CORRESP 1 filename1.htm
May 25, 2007
 
 
Re: Medifast, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2006
Filed March 16, 2007
File No. 000-23016

Dear Ms. Sifford:

We have reviewed your comments on Form 10-K for the Fiscal Year Ended December 31, 2006 and our responses are attached below. Medifast is responsible for the adequacy and accuracy of the disclosure in the filing. Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing and we may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Please fax any future correspondence to my personal fax number (410) 504-8179.
 
 
Sincerely,
   
 
Michael S. McDevitt
 
Chief Executive Officer and Chief Financial Officer


 
Form 10-K for the year ended December 31, 2006
 
Management’s Discussion and Analysis, page 13
 
2006 Comparison with 2005, page 13
 
Revenue, page 13
 
1.
Expand your disclosure to present the unit prices of your products and the volumes sold for the three years ended December 31, 2006. This is normally presented in table format. If you believe that such disclosure is not practicable, tell us why you believe that to be the case, and provide to us a copy of the sales reports provided to your chief operating decision maker, as defined in SFAS 131, for the two years ended December 31, 2006 and 2005.
 
 
Due to the amount of products Medifast sells it would be impracticable to disclose a table presenting our unit prices and volumes sold for the three years ended December 31, 2006. Please see Exhibit A that lists all our products sold and the unit price for the two years ended December 31, 2006 and 2005.
 
 
2. You explain that advertising costs increased by $10.5 million in 2006. We note that your selling, general and administrative expenses increased by $21.8 million. Amend your document to explain the reasons for the additional $11.3 million increase.
 
We have amended our disclosure on Form 10-K/A to explain the $11.3 million increase in selling, general, and administrative expenses aside from the increase in advertising. The disclosure is as follows:

 
Aside from the increase in advertising expense, selling, general, and administrative expenses increased by approximately $11.3 million. A few major expense categories attributed to the majority of the increase in expenses and were all directly related to our dramatic sales growth in 2006. Salaries and benefits increased by $3 million to support the 85% increase in sales. In addition, Take Shape for Life sales increased by 46% year-over-year which led to increased commission expense of $3.4 million that is completely variable in relation to sales growth. Another variable expense that rose by $800,000 with our sales growth was credit card processing fees. Currently, over 95% of the Company’s transactions are processed via credit card. Additional increases included an increase in office expense of $800,000, an increase in operating costs of $300,000, and an increase in sales and marketing expense of $400,000. Other expenses increased by $1.6 million, which included items such as depreciation, amortization, charitable contributions, and property taxes. To handle increased call volume, the Company began using an outsourced call center in April of 2006 which led to $1 million in additional expense as compared to prior year.
 
 
Other Income/Expense, page 14
 
3. Expand your disclosure to explain the line "Other income (expense)" on your consolidated statements of income and why it increased from $15,000 in 2005 to $276,000 in 2006.
We have amended our disclosure on Form 10-K/A to explain the increase in other income. The disclosure is as follows:
 
 
Other income increased from $15,000 in 2005 to $276,000 in 2006 primarily as a result of increased gains on the sale of equity investments, interest payments received on the CCS note receivable, and state income tax refunds related to 2005 overpayments.
  
 
2
Income taxes, page 14
 
4. Expand your disclosure to explain why you anticipate your tax rate to increase from 31% in 2006 to 36-39% in 2007.
 
We have amended our disclosure on Form 10-K/A to explain the increase in the effective tax rate from 31% in 2006 to 36-39% in 2007. The disclosure is as follows:
 
 
 
Income taxes: In the third quarter of 2006, the Company had a $1 million federal tax refund receivable. A portion of this refund was factored into the Company’s income tax provision, which lowered the estimated tax rate for 2006. In 2006, the Company recorded $2.3 million in income tax expense, which represents an annual effective rate of 31%. In 2005, we recorded income tax expense of $1.2 million, which reflected an estimated annual effective tax rate of 30.1%. The Company anticipates a tax rate of approximately 36-39% in 2007. The benefit the Company received in 2006 from a large income tax refund receivable as a result of a cost segregation study performed on its fixed assets is not expected to benefit future periods.
  
 
5. Expand your disclosure to describe the nature of the intangible assets that you acquired in 2006 for $2,427,000.
 
We have amended our disclosure on Form 10-K/A to explain the nature of the intangible assets acquired in 2006. The disclosure is as follows:
 
 
In the year ended December 31, 2006, net cash used in investing activities was $6,747,000, which primarily consisted of the purchase of intangible assets and purchases of property and equipment. The increase in intangible assets relates primarily to the acquisition of customer lists in 2006 which are vital in direct response marketing campaigns. These campaigns consist of postcards and e-mails that are sent to customers with a special offer or discount coupon to order on our website, choosemedifast.com, or through our call center. In addition, the Company acquired trademarks in preparation for future international ventures as well as incurred fees in developing patents on our diabetic line. The increase in property and equipment relates to the building of a large amount of infrastructure in 2006. This included a new Enterprise Resource Planning system, two new state of the art manufacturing lines, larger capacity blender and improvements at our distribution facility as well as the build out of our new Medifast Weight Control Centers.
  
 
2005 Comparison With 2004, page 15
 
Costs and Expenses, page 15
 
6.Expand your disclosure to describe the particular items and dollar increases that resulted in SG&A expenses increasing by $8.3 million. State with specificity amount by which advertising costs increased, and describe the other factors that contributed to this increase and the amounts for each.
 
We have amended our Form 10-K/A to include detail of the $8.3 million increase in SG&A between 2004 and 2005. The disclosure is as follows:
 
 
Selling, general and administrative (SG&A) expenses of $25,894,000 for 2005 were $8,304,000 more than the $17,590,000 in 2004, due to increased costs associated with the increased scale of the business. The Company increased its advertising and marketing expense by approximately $3.2 million to include additional print and web advertising as well as strategic testing of television advertising. Salaries and benefits increased by approximately $1.1 million, Take Shape for Life commissions increased by $1.4 million due to the sales increase in the network, office expenses increased by approximately $750,000, operating expenses increased by approximately $1 million, and other general and administrative expenses increased by approximately $850,000.
  
 
3
Other MD&A Disclosure
 
7. Expand your MD&A to include the tabular disclosure of contractual obligations required by Regulation S-K, Item 303(a)(5).
 
 
We have amended our disclosure on Form 10-K/A to include tabular disclosure of contractual obligations required by Regulation S-K, Item 303(a)(5). In addition, we noted we mistakenly omitted the printer equipment leases from Footnote 9 in Item 8. We have amended the disclosure in Footnote 9 on Form 10-K/A. The disclosures are as follows:

Contractual Obligations and Commercial Commitments

As of December 31, 2006, our principal commitments consisted of obligations for variable and fixed rate loans detailed in Note 12 of the financial statements, operating leases for corporately owned Medifast Weight Control Centers detailed in Note 9 of the financial statements, and copier equipment contracts for our printing operation that supports our marketing efforts.
  
 
The Company has the following contractual obligations as of December 31, 2006
                  
                               
   
Payments due by period
      
                               
   
2007
  
2008
  
2009
  
2010
  
2011
  
Thereafter
  
Total
  
Contractual Obligations
                              
Total Debt
    
548,000
    
404,000
    
386,000
    
386,000
    
386,000
    
1,947,000
    
4,057,000
  
Operating Leases
    
253,000
    
221,000
    
215,000
    
110,000
    
70,000
    
-
    
869,000
  
Printer Equipment Leases
    
509,000
    
509,000
    
467,000
                         
1,485,000
  
Total contractual obligations
    
1,310,000
    
1,134,000
    
1,068,000
    
496,000
    
456,000
    
1,947,000
    
6,411,000
  

 
 
9. COMMITMENTS AND CONTINGENCIES

The Company leases office space for its eleven corporately owned Medifast Weight Control Centers under lease terms ranging from one to five years with leases commencing in 2004, 2005, 2006 and 2007. Monthly payments under the leases range in price from $1,200 to $3,500. The Company is required to pay property taxes, utilities, insurance and other costs relating to the leased facilities.

The Company leases large commercial printers for our printing operation that supports our direct response marketing efforts. The leases extend through November 2009. The annual lease payments are $509,000, $509,000, and $467,000 for the years ended December 31, 2007, 2008, and 2009, respectively.

The following is a schedule by years of future minimum rental and lease payments required under operating lease that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2006:
  
 
 
4

For the Years Ending
      
December 31,
     
       
2007
  
$
762,000
  
2008
    
730,000
 
2009
    
682,000
 
2010
    
110,000
 
2011
    
70,000
 
         
Total minimum payments required
  
$
2,354,000
  
 
8. Expand your MD&A to include disclosure regarding critical accounting estimates. Refer to FRC 501.14.
 
We have amended our disclosure on Form 10-K/A to include critical accounting estimates. The disclosure is as follows:
 
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
FORWARD LOOKING STATEMENTS

This document contains forward-looking statements which may involve known and unknown risks, uncertainties and other factors that may cause Medifast, Inc. actual results and performance in future periods to be materially different from any future results or performance suggested by these statements. Medifast, Inc. cautions investors not to place undue reliance on forward-looking statements, which speak only to management's expectations on this date.


Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. Our significant accounting policies are described in Note 2 of the consolidated financial statements.

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management develops, and changes periodically, these estimates and assumptions based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Management considers the following accounting estimates to be the most critical in preparing our consolidated financial statements. These critical accounting estimates have been discussed with our audit committee.

Revenue Recognition. Revenue is recognized for product sales upon shipment and passing of risk to the customer and when estimates of discounts, rebates, promotional adjustments, price adjustments, returns, and other potential adjustments are reasonably determinable, collection is reasonably assured and the Company has no further performance obligations. These estimates are presented in the financial statements as reductions to net revenues and accounts receivable which also include estimated sales returns, allowances and discounts.
  
 

 
5
 
 
Outbound shipping charges to customers and outbound shipping-related costs are netted and included in “cost of sales.”

Returns - Consistent with industry practice, the Company maintains a return policy that allows its customers to return product within a specified period (30 days). Because the period of payment generally approximates the period revenue was originally recognized, refunds are recorded as a reduction of revenue when paid. The Company’s estimate for returns is based upon its historical experience with actual returns. While such experience has allowed for reasonable estimation in the past, history may not always be an accurate indicator of future returns. The Company continually monitors its estimates for returns and makes adjustments when it believes that actual product returns may differ from the established accruals.

Impairment of Fixed Assets and Intangible Assets.    We continually assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Judgments regarding the existence of impairment indicators are based on legal factors, market conditions and our operating performance. Future events could cause us to conclude that impairment indicators exist and the carrying values of fixed and intangible assets may be impaired. Any resulting impairment loss would be limited to the value of net fixed and intangible assets.
 
Income Taxes. In the preparation of consolidated financial statements, the Company estimates income taxes based on diverse legislative and regulatory structures that exist in jurisdictions where the company conducts business. Deferred income tax assets and liabilities represent tax benefits or obligations that arise from temporary differences due to differing treatment of certain items for accounting and income tax purposes. The Company evaluates deferred tax assets each period to ensure that estimated future taxable income will be sufficient in character amount and timing to result in their recovery. A valuation allowance is established when management determines that it is more likely than not that a deferred tax asset will not be realized to reduce the assets to their realizable value. Considerable judgments are required in establishing deferred tax valuation allowances and in assessing probable exposures related to tax matters. The Company’s tax returns are subject to audit and local taxing authorities that could challenge the company’s tax positions. The Company believes it records and/or discloses such potential tax liabilities as appropriate and has reasonably estimated its income tax liabilities and recoverable tax assets.
 
Allowance for doubtful accounts. In determining the adequacy of the allowance for doubtful accounts, we consider a number of factors including the aging of the receivable portfolio, customer payment trends, and financial condition of the customer, industry conditions and overall credibility of the customer. Actual amounts could differ significantly from our estimates.
 
  
 
Quantitative and Qualitative Disclosures About Market Risk
 
9. Amend your filing to add the disclosures required by Regulation S-K, Item 305. Refer also to Item 7A. in the instructions for Form 10-K. It appears to us that your debt instruments are sensitive to interest rate risks.
 
We have amended our disclosure on Form 10-K/A to include Item 7A. The disclosure is as follows:
 
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. The Company does not enter into derivatives, foreign exchange transactions for trading or speculative purposes. The Company has limited exposure to market risks related to changes in interest rates. The principal risks of loss arising from adverse changes in market rates and prices to which the Company is exposed relate to interest rates on debt. Since nearly all of our debt is variable rate based, any changes in market interest rates will cause an equal change in our net interest expense. See detail of our long-term debt at Note 12 in Item 8.
 
  
 
6
 
Controls and Procedures, page 17
 
Changes in Internal Controls over Financial Reporting, page 17
 
10. Amend your disclosure to state whether there were changes in your internal controls over financial reporting that occurred during the fiscal quarter that have materially affected or are reasonably likely to materially affect your internal controls over financial reporting. Changes that materially affected or are reasonably likely to materially affect your internal controls over financial reporting must he disclosed whether or not you assess them to be "significant."
 
We have amended our disclosure on Form 10-K/A. The word “significant” has been removed as there were no changes to internal controls over financial reporting in the last fiscal quarter that could have materially effected our financial statements. The disclosure is as follows:
 
 
There were no changes in the Company’s internal controls over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
 
  
 
Financial Statements, page 20
 
Consolidated Statements of Income, page 24
 
11. Revise your statement to include stock compensation expense within income from operations. In addition, we believe you should present the expense of stock based compensation in the same line item or items as cash compensation paid to the same employees. Refer to SAB 107, section F, for further guidance.
 
We have revised the statement of income to include stock compensation expense within income from operations in the amended Form 10-K/A. The revised statement of income is as follows:
 
7

MEDIFAST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

   
Years Ended December 31,  
  
                
   
2006
  
 2005
  
2004
  
                
Revenue
  
$
74,086,000
  
$
40,129,000
  
$
27,340,000
  
Cost of sales
    
(18,237,000
)
  
(10,161,000
)
  
(6,746,000
)
Gross profit
    
55,849,000
    
29,968,000
    
20,594,000
  
                     
Selling, general, and administration
    
(48,270,000
)
  
(25,894,000
)
  
(17,590,000
)
                     
Income from operations
    
7,579,000
    
4,074,000
    
3,004,000
  
                     
Other income (expense):
                    
Interest expense
    
(369,000
)
  
(317,000
)
  
(245,000
)
Interest income
    
175,000
   
158,000
   
154,000
 
Loss on sale of CCS
    
(323,000
)
            
Other income (expense)
    
276,000
   
15,000
   
(7,000
)
     
(241,000
)
  
(144,000
)
  
(98,000
)
                     
Income before provision for income taxes
    
7,338,000
    
3,930,000
    
2,906,000
  
Provision for income taxes
    
(2,256,000
)
  
(1,203,000
)
  
(1,159,000
)
                     
Net income
    
5,082,000
    
2,727,000
    
1,747,000
  
                     
Less: Preferred stock dividend requirement
    
-
    
(291,000
)
  
(18,000
)
                     
Net income attributable to common shareholders
  
$
5,082,000
  
$
2,436,000
  
$
1,729,000
  
                     
Basic earnings per share
  
$
0.40
  
$
0.20
  
$
0.16
  
Diluted earnings per share
  
$
0.38
  
$
0.19
  
$
0.14
  
                     
Weighted average shares outstanding -
                   
Basic
    
12,699,066
    
12,258,734
    
10,832,360
  
Diluted
    
13,482,894
    
12,780,959
    
12,413,424
  

The accompanying notes are an integral part of these consolidated financial statements
 
8
 
l2. Explain to us why you have not accounted for Consumer Choice Systems as a discontinued operation in your financial statements.
 
 
By using certain quantitative thresholds, we determined that Consumer Choice Systems was not material to the Company and therefore did not account for the entity as a discontinued operation. At December 31, 2005, Consumer Choice Systems had assets of $2,216,000 which represented approximately 7% of total Company assets. For the year-ended December 31, 2005, Consumer Choice Systems had net revenues of $958,000 which represented approximately 2% of total Company revenues. As a result of these tests, the Company feels that the segment did not meet materiality thresholds to be shown as a discontinued operation on our financial statements.
  
 
Note 2 — Summary of Significant Accounting Policies, page 29
 
13. It appears that you currently consider your operations to consist of only one operating segment and one reportable segment. With regard to segment reporting:
 
(a) Amend your financial statement footnotes to add the disclosures required by SFAS 131. It is apparent from your disclosure in Note 16, Disposal of a Business Segment, that your ownership of CCS necessitated SFAS 131 disclosures during periods when CCS was owned.
 
(b) Tell us why the areas of your business described on pages 4 and 8, that is "Medifast Direct," "Physician and Clinic Sales," "Medifast Weight Control Centers," and "Take Shape for Life" do not constitute separate reportable segments or operating segments as contemplated by SFAS 131. Also tell us why your brick-and-mortar clinics individually do not each constitute a separate operating segment. In your response, address the pertinent requirements of SFAS 131, such as those in paragraphs 10 and 17, including a discussion of similar economic characteristics. In addition to your explanation, provide us with a copy of the financial reports that were provided to your chief operating decision maker, as defined in SFAS 131, for the two years ended December 31, 2006 and 2005.
 
Note that if you determine that you have or had multiple reportable segments, MD&A disclosure must be revised to discuss the operations of multiple segments. Refer to FRC 501.06.
 
(A) Consumer Choice Systems would have required SFAS 131 disclosure, but it did not meet the quantitative thresholds as discussed in comment 12 above. It met the requirements of an operating segment in paragraph 10 of SFAS 131. In addition, it met the requirements of paragraph 17 as it sold a completely different line of products than the rest of our business, was distributed differently as it was sold in a retail store environment unlike the rest of our products, and the production process was different than all our other products.
 
(B) Medifast Direct, Physician and Clinic Sales, Medifast Weight Control Centers, and Take Shape for Life all sell the same exact products. In applying paragraph 17 of SFAS 131 to our support networks, the Company concludes that Medifast Direct, Physician and Clinics Sales, and Take Shape for Life would not be separate reportable segments as they all sell the same products that are produced in the same manner. Additionally, they all sell the Medifast product to the same demographic and the distribution method is the same as the Company sends the Medifast product directly to the customer’s household. In applying paragraph 10 of SFAS 131 to the support networks mentioned, we note that discrete financial information is not available for each individual network, but rather all sales and expenses are shared in one operating segment set of financial statements. See financials in Exhibit B for the two years ended December 31, 2006 and December 31, 2005. The Jason Pharmaceuticals statements of income for the years ended 2005 and 2006 record the sales and expenses of Medifast Direct, Physician and Clinic, and Take Shape for Life. The Jason Properties statements of income for the years ended 2005 and 2006 record the sales and expenses of the Medifast Weight Control Centers.
 
When applying paragraph 17 of SFAS 131 it could be construed that item (d) “the methods used to distribute their products or services” is different for Medifast Weight Control Centers. They sell the same product as our other support networks and to the same demographic, but it’s sold in a brick and mortar clinic. Therefore the distribution method is slightly different. When applying paragraph 10 of SFAS 131 the Company notes that it meets the criteria of items a, b, and c. Nevertheless, the Company does not provide separate SFAS 131 disclosure in our footnotes for the Medifast Weight Control Centers due to the quantitative threshold test we performed. We tested that both the revenues and total assets of the Medifast Weight Control Centers represent less than 10% of total Medifast, Inc. revenues and assets. If the Medifast Weight Control Centers expand and open more brick and mortar clinics we will continue to test for SFAS 131 segment disclosure in future 10-K’s.

9
14.Expand your inventory accounting policy disclosures to include how these assets are evaluated for impairment and obsolescence, describing the shelf life of your products.
 
We have amended our disclosure on form 10-K/A to address how often management tests inventory for obsolete or unsalable items as well as the useful lives of our products. Our disclosure is as follows:
 

Inventories consist principally of packaged meal replacements held in the Company’s warehouse. Inventory is stated at the lower of cost or market, utilizing the first-in, first-out method. The cost of finished goods includes the cost of raw materials, packaging supplies, direct and indirect labor and other indirect manufacturing costs. On a quarterly basis, management reviews inventory for unsalable or obsolete inventory. Obsolete or unsalable inventory write-offs have been immaterial to the financial statements as our products have minimum useful lives ranging from 14-24 months.
  
 
15. Add disclosure to describe your accounting policies for evaluating impairment of property, plant and equipment. Do the same for your intangible assets. Indicate when impairment testing is performed. We note that your current disclosure regarding impairment testing only relates to trademarks and patents, but not customer lists, property, plant and equipment, and other long-lived assets. With regard to trademarks and patents, it describes how the assessment is done but not when it would be performed.
 
We have amended our disclosure on Form 10-K/A to address when and how impairment testing is performed on intangible assets and property, plant, and equipment, and other long-lived assets. Our disclosures are as follows:

 
 
Property, Plant, and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and amortization. The Company computes depreciation and amortization using the straight-line method over the estimated useful lives of the assets acquired as follows:
  

Building and building improvements
39 years
Equipment and fixtures
3 - 15 years
Vehicles
5 years
 

The carrying amount of all long-lived assets is evaluated periodically to determine whether adjustment to the useful life or to the unamortized balance is warranted. Such evaluation is based principally on the expected utilization of the long-lived assets and the projected undiscounted cash flows of the operations in which the long-lived assets are used.

In accordance with SFAS No. 144, “Long-Lived Assets”, property, plant and equipment and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
 
 
10

 
Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement No. 142 “Goodwill and Other Intangible Assets”. This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, “Intangible Assets”. It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Upon the sale of Consumer Choice Systems, Inc. on January 17, 2006, the goodwill balance of $894,000 was removed from the Company’s books.

In addition, the Company has acquired other intangible assets, which include: customer lists, non-compete agreements, trademarks and patents. The non-compete agreements are being amortized over the legal life of the agreements ranging between 3 to 7 years. The customer lists are being amortized over a period ranging between 5 to 10 years based on management’s best estimate of the expected benefits to be consumed or otherwise used up. Goodwill and other intangible assets are tested annually for impairment in the fourth quarter, and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. The Company assesses the recoverability of its goodwill and other intangible assets by comparing the projected discounted net cash flows associated with the related asset, over their remaining lives, in comparison to their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. 
  
 
16.We note that your disclosure regarding "Goodwill and Other Intangible Assets" does not indicate the life over which trademarks and patents are being amortized. Please add this disclosure.
 
We have amended our disclosure on Form 10-K/A to indicate the life over which trademarks and patents are being amortized. The disclosure is as follows:
 

In addition, the Company has acquired other intangible assets, which include: customer lists, non-compete agreements, trademarks and patents. The non-compete agreements are being amortized over the legal life of the agreements ranging between 3 to 7 years. The customer lists are being amortized over a period of 5 years based on management’s best estimate of the expected benefits to be consumed or otherwise used up. The costs of patents are amortized over their estimated useful life and trademarks, which represent brands with an infinite life, are carried at cost and tested annually for impairment as outlined below. Goodwill and other intangible assets are tested annually for impairment, and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. The Company assesses the recoverability of its goodwill and other intangible assets by comparing the projected discounted net cash flows associated with the related asset, over their remaining lives, in comparison to their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. 
  
 
 
11

17. Explain why you do not disclose your policies for deferred compensation arrangements and the terms of those arrangements. It appears to us that this would be necessary.
 

We have amended our disclosure in Form 10-K/A to disclose the Company’s policies for deferred compensation arrangements and the terms of those arrangements. The disclosure is as follows:

Deferred Compensation Plans
 
We maintain a non-qualified deferred compensation plan for Senior Executive management. Under the deferred compensation plan that became effective in 2003, executive officers of the Company may defer a portion of their salary and bonus (performance-based compensation) annually. A participant may elect to receive distributions of the accrued deferred compensation in a lump sum or in installments upon retirement
 
Each participating officer may request that the deferred amounts be allocated among several available investment options established and offered by the Company. These investment options provide market rates of return and are not subsidized by the Company. The benefit payable under the plan at any time to a participant following termination of employment is equal to the applicable deferred amounts, plus or minus any earnings or losses attributable to the investment of such deferred amounts. The Company has established a trust for the benefit of participants in the deferred compensation plan. Pursuant to the terms of the trust, as soon as possible after any deferred amounts have been withheld from a plan participant, the Company will contribute such deferred amounts to the trust to be held for the benefit of the participant in accordance with the terms of the plan and the trust.
 
Retirement payouts under the plan upon an executive officer’s retirement from the Company are payable either in a lump-sum payment or in annual installments over a period of up to ten years. Upon death, disability or termination of employment, all amounts shall be paid in a lump-sum payment as soon as administratively feasible.
 
 
Note 7 — Trademarks and Intangibles
 
18. Your disclosure in Note 2 indicates that customer lists, which are valued at $4.7 million and $3.6 million, net of amortization, at the end of 2006 and 2005, respectively, are amortized over a period ranging between 5 to 10 years. Provide to us a detailed analysis to support the lengths of these lives. Tell us specifically how you are currently using these lists and how you have used them historically.
 
In reviewing our amortization schedule we noted that customer lists are currently being amortized over 5 years, not the 5 to 10 years disclosed in our 10-K filed on March 16, 2007. We have amended the disclosure in Form 10-K/A as noted in our response to comment number 16. Our customer lists are used in the Company's direct response marketing campaigns. Our Company’s business model is centered on the customer ordering directly via our website, choosemedifast.com, or through our in-house and outsourced call centers. One of our key marketing efforts both currently and historically is to send out postcards or e-mails to people that are on our customer lists. These postcards and e-mails contain a special offer, discount, or some other value added information that is designed to attract customers to order. A promotional code is attached to each of these postcard or e-mail mails that allow the Company to track the number of orders attributed to a specific advertising campaign. From this data, we can calculate the percentage of postcards or e-mails sent out that were converted to a sale. We compare this percentage to industry standard which is approximately 1-2% of postcards or e-mails convert to a sale. If our customer lists return decreases below industry standard we begin impairing the customer list. If the list continues to return above industry average it is amortized over the original estimated life which is currently five years.

12
Exhibits
 
19. It appears that you should have filed as exhibits the employment agreements for Mr. McDevitt, Ms. MacDonald and Mr. Connors, as well as the new agreement for Mr. MacDonald, and you should do so upon amendment.
 
We will include the employment agreements for Mr. McDevitt, Ms. MacDonald, Mr. Connors, and Mr. MacDonald as exhibits to Form 10-K/A.

Certifications
 
20. Amend your filing to strictly comply with our rules regarding the certifications filed in compliance with Section 302 of the Sarbanes Oxley Act of 2002. Specifically:
 
the introductory portion of paragraph 4 is incomplete
 
you have inappropriately omitted subpart (b) of paragraph 4; you should include subparts (a) through (d)
 
please title the document only "Certifications."

The Certifications have been updated and will be amended in the 10-K/A. The title with changed to read only “Certifications.” The disclosure is as follows:
 
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


13
 

Unit Sales
 
 
 
 
For the year ended 12/31/06
 
 
 
 
 
 
 
 
Item No.
Description
Units Sold (quantity)
Sales
Unit Sales Avg. price
 
 
 
 
 
50
HE CANVAS BAGS
1,870.00
7,480.00
4.00
72
SLIM COOKBOOK
205.00
1,332.50
6.50
73
&nbspH.E. RECEIPTS (1250 ct)
19.00
1,646.67
86.67
152
MAGNESIUM COMPLEX
73.25
6,975.76
95.23
157
VITAMIN B-12
684.42
51,483.85
75.22
158
Vitamin B-6
545.17
40,702.63
74.66
1803
Essential Fatty Acids-120ct
3,780.00
26,515.06
7.01
7201
Dr. Diet Vanilla-25Kg Drum
2,222.00
22,848.83
10.28
7211
Dr. Diet Swiss Mocha-25Kg Drum
4,651.00
47,826.23
10.28
30000
TSFL Quick Start-50 ct
34.00
1,716.08
50.47
38370
Dr.'s SUCCESS IN A SHAKER JAR
254.00
2,431.08
9.57
41030
New Quick Start Handbook
139,022.00
84,401.49
0.61
41040
Medifast Diet Book
2,715.00
54,164.25
19.95
41090
New Medifast Recipe Book
1,363.00
9,472.85
6.95
41139
TSFL Folders
3,074.00
1,530.36
0.50
41154
Healthy Highlights
121.00
8,431.22
69.68
41501
HE Pre-Conditioning Handbook
4,028.00
3,669.48
0.91
41502
HE Jump Start Handbook
2,538.00
6,835.33
2.69
41504
HE Daily Nutrition Handbook
2,701.00
2,947.47
1.09
41544
HE Silver Pearl Pen
2,112.00
1,822.93
0.86
41545
HE Notepads
1,081.00
1,619.96
1.50
41551
TSFL RECIPE GUIDE
797.00
2,064.43
2.59
41554
HE Patient Agreement/Addendum
106.00
3,135.72
29.58
41599
HE Red Water Bottles
1,997.00
7,358.35
3.68
41624
TSFL Action Pack
24.00
1,858.08
77.42
43430
Medifast Product Catalog
63,471.00
10,271.88
0.16
43440
TSFL Catalog
5,023.00
4,755.20
0.95
43444
TSFL Product Catalog (100 ct)
32.00
1,246.02
38.94
50001
TSFL Shaker Jar - New
9,788.00
19,236.16
1.97
50100
Medifast Ultimate Shaker
14,294.00
55,630.25
3.89
50101
TSFL Ultimate Shaker
4,068.00
16,079.63
3.95
50103
HE Ultimate Shaker
1,911.00
4,947.37
2.59
51600
RAINBOW CASE 55'S
5,771.00
53,673.13
9.30
51713
HE CHOCOLATE
26,850.00
157,878.00
5.88
51720
Dutch Choc.55- 24 bx/cs; 18 pk
2,030.00
26,583.07
13.10
51750
SPLIT CASE 55'S
163.00
45,001.80
276.08
51813
HE VANILLA
8,843.00
59,690.25
6.75
51820
French Van.55- 24bx/cs; 18 pks
444.00
5,872.59
13.23
51913
HE STRAWBERRY
7,078.00
41,689.42
5.89
52013
HE ORANGE
4,990.00
29,401.04
5.89
52050
ORANGE PINEAPPLE BREEZE 55
121.14
1,445.60
11.93
52063
HE BANANA BLITZ
6,183.00
36,503.36
5.90
52150
SPLIT CASE 70'S
24.00
7,544.53
314.36
52311
TSFL STRAWBERRY CREAM 70
10,420.86
148,588.41
14.26
52411
TSFL ORANGE DELIGHT 70
9,673.43
129,411.67
13.38
52461
TSFL BANANA BLITZ 70
10,014.71
142,121.57
14.19
54100
CHICKEN FASTSOUP
13,575.21
91,969.84
6.77
54200
TOMATO FASTSOUP
12,455.71
86,367.89
6.93
54303
HE CREAMY CHICKEN SOUP
2,914.00
17,206.17
5.90
57100
SAVORY BEEF FASTSOUP
6,866.93
47,005.41
6.85
57250
Soy Crisps - White Cheddar
6,693.66
38,488.55
5.75
57260
Soy Crisps - Ranch
5,379.30
30,930.98
5.75
57270
Soy Crisps - Apple Cinnamon
5,233.88
30,094.81
5.75
57303
HE HOT COCOA
9,897.00
56,721.47
5.73
 
14
 
57353
HE CAPPUCCINO
6,164.00
36,979.01
6.00
57363
HE CHAI LATTE
1,746.00
9,947.88
5.70
57403
HE CHOCOLATE PUDDING
8,857.00
54,359.14
6.14
57410
Vanilla Pudding
9,535.14
138,259.53
14.50
58003
HE APPLE CINNAMON OATMEAL
7,038.00
43,461.53
6.18
58013
HE FRENCH VAN BERRY OATMEAL
2,182.00
13,142.59
6.02
58023
HE MAPLE & BROWN SUGAR OATMEAL
8,678.00
53,575.20
6.17
58033
H.E. Peach Oatmeal
176.50
2,559.25
14.50
60303
HE SWISS MOCHA 55
4,949.00
28,218.25
5.70
60400
SWISS MOCHA 70
20,043.14
226,639.55
11.31
60401
TSFL SWISS MOCHA 70
8,030.14
110,276.00
13.73
60450
RAINBOW CASE 70'S
145.00
2,639.06
18.20
60603
HE CREAMY TOMATO SOUP
2,030.00
12,261.19
6.04
60703
HE MINESTRONE SOUP
1,225.00
7,296.55
5.96
63753
HiEnergy Split-Choc&Van Shakes
3,277.00
32,732.41
9.99
64803
HE CHOCOLATE DIVINE BAR
3,923.00
24,329.95
6.20
64903
HE CHOCOLATE MINT MADNESS BAR
4,625.00
28,432.72
6.15
65003
HE PEANUT BUTTER BARS
4,791.00
29,729.16
6.21
65203
HE CRUNCHY LEMON FANTASY BARS
5,425.00
34,101.98
6.29
65403
HE OATMEAL RAISIN BARS
8,376.00
52,047.63
6.21
65443
HE CARAMEL NUT BARS
8,133.00
51,057.49
6.28
65444
Ray Lewis Caramel Nut Bars
1,431.14
11,000.55
7.69
65453
HE S'MORE'S GRANOLA BAR
7,000.00
43,831.36
6.26
65460
RAINBOW BARS
373.00
13,949.97
37.40
65503
HE FRUIT & NUT BAR
6,385.00
40,036.73
6.27
65504
Ray Lewis Fruit & Nut Bar
1,075.14
7,694.83
7.16
66500
PEACH PRO TEA
8,976.43
97,540.47
10.87
66550
RASPBERRY PRO TEA
13,619.57
143,641.56
10.55
66563
HE TROPICAL PUNCH DRINK
2,949.00
18,186.38
6.17
66573
HE CRANBERRY MANGO JUICE
3,243.00
19,823.20
6.11
66600
MED/TS OUTRAGEOUS CHOCOLATE
4,180.00
36,619.89
8.76
66700
&nbspMED/TS LUSCIOUS VANILLA
2,280.00
18,392.89
8.07
69603
HE CHICKEN NOODLE SOUP
5,067.00
31,143.82
6.15
69653
HE CHICKEN & WILD RICE SOUP
3,704.00
29,316.64
7.91
69660
Beef Vegetable Stew
14,662.14
212,601.03
14.50
69703
HE HOMESTYLE CHILI
2,032.00
12,335.25
6.07
69750
SOUPS/ CHILI VARIETY EXTRAS
64.00
4,730.79
73.92
69790
Diabetic Shakes-Variety Case
840.00
5,592.40
6.66
69803
HE DIABETIC CHOCOLATE
3,052.00
17,041.90
5.58
69903
HE DIABETIC VANILLA
1,450.00
8,269.42
5.70
70003
HE DIABETIC STRAWBERRY
1,035.00
5,847.75
5.65
70104
(D) Ray Lewis Women's Choc
2,324.00
40,196.30
17.30
70204
(D) Ray Lewis Women's Van
2,699.00
43,511.33
16.12
70304
(D) Ray Lewis Men's Pro Choc
1,793.14
36,439.20
20.32
70404
(D) Ray Lewis Men's Pro Van
1,226.00
22,463.99
18.32
70503
HE DIABETIC CHOC. CRUNCH BAR
1,840.00
12,853.98
6.99
70603
HE DIAB PEANUT BUTTER CRUNCH
1,573.00
11,111.50
7.06
70700
Chocolate Plus for Joint Healt
8,227.43
126,004.79
15.32
70703
HE JOINT HEALTH CHOCOLATE
1,329.00
9,626.17
7.24
70800
Vanilla Plus for Joint Health
4,527.71
70,066.54
15.48
70803
HE JOINT HEALTH VANILLA
591.50
4,274.88
7.23
70903
HE CHOC APPETITE SUPPRESSION
2,182.00
15,203.20
6.97
71003
HE VANILLA APPETITE SUPPRESSIO
949.00
6,606.23
6.96
71100
Plus for Women's Health Chocol
4,540.00
75,409.37
16.61
71103
HE WOMEN'S HEALTH CHOCOLATE
675.00
4,983.98
7.38
71200
Plus for Women's Health Vanill
1,881.00
30,199.09
16.05
72200
Plus/Coronary Health Chocolate
5,247.71
68,625.95
13.08
72203
HE CORONARY HEALTH CHOCOLATE
453.00
2,896.94
6.40
72300
Plus/Coronary Health Strawberr
1,417.00
16,718.53
11.80
72320
(D) Med. Creamy Italian Dress
286.14
2,126.55
7.43
 
15
 
72340
(D) MEDIFAST RANCH DRESSING
401.36
2,999.14
7.47
72350
Honey Dijon Dressing
257.79
1,847.50
7.17
72360
Red Pepper Italian Dressing
9,013.86
33,801.98
3.75
72370
NEW Ranch Dressing
4,934.00
18,502.50
3.75
72760
Mnt Choc Shk - 017642727608
12,973.00
88,994.78
6.86
72770
Mnt Van Shk - 017642727707
12,933.00
88,720.38
6.86
72780
MNT PB Bar 017642727837
7,853.59
7,617.98
0.97
72820
CHICKEN SALAD
33,504.00
61,251.40
1.83
72830
TUNA SALAD
8,415.00
15,394.25
1.83
72853
HE BANANA PUDDING
4,403.00
27,135.84
6.16
72900
Mnt 28-Day Kit -017642189031
93.00
7,114.50
76.50
72910
Mnt Start Pack - 017642729107
4,754.00
46,541.66
9.79
73301
TSFL 11-day trial package
19.00
1,862.00
98.00
74205
Diabetic Promo Package
826.00
235,410.00
285.00
74400
70 - Variety 2 Week Package
1,371.00
194,682.00
142.00
74500
Diabetic Variety 2 Week Pack
682.00
99,572.00
146.00
74700
Diabetic 1 Week Free Pack
3,033.00
10,962.65
3.61
75200
Men's Pro Drink Challenge Pack
67.00
5,591.20
83.45
75210
Women's Pro Drink Challenge PK
67.00
4,896.67
73.08
75220
Nutrition/Energy Challenge Pak
33.00
3,816.22
115.64
378800
Diabetic Guide
3,925.00
4,267.08
1.09
384700
Direct Success IASJ Book
1,898.00
36,226.75
19.09
401002
TS DIGITAL THERMOMETER
5,052.00
11,976.65
2.37
401102
TS DIGITAL EAR THERMOMETER
4,816.00
72,618.04
15.08
401202
TS BODY FAT ANALYZER
2,337.00
28,207.09
12.07
401302
TS BLOOD PRESSURE MONITER
2,214.00
44,884.92
20.27
401402
TS DIGITAL SCALE
1,790.00
47,141.80
26.34
410220
MEDIFAST RECIPE GUIDE
3,447.00
8,414.26
2.44
411200
MED Quick Start Book - Spanish
167.00
1,238.66
7.42
415083
HE Food Journal Tearsheet
161.00
1,625.57
10.10
416210
MY DAILY JOURNAL
3,300.00
8,059.06
2.44
501330
DIABETIC SAMPLE KIT
225.00
4,248.30
18.88
501390
MEDIFAST TOTE BAGS-25
229.00
1,300.53
5.68
501430
LIFESTYLES PATIENT GUIDE
698.00
10,846.66
15.54
501470
MEDIFAST SAMPLE PACK
1,397.00
32,606.92
23.34
41151A
TSFL BeSlim Car Magnet
78.00
1,426.68
18.29
DSBC1
Business Cards-250 Double Side
46.00
2,827.96
61.48
HIFAST2
HI ENERGY SHAKER JARS- 12ct
289.50
4,380.45
15.13
HS1
Healthy Solutions (100 ct.)
64.00
1,460.87
22.83
REL01
Hi-Energy Complete 60ct
517.83
67,671.76
130.68
SPBAR
BAR SAMPLE PACK
123.00
2,013.12
16.37
TSFLQSH
TSFL Quick Start Handbook
29.00
1,964.29
67.73
66560
Tropical Punch Drink
21,358.01
250,723.59
11.74
70000
STRAWBERRY PLUS FOR DIABETICS
19,777.43
251,174.86
12.70
57230
MULTI-GRAIN CRACKERS
83,185.29
260,412.61
3.13
73300
11-day trial package
2,690.00
261,784.40
97.32
57240
Garden Vegetable Crackers
81,843.57
263,166.30
3.22
52211
TSFL FRENCH VANILLA 70
19,011.14
268,077.68
14.10
50000
Medifast Shaker Jar - New
198,860.00
276,361.05
1.39
60301
TSFL SWISS MOCHA 55
21,869.14
293,795.70
13.43
66570
Cranberry Mango Juice
24,713.29
297,062.55
12.02
52061
TSFL BANANA BLITZ 55
22,969.86
315,766.19
13.75
74201
Diab. Variety 4 Week Pack TSFL
1,151.00
328,035.00
285.00
52011
TSFL ORANGE DELIGHT 55
25,403.43
350,063.29
13.78
70500
DIABETIC CHOC. CRUNCH BAR
24,640.86
350,812.67
14.24
70600
DIABETIC PEANUT BUTTER CRUNCH
24,931.15
353,358.82
14.17
51911
TSFL STRAWBERRY CREAM 55
27,075.14
371,676.62
13.73
71000
Vanilla Appetite Suppression
31,851.86
384,297.77
12.07
52460
Banana Shake 70
37,241.43
424,444.52
11.40
52410
ORANGE DELIGHT 70
38,670.86
425,275.20
11.00
 
16
 
69900
DIABETIC VANILLA
35,910.14
449,608.22
12.52
52310
STRAWBERRY CREAM 70
45,837.29
521,368.64
11.37
68800
Ready-To-Drink French Vanilla
266,946.50
548,575.06
2.06
60600
CREAMY TOMATO SOUP
44,705.01
572,478.17
12.81
51811
TSFL FRENCH VANILLA 55
45,024.86
614,925.95
13.66
52111
TSFL DUTCH CHOCOLATE 70
45,288.00
636,791.82
14.06
54300
CREAMY CHICKEN SOUP
52,759.30
662,424.05
12.56
74101
70 - Variety 4 Week Pack TSFL
2,422.00
666,050.00
275.00
74105
70 Promo Package
2,278.00
678,844.00
298.00
65200
Lemon Fantasy Bars
58,051.29
731,176.96
12.60
74600
55 & 70 - 1 Week Free Pack
38,880.00
733,744.03
18.87
60300
SWISS MOCHA 55
75,026.57
872,214.81
11.63
52210
FRENCH VA70
80,251.00
877,307.93
10.93
57360
Medifast Chai Latte
85,541.00
884,950.77
10.35
69800
CHOCOLATE PLUS FOR DIABETICS
72,940.57
915,116.40
12.55
70900
Chocolate Appetite Suppression
67,684.00
952,560.93
14.07
64900
CHOCOLATE MINT MADNESS BAR
72,970.86
976,162.80
13.38
64800
CHOCOLATE BAR
77,723.00
1,013,629.99
13.04
74200
Diabetic Variety 4 Week Pack
3,610.00
1,015,324.53
281.25
58010
Blueberry Oatmeal
88,077.60
1,076,316.09
12.22
65000
PEANUT BUTTER BARS
90,488.14
1,158,449.43
12.80
57300
HOT COCOA
112,383.72
1,185,224.79
10.55
74300
55 - Variety 2 Week Package
8,901.00
1,249,448.85
140.37
57350
Cappuccino
119,434.73
1,264,308.70
10.59
52060
Banana Creme 55
119,162.86
1,264,734.30
10.61
57000
CREAMY BROCCOLI SOUP
102,245.29
1,276,245.12
12.48
52010
ORANGE DELIGHT 55
117,773.14
1,375,968.95
11.68
51711
TSFL DUTCH CHOCOLATE 55
103,295.57
1,406,429.56
13.62
52110
DUTCH CH70
133,485.57
1,415,610.48
10.60
72850
Banana Pudding
126,769.16
1,471,005.81
11.60
60700
MINESTRONE SOUP
117,198.72
1,521,037.00
12.98
74100
70 - Variety 4 Week Package
5,581.00
1,534,775.00
275.00
51910
STRAWBERRY CREAM 55
143,575.43
1,610,877.33
11.22
65450
S'More's Granola Bar
129,077.14
1,666,367.73
12.91
68700
Ready-To-Drink Dutch Chocolate
864,789.50
1,814,254.89
2.10
69650
Chicken & Wild Rice Soup
138,113.86
1,858,534.33
13.46
58030
Peach Oatmeal
128,355.57
1,861,155.77
14.50
74800
New Brennan Kit
7,125.00
1,959,375.00
275.00
65500
Fruit & Nut Bar
150,321.02
1,972,290.78
13.12
57400
Chocolate pudding
173,047.16
2,031,211.03
11.74
65400
OATMEAL RAISIN BARS
173,998.16
2,182,887.35
12.55
65440
Caramel Nut Bars
177,716.30
2,315,592.18
13.03
69600
Chicken Noodle Soup
212,804.74
2,636,845.34
12.39
51810
FRENCH VA55
251,281.59
2,780,382.27
11.06
58000
Apple Cinnamon Oatmeal
226,887.16
2,811,713.56
12.39
69700
Homestyle Chili
209,575.31
2,832,446.06
13.52
58020
Maple & Brown Sugar Oatmeal
228,274.00
2,908,210.76
12.74
51710
DUTCH CH55
442,549.30
4,852,973.07
10.97
 
Gross Sales
7,598,572.16
80,861,925.53
  

17

Consumers Choice Systems, Inc
      
Sales by Item
              
For the year ended 12/31/06
      
                 
                 
 
Inventory
    
Units Sold
  
Avg. Price
   
CRANBERRY
      
     
CCS CRANBERRY 50850
      
       
50850
      
         
50850-091810FG
676.00
  
4.79
     
CVS 100 Ct CRANBERRY 08162
      
       
08162
      
         
08162-054270FG
504.00
  
3.19
     
CVS 50 Ct CRANBERRY 05646
      
       
05646
      
         
05646-053424FG
2,712.00
  
1.80
     
Total CVS 50 Ct CRANBERRY 05646
      
   
LUBRICANT
      
     
80002 4ml 8 PAK APPLICATOR
      
       
80002-31007FG
2.00
  
16.94
       
80002-312302T FG
444.00
  
7.52
                 
     
4600 · Pro Energy Dietary Supplement
24
  
11.96
     
4610 · Always Trim
110
  
11.90
                 
   
MENOPAUSE RELIEF 24HR 40030
      
     
40030FG
      
       
40030-5342FG
86.00
  
11.21
       
40030-5342TFG
240.00
  
9.95
   
UTI RELIEF 50512
      
     
50512fg
      
       
50512-051666FG
3,192.00
  
3.09
   
UTI TEST STICK 50620
      
     
50620fg
      
       
50620-101062FG
74.00
  
6.26
       
50620-101062T FG
312.00
  
5.95
       
50620-101830FG
120.00
  
5.95
       
50620-101830T FG
1,416.00
  
5.93

18
Unit Sales
 
 
 
 
For the year ended 12/31/05
 
 
 
Number
Description
Unit Sales (quantity)
Total Sales
Unit Sales Avg. price
 
 
 
 
 
 
 
 
 
 
15
Chromium
23.00
1,662.00
72.26
50
HE CANVAS BAGS
2,047.00
8,188.00
4.00
72
SLIM COOKBOOK
283.00
1,839.50
6.50
73
&nbspH.E. RECEIPTS (1250 ct)
27.00
2,340.00
86.67
125
HE FOLDERS
3,207.00
3,102.00
0.97
127
HE INSULATED MUGS 34oz
26.04
1,911.87
73.41
152
MAGNESIUM COMPLEX
93.75
8,928.02
95.23
153
Coenzyme Q-10
7.00
1,355.76
193.68
157
VITAMIN B-12
650.58
48,938.58
75.22
158
Vitamin B-6
530.25
39,588.70
74.66
159
HE CORAL CALCIUM 120CT
11.00
1,820.50
165.50
202
Necessary Materials
6.00
9,900.00
1,650.00
1803
Essential Fatty Acids-120ct
3,999.00
28,051.25
7.01
5171
[D] DUTCH CHOC 55
127.00
235,244.00
550.92
5181
[D] VANILLA SHAKE 55
428.88
236,278.00
550.92
5191
[D] STRAWBERRY CREAM 55
71.44
39,358.37
550.92
5201
[D] ORANGE DELIGHT 55
42.55
23,706.92
557.21
5205
[D] ORANGE PINEAPPLE BZ 55
43.89
26,125.78
595.21
5206
[D] Banana Shake 55
25.48
13,953.95
547.59
5211
[D] DUTCH CH70
142.97
70,661.34
494.25
5221
[D] FRENCH VA70
52.25
28,758.44
550.39
5231
[D] STRAWBERRY CRM 70
35.08
19,820.91
564.98
5241
[D] ORANGE DELIGHT 70
24.66
12,452.61
505.07
5246
[D] Banana Shake 70
11.85
6,267.17
528.87
5410
[D] CHICKEN FASTSOUP
29.65
2,411.70
81.33
5420
[D] TOMATO FASTSOUP
28.95
2,388.10
82.48
5430
[D] CREAMY CHICKEN SOUP
89.21
12,747.19
142.89
5700
[D] CREAMY BROCCOLI SOUP
86.03
12,944.13
150.46
5710
[D] SAVORY BEEF FASTSOUP
13.94
1,209.70
86.78
5723
[D] MULTI-GRAIN CRACKERS
236.45
8,647.21
36.57
5724
[D] Garden Vegetable Crackers
157.95
6,037.72
38.23
5730
[D] HOT COCOA
71.87
8,051.95
112.04
5731
[D] Hot Cocoa w/Marshmallows
94.12
10,270.12
109.11
5735
[D] Cappuccino
74.72
8,456.62
113.18
5736
[D] Medifast Chai Latte
38.46
5,299.34
137.80
5737
[D] Hi-Energy Chai Latte
32.00
2,390.72
74.71
5740
[D] Chocolate pudding
107.24
14,426.38
134.52
5800
[D] Oatmeal - Apple Cinnamon
224.31
32,602.23
145.35
5801
[D] Oatmeal - French Vanilla B
102.88
14,940.01
145.22
5802
[D] Mple & Brwn Sugar Oatmeal
243.79
33,866.81
138.92
6030
[D] SWISS MOCHA 55
67.76
39,359.94
580.90
6040
[D] SWISS MOCHA 70
33.05
19,090.35
577.67
6060
[D] CREAMY TOMATO SOUP
65.46
9,625.88
147.04
6070
[D] MINESTRONE SOUP
76.05
11,432.40
150.33
6370
[D] HI ENERGY CHOCOLATE
8.50
1,049.93
123.52
6371
[D] Hi-Energy Chocolate Shake
17.64
3,746.30
212.39
6381
[D] Hi Energy Vanilla Shake
5.69
1,219.60
214.17
6391
[D] HE Strawberry Shake
6.58
1,425.45
216.52
6401
[D] Hi Energy Orange Shake
7.75
1,665.60
214.92
6422
[D] HE Creamy Broccoli Soup
16.17
1,215.23
75.17
6441
[D] Hi Energy Hot Cocoa
14.17
2,944.74
207.86
6442
[D] Hi Energy Cappuccino
20.00
1,272.16
63.61
6446
[D] HE Apple Cin. Oatmeal
19.00
1,196.48
62.97
6450
[D] Hi Energy Fruit & Nut Bar
27.00
1,903.00
70.48
6451
[D] Hi-E S'More's Granola Bar
22.08
1,533.60
69.45
6480
[D] CHOCOLATE DIVINE BAR
149.99
22,829.52
152.21
6490
[D] CHOC MINT MADNESS BAR
141.12
20,755.64
147.08
6500
[D] PEANUT BUTTER BARS
270.28
36,539.83
135.19
6520
[D] CR LEMON FANTASY BARS
153.59
21,678.92
141.15
6540
[D] OATMEAL RAISIN BARS
313.91
42,868.64
136.56
6544
[D] Caramel Nut Bars
242.98
34,976.40
143.95
6545
[D] S'More's Granola Bar
81.99
12,728.13
155.23
6550
[D] Fruit & Nut Bar
153.16
23,326.69
152.30
19
6553
[D] Hi E Peanut Butter Bars
20.50
1,539.64
75.10
6559
[D] Hi Energy ChoC Pudding
31.58
2,386.61
75.57
6560
[D] Hi E Banana Pudding
35.08
2,477.82
70.63
6565
[D] HE Caramel Nut Bars
32.67
2,346.39
71.83
6579
[D] HE Chic & Wild Rice Soup
15.50
1,493.00
96.32
6620
(D)FORM YOU 3 ESSTL CHOC DRINK
122.00
5,873.08
48.14
6630
(D)FORM YOU 3 ESSTL VAN DRINK
121.00
5,824.94
48.14
6640
(D)FORM YOU esse 3 STRAW DRINK
65.00
3,129.10
48.14
6655
[D] RASPBERRY PRO TEA
9.08
1,107.51
121.93
6656
[D] Tropical Punch Drink
22.72
3,017.38
132.82
6657
[D] Cranberry Mango Juice
14.66
2,039.70
139.16
6660
[D] MED/TS OUTRAGEOUS CHOC
19.87
2,479.37
124.79
6870
[D] RTD Dutch CH55
922.03
53,122.95
57.62
6880
[D] RTD FRENCH VA55
333.31
19,824.83
59.48
6890
[D] RTD FIT CHOC DRINK
235.43
11,758.15
49.94
6960
[D] Chicken Noodle Soup
190.81
28,322.53
148.43
6965
[D] Chic & Wild Rice Soup
123.67
19,186.26
155.13
6970
[D] Homestyle Chili
124.06
19,640.40
158.31
6980
[D] CHOC PLUS FOR DIABETICS
177.45
25,165.91
141.82
6990
[D] VAnPLUS FOR DIABETICS
73.56
10,568.72
143.68
7000
[D] STRAWBERRY PLUS FOR DIAB
45.39
6,905.28
152.13
7050
[D] DIAB CHOC. CRUNCH BAR
35.85
5,334.49
148.82
7060
[D] DIABETIC P BUTTER CRUNCH
42.93
6,376.45
148.54
7061
[D] FIT! Chocolate Shake
11.52
1,316.36
114.23
7070
[D] Choc Plus for Joint Healt
44.13
8,407.79
190.52
7080
[D] Van Plus for Joint Health
31.00
5,005.32
161.46
7090
[D] Choc Appetite Suppression
277.26
39,488.10
142.42
7100
[D] Van Appetite Suppression
117.26
18,084.96
154.23
7110
[D] Plus for Women Health Choc
16.73
3,448.00
206.14
7120
[D] Plus for Womens Health Van
7.01
1,338.81
190.93
7201
Dr. Diet Vanilla-25Kg Drum
8,200.00
84,320.60
10.28
7211
Dr. Diet Swiss Mocha-25Kg Drum
20,600.00
211,829.80
10.28
7220
[D] Plus/Corn Health Chocolate
28.92
4,677.27
161.75
7230
[D] Plus/Corn Health Straw
13.17
1,640.27
124.58
7234
[D] Medifast Ranch Dress
16.01
1,399.06
87.40
7280
[D] CHICKEN BREAST
15.03
2,617.97
174.16
7281
[D] BEEF PATTY
8.13
1,234.50
151.80
7282
[D] CHICKEN SALAD
21.99
2,870.52
130.55
7283
[D] TUNA SALAD
25.39
3,153.27
124.19
7285
[D] Banana Pudding
77.29
10,973.71
141.99
7295
[D] HSN Main 14ct Choc Pudg
999.00
13,906.08
13.92
7300
[D] 28 Day Diac Variety Kit
52.00
16,253.27
312.56
7301
[D] 28 Day Diabetic Lover Kit
15.00
4,780.22
318.68
7303
[D] 2 wk. Diabeitc Variety
22.00
3,505.70
159.35
7304
[D] 2 wk. Diabetic Lover Kit
6.00
1,035.75
172.63
7310
[D] 55's 28 Day Variety Kit
352.00
104,456.88
296.75
7311
[D] 55's 28 Day Lover Kit
119.00
36,572.28
307.33
7312
[D] 55's 28 Day Vanilla Kit
38.00
11,642.92
306.39
7313
[D] 55's 2 Wk. Lover Kit
47.00
7,351.45
156.41
7314
[D] 55's 2wk Variety Kit
112.00
17,511.20
156.35
7320
[D] 70's 28 Day Variety Kit
149.00
44,934.68
301.58
7321
[D] 70's 28 Day Lover Kit
41.00
12,747.28
310.91
7322
[D] 70's 28 Day Vanilla Kit
15.00
4,700.56
313.37
7323
[D] 70's 2 Wk. Variety Kit
32.00
5,099.20
159.35
7330
[D] 980 Pr Package
261.00
25,495.00
97.68
30000
TSFL Quick Start-50 ct
37.00
1,867.50
50.47
30002
TSFL Quick Start - 150 ct
13.00
1,462.50
112.50
38370
Dr.'s SUCCESS IN A SHAKER JAR
412.00
3,943.33
9.57
38470
Direct Success IASJ Book
158.00
2,429.73
15.38
40100
TS DIGITAL THERMOMETER
546.00
1,197.67
2.19
40110
TS DIGITAL EAR THERMOMETER
188.00
2,957.81
15.73
40120
TS BODY FAT ANALYZER
236.00
3,030.40
12.84
40130
TS BLOOD PRESSURE MONITER
290.00
6,037.08
20.82
40140
TS DIGITAL SCALE
378.00
10,777.67
28.51
41096
DIABETIC BROCHURE-TSFL 25 PK
290.00
1,710.00
5.90
41097
TSFL Program Brochure 25/PK
965.00
4,614.00
4.78
41141
TSFL Folders (25 = $11.50)
261.00
2,990.00
11.46
41143
TSFL Picture Frame Magnet
6,342.00
3,121.00
0.49
41150
TSFL BMI Chart (25 pack)
104.00
1,067.00
10.26
20
41152
TSFL Product/Program DVD
633.00
1,991.75
3.15
41153
TSFL Direct Mail Piece
16.00
2,480.00
155.00
41154
Healthy Highlights
78.00
5,435.00
69.68
41172
Inactive Customer Mailing
21,320.00
6,822.40
0.32
41501
HE Pre-Conditioning Handbook
5,057.00
4,606.89
0.91
41502
HE Jump Start Handbook
3,315.00
8,927.94
2.69
41504
HE Daily Nutrition Handbook
3,466.00
3,782.28
1.09
41505
HE Special Success Handbook
2,637.00
1,831.59
0.69
41506
HE Stabilization Handbook
1,751.00
1,439.20
0.82
41507
HE Maintenance Handbook
1,375.00
1,055.34
0.77
41544
HE Silver Pearl Pen
2,475.00
2,136.25
0.86
41545
HE Notepads
1,052.00
1,576.50
1.50
41551
TSFL RECIPE GUIDE
918.00
2,377.85
2.59
41554
HE Patient Agreement/Addendum
76.00
2,248.25
29.58
41599
HE Red Water Bottles
402.00
1,481.25
3.68
41624
TSFL Action Pack
50.00
3,871.00
77.42
42803
HE Leads Broch. Blank contact
507.00
1,358.80
2.68
43442
TSFL Cataolg (25 ct)
69.00
1,320.00
19.13
43444
TSFL Product Catalog (100 ct)
81.00
3,154.00
38.94
50000
Medifast Shaker Jar - New
6,586.00
9,152.74
1.39
50001
TSFL Shaker Jar - New
1,127.00
2,214.87
1.97
50100
Medifast Ultimate Shaker
989.00
3,849.05
3.89
51600
RAINBOW CASE 55'S
10,968.00
102,007.78
9.30
51710
DUTCH CH55
189,725.00
2,080,514.68
10.97
51711
TSFL DUTCH CHOCOLATE 55
113,776.14
1,549,128.67
13.62
51713
HE CHOCOLATE
19,183.43
112,690.94
5.87
51720
Dutch Choc.55- 24 bx/cs; 18 pk
7,297.00
95,555.01
13.10
51750
SPLIT CASE 55'S
56.00
15,460.74
276.08
51810
FRENCH VA55
85,662.29
947,836.65
11.06
51811
TSFL FRENCH VANILLA 55
45,761.15
624,981.74
13.66
51813
HE VANILLA
8,164.00
48,065.59
5.89
51820
French Van.55- 24bx/cs; 18 pks
2,256.00
29,839.10
13.23
51910
STRAWBERRY CREAM 55
42,036.86
471,642.12
11.22
51911
TSFL STRAWBERRY CREAM 55
22,094.86
303,309.37
13.73
51913
HE STRAWBERRY
6,694.00
40,007.21
5.98
52010
ORANGE DELIGHT 55
27,388.14
319,981.57
11.68
52011
TSFL ORANGE DELIGHT 55
17,808.29
245,401.02
13.78
52013
HE ORANGE
4,957.00
29,206.60
5.89
52050
ORANGE PINEAPPLE BREEZE 55
39,876.14
475,854.08
11.93
52060
Banana Creme 55
38,183.86
405,264.14
10.61
52061
TSFL BANANA BLITZ 55
23,997.00
329,886.26
13.75
52063
HE BANANA BLITZ
7,015.29
41,417.03
5.90
52110
DUTCH CH70
71,322.86
756,376.77
10.60
52111
TSFL DUTCH CHOCOLATE 70
45,929.71
645,814.92
14.06
52150
SPLIT CASE 70'S
9.00
2,829.20
314.36
52210
FRENCH VA70
31,720.86
346,773.99
10.93
52211
TSFL FRENCH VANILLA 70
20,270.57
285,837.04
14.10
52310
STRAWBERRY CREAM 70
16,444.71
187,047.67
11.37
52311
TSFL STRAWBERRY CREAM 70
9,185.57
130,974.75
14.26
52410
ORANGE DELIGHT 70
13,904.86
152,915.94
11.00
52411
TSFL ORANGE DELIGHT 70
10,945.29
146,426.63
13.38
52460
Banana Shake 70
14,829.14
169,009.31
11.40
52461
TSFL BANANA BLITZ 70
12,407.14
176,073.26
14.19
54100
CHICKEN FASTSOUP
8,255.50
55,929.66
6.77
54200
TOMATO FASTSOUP
6,107.50
42,349.40
6.93
54300
CREAMY CHICKEN SOUP
23,290.71
292,428.62
12.56
54303
HE CREAMY CHICKEN SOUP
3,384.00
19,981.36
5.90
57000
CREAMY BROCCOLI SOUP
23,903.14
298,363.57
12.48
57003
HE CREAMY BROCCOLI SOUP
2,610.00
15,246.20
5.84
57100
SAVORY BEEF FASTSOUP
5,233.07
35,821.34
6.85
57230
MULTI-GRAIN CRACKERS
63,295.29
198,146.70
3.13
57240
Garden Vegetable Crackers
48,806.43
156,936.06
3.22
57300
HOT COCOA
19,995.43
210,876.43
10.55
57303
HE HOT COCOA
9,748.00
55,867.52
5.73
57310
Hot Cocoa w/Marshmallows
9,248.14
90,901.58
9.83
57350
Cappuccino
22,436.71
237,509.92
10.59
57353
HE CAPPUCCINO
6,105.14
36,625.91
6.00
57360
Medifast Chai Latte
14,484.86
149,850.78
10.35
57363
HE CHAI LATTE
2,120.29
12,080.38
5.70
21
57400
Chocolate pudding
35,277.43
414,083.09
11.74
57403
HE CHOCOLATE PUDDING
9,434.14
57,901.31
6.14
58000
Apple Cinnamon Oatmeal
71,917.57
891,243.08
12.39
58003
HE APPLE CINNAMON OATMEAL
6,960.43
42,982.51
6.18
58010
Blueberry Oatmeal
33,769.29
412,663.67
12.22
58013
HE FRENCH VAN BERRY OATMEAL
2,276.00
13,708.77
6.02
58020
Maple & Brown Sugar Oatmeal
72,076.14
917,770.27
12.73
58023
HE MAPLE & BROWN SUGAR OATMEAL
7,754.00
47,870.72
6.17
60110
TSFL DVD (1 EA)
721.00
1,754.75
2.43
60111
TSFL DVD (25 pk)
71.00
5,281.25
74.38
60112
TSFL DVD (50pk)
28.00
3,662.50
130.80
60113
TSFL DVD (100pk)
41.00
9,400.00
229.27
60300
SWISS MOCHA 55
42,104.14
489,478.02
11.63
60301
TSFL SWISS MOCHA 55
22,799.71
306,297.24
13.43
60303
HE SWISS MOCHA 55
3,317.00
18,912.90
5.70
60400
SWISS MOCHA 70
15,195.57
171,825.25
11.31
60401
TSFL SWISS MOCHA 70
9,904.43
136,015.16
13.73
60450
RAINBOW CASE 70'S
2,296.00
41,788.19
18.20
60600
CREAMY TOMATO SOUP
17,012.86
217,861.25
12.81
60603
HE CREAMY TOMATO SOUP
2,187.00
13,209.47
6.04
60650
Creamy Soups-Rainbow Case
757.00
7,656.53
10.11
60700
MINESTRONE SOUP
22,261.71
288,918.61
12.98
60703
HE MINESTRONE SOUP
1,201.00
7,153.60
5.96
63753
HiEnergy Split-Choc&Van Shakes
1,569.00
15,672.00
9.99
64800
CHOCOLATE BAR
36,218.29
472,343.33
13.04
64803
HE CHOCOLATE DIVINE BAR
3,765.00
23,350.05
6.20
64900
CHOCOLATE MINT MADNESS BAR
34,032.57
455,268.45
13.38
64903
HE CHOCOLATE MINT MADNESS BAR
3,559.29
21,881.12
6.15
65000
PEANUT BUTTER BARS
52,150.29
669,766.26
12.84
65003
HE PEANUT BUTTER BARS
5,307.14
32,931.94
6.21
65050
Oatmeal & PB Bar Split Case
23.00
1,756.21
76.36
65200
Lemon Fantasy Bars
37,604.43
473,641.36
12.60
65400
OATMEAL RAISIN BARS
66,406.86
833,104.72
12.55
65403
HE OATMEAL RAISIN BARS
8,212.00
51,028.55
6.21
65440
Caramel Nut Bars
56,150.86
731,629.49
13.03
65443
HE CARAMEL NUT BARS
8,724.14
54,768.58
6.28
65444
Ray Lewis Caramel Nut Bars
428.00
3,289.85
7.69
65450
S'More's Granola Bar
37,720.00
486,959.90
12.91
65453
HE S'MORE'S GRANOLA BAR
9,203.00
57,625.72
6.26
65460
RAINBOW BARS
298.00
11,145.02
37.40
65500
Fruit & Nut Bar
43,783.29
574,459.72
13.12
65503
HE FRUIT & NUT BAR
7,309.00
45,830.61
6.27
65504
Ray Lewis Fruit & Nut Bar
397.00
2,841.35
7.16
66500
PEACH PRO TEA
4,916.00
53,418.67
10.87
66550
RASPBERRY PRO TEA
6,643.71
70,069.28
10.55
66560
Tropical Punch Drink
7,646.43
89,762.11
11.74
66563
HE TROPICAL PUNCH DRINK
2,667.00
16,447.30
6.17
66570
Cranberry Mango Juice
8,122.71
97,637.92
12.02
66573
HE CRANBERRY MANGO JUICE
2,819.00
17,231.45
6.11
66600
MED/TS OUTRAGEOUS CHOCOLATE
5,175.71
45,343.08
8.76
66603
(D)HE COMP NUTRITION CHOCOLATE
186.00
1,323.14
7.11
66604
(D) Ray Lewis TS Nut. Choc
374.00
3,455.88
9.24
66700
&nbspMED/TS LUSCIOUS VANILLA
4,971.57
40,105.94
8.07
66704
(D) Ray Lewis TSe Nut. Van.
243.00
2,762.61
11.37
66800
MED/TS STRAWBERRY PASSION
797.57
9,590.93
12.03
68700
Ready-To-Drink Dutch Chocolate
463,000.00
972,300.00
2.10
68800
Ready-To-Drink French Vanilla
210,005.50
441,011.55
2.10
68900
RTD FIT CHOCOLATE DRINK
15,094.50
31,229.18
2.07
69600
Chicken Noodle Soup
57,986.29
718,503.11
12.39
69603
HE CHICKEN NOODLE SOUP
3,860.00
23,725.11
6.15
69610
FIT! Chicken Noodle Soup
124.43
1,205.33
9.69
69650
Chicken & Wild Rice Soup
36,100.43
485,786.77
13.46
69653
HE CHICKEN & WILD RICE SOUP
4,144.00
32,799.18
7.91
69700
Homestyle Chili
40,956.43
553,533.12
13.52
69703
HE HOMESTYLE CHILI
2,163.00
13,130.48
6.07
69750
SOUPS/ CHILI VARIETY EXTRAS
45.00
3,326.34
73.92
69790
Diabetic Shakes-Variety Case
1,104.00
7,350.01
6.66
69800
CHOCOLATE PLUS FOR DIABETICS
43,224.43
542,296.06
12.55
69803
HE DIABETIC CHOCOLATE
3,022.00
16,874.38
5.58
22
69900
DIABETIC VANILLA
19,090.43
239,019.22
12.52
69903
HE DIABETIC VANILLA
1,601.00
9,130.58
5.70
70000
STRAWBERRY PLUS FOR DIABETICS
11,678.43
148,316.93
12.70
70003
HE DIABETIC STRAWBERRY
1,104.00
6,237.60
5.65
70100
TS WOMEN'S CHOCOLATE SPORT DRI
214.29
4,544.42
21.21
70104
(D) Ray Lewis Women's Choc
136.14
2,354.75
17.30
70200
(R)TS WOMEN'S STRAWBERRY SPORT
175.43
3,652.35
20.82
70204
(D) Ray Lewis Women's Van
115.14
1,856.25
16.12
70304
(D) Ray Lewis Men's Pro Choc
269.00
5,466.47
20.32
70400
(R)TS BIO-ENGINEERED VANILLA
87.14
1,340.80
15.39
70404
(D) Ray Lewis Men's Pro Van
187.00
3,426.40
18.32
70500
DIABETIC CHOC. CRUNCH BAR
6,499.00
92,526.46
14.24
70503
HE DIABETIC CHOC. CRUNCH BAR
1,306.00
9,123.53
6.99
70600
DIABETIC PEANUT BUTTER CRUNCH
9,185.14
130,184.58
14.17
70603
HE DIAB PEANUT BUTTER CRUNCH
1,306.00
9,225.44
7.06
70610
[D] FIT! Chocolate Shake
1,297.86
13,270.43
10.22
70620
[D] FIT! Vanilla Shake
2,953.71
29,865.68
10.11
70630
[D] FIT! Creamsicle Shake
2,678.00
25,803.97
9.64
70640
[D] Fit! Oatmeal Rsn Bars- 7pk
255.86
2,842.31
11.11
70670
[D] FIT Van Berry Oatmeal
157.43
1,737.65
11.04
70680
[D] Fit! Hot Cocoa w/Marsh
289.43
2,515.53
8.69
70690
[D] Fit! Chocolate Pudding
1,595.00
15,352.36
9.63
70700
Chocolate Plus for Joint Healt
8,600.86
131,723.90
15.32
70703
HE JOINT HEALTH CHOCOLATE
1,300.00
9,416.12
7.24
70720
[D] Fit! Choc Mint Bar- 7pk
166.00
1,699.95
10.24
70730
[D] Fit! Chocolate Bar 7pk
175.29
1,578.56
9.01
70740
[D] Fit! P Butter Bar- 7pk
142.29
1,408.51
9.90
70800
Vanilla Plus for Joint Health
4,747.14
73,462.27
15.48
70803
HE JOINT HEALTH VANILLA
750.00
5,420.39
7.23
70900
Chocolate Appetite Suppression
53,212.86
748,899.13
14.07
70903
HE CHOC APPETITE SUPPRESSION
1,838.43
12,809.35
6.97
71000
Vanilla Appetite Suppression
27,142.43
327,477.73
12.07
71003
HE VANILLA APPETITE SUPPRESSIO
1,025.14
7,136.28
6.96
71100
Plus for Women's Health Chocol
3,768.29
62,591.20
16.61
71103
HE WOMEN'S HEALTH CHOCOLATE
774.00
5,714.96
7.38
71200
Plus for Women's Health Vanill
2,139.29
34,345.82
16.05
71203
HE WOMEN'S HEALTH VANILLA
198.00
1,483.43
7.49
72200
Plus/Coronary Health Chocolate
4,433.43
57,977.34
13.08
72203
HE CORONARY HEALTH CHOCOLATE
558.00
3,568.41
6.40
72300
Plus/Coronary Health Strawberr
1,366.14
16,118.49
11.80
72320
(D) Med. Creamy Italian Dress
2,371.00
17,620.93
7.43
72330
(D) Medifast Caesar Dressing
2,256.21
16,892.22
7.49
72340
(D) MEDIFAST RANCH DRESSING
3,328.14
24,869.34
7.47
72350
Honey Dijon Dressing
2,209.43
15,834.27
7.17
72640
[D] HSN Maain 28 Day Supply
5,499.00
382,950.36
69.64
72800
(D) CHICKEN BREAST
7,609.29
45,100.71
5.93
72810
BEEF PATTY
7,686.00
38,008.02
4.95
72820
CHICKEN SALAD
41,940.00
76,673.94
1.83
72830
TUNA SALAD
31,547.00
57,711.52
1.83
72850
Banana Pudding
22,645.00
262,768.38
11.60
72853
HE BANANA PUDDING
5,782.00
35,634.67
6.16
72900
Mnt 28-Day Kit -017642189031
48.00
3,672.00
76.50
73000
28 Day Diabetic Variety Kit
1,232.00
377,487.60
306.40
73010
28 Day Diabetic Choc.Lover Kit
406.00
123,258.72
303.59
73020
28 Day Diabetic Vanilla Kit
125.00
39,365.84
314.93
73030
2 wk. Diabetic Variety Kit
557.00
87,659.80
157.38
73040
2 wk. Diabetic Choc.Lover Kit
164.00
26,372.35
160.81
73050
2 wk. Diabetic Vanilla Kit
37.00
5,895.95
159.35
73100
55's 28 Day Variety Kit
10,034.00
2,989,526.28
297.94
73110
55's 28 Day Choc.Lover Kit
3,584.00
1,065,861.74
297.39
73120
55's 28 Day Vanilla Kit
910.00
271,624.76
298.49
73130
55's 2 Wk. Choc. Lover Kit
1,025.00
158,410.80
154.55
73140
55's 2wk Variety Kit
3,107.00
481,134.15
154.85
73150
55's 2 wk. Vanilla Kit
221.00
34,084.30
154.23
73200
70's 28 Day Variety Kit
3,180.00
977,628.62
307.43
73210
70's 28 Day Choc. Lover Kit
980.00
301,561.62
307.72
73220
70's 28 Day Vanilla Kit
303.00
93,692.20
309.22
73230
70's 2 Wk. Variety Kit
810.00
126,801.85
156.55
73240
70's 2 wk. Choc. Lover Kit
211.00
33,321.45
157.92
23
73250
70's 2 wk. Vanilla Kit
58.00
9,242.30
159.35
73300
11-day trial package
11,191.00
1,089,081.50
97.32
74000
55 - Variety 4 Week Package
648.00
174,075.00
268.63
74001
55 - Variety 4 Week Pack TSFL
454.00
124,300.00
273.79
74005
55 Promo Package
103.00
28,325.00
275.00
74100
70 - Variety 4 Week Package
116.00
31,350.00
270.26
74101
70 - Variety 4 Week Pack TSFL
164.00
45,100.00
275.00
74105
70 Promo Package
14.00
3,850.00
275.00
74200
Diabetic Variety 4 Week Pack
75.00
21,094.00
281.25
74201
Diab. Variety 4 Week Pack TSFL
73.00
20,805.00
285.00
74205
Diabetic Promo Package
10.00
2,850.00
285.00
74300
55 - Variety 2 Week Package
230.00
32,285.50
140.37
74400
70 - Variety 2 Week Package
48.00
6,816.00
142.00
74500
Diabetic Variety 2 Week Pack
20.00
2,920.00
146.00
74600
55 & 70 - 1 Week Free Pack
922.00
17,400.00
18.87
74800
New Brennan Kit
142.00
39,050.00
275.00
75200
Men's Pro Drink Challenge Pack
72.00
6,008.45
83.45
75210
Women's Pro Drink Challenge PK
26.00
1,900.20
73.08
75220
Nutrition/Energy Challenge Pak
33.00
3,816.22
115.64
378800
Diabetic Guide
1,244.00
1,352.42
1.09
384700
Direct Success IASJ Book
1,791.00
34,184.46
19.09
400302
Meno CALL 1-800-479-5232
219.00
2,789.26
12.74
401102
TS DIGITAL EAR THERMOMETER
193.00
2,910.15
15.08
401202
TS BODY FAT ANALYZER
524.71
6,333.19
12.07
401302
TS BLOOD PRESSURE MONITER
489.29
9,919.40
20.27
401402
TS DIGITAL SCALE
940.00
24,756.03
26.34
410220
MEDIFAST RECIPE GUIDE
2,300.71
5,616.13
2.44
415083
HE Food Journal Tearsheet
355.00
3,584.34
10.10
416210
MY DAILY JOURNAL
1,950.00
4,762.17
2.44
501330
DIABETIC SAMPLE KIT
748.00
14,123.24
18.88
501340
(D)MEDIFAST FASTSHAKER JAR LID
10,995.00
17,587.44
1.60
501390
MEDIFAST TOTE BAGS-25
320.00
1,817.33
5.68
501430
LIFESTYLES PATIENT GUIDE
706.00
10,970.98
15.54
501440
Physician QUICK-START BOOKS
2,527.00
4,069.97
1.61
501470
MEDIFAST SAMPLE PACK
3,283.00
76,627.42
23.34
501480
Transition Guide
1,117.00
1,856.76
1.66
800282
Always CALL 1-800-479-5232
125.00
2,290.66
18.33
41151A
TSFL BeSlim Car Magnet
141.00
2,579.00
18.29
5160R
[D] RAINBOW CASE 55'S
9.00
2,516.84
279.65
6045R
[D] RAINBOW CASE 70'S
8.00
2,190.31
273.79
6065R
[D] Creamy Soups-Rainbow Case
30.00
2,154.38
71.81
6545R
[D] RAINBOW BARS
144.00
10,236.17
71.08
DSBC1
Business Cards-250 Double Side
73.00
4,487.85
61.48
EBMONTH
Exec. Back Office Monthly Fee
227.00
3,393.65
14.95
EBYEAR
Back Office Annual
37.00
5,328.00
144.00
EBYRENEW
Exec. Back Office Annual Renew
8.00
1,152.00
144.00
EFA
Essential Fatty Acids-120ct
26.50
2,077.75
78.41
FAST
MEDIFAST FASTSHAKES
993.00
1,475.62
1.49
HIFAST2
HI ENERGY SHAKER JARS- 12ct
480.33
7,267.95
15.13
REL01
Hi-Energy Complete 60ct
420.83
54,995.92
130.68
REN001
Health Advisor Renewals
271.00
10,826.41
39.95
REPROCES
Bank Draft Reprocessing Fee
203.00
5,075.00
25.00
SP
MEDIFAST SAMPLE PACK
167.00
4,039.34
24.19
SPBAR
BAR SAMPLE PACK
590.00
9,656.43
16.37
SSBC1A
Singel Side Bus. Cards Style A
135.00
4,889.85
36.22
SSBC1B
Single Side Bus. Cards Style B
69.00
2,636.70
38.21
SSBC1C
Business Cards 250 SS, Style C
29.00
1,078.65
37.19
TSFLQSH
TSFL Quick Start Handbook
282.00
19,101.00
67.73
TSFLTSB
TSFL Booth (95 LBS)
766.00
173,040.00
225.90
TSFLTSB2
TSFL Booth 2 (40 LBS)
52.00
7,243.00
139.29
TSRP
TS Tasting Refill Pack
24.00
4,750.00
197.92
 
TSFL Spouse Certif. Course
28.00
1,428.70
51.03
 
TSFL ADVERTISEMENT PACK
1,976.00
1,898.03
0.96
 
TSFL Certification Exam
26.00
2,518.95
96.88
 
TSFL Career Opp. Presentation
5,315.00
6,342.83
1.19
 
TSFL Daily Journal
229.00
31,136.00
135.97
 
 
 
 
 
 
Gross Sales
3,452,070.27
42,140,749.26
 

24

   
Consumers Choice Systems, Inc
    
   
Sales by Item
      
   
For the year ended 12/31/05
      
           
     
Jan - Dec 05
     
Qty
 
Avg Price
   
Sales
      
CCS-CRANBERRY
      
 
50850
      
   
50850-031705FG
3.00
  
6.39
   
50850-070608FG
1.00
  
6.39
   
50850-071011FG
75.00
  
5.09
   
50850-081706FG
1,271.00
  
4.75
   
50850-091003FG
4,664.00
  
4.76
   
50850-091810FG
3,337.00
  
4.74
   
50850-092705FG
4,694.00
  
4.73
CCS-CVS-PRIV LABEL 50 ct
      
 
05646-044236FG
30,768.00
  
1.80
 
05646-051581FG
31,896.00
  
1.80
 
05646-052134FG
1,248.00
  
1.80
 
05646-053424FG
20,688.00
  
1.80
 
5092u
0.00
  
0.00
CCS-CVS Private Label 100 ct
      
 
08162-052134FG
      
   
08162-054270FG
3,504.00
  
3.19
   
08162-052134FG - Other
31,632.00
  
3.19
CCS-LUBRICANT
      
 
24822
      
   
24822-39441
10,518.00
  
1.88
   
24822-43003
4,837.00
  
1.88
   
8003
0.00
  
0.00
 
24823
      
   
24823-39441
9,983.00
  
2.93
   
24823-43003
5,007.00
  
2.93
   
8004
0.00
  
0.00
 
80002
      
   
80002-21022FG
2.00
  
14.95
   
80002-31007FG
826.00
  
10.04
   
80002-31007T FG
9,144.00
  
7.30
   
80002-312302T FG
96.00
  
7.47
 
80005
      
   
80005-39411
21,720.00
  
0.27
   
80005 - Other
12,060.00
  
0.26
 
80025
      
   
80025-40406-10
727.00
  
3.52
   
80025 - Other
4.00
  
5.95
CCS-PRO ENERGY
      
 
80026-4476
      
   
80026-5144
7,440.00
  
10.95
   
80026-4476 - Other
3,645.00
  
11.00
CCS-PRO THERMO
      
 
80028-4553
      
   
80028-5143
10,488.00
  
10.95
   
80028-4553 - Other
3,429.00
  
11.04
CCS-RELIEF
      
 
50512
      
   
50512-038164FG
57,157.00
  
3.12
   
50512-051666FG
49,683.00
  
3.14
CCS-SOY
      
 
40028-021869u
      
   
40028-021869
3.00
  
16.95
 
40028-024185u
      
   
40028-024185
182.00
  
11.12
   
40028-024185T
108.00
  
11.34
 
CCS-Reblistered for Retail
      
   
40028-024185RT
341.00
  
10.65
CCS-Time Released Soy
      
 
40030
      
   
4002u
2.00
  
16.95
   
40030 - Other
295.00
  
9.95
 
40030-5342FG
1,537.00
  
11.63
 
40030-5342T FG
17,628.00
  
9.95
 
40030-53528201FG
87.00
  
10.57
 
40030-53528201T FG
1,752.00
  
9.95
25
 
CCS-UTI TEST STICK
      
 
50620-061812FG
1.00
  
0.00
 
50620-081236FG
457.00
  
5.96
 
50620-081236T FG
6,842.00
  
5.85
 
50620-082042FG
3,269.00
  
5.95
 
50620-082042T FG
31,608.00
  
5.93
 
50620-100830FG
6,540.00
  
5.90
 
50620-100830T FG
28,368.00
  
5.88
 
50620-101062FG
2,437.00
  
5.73
 
50620-101062T FG
32,016.00
  
5.89
 
5100-080218
145.00
  
5.81

26

Jason Pharmaceuticals, Inc.
  
Statement of Income
  
December 31, 2006
  
 
       
Revenue
      
Canadian Sales
    
23.97
  
Hi Energy Licensee
    
20,565.95
  
Jason Pharm Sales
    
77,102,471.53
  
Gross Revenues (Comm. 50%)
    
0.00
  
Sunrise Sales
    
254,958.02
  
HI Energy Discounts
    
-17,854.65
  
Medifast Discounts
    
-3,212,069.30
  
TSFL Discounts
    
-423,627.33
  
Medifast returns and allowances
    
-2,665,319.59
  
TSFL Returns and allowances
    
47,032.75
  
Net Revenue
    
71,106,181.35
  
         
Cost of Goods Sold
    
12,909,992.33
  
Direct Costs
    
4,829,481.64
  
Cost of Sales
    
17,739,473.97
  
Gross Profit
    
53,366,707.38
  
Operating
    
2,563,877.31
  
Personnel
    
2,517,684.29
  
Sales
    
32,451,493.20
  
Communications
    
1,220,911.55
  
Vehicle
    
993.33
  
Office
    
3,642,775.22
  
Other
    
3,992,806.37
  
Total SG and A
    
46,390,541.27
  
Income/(Loss) from Operations
    
6,976,166.11
  
         
Other Income and Expenses
        
Gain/Loss on sale
    
0.00
  
Interest income
    
-80,125.86
  
Other income/expense
    
-30,540.00
  
Total Other Income and Expenses
    
-110,665.86
  
Provision for income taxes:
        
Income Tax Expense
        
Provision for income taxes:
    
2,246,627.00
  
Interest Expense
    
204,015.00
  
     
2,450,642.00
  
         
Net Income/(Loss)
    
4,636,189.97
  
 
27
 

Jason Properties, Inc. (Medifast Weight Control Centers)
  
Statement of Income
  
December 31, 2006
  
 
       
Income
      
5050 · Product Sales
    
2,022,076.69
  
5075 · Program Fees
    
1,551,886.17
  
Royalty Income
    
108,378.18
  
Product Returns & Allowances
    
-236,511.60
  
Program Returns & Allowances
    
-356,963.91
  
Total Income
    
3,088,865.53
  
     
0.00
  
Expense
    
0.00
  
6200 · Cost of Goods Sold
    
361,896.11
  
TOTAL CGS
    
361,896.11
  
Direct Costs
    
136,313.26
  
Operating Costs
    
24,307.89
  
Selling, General, and Administrative
    
2,920,366.70
  
Total Expense
    
3,080,987.85
  
           
Net Ordinary Income
    
-354,018.43
  
         
Other Income/Expense
        
Other Expense
        
Interest Income
    
0.00
  
Interest Expense
    
0.00
  
Misc other Income
    
-2,509.58
  
Total Other Income (Expense)
    
-2,509.58
  
           
Net Income
    
-356,528.01
  
 
 
28

Jason Pharmaceuticals, Inc.
  
Statement of Income
  
December 31, 2005
  
 
Revenue
      
Canadian Sales
    
569.72
  
Hi Energy Licensee
    
430.07
  
Jason Pharm Sales
    
42,336,021.33
  
Gross Revenues (Comm. 50%)
    
0.00
  
Sunrise Sales
    
300,216.78
  
HI Energy Discounts
    
-41.02
  
Medifast Discounts
    
-1,969,493.42
  
TSFL Discounts
    
-484,292.32
  
Medifast and TSFL returns and allowances
    
-1,245,366.39
  
Net Revenue
    
38,938,044.75
  
         
Cost of Goods Sold
    
6,930,774.01
  
Direct Costs
    
2,814,370.93
  
Cost of Sales
    
9,745,144.94
  
Gross Profit
    
29,192,899.81
  
Operating
    
1,245,785.91
  
Personnel
    
2,296,491.95
  
Sales
    
14,852,752.39
  
Communications
    
231,325.04
  
Vehicle
    
3,878.45
  
Office
    
2,604,624.84
  
Other JP
    
1,279,426.38
  
Other
    
1,861,656.32
  
Total SG and A
    
24,375,941.28
  
Income/(Loss) from Operations
    
4,816,958.53
  
         
Other Income and Expenses
        
Gain/Loss on sale
    
0.00
  
Interest income
    
12,790.94
  
Other income/expense
    
0.00
  
Total Other Income and Expenses
    
12,790.94
  
Provision for income taxes:
        
Income Tax Expense
    
-35,000.00
  
Provision for income taxes:
    
1,169,070.71
  
Interest Expense
    
196,764.90
  
     
1,330,835.61
  
         
Net Income/(Loss)
    
3,498,913.86
  
 
 
29
 
Jason Properties, Inc. (Medifast Weight Control Centers)
  
Statement of Income
  
December 31, 2005
  
   
Income
      
5050 · Product Sales
    
849,838.26
  
5075 · Program Fees
    
772,362.35
  
5300 · Licensee Fees
    
7,838.92
  
Royalty Income
    
112,797.18
  
5250 · Taining Fees
    
750.00
  
Consulting Fees
    
0.00
  
Product Returns & Allowances
    
-142,417.15
  
Program Returns & Allowances
    
-248,109.86
  
Total Income
    
1,353,059.70
  
     
0.00
  
Expense
    
0.00
  
6200 · Cost of Goods Sold
    
247,930.17
  
TOTAL CGS
    
247,930.17
  
Direct Costs
    
168,360.93
  
Operating Costs
    
17,939.53
  
Selling, General, and Administrative
    
1,302,959.36
  
Total Expense
    
1,489,259.82
  
         
Net Ordinary Income
    
-384,130.29
  
         
Other Income/Expense
        
Other Expense
        
Interest Income
    
496.13
  
Interest Expense
    
-2,008.12
  
Misc other Income
    
25,000.00
  
Total Other Income (Expense)
    
23,488.01
  
            
Net Income
    
-360,642.28
  
 
 
30