Proforma Condensed Consolidated
Financial Statements (Unaudited)
eDiets.com, Inc.
EDIETS.COM, INC.
PROFORMA CONDENSED CONSOLIDATED STATEMENTS (UNAUDITED)
Contents
Proforma Condensed Consolidated Balance Sheet as of June 30, 2001.......... 2
Proforma Condensed Consolidated Statement of Operations for the
six months ended June 30, 2001........................................... 3
Proforma Condensed Consolidated Statement of Operations for the
year ended December 31, 2000............................................. 5
PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following pro forma condensed consolidated balance sheet at June 30, 2001
gives effect to the acquisition of DietSmart, Inc. (DietSmart) by eDiets.com,
Inc. (the Company) as if the transaction had occurred on June 30, 2001. The pro
forma condensed consolidated statements of operations for the year ended
December 31, 2000 and the six months ended June 30, 2001 give effect to the
foregoing as if the transaction had occurred on January 1, 2000.
The Company has entered into an agreement and plan of merger with DietSmart,
Inc., a private company, in exchange for 2 million shares of common stock, par
value $.001 per share, of the Company and cash of $2.5 million. Subject to
escrow provisions, the cash consideration, and interest thereon, shall be
payable to DietSmart as follows: $500,000 was paid on the effective date of
closing; $500,000 shall be paid on the last day of the 6th month ending after
the effective date; $500,000 shall be paid on the last day of the 9th month
ending after the effective date; $500,000 shall be paid on the last day of the
12th month ending after the effective date; and $500,000, plus all interest then
accrued and unpaid, shall be paid on the last day of the 15th month ending after
the effective date.
Upon the completion of the acquisition, certain deferred compensation owed to
the three DietSmart founders was paid and the remainder will be paid on an
installment basis. In addition, the Company has entered into a three-year
employment agreement with each of the three DietSmart founders providing for an
annual base salary of $160,000 with a 6% increase per year.
The pro forma financial data is presented for informational purposes only and
does not purport to project the financial position or results of operations for
any future period or as of any future date. The pro forma condensed consolidated
financial statements should be read in conjunction with the notes thereto and
with the financial statements and the notes thereto of the Company and the
financial statements and the notes thereto of DietSmart, Inc., all of which are
included elsewhere in this document.
1
EDIETS.COM, INC.
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 2001
Company Proforma Company
as Reported DietSmart, Inc. Adjustments Proforma
-----------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 1,867,221 $ 205,275 $ (500,000) (1) $ 1,487,496
(85,000) (2)
Accounts receivable 441,709 31,737 - 473,446
Prepaid advertising costs 333,318 - - 333,318
Other current assets 225,772 18,477 - 244,249
-----------------------------------------------------------------------
Total current assets 2,868,020 255,489 (585,000) 2,538,509
Restricted cash 237,796 55,025 - 292,821
Property and equipment, net 930,417 713,733 - 1,644,150
Prepaid advertising costs 1,043,081 - - 1,043,081
Intangible assets - - 5,822,111 (1) 5,634,813
(187,298) (2)
Other assets - 76,641 - 76,641
-----------------------------------------------------------------------
Total assets $ 5,079,314 $ 1,100,888 $ 5,049,813 $ 11,230,015
=======================================================================
Liabilities and stockholders' equity
(deficit)
Current liabilities:
Accounts payable $ 391,225 $ 603,021 $ - $ 994,246
Accrued liabilities 1,593,618 203,770 1,500,000 (1) 3,557,388
260,000 (1)
Deferred revenue 2,174,009 633,312 - 2,807,321
Current portion of capital lease 119,577 14,891 - 134,468
obligations
Related party notes payable - 50,000 - 50,000
-----------------------------------------------------------------------
Total current liabilities 4,278,429 1,504,994 1,760,000 7,543,423
Capital lease obligations, net of
current portion 141,412 6,510 - 147,922
Deferred executive compensation - 362,298 (272,298) (2) 90,000
Other long-term liabilities - - 500,000 (1) 500,000
Stockholders' equity (deficit):
Series A convertible preferred stock - 1,645 (1,645) (1) -
Series B convertible preferred stock - 1,407 (1,407) (1) -
Common stock 13,586 6,572 (6,572) (1) 15,586
2,000 (1)
Additional paid-in capital 7,308,397 5,109,386 (5,109,386) (1) 9,595,594
169,197 (1)
2,118,000 (1)
Unearned compensation (5,365) (779,472) 779,472 (1) (5,365)
Accumulated deficit (6,657,145) (5,112,452) 5,112,452 (1) (6,657,145)
-----------------------------------------------------------------------
Total stockholders' equity (deficit) 659,473 (772,914) 3,062,111 2,948,670
-----------------------------------------------------------------------
Total liabilities and stockholders' equity
(deficit) $ 5,079,314 $ 1,100,888 $ 5,049,813 $ 11,230,015
=======================================================================
See accompanying notes.
2
EDIETS.COM, INC.
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001
Company Proforma Company
as Reported DietSmart, Inc. Adjustments Proforma
-----------------------------------------------------------------------
Revenue $ 10,519,633 $1,684,277 $ - $ 12,203,910
Costs and expenses:
Cost of revenue 522,755 63,568 - 586,323
Product development 207,824 440,457 - 648,281
Sales and marketing 7,669,001 1,515,006 80,000 (3) 9,225,536
(38,471) (3)
General and administrative 1,725,773 402,793 160,000 (3) 2,211,623
(76,943) (3)
Depreciation and amortization 216,412 130,215 291,106 (4) 637,733
-----------------------------------------------------------------------
Total costs and expenses 10,341,765 2,552,039 415,692 13,309,496
Other income (expense), net 7,599 (10,617) (8,995) (5) (12,013)
Provision for income taxes (3,719) - - (3,719)
-----------------------------------------------------------------------
Net income (loss) $ 181,748 $ (878,379) $ (424,687) $ (1,121,318)
=======================================================================
Earnings (loss) per common share - basic
and diluted $ 0.01 $ (0.07)
================== ===================
Weighted average number of common
shares outstanding:
Basic 13,557,446 15,557,446
================== ===================
Diluted 14,723,530 15,557,446
================== ===================
See accompanying notes.
3
(1) Reflects elimination of the historical equity accounts of DietSmart, Inc.
and allocation of total purchase price as follows:
Cash.................................... $2,500,000
Common Stock............................ 2,120,000
Fair value of stock options............. 169,197
Direct acquisition costs................ 260,000
--------------
Total purchase price.................... $5,049,197
==============
Reflects the estimated value of eDiets.com, Inc. common stock to be issued
at $1.06 per share.
(2) Reflects adjustment to deferred executive compensation as per the agreement
and plan of merger.
(3) Reflects six months of annual salary for each of the three executives of
DietSmart under new employment agreements and reversal of previously
recorded cash and deferred compensation amounts for the period.
(4) For the purpose of these unaudited pro forma condensed consolidated
financial statements, we have allocated half of the excess of the purchase
price over the fair value of the net liabilities acquired to identifiable
intangible assets and the other half to goodwill. We believe that we will
benefit from these intangibles for an indeterminable period of time of at
least five years, and therefore a five-year amortization is appropriate.
For the purpose of these unaudited pro forma condensed consolidated
financial statements, we have adopted Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142,
"Goodwill and Intanbible Assets." In accordance with SFAS No. 141, no
amortization of goodwill is included.
The final allocation of the purchase price will be determined after the
completion of a valuation of tangible and identifiable intangible assets
acquired (including their estimated useful lives) and liabilities assumed.
Using this information we will make a final allocation of the purchase
consideration, including allocation to tangible assets and liabilities,
identifiable intangible assets and goodwill. Accordingly, depreciation and
amortization, as presented in the pro forma condensed consolidated
statements of operations for the six months ended June 30, 2001 may
fluctuate significantly from the preliminary estimate when the final
valuation of tangible and intangible assets is completed.
(5) Reflects interest expense related to the deferred cash payment component of
the purchase price.
4
EDIETS.COM, INC.
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
YEAR ENDED DECEMBER 31, 2000
Company Proforma Company
as Reported DietSmart, Inc. Adjustments Proforma
------------------------------------------------------------------------
Revenue $ 11,433,680 $ 192,868 $ - $ 11,626,548
Costs and expenses:
Cost of revenue 544,333 136,713 - 681,046
Product development 237,700 577,550 - 815,250
Sales and marketing 12,746,650 1,544,424 160,000 (1) 14,355,797
(95,277) (1)
General and administrative 3,202,474 1,924,760 320,000 (1) 5,256,727
(190,507) (1)
Depreciation and amortization 313,472 113,200 582,211 (2) 1,008,883
------------------------------------------------------------------------
Total costs and expenses 17,044,629 4,296,647 776,427 22,117,703
Other income, net 160,798 3,752 (99,651) (3) 64,899
------------------------------------------------------------------------
Net loss $ (5,450,151) $ (4,100,027) $ (876,078) $ (10,426,256)
========================================================================
Loss per common share - basic and diluted
$ (0.41) $ (0.69)
================== =================
Weighted average number of common shares
outstanding - basic and diluted 13,214,855 15,214,855
================== =================
See accompanying notes.
5
(1) Reflects annual salary for each of the three executives of DietSmart under
new employment agreements and reversal of previously recorded cash and
deferred compensation amounts for the period
(2) For the purpose of these unaudited pro forma condensed consolidated
financial statements, we have allocated half of the excess of the purchase
price over the fair value of the net liabilies acquired to identifiable
intangible assets and the other half to goodwill. We believe that we will
benefit from these intangibles for an indeterminable period of time of at
least five years, and therefore a five-year amortization is appropriate.
For the purpose of these unaudited pro forma condensed consolidated
financial statements, we have adopted Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142,
"Goodwill and Intanbible Assets." In accordance with SFAS No. 141, no
amortization of goodwill is included.
The final allocation of the purchase price will be determined after the
completion of a valuation of tangible and identifiable intangible assets
acquired (including their estimated useful lives) and liabilities assumed.
Using this information we will make a final allocation of the purchase
consideration, including allocation to tangible assets and liabilities,
identifiable intangible assets and goodwill. Accordingly, depreciation and
amortization, as presented in the pro forma condensed consolidated
statements of operations for the twelve months ended December 31, 2000 may
fluctuate significantly from the preliminary estimate when the final
valuation of tangible and intangible assets is completed.
(3) Reflects interest expense related to the deferred cash payment component of
the purchase price.
6