[LOGO] MEDIFAST
Medifast, Inc.
11445 Cronhill Drive
Owings Mills, MD 21117
May 23, 2003
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of shareholders of
Medifast, Inc., (the "Company"), to be held on July 25, 2003 at The American
Stock Exchange, 86 Trinity Place, New York, NY, 10006 on Friday, July 25, 2003,
at 10:00 A.M., Eastern Time, for the following purposes:
(1) To elect a classified Board of Directors consisting of six directors
each of whom is to hold office until the next Annual Meeting of
Stockholders at which their respective class term expires and their
respective successors will be duly elected and qualified, as more
fully described in the accompanying proxy statement and to amend the
Company's Bylaws accordingly.
(2) To approve the re-appointment of Wooden & Benson, Chartered, an
independent member of the BDO Seidman alliance, as the Company's
independent auditors for the fiscal year ending December 31, 2003.
(3) To amend the 1993 stock option plan and increase the number of
authorized stock options from 1,000,000 shares to 1,250,000 shares
to provide incentives for employees performance.
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Your Board of Directors and Management look forward to greeting those
shareholders able to attend. Only stockholders of record at the close of
business on May 23, 2003 will be entitled to notice of, and to vote at, the
meeting or any adjournments thereof.
It is important that your shares be represented and voted at the Annual
Meeting, regardless of whether or not you plan to attend in person. You are
therefore urged to vote your shares in a timely fashion.
By Order of the Board of Directors,
/s/ Bradley T. MacDonald
------------------------
Bradley T. MacDonald
Chairman of the Board & Chief Executive Officer
MEDIFAST, INC.
----------
PROXY STATEMENT
This proxy statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Medifast Inc., a Delaware
corporation (the "Company" or "Medifast"), to be voted at the Annual Meeting of
Stockholders (the "Meeting") scheduled to be held at The American Stock
Exchange, 86 Trinity Place, New York, NY, 10006 on Friday, July 25, 2003, at
10:00 A.M., Eastern Time, and at any adjournments thereof.
Only stockholders of record as of the close of business on May 23, 2003*
are entitled to notice of and to vote at the Meeting or any adjournment thereof.
On that date, the Company had outstanding 9,057,376 shares of Common Stock, par
value $.01 per share (the "Common Stock"), 453,735 shares of Series "B"
Preferred Convertible Stock (the "Preferred Stock") and 415,000 shares of Series
"C" Preferred Convertible Stock. Each share of Common Stock is entitled to one
vote, each share of Series "B" Preferred Stock is entitled to two votes and each
share of Series "C" Preferred Stock is entitled to one vote. Total voting power
equals to 10,379,846 votes eligible at the Annual Meeting.
Each form of proxy which is properly executed and returned to the Company
will be voted in accordance with the directions specified thereon, or, if no
directions are specified, will be voted (i) for the election as Directors of the
persons named herein under the caption "Election of Directors," and (ii) for the
approval of the appointment of Wooden & Benson, Chartered as the Company's
independent auditors for the fiscal year ending December 31, 2003. Any
stockholder giving a proxy may revoke it at any time before it is exercised.
Such revocation may be affected by voting in person or by proxy at the Meeting,
by returning to the Company prior to the Meeting a proxy bearing a later date,
or by otherwise notifying the Secretary of the Company in writing prior to the
Meeting.
The Company's executive offices are at 11445 Cronhill Drive, Owings Mills,
Maryland 21117 and its telephone number is (410) 581-8042. This proxy statement
and the accompanying proxy are first being distributed to the stockholders of
the Company on or about June 2, 2003.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of March 31, 2003, information
concerning the ownership of Common Stock and Preferred Stock by persons which,
to the Company's knowledge, own beneficially more than 5% of the outstanding
shares of Common Stock or Preferred Stock.
Common Stock % of
Name and Address Beneficially Owned Outstanding
---------------- ------------------ -----------
Bradley T. MacDonald.............. 1,652,675 19.0%
11445 Cronhill Drive
Owings Mills, MD 21117
Warren H. Haber................... 472,000 5.00%
c/o Founder's Management
New York City, NY 10021
Series "B" Voting
Preferred Convertible Stock % of
Name and Address Beneficially Owned Outstanding
---------------- ------------------ -----------
"DS" Capital Investors............ 478,735(1) 87%
JPR Capital
Staten Island, NY 10314
----------
(1) On January 19, 2000, Medifast, Inc. closed a Private Placement Offering of
552,757 shares of Series "B" Voting Preferred Convertible Stock.
1
ELECTION OF DIRECTORS
The Board of Directors recommends the classification of the Board of
Directors based on seniority, pursuant to which the directors of Medifast are to
be divided into three classes consisting of Class I, Class II, and Class III,
respectively, commencing with our first annual meeting after July 25, 2003.
Inasmuch as the Annual Meeting represents the first annual meeting at which
directors will be elected following the establishment of the three classes,
directors for each of the three classes will need to be elected at the Annual
Meeting. At subsequent annual meetings, only directors for the class whose term
is expiring will be elected at that annual meeting.
The number of directors in each class is determined by the Board of
Directors and consists of as nearly equal a number of directors as possible.
There are six nominees for directors therefore, each class will include two
directors, which may be adjusted from time to time, should the Board of
Directors increase or decrease the number of directors representing a class. The
term of Class I, Class II and Class III, initially expires in 2004, at which
time, Class I will be up for re-election for a three year term expiring in 2007
and Class II and III will be up for re-election for a one year term. In 2005,
Class II will be up for re-election for a three-year term and Class III will be
up for a one-year re-election. Accordingly, in 2006, only Class III will be up
for re-election for a three-year term and accordingly.
The Board of Directors has nominated the nominees named below, which
nominees are currently serving as directors and have indicated their willingness
to continue serving as directors. The Board of Directors knows of no reason why
such nominees would be unable to serve as directors. If any of the nominees
should for any reason become unable to serve, then valid proxies will be voted
for the election of such substitute nominee as the Board of Directors may
designate. The two nominees for Class I Directors, are Bradley T. MacDonald and
Rev. Donald Reilly. The two nominees for Class II Directors, are Scott Zion and
Michael MacDonald. The two nominees for Class III Directors, are Mary Travis and
Michael McDevitt.
Each director serves until his or her successor is elected and qualified
or until his or her death, retirement, resignation, or removal. Should a vacancy
occur or be created, whether arising through death, resignations, retirement or
removal of a director, the vacancy will be filed by a majority vote of the
remaining directors. A director so elected to fill vacancy will serve for the
remainder of the present term of office of the class to which he or she was
elected.
Information Concerning Nominees
The name and age of each nominee and the year he/she became a Director of the
Company, according to information furnished by each, is as follows:
FIRST
BECAME A
NAME AGE DIRECTOR
---- --- --------
Bradley T. MacDonald(1)........................... 55 1996
Donald F. Reilly(3)(4)............................ 55 1998
Michael C. MacDonald(1)........................... 50 1999
R. Scott Zion (1)(2)(3)(4)........................ 52 1999
Michael J. McDevitt(2)(4)......................... 54 2002
Mary T. Travis(2)(3)(4)........................... 51 2002
----------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Independent director per the American Stock Exchange regulations.
2
Class I Directors
Bradley T. MacDonald became Chairman of the Board and CEO of Medifast, Inc. on
January 28, 1998. Prior to joining the company, he was appointed as Program
Director of the U.S. Olympic Coin Program of the Atlanta Olympic Games. From
1991 through 1994, Colonel MacDonald returned to active duty to be Deputy
Director and Chief Financial Officer of the Retail, Food, Hospitality, and
Recreation Businesses for the United States Marine Corps. Prior thereto, Mr.
MacDonald served as Chief Operating Officer of the Bonneau Sunglass Company,
President of Pennsylvania Optical Co., and Chairman and CEO of MacDonald and
Associates. Mr. MacDonald was national president of the Marine Corps Reserve
Officers Association and retired from the United States Marine Corps Reserve as
a Colonel in 1997, after 27 years of service. Mr. MacDonald is also serving on
the Board of Directors of the Wireless Accessories Group (WIRX:OB), a Nasdaq
Bulletin Board Company.
Very Reverend Donald Francis Reilly, O.S.A. holds a Doctorate in Ministry
(Counseling) from New York Theological and an M.A. from Washington Theological
Union as well as a B.A. from Villanova University. Very Reverend Reilly was
ordained an Augustinian priest in 1974 and now serves as the Provincial for the
Augustinian Order at Villanova, Pennsylvania. He is currently on the Board of
Trustees of Villanova University, is President of the Board of "Bird Nest" in
Philadelphia, Pennsylvania and is Board Member of Prayer Power. Fr. Reilly
oversees more than 300 Augustinian Friars and their service to the Church,
teaching at universities and high schools, ministering to parishes, serving as
chaplains in the Armed Forces and hospitals, ministering to AIDS victims, and
serving missions in Japan South America, and South Africa. He is a member of the
Medifast Compensation Committee.
Class II Directors
R. Scott Zion, is a Director and the Corporate Secretary for Medifast, Inc. He
received a Bachelor of Arts Degree from Denison University, Granville, Ohio. Mr.
Zion is currently a principal in Resources Development, Inc., a health care
consulting company in Napa, California. Prior to forming Resources Development,
he was Senior Vice President of Sales and Marketing for Santen, Inc., an
ophthalmic pharmaceutical company. He also spent 20 years with the Mead Johnson
Nutritional Division of Bristol Myers Squibb in various positions of increasing
responsibility in sales management. He is a member of the Medifast Executive,
Audit, and Compensation Committee.
Michael C. MacDonald is a corporate officer and the President of North American
Solutions Group for the Xerox Corporation. Mr. MacDonald's former positions at
Xerox Corporation include executive positions in the sales and marketing areas.
He is currently on the Board of Trustees of Rutgers University and a Director of
the Jimmy V Foundation. He is also serving on the Board of Directors of US LEC
Corp. (NASDAQ:CLEC) Mr. MacDonald is the brother of Bradley T. MacDonald, the
CEO of the Company. He is a member of the Medifast Executive Committee.
Class III Directors
Mary T. Travis is currently the Senior Vice President of Wholesale Operations
for Sunset Mortgage Company, L.P. in Pennsylvania and was formerly the Vice
President of Operations for the Financial Mortgage Corporation. Mrs. Travis is
an expert in mortgage banking with over 31 years of diversified experience. She
is an approved instructor of the Mortgage Bankers Association Accredited School
of Mortgage Banking and is a Delegate and 2nd Vice president of the Mortgage
Bankers Association of Greater Philadelphia. She is a member of the Medifast
Audit Committee and is the qualified financial expert per the American Stock
Exchange and Securities and Exchange Commission regulations. She is also a
member of the Medifast Compensation Committee.
Michael J. McDevitt is a retired Senior Executive and Senior Security Manager
with the Federal Bureau of Investigation (FBI). Mr. McDevitt developed and
managed highly successful technical security programs through a succession of
leadership posts, culminating in a Senior Executive Services (SES) position in
the Investigative Technology Branch, FBI Laboratory Division. He managed nearly
two hundred Special Agent and engineering support staff spanning a broad
spectrum of technical security programs, as well as an annual budget exceeding
$200 million. Senior government personnel regard him as a leading expert on
technology applied to physical security and has played a leading role in
developing critical partnerships within his industry as well as coupling
technical capabilities with operational requirements. He is a member of the
Medifast Audit Committee.
3
Resignation of Independent Director
On March 27, 2003, Mr. David Scheffler, Director and former consultant for
Medifast, Inc., and investment banker for D.S. Capital Investors, resigned from
the Board of Directors due to his concern about the Company's need for more
independence on the Board and the limited number of seats to fill that need in
accordance with SEC and AMEX regulations. It is with deep regret that the Board
of Directors has accepted his resignation but understands his concerns. Mr.
Scheffler was instrumental in preventing the Company from filing for Chapter 11
bankruptcy in 1999/2000 because of his sage investment advice and his ability to
raise funds at a time when the Company had "a going concern" opinion from its
auditors preventing the Company from receiving commercial financing on any
reasonable terms. Mr. Scheffler will continue to act as an Investment Relations
Advisor and Consultant for the Company under contract for the next three years.
Meetings and Committees
During the fiscal year ended December 31, 2002 ("Fiscal 2002"), the Board
of Directors held two (2) meetings, including those in which matters were
adopted by unanimous written consent. The Board has an Audit Committee, an
Executive Committee, and a Compensation Committee. The purpose and
responsibilities for each of these committees is outlined in committee charters
adopted by the Board. The Board may, from time to time, form a new committee or
disband a current committee depending on circumstances. In addition, the Board
may determine to form ad hoc committees from time to time, and determine the
composition and areas of competence of such committees.
The Audit Committee of the Board of Directors consists of Mr. R. Scott
Zion, Mr. Michael J. McDevitt and Mrs. Mary T. Travis. In 2002, prior to the
listing on the American Stock Exchange, the Company implemented a new Audit
Committee Charter by which the primary function of the committee is to assist
the Board of Directors in fulfilling their oversight responsibilities by
reviewing: the financial reports and other financial information provided by the
Corporation to any governmental body or the public; the Corporation's systems of
internal controls regarding finance, accounting, legal compliance, and ethics
that management and the Board have established; and the Corporation's auditing,
accounting and financial reporting processes generally. The committee held four
(4) meetings during fiscal year 2002. The Audit Committee encourages continuous
improvement of, and fosters adherence to, the corporation's policies, procedures
and practices at all levels
Messrs. Michael C. MacDonald, R. Scott Zion, and Bradley T. MacDonald are
members of the Executive Committee. The Executive Committee has all the
authority of the Board of Directors, except with respect to certain matters that
by statue nay not be delegated by the Board of Directors. The Committee meets
periodically during the year to develop and review strategic operational and
management policies for the Company. The Committee held three (3) meetings
during fiscal year 2002.
The Compensation Committee of the Board of Directors held two (2) meeting
during fiscal year 2002. The members were Very Rev. Donald F. Reilly O.S.A, Mr.
David Scheffler, and Mrs. Mary T. Travis. The primary purpose of the
Compensation Committee is to assist the Board in discharging its
responsibilities in respect of compensation of the Company's executive officers
and to produce an annual report for inclusion in the Company's proxy statement
on executive compensation. The Committee approved a contract salary for Mr.
MacDonald, the Chief Executive Officer to $225,000 in the year 2003 as compared
to $190,000 in 2002, $150,000 in 2001 and $170,000 in 1997. The board adjusted
his contract salary accordingly and authorized a bonus of up to 100% of base
salary provided the Company attains its profit plan per the Board approved
forecast.
The Chairman of each committee, in consultation with the committee
members, will determine the frequency and length of the committee meetings
consistent with any requirements set forth in the committee's charter. The
Chairman of each committee, in consultation with the appropriate members of the
committee and management, will develop the committee's agenda. The schedule for
each committee will be furnished to all Directors.
4
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules of the Securities and Exchange Commission (the "Commission")
thereunder require the Company's Directors and officers, and any person who owns
more than ten percent of the Company's Common Stock (collectively, "Reporting
Persons"), to file reports of their ownership and changes in ownership of Common
Stock with the Commission. Reporting Persons are also required to furnish the
Company with copies of all Section 16(a) reports they file.
Based solely upon a review of copies of such reports furnished to the
Company, and written representations that certain reports were not required, the
Company believes that all of its Reporting Persons filed on a timely basis all
reports required by Section 16(a) of the Exchange Act during or with respect to
the year ended December 31, 2002.
BOARD REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers has been determined
by agreements negotiated prior to their employment. The Compensation and Stock
Options committee (the "Committee") is authorized to review and make
recommendation to the Board as to the compensation in cash or other forms for
its executive officers. Its compensation policy will be to provide for base
salaries, which are comparable to the compensation paid to executive officers of
equivalent competency and responsibilities by companies of comparable size and
capitalization both in and out of the pharmaceutical industry. The Committee
also intends to provide for the payment of cash bonuses to executive officers
and stock options, as an incentive to remain with the Company and enhance
shareholder value. It is also intended to be used when the Company attains
favorable operating results.
The Committee believes that the Company's stock option program, as it has
been in the past, should be used as a means to conserve cash in rewarding key
consultants, executives, and key employees for good or exceptional performance;
the performance of increased responsibilities, improved performance independent
of operating results, loyalty and seniority.
In the year ending December 31, 2002, the Committee approved the
following: the contract salary of Mr. MacDonald, CEO was $225,000 per year in
2003, from $190,000 in 2002 and $150,000 in 2001, and adjusted his compensation
as is currently set forth in an Employment Agreement entered into by the Chief
Executive Officer in 1998. (See "Employment Agreements" filed as an exhibit to
10KSB, dated April 15, 1999 of the Company, file No. 000-23016). The Committee
recommended and the Board approved the salary increase of $35,000 for 2003 and a
bonus of $100,000 for reaching the Company's initial revenue and profit forecast
by the 4th quarter of 2002, paid in January 2003.
The Committee also approved the employment contracts for the following officers
of its Take Shape for Life Inc., subsidiary:
Annual Compensation
-------------------
Salary
Name Position ($) Bonus Potential
---- -------- ---
Richard Logsdail President and Chief Operations 100,000 $50,000
Officer
Daniel Bell Executive Vice President of Sales 98,000 Estimated to be 50% of salary
and Marketing based on new business
development
DIRECTORS' COMPENSATION
The Company is authorized to pay a fee of $300 for each meeting attended
by its Directors who are not executive officers. It reimburses those who are not
employees of the Company for their expenses incurred in attending meetings.
Independent Directors claimed $3,850.00 in Director's fees and/or expenses in
2002. See "Executive Compensation - Stock Options" for stock options granted
under the 1993 Plan to the Directors. The Company authorized a stock grant under
rule 144 of 10,000 shares to Michael J. McDevitt, Director, Chairman of the
Audit
5
Committee; 10,000 shares to David Scheffler, Director, and 5,000 shares to Mary
Travis, Director appointed prior to the AMEX listing in November 2002.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information as to the compensation of the
Chief Executive Officers of the Company and each other executive officer who
received or will receive compensation in excess of $100,000 for 2003, 2002, and
2001.
Annual Compensation
-------------------
Value of Common/
Preferred Stock Issued Option Other Annual
Name Year Salary ($) Bonus ($) in Lieu of Cash Awards Compensation
---- ---- ---------- --------- --------------- ------ ------------
Bradley T. MacDonald 2003 225,000 100,000(1) 0 0 0
2002 145,000 75,000 0 100,000(2) 0
2001 135,371 0 $20,000(3) 0 0
Richard Logsdail 2003 100,000 0 0 50,000(4) 0
Daniel Bell 2003 98,000 10,000 0 25,000(5) 0
----------
(1) The Board of Directors as approved a salary of $225,000 for 2003 and paid
a $100,000 bonus in January 2003 for attaining initial revenue, profit and
cash flow forecasts in 2002.
(2) The Board of Directors reinstated 100,000 options at $1.50 per share
granted in 1997 and not exercised. Mr. MacDonald exercised those options
in December 2002 per the Board's direction.
(3) Mr. MacDonald was issued 20,000 shares of restricted Series "C" Preferred
Convertible Stock as part of compensation related to restructuring and
raising new capital.
(4) Mr. Logsdail received 50,000 options at $1.46 under the 1993 employee
options program.
(5) Mr. Bell received 25,000 options at $1.60 under the 1993 employee option
program.
STOCK OPTIONS
The Company's 1993 Employee Stock Option Plan (the "Plan"), as amended in
July 1995, December 1997 and again in June 2002, authorizes the issuance of
options for 1,000,000 shares of Common Stock. The Plan authorizes the Board of
Directors or a Stock Option Committee appointed by the Board to grant incentive
stock options and non-incentive stock options to officers, key employees,
directors, and independent consultants, with directors who are not employees and
consultants eligible only to receive non-incentive stock options. Employee stock
options are vested over 2 years.
* The following tables set forth pertinent information as of December 31,
2002 with respect to options granted under the Plan since the inception of the
Plan to the persons set forth under the Summary Compensation Table, all current
executive officers as a group, all current Directors who are not executive
officers as a group of the Company. In addition, a chart listing option holders,
grants made in FY 2002, and a list of aggregated options and the value of these
options, is provided.
ALL CURRENT ALL CURRENT
EXECUTIVE INDEPENDENT
BRADLEY T. OFFICERS DIRECTORS
MACDONALD(1) AS A GROUP AS A GROUP
------------ ----------- -----------
Options granted ................................... 215,000 90,000 200,000
Average exercise price ............................ $ 0.86 $ 0.56 $ 0.60
Options exercised ................................. 120,000 -- 10,000
Average exercise price ........................... $ 1.29 -- $ 0.25
Shares sold ....................................... -- -- --
Options unexercised as of 12/31/02 ................ 95,000 90,000 190,000
6
(1) 100,000 options issued at $1.50 per share in 1997 were reinstated after
shareholders increased authorized options to 1,000,000 shares provided
they were exercised by 12/31/02.
APPROXIMATE 5 YR
FY 02 GRANTS@ POTENTIAL REALIZABLE UNEXERCISED VALUE OF
PRICE & EXPIRATION VALUE AT 10% ANNUAL OPTIONS AS OF UNEXERCISED OPTIONS
LIST OF OPTION HOLDERS MONTH/YEAR STOCK APPRECIATION 12/31/02 AS OF 12/31/02
---------------------- ------------------ -------------------- ------------- -------------------
Bradley T. MacDonald/Chairman 95,000 474,150
Scott Zion/Director 50,000 238,500
Rev. Donald Reilly/Director 50,000 223,500
Michael C. MacDonald/Director 40,000 187,800
Kristina DeSantis/Director 20,000 101,400
Alan Silver, Silver & Silver/CPA 35,000 177.450
Steve & Susan Rade/Consultants 150,000 760,500
David Scheffler, Consultant 100,000 482,000
Sarah Clarke, Employee 3,333@ $.32 01/07 $0.52
Margaret MacDonald, Employee 20,000@ $.32 01/07 $0.52 20,000 100,000
Joseph DiBartolomeo, Employee 50,000@ $.65 07/07 $1.05 50,000 233,500
Kellie Hudson, Employee 25,000@ $.65 07/07 $1.05 25,000 116,750
Erin Erwood, Employee 5,000@ $.86 07/07 $1.39 5,000 22,300
Casey Seward, Employee 5,000@ $.86 07/07 $1.39 5,000 22,300
Michael McDevitt, Employee 20,000@ $.80 07/07 $1.29 20,000 90,400
Richard Law, Employee 20,000@ $.80 07/07 $1.29 40,000 190,400
Jaime Elwood, Employee 10,000@ $.80 07/07 $1.29 10,001 46,805
Shannon Wynne, Employee 5,000@ $.80 07/07 $1.29 6,668 31,740
Richard Logsdail, Employee 50,000@ $1.26 09/07 $2.03 50,000 203,000
Dan Bell, Employee 25,000@ $1.60 09/07 $2.58 25,000 93,000
Melissa Clark, Employee 10,000@ $1.23 09/07 $1.98 10,000 40,900
Don Boysen, Employee 10,000@ $1.23 09/07 $1.98 10,000 40,900
Dick Vitale, Consultant 75,000@ $2.00 11/07 $3.22 75,000 249,000
The Board will report no changes to the Compensation Committee.
The following table provides information as to the value of the
unexercised options held by the persons named in the Summary Compensation Table
who are option holders as of March 31, 2003 measured in terms of the closing bid
price of the Company's Common Stock on such date:
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN THE MONEY
OPTIONS AS OF 3/31/03 OPTIONS ON 3/31/03
EXERCISABLE/ UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
-------------------------- --------------------------
Bradley T. MacDonald(1) 95,000/0 $474,150 /$-0-
----------
On March 31, 2003 the closing price was $4.94 on the American Stock Exchange
Mr. MacDonald exercised 100,000 options @ 1.50 on 12/27/02.
7
Nutraceutical Group Industry Comparison of Stock Prices
1 Year Comparison
[The following information was depicted as a line graph in the printed material]
December 31, 2002 December 31, 2001 $ %
Company Stock Price Stock Price Change Change
------- ----------------- ----------------- ------ ------
Medifast (MED) ........................................... $ 5.32 $ .22 5.10 2318.2%
Natural Alternatives International, Inc. (NAII) .......... 3.98 2.25 1.73 76.8%
Weider Nutrition (WNI) ................................... 1.45 1.68 (.23) (13.7)%
Pure World, Inc (PURW) ................................... .51 .85 (.34) (40.0)%
Twinlab Corporation (TWLB) ............................... .10 1.35 (1.25) (92.6)%
Natures Sunshine Products, Inc. (NATR) ................... 9.71 11.74 (2.03) (17.3)%
5 Year Comparison
[The following information was depicted as a line graph in the printed material]
December 31, 2002 December 31, 1999 $ %
Company Stock Price Stock Price Change Change
------- ----------------- ----------------- ------ ------
Medifast (MED) ........................................... $ 5.32 $ .19 5.13 2700.0%
Natural Alternatives International, Inc. (NAII) .......... 3.98 3.25 .73 22.5%
Weider Nutrition (WNI) ................................... 1.45 3.69 (2.24) (60.7)%
Pure World, Inc (PURW) ................................... .51 3.12 (2.61) (83.7)%
Twinlab Corporation (TWLB) ............................... .10 7.94 (7.84) (98.7)%
Natures Sunshine Products, Inc. (NATR) ................... 9.71 8.00 1.71 21.3%
8
Pharmaceutical Group Industry Comparison of Stock Prices
I Year Comparision
December 31, 2002 December 31, 2001 $ %
Company Stock Price Stock Price Change Change
------- ----------------- ----------------- ------ ------
Medifast (MED) ...................................... $ 5.32 $ .22 5.10 2318.2%
Abbott Labs (ABT) ................................... 40.00 55.75 (15.75) (28.3)%
Unilever (UL) ....................................... 38.25 33.27 4.98 15.0%
Novartis (NVS) ...................................... 36.73 36.50 .23 0.63%
Bristol Myers Squibb (BMY) .......................... 23.15 51.00 (27.85) (55.0)%
Index Comparison
[The following information was depicted as a line graph in the printed material]
$100 invested in 1999 would return:
1999 2002
---- ----
Nutraceutical Group Index................. $100 $ 80
Medifast.................................. $100 $ 2,431
S&P 500................................... $100 $ 71
Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.
SECURITY OWNERSHIP OF OWNERS AND MANAGEMENT.
The following table sets forth information with respect to the beneficial
ownership of shares of Common Stock or voting Preferred Stock as of March 31,
2003 of the Chief Executive Officer, each Director, each nominee for Director,
each current executive officer named in the Summary Compensation Table under
"Executive Compensation" and all executive officers and Directors as a group.
The number of shares beneficially owned is determined under the rules of the
Securities and Exchange Commission and the information is not necessarily
indicative of beneficial ownership for any other person. Under such rules,
"beneficial ownership" includes shares as to which the undersigned has sole or
shared voting power or investment power and shares which the undersigned has the
right to acquire within 60 days of March 15, 2002 through the exercise of any
stock option or other right. Unless otherwise indicated, the named person has
sole investment and voting power with respect to the shares set forth in the
table.
9
NUMBER % OF
NAME AND ADDRESS* OF SHARES OUTSTANDING
----------------- --------- -----------
Bradley T. MacDonald ................. 1,652,675(1) 19.00%
Donald F. Reilly ..................... 62,952(2) 0.70%
Michael C. MacDonald ................. 65,854(2) 0.74%
Scott Zion ........................... 255,000(2) 2.86%
David Scheffler ...................... 197,438(2)(3) 2.21%
Mary Travis .......................... 5,000(2) .05%
Michael McDevitt ..................... 11,400(2) .13%
Executive Officers and Directors
as a group (7 persons) ............. 2,111,000 39.92%
* The address is c/o Medifast, Inc., 11445 Cronhill Drive, Owings Mills,
Maryland 21117
(1) Mr. MacDonald beneficially owns 1,652,675 shares of common stock and
90,000 shares of voting Series "C" Preferred Convertible Stock. Mrs.
Shirley D. MacDonald and Ms. Margaret E. MacDonald, wife and daughter of
Mr. MacDonald, individually or jointly own 1,053,402 shares of stock.
(2) Independent directors were issued 25,000 shares of common stock as
compensation for their participation as Board Members in 2002.
(3) David Scheffler, who resigned from the Board of Directors in March 2003,
was an investment banker for three high net worth individuals who wished
to remain anonymous but called themselves D.S. Capital Investors prior to
his election to the Board. He received 44,000 shares of Series "C" stock
and 100,000 options at $0.50 a share for investment advisory services to
the Company while redeeming 36,000 shares of Series "B" preferred stock
previously earned.
ANNUAL REPORT
The Annual Report of the Company to the stockholders for the year ended
December 31, 2002 on Form 10K immediately follows this Proxy Statement. No part
thereof is incorporated by reference in this Proxy Statement.
On written request, the Company will provide without charge to each record
or beneficial holder of the Common Stock as of May 23, 2003, a copy of the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2002 as
filed with the Securities and Exchange Commission. Requests should be addressed
to Investor Relations, c/o Medifast, Inc., 11445 Cronhill Drive, Owings Mills,
Maryland 21117.
PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition
to the use of mail, proxies may be solicited, personally or by telephone or
telegraph, by officers, Directors and regular employees of the Company, who will
not be specially compensated for this purpose. The Company will also request
record holders of Common Stock who are securities brokers, custodians, nominees
and fiduciaries to forward soliciting material to the beneficial owners of such
stock, and will reimburse such brokers, custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses in forwarding soliciting material.
INDEPENDENT PUBLIC ACCOUNTANTS
Wooden & Benson, Chartered, certified public accountants, which has
audited the Company's financial statements as of December 31, 2002 and for the
year then ended, has been selected by management to audit the Company's
financial statements for the current fiscal year. During the year 2002, audit
fees paid to Wooden & Benson, Chartered, certified public accountants, was
$40,500 and includes three (3) 10QSB reviews. Wooden & Benson, Chartered,
certified public accountants did not perform any consulting services for the
company. A representative of that firm is expected to be present or available by
telephone at the Meeting with an opportunity to make a statement to the
stockholders if he desires to do so, and will respond to appropriate questions.
OTHER MATTERS
The Company is unaware of any matters, above, which will be brought before
the Meeting.
10
Any proposals intended to be presented at the Meeting of Stockholders to
be held in 2003 must be received by the Company for inclusion in the Company's
proxy material no later than May 22, 2003.
It is important that your proxy be returned promptly no matter how small
or large your holding may be. Stockholders who do not expect to attend in person
are urged to execute and return the enclosed form of proxy. As a matter of
policy, we keep confidential proxies, ballots and voting tabulations that
identify individual shareholders. Such documents are available for examination
only by the inspector of elections, certain employees and our transfer agent who
are associated with the processing proxy cards and tabulation of the votes. The
vote of any shareholder is not disclosed except in a contested proxy
solicitation or as may be necessary to meet legal requirements.
May 23, 2003
11
PROXY
MEDIFAST, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Bradley T. MacDonald with full power of
substitution, as attorneys for and in the name, place and stead of the
undersigned, to vote all the shares of the common stock of MEDIFAST INC., owned
or entitled to be voted by the undersigned as of the record date, at the Annual
Meeting of Stockholders of said Company scheduled to be held at The American
Stock Exchange, 86 Trinity Place, New York, New York, 10006 on Friday, July 25,
2003, at 10:00 A.M., Eastern Time or at any adjournment or adjournments of said
meeting, on the following proposals as indicated.
1. To elect a classified Board of Directors consisting of six directors each
of whom is to hold office until the next Annual Meeting of Stockholders at
which their respective class term expires and their respective successors
will be duly elected and qualified, as more fully described in the
accompanying proxy statement and to amend the Company's Bylaws
accordingly.
[ ] FOR All nominees (except as marked to the contrary below)
[ ] WITHHOLD
Class I Directors: Bradley T. MacDonald and Rev. Donald F. Reilly, O.S.A.
Class II Directors: Scott Zion and Michael C. MacDonald
Class III Directors: Mary Travis and Michael McDevitt
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
2. To approve the appointment of Wooden & Benson, Chartered, an independent
member of the BDO Seidman alliance, as the Company's independent auditors
for the fiscal year ending December 31, 2003.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To amend the 1993 stock option plan and increase the number of authorized
stock options from 1,000,000 shares to 1,250,000 shares to provide
incentives for employee performance.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before the meeting or
any adjournment thereof. (Please date and sign on reverse side).
This proxy, if properly executed and returned will be voted in accordance
with the directions specified hereof. If no directions are specified, this proxy
will be voted FOR the election of the Directors named above or their substitutes
as designated by the Board of Directors and the proposal to amend the Stock
Option Plan.
Dated: _________________ ___________________________________
Signature of Stockholder
___________________________________
Signature of Co-Holder (if any)
Please sign exactly as your name appears hereon and date. Joint owners
should each sign. Trustees and fiduciaries should indicate the capacity in which
they are signing.
12