
ROBERT T. HAMILTON
Chief Financial Officer
(Principal Financial Officer)
DATE: July 30, 2002
14
Exhibit Index
Exhibit
Number Description
-------- -----------
- 10.1 - Employment Agreement - Robert T Hamilton
- 10.2 - Employment Agreement - Christine M Brown
- 10.3 - Employment Agreement - Steven E Johnson
- 10.4 - Employment Agreement - Ronald L Caporale
- 10.5 - Employment Agreement - M Roshelle Jones
- 10.6 - Amended Revenue Share Program Agreement dated May 19, 2002 between
eDiets.com and eUniverse, Inc. (1)
- 10.7 - Amendment No. 2 to Master Advertising Agreement dated April 5, 2002
between eDiets.com and Microsoft Corporation (1)
- 10.8 - Schedule No. 2 to Master Advertising Agreement dated July 1, 2002
between eDiets.com and Microsoft Corporation (1)