Current Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: August 4, 2011
(Date of earliest event reported)
VITACOST.COM, INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of incorporation)
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001-34468
(Commission File No.)
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37-1333024
(IRS Employer Identification No.)
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5400 Broken Sound Blvd. NW – Suite 500
Boca Raton, Florida 33487-3521
(Address of Principal Executive Offices)
(561) 982-4180
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02. Results of Operations and Financial Condition.
On August 9, 2011, Vitacost.com, Inc. (the “Company”) issued a press release containing its results of operations and financial condition for the three months ended June 30, 2011. The press release is furnished as Exhibit 99.1 to this Form 8-K.
The information under Item 2.02 and in Exhibit 99.1 in this Form 8-K is being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information under Item 2.02 and in Exhibit 99.1 in this Form 8-K shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On August 4, 2011, the Company appointed Robert Wegner, age 43, as the Chief Operating Officer of the Company, effective immediately.
Prior to his appointment as the Company’s Chief Operating Officer, Mr. Wegner was the Director of Operations, North America at Amazon.com from 2006 through 2010 and served in other senior operational and managerial roles at Amazon from 1999 through 2006.
Employment Agreement
On August 4, 2011, in connection with Mr. Wegner’s appointment as Chief Operating Officer, the Company and Mr. Wegner entered into an employment agreement (the “Employment Agreement”), outlining the terms of Mr. Wegner’s employment with the Company. Under the terms of the Employment Agreement, Mr. Wegner will receive a base salary of $250,000 per year and an annual bonus equal to up to 50% of his base salary, which is guaranteed on a prorated basis for 2011. Subject to the approval of the award grant by the Company’s Board of Directors, the Company will issue to Mr. Wegner options to purchase 300,000 shares of the Company’s common stock. The options will vest 20% per year over five years. In addition, Mr. Wegner will receive $25,000 for relocation expenses and is eligible to participate in the Company’s standard employee benefits programs available to senior executives.
The term of the Employment Agreement is one year, renewing automatically for additional one year periods unless the Employment Agreement is terminated by Mr. Wegner or the Company, in each case by 30 days’ written notice. In addition, the Company may terminate Mr. Wegner’s employment at any time, with or without cause, and Mr. Wegner may terminate his employment with the Company on 30 days’ written notice or immediately for good reason, as defined in the Employment Agreement.
Under the Employment Agreement, in the event Mr. Wegner’s employment is terminated by the Company without cause, Mr. Wegner will be entitled to receive severance benefits equal to six months of his base salary, plus a prorated bonus for the year of termination.
If the event that Mr. Wegner’s employment is terminated by the Company without cause or by Mr. Wegner for good reason during the twelve months following a change in control of the Company, then Mr. Wegner will be entitled to receive a bonus prorated through the date of his termination and a severance amount equal to six months of his current base salary. Mr. Wegner, or his estate, is also entitled to a prorated bonus and other benefits in the event that Mr. Wegner’s employment is terminated due to his death or disability.
Mr. Wegner’s receipt of the severance benefits discussed above is contingent on Mr. Wegner signing and not revoking a release of claims against the Company. The Employment Agreement also contains post-termination non-solicitation and non-competition covenants.
The preceding summary of the Employment Agreement is qualified in its entirety by reference to the text of the Employment Agreement, which is filed with this Current Report on Form 8-K as Exhibit 10.1.
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Item 9.01
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Financial Statements and Exhibits.
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(d)
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Exhibits
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10.1 Employment Agreement between Vitacost.com, Inc. and Robert Wegner, dated August 4, 2011.
99.1 Press Release dated August 9, 2011, announcing results of operations and financial condition for the three months ended June 30, 2011.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: August 9, 2011
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VITACOST.COM, INC.
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By:
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/s/ Stephen E. Markert, Jr.
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Name:
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Stephen E. Markert, Jr.
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Title:
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Interim Chief Financial Officer
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EXHIBIT INDEX
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10.1
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Employment Agreement between Vitacost.com, Inc. and Robert Wegner, dated August 4, 2011
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99.1
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Press Release dated August 9, 2011, announcing results of operations and financial condition for the three months ended June 30, 2011.
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EMPLOYMENT, NON-COMPETITION
AND PROPRIETARY RIGHTS AGREEMENT
THIS EMPLOYMENT NON-COMPETITION AND PROPRIETARY RIGHTS AGREEMENT (the “Agreement”) is made as of this 4th day of August, 2011, by and between
Vitacost.Com, Inc
., a Delaware corporation (the “Company”), and Robert Wegner (the “Employee”).
RECITALS:
A. The Company is engaged in the sale of nutritional supplements, vitamins, and other healthcare products;
B. The Company desires to employ the Employee and Employee desires to be employed by the Company as its Chief Operating Officer (Exempt-Professional), subject to the terms, conditions and covenants hereinafter set forth; and
C. As a condition of the Company employing the Employee, Employee has agreed not to divulge to the public the Company’s confidential information, not to solicit the Company’s vendors, customers or employees and not to compete with the Company, all upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the agreements, covenants and conditions set forth herein, the Employee and the Company hereby agree as follows:
ARTICLE I
EMPLOYMENT
1.1
Employment
. The Company hereby employs, engages and hires Employee, and Employee hereby accepts employment, as its Chief Operating Officer upon the terms and conditions set forth in this Agreement. Employee is employed as and as such reports to the Company’s Chief Executive Officer, Jeffrey Horowitz. Employee’s responsibilities are outlined on the attached Exhibit A.
1.2
Activities and Duties During Employment
. Employee represents and warrants to the Company that Employee is free to accept employment with the Company and that Employee has no prior or other commitments or obligations of any kind to anyone else which would hinder or interfere with the acceptance and performance of the obligations under this Agreement.
Employee accepts the employment described in
Article I
of this Agreement and agrees to devote his exclusive full time and efforts to the faithful and diligent performance of the services described herein, including the performance of such other services and responsibilities as the Company may, from time to time, stipulate. Notwithstanding the foregoing, Employee may: (i) serve on the board of directors of other entities or serve in any capacity with any hobby, avocation, civic, educational, religious, professional or charitable activity or organization provided that such service does not materially interfere or conflict with his duties hereunder; and (ii) make and manage personal investments of his choice. Employee shall comply with and be bound by the Company’s operating policies, procedures and practices in effect from time to time during the terms of his employment.
ARTICLE II
TERM
2.1
Term
. The term of employment under this Agreement shall be one (1) year, commencing as of the date of the Agreement (such term of employment, as it may be extended or terminated, is herein referred to as the “Employment Term”), which Employment Term shall automatically renew for additional one (1) year periods unless terminated by Employee or the Company by written notice not less than thirty (30) days prior to expiration of the then-current term.
2.2
Termination
. The Employment Term and Employment of Employee may be terminated as follows:
(a)
Automatically, without the action of either party, upon the death of the Employee.
(b)
By either party upon the Total Disability of the Employee. The Employee shall be considered to have a Total Disability for purposes of this Agreement if he is unable by reason of accident or illness or mental disability to substantially perform his employment duties, and is expected to be in such condition for periods totaling six (6) months (whether or not consecutive), during any period of twelve (12) consecutive months. The determination of whether a Total Disability has occurred shall be based on the determination of a physician selected by the Company. Nothing herein shall limit the Employee’s right to receive any payments to which Employee may be entitled under any disability or employee benefit plan of the Company or under any disability or insurance policy or plan. During a period of Total Disability prior to termination hereunder, Employee shall continue to receive his full compensation (including base salary and bonus) and benefits.
(c)
By the Employee upon thirty (30) days’ written notice to the Company.
(d)
By the Company “Without Cause,” and without notice which shall mean a termination of the Employee’s employment by the Company other than pursuant to the provisions of
Section 2.2(a)
,
Section 2.2(b)
and
Section 2.2(e)
hereof.
(e)
By the Company for “Cause” (as defined below).
(f)
By the Employee with Good Reason (as defined in
Section 2.7(b)
of this Agreement).”
2.3
Cessation of Rights and Obligations: Survival of Certain Provisions
. On the date of expiration or earlier termination of the Employment Term for any reason, all of the respective rights, duties, obligations and covenants of the parties, as set forth herein, shall except as specifically provided herein to the contrary, cease and become of no further force or effect as of the date of said termination, and shall only survive as expressly provided for herein.
2.4
Cessation of Compensation
. In lieu of any severance under any severance plan that the Company may then have in effect, and subject to: (i) the receipt of a full and unconditional release from Employee; and (ii) any amounts owed by the Employee to the Company under any contract, agreement or loan document entered into after the date hereof (including, but not limited to, loans made by the Company to the Employee), the Company shall pay to the Employee, and the Employee shall be entitled to receive, the following amounts within thirty (30) days of the date of termination of his employment in full satisfaction of any obligation to Employee for termination of this Agreement:
(a)
Voluntary Termination/Termination For Cause/Expiration of Term
. Upon: (i) termination of the Employee’s employment pursuant to
Sections 2.2(c) or (e)
; or (ii) the expiration of the Employment Term because the Employee elects not to extend the Employment Term, Employee shall be entitled to receive his base salary, bonus, benefits and expense reimbursements solely through the date of termination.
(b)
Death or Total Disability
. Upon the termination of the Employment Term by reason of the death or Total Disability of the Employee, the Employee (or, in the case of death, his estate) shall be entitled to receive in a lump sum his base salary through the date of death plus ninety (90) days, or date of determination of Total Disability plus one hundred eighty (180) days (which shall include any of his unused vacation pay), unpaid bonus (if any) based on the portion of the calendar year through the date the Employment Term ends hereunder based on the annual bonus, if any, paid in the immediately preceding calendar year and expense reimbursement through the date of death or Total Disability.
(c)
Without Cause
. If Employee’s employment is terminated Without Cause, Employee will be entitled to receive payment of severance benefits equal to amount to six (6) months’ Base Salary (subject to any applicable tax withholding)
plus the portion of Employee's bonus earned if any based on the percentage of the calendar year through the date of termination of employment, multiplied by the bonus earned by the Employee in the immediate preceding calendar year.
. Payment will be made in a lump sum not more than thirty (30) days following the date of termination.
Provided that Employee makes a timely election to continue coverage under the Company’s group health plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), health insurance benefits with the same coverage (subject to Company’s right to change coverage as set forth in the last sentence of this Section) provided to Employee prior to the termination (e.g. medical, dental, optical, mental health) will be provided at the Company’s cost price to the Employee at the expense of the Employee for eighteen (18) months following the termination date, but not longer than until Employee is covered by comparable health insurance benefits from another employer or is otherwise ineligible for COBRA continuation coverage. Nothing in this
Section 2.4(c)
shall restrict the ability of the Company or its successor from changing some or all of the terms of such health insurance benefits, the cost to participants or other features of such benefits; provided, however, that all similarly situated participants are treated the same.
2.5
Business Expenses
.
(a)
Reimbursement
. The Company shall reimburse the Employee for all reasonable, ordinary, and necessary business expenses incurred by his in connection with the performance of his duties hereunder, including, but not limited to, ordinary and necessary travel expenses and entertainment expenses. The reimbursement of business expenses will be governed by the policies for the Company and the terms otherwise set forth herein.
(b)
Accounting
. The Employee shall provide the Company with an accounting of his expenses, which accounting shall clearly reflect which expenses were incurred for proper business purposes in accordance with the policies adopted by the Company and as such are reimbursable by the Company. The Employee shall provide the Company with such other supporting documentation and other substantiation of reimbursable expenses as will conform to Internal Revenue Service or other requirements. All such reimbursements shall be payable by the Company to the Employee within a reasonable time after receipt by the Company of appropriate documentation therefore.
2.6
Definitions
. For purposes of this Agreement, the following definitions will apply:
(a)
“Cause” for Employee’s termination will exist if the Company terminates Employee’s employment for any of the following reasons: (i) Employee willfully fails to substantially perform his duties hereunder (other than any such failure due to his physical or mental illness), and such willful failure is not remedied within forty five (45) days after written notice from the Company’s Chief Executive Officer, which written notice shall state that failure to remedy such conduct may results in an involuntary termination for Cause; (ii) Employee engages in willful and serious misconduct (including, but not limited to, an act of fraud or embezzlement) that has caused or is reasonably expected to result in material injury to the Company or any of its Affiliates; (iii) Employee is convicted of or enters a plea of guilty or nolo contendere to a: (A) crime that materially adversely affects his ability to perform his duties on behalf of the Company; or (B) felony; (iv) Employee engages in alcohol or substance abuse which adversely affects his ability to perform his duties; or (v) Employee willfully breaches any of his obligations hereunder or under any other agreement between herself and the Company, and such willful breach is not remedied within forty five (45) after written notice from the Company’s Chief Executive Officer, which written notice shall state that failure to remedy such conduct may result in an involuntary termination for Cause.
(b)
“Good Reason” for Employee’s termination of employment will be deemed to exist if any of the following occurs: (i) a material diminution in the Employee’s base compensation; (ii) a material diminution in the Employee’s authority, duties, or responsibilities; (iii) a material change in the executive level of the party to whom the Employee is required to report; (iv) a material change in the geographic location at which the Employee must perform the services under this Agreement; or (v) any other action or inaction that constitutes a material breach by the Company of this Agreement or any other agreement between the Company and the Employee. For purposes of these Agreements, Good Reason shall not be deemed to exist unless the Employee’s termination of employment for Good Reason occurs within one (1) year following the initial existence of one of the conditions specified in clauses (i) through (v) above, the Employee provides the Company with written notice of the existence of such condition within 90 days after the initial existence of the condition, and the Company fails to remedy the condition within 30 days after its receipt of such notice.”
(c)
“Change in Control” means any of the following:
(i) The acquisition by any person of Beneficial Ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of more than fifty percent (50%) of either (A) the then outstanding shares of common stock of the Company (the “
Outstanding Company Common Stock
”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “
Outstanding Company Voting Securities
”) (the foregoing Beneficial Ownership hereinafter being referred to as a "
Controlling Interest
"); provided, however, that for purposes of this definition, the following acquisitions shall not constitute or result in a Change of Control: (x) any acquisition by the Company; (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company; or (z) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) and (B) of subsection (iii) below; or
(ii) During any period of two (2) consecutive years (not including any period prior to the Commencement Date) individuals who constitute the Company’s board of directors on the Commencement Date (the “
Incumbent Board
”) cease for any reason to constitute at least a majority of the Company’s board of directors; provided, however, that any individual becoming a director subsequent to the Commencement Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Company’s board of directors; or
(iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each a “
Business Combination
”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (B) at least a majority of the members of the Board of Directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Company’s board of directors, providing for such Business Combination; or approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
2.7
Change in Control of the Company
. If the Employee’s employment is terminated by the Company Without Cause pursuant to
Section 2.2(d)
hereof or by the Employee for Good Reason pursuant to
Section 2.2(f)
hereof, in either case during the twelve (12) month period immediately following the Change in Control, then in lieu of any amounts otherwise payable under
Section 2.4(c)
hereof, the Employee shall be entitled to the following:
(i) payment of (a) any accrued yet unpaid base salary through the date of termination, (b) any accrued yet unpaid bonus payable on account of any calendar year ending prior to the year in which the termination occurs, (c) benefits through the date of termination, (d) reimbursement of reimbursable expenses incurred prior to the date of termination, and (e) any vacation pay on account of unused vacation accruing prior to the date of termination; and
(ii) a severance amount equal to 6 months at his then current base salary, which severance amount shall be paid in a lump sum within ten days following the termination of employment (subject to applicable withholding and employment taxes)
2.8
Compensation
. During Employee’s employment, the Company shall pay Employee such salary, bonus and other benefits and awards as set forth on
Exhibit B
.
2.9
Payment
. Except as otherwise provided herein, all compensation shall be payable in intervals in accordance with the general payroll payment practice of the Company. The compensation shall be subject to such withholdings and deductions by the Company as are required by law.
2.10
Vacation
. The Employee shall be entitled to receive personal time off (“PTO”) as outlined in the company’s Employee Handbook. Any PTO time not taken during each year of the Employment Term shall carry over to the next year subject to a maximum amount of hours. See employee manual for specific details on the companies PTO policy
2.11
Relocation. To assist the Employee in meeting the extraordinary expense of moving and relocation and as a further inducement to accept employment, the Company shall pay the Employee Twenty Five Thousand Dollars ($25,000) net of taxes. In consideration for this sum, Employee agrees to remain in the employ of the Company for a period of twelve (12) months. In the event that the Employee does not remain in the employ of the Company as a full-time employee for the full twelve-month period, the Employee will repay such relocation expenses, provided however, that the Company will prorate, on a monthly basis, the amount for repayment so that each month during with the Employee remained employed by the Company, the amount for repayment is reduced by one-twelfth (1/12) of the total reimbursement. The Company, in its sole discretion, may waive such repayment if the Employee is separated for reason beyond the Employee’s control.
2.12
Other Benefits
. Employee shall be entitled to participate in any retirement, pension, profit-sharing, stock option, health plan, insurance, disability income, incentive compensation and welfare or any other benefit plan or plans of the Company which may now or hereafter be in effect and for which the Employee is eligible or for which all senior executives in general are eligible. Notwithstanding the forgoing, the Company shall be under no obligation to institute or continue the existence of any such benefit plan.
ARTICLE III
CONFIDENTIALITY, NON-SOLICITATION, NON-COMPETE
AND QUIT CLAIM AGREEMENT
3.1
Non-Disclosure of Confidential Information
. Employee hereby acknowledges and agrees that, as of a result of the employment hereunder, Employee will acquire, develop, and use information that is not generally known to the public or to the Company’s industry, including but not limited to, certain records, phone locations, documentation, software programs, price lists, customer lists, contract prices for the Company’s services, business plans and prospects of the Company, equipment configurations, ledgers and general information, employee records, mailing lists, manufacturing techniques, product formulations, accounts receivable and payable ledgers, financial and other records of the Company or its affiliates, and other similar matters, as well as any information disclosed to the Company by any third party under which the Company has a confidentiality obligation to the third party (all such information pertaining to the Company, its affiliates or disclosed to Company under confidentiality from third parties being hereinafter referred to as “Confidential Information”). Employee further acknowledges and agrees that the Confidential Information is of great value to the Company and its affiliates and that the restrictions and agreements contained in this Agreement are reasonably necessary to protect the Confidential Information and the goodwill of the Company. Accordingly, Employee hereby agrees that:
(a)
Employee will not, while employed by the Company or for two years thereafter, directly or indirectly, except in connection with Employee’s performance of the duties under this Agreement, or as otherwise authorized in writing by the Company for the benefit of the Company or its “Affiliates” (as hereinafter defined), divulge to any person, firm, corporation, limited liability company, or organization, other than the Company or its Affiliates (hereinafter referred to as “Third Parties”), or use or cause or authorize any Third Parties to use, the Confidential Information, except as required by law; and
(b)
Upon the termination of Employee’s employment for any reason whatsoever, Employee shall deliver or cause to be delivered to the Company any and all Confidential Information, including drawings, notebooks, notes, records, keys, disks data and other documents and materials belonging to the Company or its Affiliates which is in his possession or under his control relating to the Company or its Affiliates or abstracts therefrom, regardless of the medium upon which it is stored, and will deliver to the Company upon such termination of employment any other property of the Company or its Affiliates which is in his possession or control.
3.2
Non-Solicitation Covenant
. Employee hereby covenants and agrees that while employed by the Company and for a period of two (2) years following the termination of the Employee’s employment with the Company for any reason, Employee shall not: (i) directly or indirectly, endeavor to entice away from the Company or its Affiliates any person, firm, corporation, limited liability company or other entity that was a customer of the Company at any time while Employee was an employee of the Company or its Affiliates or who is a “prospective vendor or customer” of the Company; or (ii) induce, attempt to induce or hire any employee (or any person who was an employee during the year preceding the date of any solicitation) of the Company or its Affiliates to leave the employ of the Company or its Affiliates or to otherwise perform services directly or indirectly for others, or in any way interfere with the relationship between any such employee and the Company or its Affiliates. For purposes hereof, “prospective vendor or customer” shall mean any person or entity which has been solicited for business by Employee or any officer or other employee of the Company or its Affiliates at any time during Employee’s employment.
3.3
Non-Competition Covenant
. Employee acknowledges that the covenants set forth in this
Section 3.3
are reasonable. Employee also acknowledges that the enforcement of the covenants set forth in this
Section 3.3
will not preclude Employee from being gainfully employed in such manner and to the extent as to provide a standard of living for herself, the members of his family and the others dependent upon him of at least the level to which he and they have become accustomed and may expect. Employee hereby agrees that he shall not, during his employment and for a period of one (1) year after the end of his employment directly or indirectly, engage in any proprietorship, partnership, firms trust, company, limited liability company or other entity, other than the Company (whether as owner, partner, trustee, beneficiary, stockholder, member, officer, director, employee, independent contractor, agent, servant, consultant, manager, lessor, lessee, or otherwise) that competes with the Company in the Business of the Company in the Restricted Territory (as defined herein), other than acquiring an ownership interest in a company listed on a recognized Stock exchange in an amount which does not exceed five percent (5%) of the outstanding Stock of such corporation. For purposes of this Agreement: (i) the term “Business of the Company” shall include all business activities and ventures related to the sale of nutritional supplements, online and/or mail order sales vitamins and other healthcare products in which the Company is engaged, and all other businesses in which the Company subsequently is engaged in prior to, and on the date of, termination of Employee’s employment; and (ii) the term “Restricted Territory” means any state in the United States of America.
3.4
Remedies
.
(a)
Injunctive Relief
. Employee expressly acknowledges and agrees that a violation of any of the provisions of
Sections 3.1, 3.2 or 3.3
could cause immediate and irreparable harm, loss and damage to the Company not adequately compensable by a monetary award. Employee further acknowledges and agrees that the time periods and territorial areas provided for herein are reasonable in order to adequately protect the Business of the Company, the enjoyment of the Confidential Information and the goodwill of the Company. Without limiting any of the other remedies available to the Company at law or in equity, or the Company’s right or ability to collect money damages, Employee agrees that any actual or threatened violation of any of the provisions of
Sections 3.1, 3.2, or 3.3
may be immediately restrained or enjoined by any court of competent jurisdiction, injunction may be issued in any court of competent jurisdiction, without notice and without bond. Notwithstanding anything to the contrary contained in this Agreement, the provisions of this
Article III
shall survive the termination of Employee’s employment.
(b)
Enforcement
: It is the desire of the parties that the provisions of
Sections 3.1, 3.2, or 3.3
be enforced to the fullest extent permissible under the laws and public policies in each jurisdiction in which enforcement might be sought. Accordingly, if any particular portion of
Sections 3.1, 3.2 or 3.3
shall ever be adjudicated as invalid or unenforceable, or if the application thereof to any party or circumstance shall be adjudicated to be prohibited by or invalidated by such laws or public policies, such section or sections shall be: (i) deemed amended to delete there from such portions so adjudicated; or (ii) modified as determined appropriate by such a court, such deletions or modifications to apply only with respect to the operation of such section or sections in the particular jurisdictions so adjudicating on the parties and under the circumstances as to which so adjudicated.
(c)
Legal Fees
. In any action to enforce the terms of this Agreement, the prevailing party shall be entitled to reimbursement from the other party of reasonable legal fees and costs.
3.5
Company
. All references to the Company in this
Article III
shall include “Affiliates” of the Company, as that term is construed under Rule 405 of the Securities Act of 1933, as amended. Company acknowledges that, as of the date of this Agreement, the only Affiliate is Nutraceutical Sciences Institute.
ARTICLE IV
MISCELLANEOUS
4.1
Notices
. All notices or other communications required or permitted hereunder shall be in writing addressed to the last known address of the Party entitled to notice and shall be deemed given, delivered and received: (a) when delivered, if delivered personally; (b) four (4) days after mailing, when sent by registered or certified mail, return receipt requested and postage prepaid; (c) one (1) business day after delivery to a private courier service, when delivered to a private courier service providing documented overnight service; and (d) on the date of delivery if delivered by telecopy, receipt confirmed, provided that a confirmation copy is sent on the next business day by first class mail, postage prepaid, in each case addressed as follows:
Any party may change its address for purposes of this paragraph by giving the other party written notice of the new address in the manner set forth above.
4.2
Entire Agreement; Amendments, Etc
. This Agreement contains the entire agreement and understanding of the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof. No modification, amendment, waiver or alteration of this Agreement or any provision or term hereof shall in any event be effective unless the same shall be in writing, executed by both parties hereto, and any waiver so given shall be effective only in the specific instance and for the specific purpose for which given.
4.3
Benefit
. This Agreement shall be binding upon, and inure to the benefit of, and shall be enforceable by, the heirs, successors, legal representatives and permitted assignees of Employee and the successors, assignees and transferees of the Company. This Agreement or any right or interest hereunder may not be assigned by Employee without the prior written consent of the Company.
4.4
No Waiver
. No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder or pursuant hereto shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or pursuant thereto.
4.5
Severability
. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law but, if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provision of this Agreement. If any part of any covenant is unenforceable or the making of any covenant hereunder is unenforceable, the parties hereto agree, and it is their desire, that the court shall substitute a judicially enforceable limitation in its place, and that as so modified this Agreement, as so modified, shall be binding upon the parties as if originally set forth herein.
4.6
Compliance and Headings
. Time is of the essence of this Agreement. The headings in this Agreement are intended to be for convenience and reference only, and shall not define or limit the scope, extent or intent or otherwise affect the meaning of any portion hereof.
4.7
Arbitration
. If there is any dispute between the parties concerning any matter relating to this Agreement, the exclusive basis for adjudication of this Agreement (except with respect to the performance of the covenants and obligations as set forth in
Article III
above) shall be by arbitration as detailed herein. Either party may submit the dispute to binding arbitration. Any such arbitration proceeding will be conducted in Palm Beach, Florida and except as otherwise provided in this Agreement, will be conducted under the auspices of JAMS/Mediation, Inc., in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall allow such discovery as the arbitrator determines appropriate under the circumstances. The arbitrator shall determine which party, if either, prevailed and shall award the prevailing party its costs. Each party will bear its respective attorneys’ fees. The award and decision of the arbitrator shall be conclusive and binding on all parties to this Agreement and judgment on the award may be entered in any court of competent jurisdiction. The parties acknowledge and agree that any arbitration award may be enforced against either or both of them in a court of competent jurisdiction and each waives any right to contest the validity or enforceability of such award. The parties further agree to be bound by the provisions of any statute of limitations which would be applicable in a court of law to the controversy or claim which is the subject of any arbitration proceeding initiated under the Agreement. The parties further agree that they are entitled in any arbitration proceeding to the entry of an order, by a court of competent jurisdiction pursuant to an opinion of the arbitrator, for specific performance of any of the requirements of this Agreement.
In any action to enforce any of the provisions of
Article III
hereof, the action shall be litigated in the state or federal courts situated in Palm Beach County, to which jurisdiction and venue all parties consent. Each party hereby waives its right to trial by jury with respect to such action and agrees that the prevailing party such action shall be entitled to reimbursement from the other party of its legal fees and costs incurred in connection with such actions. Company shall be entitled to injunctive relief, without the necessity of posting bond to remedy any breach of any of the terms of
Article III
of this Agreement by Employee.
4.8
Governing Law
. The parties agree that this Agreement shall be governed by, interpreted and construed in accordance with the laws of the State of Florida.
4.9
Counterparts
. This Agreement may be executed in one or more counterparts, whether by original, photocopy, facsimile or e-mail attachment in PDF format, each of which will be deemed an original and all of which together will constitute one and the same instrument.
4.10
Recitals
. The Recitals set forth above are hereby incorporated in and made a part of this Agreement by this reference.
4.11
Indemnification
. The Company shall indemnify and hold Employee harmless to the fullest extent permitted by law and under the Articles and bylaws of the Company as, to and from any and all costs, expenses (including reasonable attorneys’ fees, which shall be paid in advance by the Company, subject to recoupment in accordance with applicable law) or damages incurred by Employee as a result of any claim, suit, action or judgment arising out of the activities of the Company or its Affiliates or the Employee’s activities as an employee, officer or director of the Company or any related company; provided, however that the Employee shall not be entitled to indemnification hereunder to the extent the damages are the result of actions or omissions which have been finally adjudicated by a court of competent jurisdiction to constitute gross negligence or willful or intentional misconduct by the Employee. This provision shall survive the termination of this Agreement.
4.12
Survival
. Employee’s obligations under
Article III
hereof shall survive any termination of this Agreement.
|
COMPANY:
|
EMPLOYEE:
|
||||
|
Vitacost.com, Inc
.
|
|||||
|
By:
|
/s/ Jeffrey J. Horowitz
|
/s/ Robert Wegner
|
|||
|
Jeffrey J. Horowitz
|
Robert Wegner
|
||||
|
Chief Executive Officer
|
|||||
|
Employee Owned Inventions:
|
none
|
||||
Exhibit A
As may be determined by the Company.
Exhibit B
Salary as of August 4, 2011 is $250,000 per annum ($4,807.70 per week).
Bonus equal to 50% of base salary, guaranteed and pro-rated in 2011.
A recommendation will be made to the Board of Directors to grant you 300,000 incentive stock options which shall vest over 5 years at 20% per year. Such grant shall only be made (a) upon the approval of our 2011 Incentive Stock Option Plan by our stockholders at the Special Meeting of Stockholders to be held September 7, 2011 and (b) the approval of such grant by our Board of Directors.
14
Investor Contact:
Vitacost.com
Kathleen Reed
Director of Investor Relations
561.982.4180
ICR, Inc.
John Mills
Senior Managing Director
310.954.1105
Vitacost.com Announces Results for Second Quarter 2011 and Provides Update on Long-term Sales Growth Initiatives
Names Robert Wegner as Chief Operating Officer
BOCA RATON, Fla., August 9, 2011 –Vitacost.com, Inc. (NASDAQ:VITC), a leading online retailer and direct marketer of health and wellness products, reported financial results for the second quarter of 2011 and provided updates to its long-term sales growth initiatives previously outlined on June 16
th
, 2011 in conjunction with the conclusion of the Strategic Review. In addition, the Company announced that it has named Robert “Bert” Wegner as Chief Operating Officer. Mr. Wegner has over 20 years of logistical experience and was formerly the Director of Operations, North America at Amazon.com from 2006 through 2010. He served in other senior operational and managerial roles at Amazon from 1999 through 2006. His initial responsibilities include fulfillment, manufacturing and customer service.
"We are making progress on our initiatives to drive the top-line as we look to grow sales at a faster pace in order to leverage our fixed cost structure," said Jeffrey J. Horowitz, the Company's Chief Executive Officer. “We are thrilled that Bert has joined the Vitacost.com team as he will be instrumental in helping manage the business towards long-term profitable growth.”
Sales Growth Initiatives
The Company provided additional details on its long-term sales growth strategy. Key initiatives include:
|
|
·
|
Expand Customer Base: New customer additions are a top priority in 2011. The Company believes that due to the high number of repeat purchases made by existing customers, an expanded base will create long-term value. To that end, the Company has extended its reach on the internet beyond its
www.vitacost.com
website and is now selling products through online marketplaces and testing new marketing vehicles such as daily deal sites and offline magazines. In the second quarter of 2011, the Company added 157,200 new customers bringing total active customers to 1.2 million at June 30, 2011, up 10.2% year-over-year.
|
|
|
·
|
Expand Product Offerings: The Company has increased the number of new proprietary product launches in 2011 from 100 previously announced to a new goal of 150 by year-end. An estimated 135 of these are scheduled to be launched under the Vitacost VMHS label. Year-to-date, the Company has launched approximately 88 new proprietary products, 40 of which were launched in the second quarter of 2011. On the third party side, the Company added 2,165 new SKUs in the second quarter of 2011, with 1,056 new products in its core VMHS category. The Company also continues to focus on faster growing categories such as personal care, sports nutrition and food.
|
|
|
·
|
The Vitacost Brand: The process of converting the NSI proprietary product line over to the new Vitacost label continued in the second quarter of 2011 with the majority of products on track to be converted over by year-end.
|
|
|
·
|
Elimination of Virtual Inventory: During the second quarter of 2011, the Company completed the process of bringing more than 12,000 former virtual inventory SKUs in-house. Sales of these products have accelerated, increasing over 170% on a monthly basis since the date of transition.
|
Second Quarter 2011 Results
For the second quarter of 2011, the Company reported net sales of $65.9 million, a 22.1% increase from net sales of $54.0 million for the second quarter of 2010. Due to the elimination of the loyalty membership program in the fourth quarter of 2010, advertising and fees earned from affiliates was negligible in the second quarter of 2011, compared to $0.2 million in the second quarter of 2010. Excluding these amounts, sales of third party product increased 36.5% year-over-year to $47.8 million. Sales growth of the Company’s proprietary products continued to improve sequentially and turned positive in the quarter with sales increasing 8.1% year-over-year to $16.2 million. This was the first positive growth in proprietary products in four quarters. Revenue billed from freight was down 50.2% compared to the second quarter of 2010 to $1.9 million as the Company offered ‘free shipping’ at an order value of $49 or higher during all three months of the 2011 quarter. Free shipping was not offered in the second quarter of 2010. The increase in net sales was primarily the result of an increase in the customer base and the number of shipped orders as customers responded positively to the Company’s promotional offers and new product offerings in both proprietary and third-party brands.
Reported gross profit was $14.5 million, in the second quarter of 2011, up 3.6% year-over-year. Included in the second quarter of 2011 was a $0.5 million credit from the Company’s shipping provider. Excluding this amount, gross profit increased 0.4% year-over-year, with gross margin of 21.3% in the second quarter of 2011 compared to 25.9% in the second quarter of 2010. Third party sales accounted for 74.7% of total product sales in the second quarter of 2011 compared to 70.0% in the second quarter of 2010. Gross margin declined sequentially from the 24.1% reported in the first quarter of 2011 due to increased product promotions and decreased margins on freight as ‘free shipping’ was offered for two months in the first quarter of 2011 compared to a full three month period in the second quarter. Product mix remained relatively consistent with the first quarter and did not have a material impact on the sequential change in gross margin. Going forward, the Company expects to see a similar product mix, as third party product offerings continue to outpace new proprietary product launches and due to a continuation of higher third party product growth rates. ‘Free shipping’ and other promotional offers are expected to continue for the remainder of 2011.
Fulfillment expense was $5.1 million in the second quarter of 2011 compared to $4.4 million in the same period last year. As a percent of sales, fulfillment expense decreased 40 basis points year-over-year to 7.7% compared to 8.1% in the same period last year. The year-over-year decrease on a percentage basis, was due to operating duplicate distribution centers in Las Vegas in the early part of the year ago quarter to ensure there were no disruptions to service levels as the Company transitioned over to its new Las Vegas facility. Fulfillment expense as a percentage of sales was flat sequentially with the first quarter of 2011. The Company continues to focus on reducing special handling and packaging costs and is improving efficiencies at its distribution centers with total labor costs flat with first quarter levels despite increased sales volume. The Company expects to see improvement in fulfillment expense by the end of the year.
For the second quarter of 2011, sales and marketing expense increased to $5.2 million from $5.1 million for the second quarter of 2010. While driving a 22.1% year-over-year increase in sales, sales and marketing expense as a percentage of sales decreased to 7.9% for the second quarter of 2011 from 9.5% in the second quarter of 2010 due to improved advertising efficiency. Savings from decreased spending on catalogs more than offset increases in internet advertising and decreased levels of co-op revenue. Sales and marketing expense also increased $0.1 million from the first quarter of 2011 but decreased as a percentage of sales from the 8.1% reported in the March quarter. The Company expects spending on catalogs to continue to be down for the remainder of 2011 as savings are reinvested in on-line and other media to further increase the focus of the business around serving on-line customers.
Total reported general and administrative expense was $7.8 million, up $1.4 million from the $6.4 million reported in the second quarter of 2010. Included in the second quarter of 2011 were $1.1 million in expenses primarily related to the Strategic Review and the Company’s Equity Capitalization issue. Included in the year ago quarter were $1.4 million in expenses associated with the proxy solicitation. The Company expects these charges to decrease going forward as the Board of Directors concluded the Strategic Review in June 2011 and the Company has made significant progress in rectifying its Equity Capitalization issue.
Excluding the expenses mentioned above in both quarters, general and administrative expense was $6.7 million in the second quarter of 2011, up $1.6 million compared to $5.1 million in the second quarter of 2010. The year-over-year increase was primarily due to increased employee expenses of $1.3 million and increased credit card fees of $0.2 million due to higher sales. Increased payroll expenses were due to additional hires in critical areas such as IT, Finance and Business Intelligence. However, general and administrative expenses declined $0.2 million sequentially from the $6.9 million reported in the first quarter of 2011, excluding $0.6 million in expenses in the first quarter associated with the Equity Capitalization issue and the Strategic Review. The sequential decline was primarily attributable to decreased bad debt expense and credit card charge backs.
The Company reported an operating loss of $3.7 million for the second quarter of 2011 compared to an operating loss of $2.0 million in the same period a year ago. For the second quarter of 2011, the Company reported $44,048 in tax expense, compared to a tax benefit of $692,060 in the second quarter of 2010. During the second quarter of 2011, the Company recorded an additional $1.4 million valuation allowance on its deferred tax assets.
For the second quarter of 2011, the Company reported a net loss of $3.7 million or ($0.13) per share calculated on a weighted average basic share count of 27.8 million shares compared to a net loss of $1.4 million or ($0.05) per share for the second quarter of 2010 calculated on a weighted average basic share count of 27.7 million shares outstanding. The Company is using basic shares outstanding in the second quarter of 2011 and second quarter of 2010 calculations as the inclusion of common stock equivalents in the calculation during both quarters was anti-dilutive. Excluding the expenses previously mentioned in the discussion on gross profit and general and administrative expense, earnings per share were ($0.11) in the second quarter of 2011 compared to ($0.02) per share in the second quarter of 2010.
Excluding the expenses previously mentioned in the discussion on gross profit and general and administrative expenses, adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and related non-cash compensation expense) for the second quarter of 2011 was ($1.2) million, compared to $0.9 million in the previous year.
Balance Sheet/Cash Flow Highlights
The Company had cash, cash equivalents, and securities available for sale of $16.3 million as of June 30, 2011 compared to $19.7 million as of March 31, 2011 and compared to $22.9 million as of December 31, 2010. The Company has revised its December 31, 2010 and its March 31, 2011 cash and cash equivalents balances to include outstanding checks as opposed to classifying them as a component of accounts payable. The effect of this revision on the Company's consolidated balance sheets was to decrease cash and cash equivalents and accounts payable at December 31, 2010 and March 31, 2011 by approximately $2.6 million and $3.6 million, respectively. The effect of the revision on the Company’s consolidated statements of cash flows was to decrease (increase) net cash provided by (used in) operating activities by $2.6 million and ($0.9 million) for the year ended December 31, 2010 and the three months ended March 31, 2011, respectively. This revision, which the Company has concluded is not material, and which will be made prospectively, does not impact the Company’s operating (loss) income, net (loss) income, or working capital for any prior period.
Cash balances declined in the quarter primarily as a result of the $3.5 million Derivative Settlement payment previously disclosed in a press release dated May 27, 2011. The Company reported accounts receivable of $1.5 million and inventory of $31.9 million compared to balances of $1.3 million and $28.5 million, respectively as of March 31, 2011 and compared to balances of $0.4 million and $29.8 million, respectively as of December 31, 2010. Cash flow from operations for the six-months ended June 30, 2011 was a use of $4.4 million compared to a source of $7.4 million in the prior year six month period. The current year period reflects the $3.5 million Derivative Settlement payment mentioned above.
E-Commerce Metrics
A copy of historical e-commerce metrics is available on the Company's website at http://investor.vitacost.com/events.cfm.
Conference Call Information
The Company will host a conference call to discuss these results and will provide additional comments and details at that time. Participating on the call will be Jeff Horowitz, the Company’s Chief Executive Officer and Steve Markert, interim Chief Financial Officer.
The conference call is scheduled to begin at 10:00 a.m. EDT on August 9, 2011. The call will be broadcast live over the Internet hosted on the Investor Relations section of Vitacost.com's website at http://investor.vitacost.com/events.cfm, and will be archived online through August 31, 2011. In addition, you may dial (877) 407-0784 to listen to the live broadcast.
A telephonic playback will be available from 1:00 p.m. EDT, August 9, 2011, through August 31, 2011. Participants can dial (877) 870-5176 to hear the playback. The pass code is 376432.
About Vitacost.com, Inc.
Vitacost.com, Inc. (NASDAQ: VITC) is a leading online retailer and direct marketer of health and wellness products, including dietary supplements such as vitamins, minerals, herbs or other botanicals, amino acids and metabolites, as well as cosmetics, organic body and personal care products, sports nutrition and health foods. Vitacost.com, Inc. sells these products directly to consumers through its website,
www.vitacost.com
. Vitacost.com, Inc. strives to offer its customers the broadest product selection of healthy living products, while providing superior customer service and timely and accurate delivery.
Forward-Looking Statements
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements made herein, which include statements regarding the Company’s future growth prospects, future financial performance, expectations regarding improvements in fulfillment expenses, promotional and product introduction plans, plans to increase brand awareness, sales expectations, international expansion plans, expectations regarding advertising expenditures, customer acquisition strategy and expectations regarding the pace of customer growth, plans to launch new SKUs and plans to move virtual inventory in-house to accelerate order fulfillment and delivery time, involve known and unknown risks and uncertainties, which may cause the Company’s actual results in current or future periods to differ materially from those anticipated or projected herein. Those risks and uncertainties include, among other things, the current global economic downturn or recession; difficulty expanding the Company’s manufacturing and distribution facilities; significant competition in the Company’s industry; unfavorable publicity or consumer perception of the Company’s products on the Internet; the incurrence of material product liability and product recall costs; inability to defend intellectual property claims; costs of compliance and the Company’s failure to comply with government regulations; the Company’s failure to keep pace with the demands of customers for new products; disruptions in the Company’s manufacturing system, including information technology systems, or losses of manufacturing certifications; or the lack of long-term experience with human consumption of some of the Company’s products with innovative ingredients. Those and other risks are more fully described in the Company’s filings with the Securities and Exchange Commission, including the Company’s Form 10-K for the full year ended December 31, 2010 and the Company’s Form 10-Q for the quarter ended March 31, 2011.
Non-GAAP Measures
To supplement the consolidated financial statements presented in accordance with GAAP, Vitacost.com uses the non-GAAP measure of adjusted EBITDA, defined as earnings before interest, taxes, depreciation, and amortization of intangible assets. To adjust for the impact of certain matters in 2010 and 2011, the Company has further adjusted the EBITDA calculation to exclude the impact of stock-based compensation expense and expenses from certain legal actions, settlements and related costs, severance costs, and certain other charges and credits. These non-GAAP measures are provided to enhance the user’s overall understanding of the Company’s current financial performance. Management believes that adjusted EBITDA provides useful information to the Company and to investors by excluding certain items that may not be indicative of the Company’s core operating results. However, adjusted EBITDA should not be considered in isolation, or as a substitute for, or as superior to, net income/loss, cash flows, or other consolidated income/loss or cash flow data prepared in accordance with GAAP, or as a measure of the Company’s profitability or liquidity. Although adjusted EBITDA is frequently used as a measure of operating performance, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. Operating income (loss) is the closest financial measure prepared by the Company in accordance with GAAP in terms of comparability to adjusted EBITDA. Attached at the end of this release is a reconciliation of reported operating income (loss) determined under GAAP to the presentation of adjusted EBITDA.
VITACOST.COM, INC. BALANCE SHEET
June 30, 2011 and December 31, 2010
|
June 30, 2011
|
||||||||
|
Assets
|
(unaudited)
|
December 31, 2010
|
||||||
|
Current Assets
|
||||||||
|
Cash and cash equivalents
|
$ | 16,282,051 | $ | 11,951,643 | ||||
|
Securities available for sale
|
- | 10,912,392 | ||||||
|
Accounts receivable
|
1,467,237 | 440,033 | ||||||
|
Other receivables
|
243,413 | 1,087,311 | ||||||
|
Inventory, net
|
31,922,727 | 29,827,929 | ||||||
|
Prepaid expenses
|
1,941,907 | 1,361,230 | ||||||
|
Deferred income taxes
|
- | - | ||||||
|
Other assets
|
2,661,045 | 3,553,089 | ||||||
|
Total current assets
|
54,518,380 | 59,133,627 | ||||||
|
Property and equipment, net
|
36,922,325 | 38,011,314 | ||||||
|
Goodwill
|
2,200,000 | 2,200,000 | ||||||
|
Intangible assets, net
|
2,698 | 4,946 | ||||||
|
Deposits
|
271,254 | 114,308 | ||||||
|
Deferred tax asset
|
- | - | ||||||
| 2,473,952 | 2,319,254 | |||||||
|
Total assets
|
$ | 93,914,657 | $ | 99,464,195 | ||||
|
Liability and Stockholders' Equity
|
||||||||
|
Current Liabilities
|
||||||||
|
Line of credit
|
$ | - | $ | - | ||||
|
Current maturities of notes payable
|
- | 58,888 | ||||||
|
Current maturities of capital lease obligations
|
- | - | ||||||
|
Accounts payable
|
26,278,433 | 23,892,044 | ||||||
|
Deferred revenue
|
2,907,032 | 2,134,305 | ||||||
|
Accrued expenses
|
7,531,698 | 10,671,865 | ||||||
|
Income taxes payable
|
- | - | ||||||
|
Total current liabilities
|
36,717,163 | 36,757,102 | ||||||
|
Notes payable, less current maturities
|
- | - | ||||||
|
Interest rate swap liability
|
- | - | ||||||
|
Deferred tax liability
|
547,678 | 521,389 | ||||||
|
Total liabilities
|
$ | 37,264,841 | $ | 37,278,491 | ||||
|
Commitments and Contingencies
|
||||||||
|
Stockholders' Equity
|
||||||||
|
Preferred stock, par value $.00001 per share; authorized 25,000,000;
|
||||||||
|
no shares issued and outstanding at June 30, 2011,
|
||||||||
|
and December 31, 2010, respectively
|
||||||||
|
Common stock, par value $.00001 per share; authorized 100,000,000;
|
||||||||
|
27,790,953, and 27,780,453 shares issued and outstanding at
|
||||||||
|
June 30, 2011, and December 31, 2010, respectively
|
278 | 278 | ||||||
|
Additional paid-in capital
|
75,196,017 | 74,829,972 | ||||||
|
Accumulated other comprehensive loss
|
- | (20,207 | ) | |||||
|
Retained earnings/(Accumulated Deficit)
|
(18,546,479 | ) | (12,624,339 | ) | ||||
|
Total stockholders' equity
|
56,649,816 | 62,185,704 | ||||||
|
Total liabilities and stockholders' equity
|
$ | 93,914,657 | $ | 99,464,195 | ||||
|
Source: Vitacost.com
|
||||||||
VITACOST.COM, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – For the Three Months Ended June 30, 2011 and June 30, 2010
Vitacost.com, Inc.
Income Statement ($ in 000s)
(Unaudited)
|
Quarter Ended
|
||||||||||||||||||||||||
|
June 30, 2011
|
June 30, 2010
|
|||||||||||||||||||||||
|
As
|
Excluding
|
As
|
Excluding
|
|||||||||||||||||||||
|
Reported
|
Adjustments
|
Adjustments
|
Reported
|
Adjustments
|
Adjustments
|
|||||||||||||||||||
|
Net Sales
|
$ | 65,891.2 | $ | 65,891.2 | $ | 53,951.9 | $ | 53,951.9 | ||||||||||||||||
|
Cost of Goods Sold
|
51,418.6 | (454.0 | ) | 51,872.6 | 39,983.1 | 39,983.1 | ||||||||||||||||||
|
Gross Profit
|
14,472.6 | 14,018.6 | 13,968.8 | 13,968.8 | ||||||||||||||||||||
|
Fulfillment
|
5,094.7 | 5,094.7 | 4,394.8 | 4,394.8 | ||||||||||||||||||||
|
Sales & Marketing
|
5,236.9 | 5,236.9 | 5,131.0 | 5,131.0 | ||||||||||||||||||||
|
General & Administrative
|
7,807.5 | 1,116.7 | 6,690.8 | 6,443.0 | 1,358.5 | 5,084.4 | ||||||||||||||||||
|
Total Operating Expenses
|
18,139.2 | 17,022.5 | 15,968.8 | 14,610.3 | ||||||||||||||||||||
|
Operating Income
|
(3,666.5 | ) | (3,003.8 | ) | (2,000.0 | ) | (641.5 | ) | ||||||||||||||||
|
Interest Income
|
7.7 | 7.7 | 32.4 | 32.4 | ||||||||||||||||||||
|
Interest Expense
|
(0.2 | ) | (0.2 | ) | (150.1 | ) | (150.1 | ) | ||||||||||||||||
|
Other Income (Expense)
|
3.5 | 3.5 | 4.5 | 4.5 | ||||||||||||||||||||
|
Income (loss) before taxes
|
(3,655.6 | ) | (2,992.9 | ) | (2,113.3 | ) | (754.8 | ) | ||||||||||||||||
|
Income tax (expense) benefit
|
(44.0 | ) | - | (44.0 | ) | 692.1 | 444.9 | 247.2 | ||||||||||||||||
|
Net Income (loss)
|
$ | (3,699.6 | ) | $ | (3,037.0 | ) | $ | (1,421.3 | ) | $ | (507.6 | ) | ||||||||||||
|
EPS
|
||||||||||||||||||||||||
|
Basic
|
$ | (0.13 | ) | $ | (0.11 | ) | $ | (0.05 | ) | $ | (0.02 | ) | ||||||||||||
|
Fully Diluted*
|
$ | (0.13 | ) | $ | (0.11 | ) | $ | (0.05 | ) | $ | (0.02 | ) | ||||||||||||
|
Basic Shares Outstanding
|
27,790.5 | 27,790.5 | 27,730.7 | 27,730.7 | ||||||||||||||||||||
|
Fully Diluted Shares Outstanding*
|
27,790.5 | 27,790.5 | 27,730.7 | 27,730.7 | ||||||||||||||||||||
|
*The inclusion of common stock equivalents in the calculation of dilluted earnings per share during the periods was anti-dilutive.
|
||||||||||||||||||||||||
|
Source: Vitacost.com
|
||||||||||||||||||||||||
QUARTERLY NET SALES BY PRODUCT LINE – For the Three and Six Months Ended June 30, 2011 and June 30, 2010
VITACOST.COM, INC. RECONCILIATION OF GAAP OPERATING INCOME TO ADJUSTED EBITDA
To supplement the consolidated financial statements presented in accordance with GAAP, Vitacost.com uses the non-GAAP measure of adjusted EBITDA, defined as earnings before interest, taxes, depreciation, and amortization of intangible assets. To adjust for the impact of certain matters in 2010 and 2011, the Company has further adjusted the EBITDA calculation to exclude the impact of stock-based compensation expense and expenses from certain legal actions, settlements and related costs, severance costs, and certain other charges and credits. These non-GAAP measures are provided to enhance the user’s overall understanding of the Company’s current financial performance. Management believes that adjusted EBITDA provides useful information to the Company and to investors by excluding certain items that may not be indicative of the Company’s core operating results. However, adjusted EBITDA should not be considered in isolation, or as a substitute for, or as superior to, net income/loss, cash flows, or other consolidated income/loss or cash flow data prepared in accordance with GAAP, or as a measure of the Company’s profitability or liquidity. Although adjusted EBITDA is frequently used as a measure of operating performance, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. Operating income (loss) is the closest financial measure prepared by the Company in accordance with GAAP in terms of comparability to adjusted EBITDA. Below is a reconciliation of reported operating income (loss) determined under GAAP to the presentation of adjusted EBITDA.
Adjusted EBITDA Calculation ($ in 000s)
(Unaudited)
| 2Q11 | 2Q10 | |||||||
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Reported operating (loss) income
|
(3,666.5 | ) | (2,000.0 | ) | ||||
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Depreciation and amortization
|
1,533.2 | 1,322.8 | ||||||
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Stock Based Compensation Expense
|
243.3 | 193.0 | ||||||
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Adjusted EBITDA
|
(1,890.0 | ) | (484.2 | ) | ||||
|
Adjustments:
|
||||||||
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- Credit from shipping provider
|
(454.0 | ) | ||||||
|
- Additional proxy/legal/consulting expenses
|
1,116.7 | 1,358.5 | ||||||
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Total
|
662.7 | 1,358.5 | ||||||
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Adjusted EBITDA
|
$ | (1,227.4 | ) | $ | 874.3 | |||
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Source: Vitacost.com
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