What changed in this filing

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Item 1. Business

2022-02-23 compared with 2021-02-26 · 146 added, 149 removed, 246 unchanged (55% of the section changed)

Medifast, Inc.

(“Medifast,” the “Company,” “we” or “us”) is the global company behind one of the fastest-growing health and wellness communities called OPTA VIA ® , which offers Lifelong Transformation, One Healthy Habit at a Time ® .

Reflecting the success of our holistic approach to health and wellness, we have consistently grown revenue over the past four years.

Of equal importance, we expect our differentiated model to deliver long-term growth in the foreseeable future.

Medifast has created a new business model by combining the most powerful aspects of direct selling, while eliminating those dimensions that have typically challenged other companies.

(“Medifast,” the “Company,” “we” or “us”) is the global company behind one of the fastest-growing health and wellness communities, OPTA VIA ® , which offers Lifelong Transformation, One Healthy Habit at a Time ® .

Reflecting the success of our holistic approach to health and wellness, we have consistently grown revenue over the past five years.

Of equal importance, we expect our differentiated direct-to-consumer business model to continue to deliver growth in the foreseeable future.

Medifast has redefined direct selling by combining the best aspects of the model, while eliminating those dimensions that have typically challenged other companies.

Medifast is often compared to diet and weight loss-only companies or to multi-level marketing companies, but our model is different.

We employ a differentiated direct-to-consumer sales model in which approximately 92.0% of our revenue comes from subscription-based meal-plan orders.

Our OPTA VIA brand offers a highly competitive and effective lifestyle solution centered on developing new healthy habits through smaller, foundational changes called micro-habits.

The program is built around four key components:

Independent OPTA VIA Coaches, the OPTA VIA Community, the Habits of Health® Transformational System, and Scientifically Developed Products and Clinically Proven Plans.

● Independent OPTAVIA Coaches:

• Independent OPTA VIA Coaches:

Provide individualized support and guidance to clients on the path to optimal health and wellbeing.

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Clinically proven plans and scientifically developed products, called “Fuelings,” backed by dietitians, scientists and physicians.

We help clients achieve their health goals through a network of more than 44,000 independent OPTA VIA Coaches, approximately 90.0% of whom were clients first, and have impacted almost 2.0 million lives to date.

We help clients achieve their health goals through a network of approximately 59,800 independent OPTA VIA Coaches, about 90% of whom were clients first, and have impacted more than 2 million lives to date.

OPTA VIA Coaches introduce clients to a set of healthy habits, in most cases starting with the habit of healthy eating, and offer exclusive OPTA VIA-branded nutritional products, or Fuelings.

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They are formulated with high-quality ingredients and are fortified with probiotic cultures, vitamins and minerals, as well as other nutrients essential for good health.

Our products support the process of integrating healthy habits into their client’s day-to-day lives.

Our products support the process of integrating healthy habits into our client’s day-to-day lives.

The OPTA VIA coaching model is client-centric and boasts an energized health and wellness community.

It promotes holistic health and wellness and positions healthy weight as a catalyst to greater lifestyle changes.

OPTA VIA Coaches provide personalized support to their Clients and motivate them by sharing their passion for healthy living and lifestyle transformation.

OPTA VIA Coaches provide personalized support to clients and motivate them by sharing their passion for healthy living and lifestyle transformation.

We believe this personal coaching is an essential factor in client success based on findings from a clinical study published in Obesity Science and Practice in 2018, which validated the OPTA VIA model when its meal plan was combined with education and support consistent with that provided by OPTA VIA Coaches.

The entrepreneurial spirit of our OPTA VIA Coaches is another key to our success, as they create a continuous cycle of growth, activating new Clients, many of whom go on to become Coaches.

We offer economic incentives designed to support each Coach’s long-term success, which plays an important role in their financial wellness, providing the

opportunity to improve their finances while changing the health trajectory of families, communities and generations.

OPTA VIA Coaches are independent contractors, not employees, who support our clients and market our products and services primarily through word of mouth, email and via social media channels such as Facebook, Instagram, Twitter and video conferencing platforms.

The entrepreneurial spirit of our OPTA VIA Coaches is another key to our success, as they create a continuous cycle of growth, activating new clients, many of whom go on to become OPTA VIA Coaches.

We offer economic incentives designed to support each OPTA VIA Coach’s long-term success, which we believe plays an important role in their financial wellness, providing the opportunity to improve their finances while changing the health trajectory of families, communities and generations.

OPTA VIA Coaches are independent contractors, not employees, who support clients and market our products and services primarily through word of mouth, email and via social media channels such as Facebook, Instagram, Twitter and video conferencing platforms.

As entrepreneurs, OPTA VIA Coaches market our products to friends, family and other acquaintances.

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This arrangement frees our OPTA VIA Coaches from having to manage inventory and allows them to maintain an arms-length transactional relationship while focusing their attention on support and encouragement.

1 OPTA VIA makes no guarantee of financial success.

Success with OPTA VIA results from successful sales efforts, which require hard work, diligence, skill, persistence, competence and leadership.

Please see the OPTA VIA Income Disclosure Statement (http://bit.ly/ids OPTA VIA) for statistics on actual earnings of Coaches.

Table of Conte n t s

We measure our success by the results our clients are able to achieve.

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Our growth is demonstrated by strong financial performance over the last several years.

We generated revenue of $934.8 million in 2020, $713.7 million in 2019 and $501.0 million in 2018, representing year-over-year increases of 31.0% in 2020 and 42.4% in 2019.

Income from operations was $134.2 million in 2020, $91.0 million in 2019 and $69.1 million in 2018, increases of 47.5% in 2020 and 31.8% in 2019.

As a result of our strategic investment in the development, introduction, and marketing of our OPTA VIA brand, our OPTA VIA business accounted for approximately 98.0% of our revenues for the year ended December 31, 2020.

We are one of the fastest growing health and wellness companies in the United States, with a large and growing market opportunity.

Our scalable coach-based approach drives both client success and growth.

We believe our continued investment in fostering a robust community around our OPTA VIA brand and our OPTA VIA Coaching Model will continue to drive a sustainable, repeatable business rhythm focused on our mission of offering the world Lifelong Transformation, One Healthy Habit at a Time.

We generated revenue of $1.526 billion in 2021, $934.8 million in 2020 and $713.7 million in 2019, representing year-over-year increases of 63.2% in 2021 and 31.0% in 2020.

Income from operations was $216.2 million in 2021, $134.2 million in 2020 and $91.0 million in 2019, representing year-over-year increases of 61.2% in 2021 and 47.5% in 2020.

We are one of the fastest growing health and wellness companies in the United States ("U.S."), with a large and growing market opportunity.

We believe our coach-based model is scalable and drives both client success and growth.

We expect our continued investment in fostering a robust community around our OPTA VIA brand and our OPTA VIA Coaching Model will continue to drive a sustainable, repeatable business rhythm focused on our mission of offering the world Lifelong Transformation, One Healthy Habit at a Time.

Our operations are conducted through our wholly owned subsidiaries, Jason Pharmaceuticals, Inc., OPTA VIA, LLC, Jason Enterprises, Inc., Jason Properties, LLC, Medifast Franchise Systems, Inc., Seven Crondall Associates, LLC, Corporate Events, Inc., OPTA VIA (Hong Kong) Limited, OPTA VIA (Singapore) PTE.

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COVID-19 Update

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified in Asia.

Over the next several months, COVID-19 quickly spread across the world.

A novel strain of coronavirus (“COVID-19”) surfaced in late 2019 and has spread around the world, including to the U.S.

In March 2020, the World Health Organization declared COVID-19 a worldwide pandemic.

As of February 2021, the virus continues to spread, infecting more than 110 million people worldwide, and impacting worldwide economic activity.

In response to the pandemic, many governments implemented policies intended to stop or slow the further spread of the disease, such as social distancing and shelter-in-place orders.

This has resulted in the temporary closure of schools and non-essential businesses.

Because the Company sells products that are essential to the daily lives of consumers, the COVID-19 pandemic has not had a material impact to our consolidated operating results for the year ended December 31, 2020.

While the duration and severity of this COVID-19 pandemic is uncertain, the extent to which the pandemic ultimately impacts the Company’s business, financial condition, results of operations, cash flows, and liquidity may differ from management’s current estimates.

The difference is due to inherent uncertainties regarding the duration and further spread of the outbreak, its severity, government actions taken to contain the virus or treat its impact, changes in consumer behavior resulting from the pandemic and how quickly and to what extent normal economic and operating conditions can resume.

1 OPTA VIA makes no guarantee of financial success.

Success with OPTA VIA results from successful sales efforts, which require hard work, diligence, skill, persistence, competence, and leadership.

Please see the OPTA VIA Income Disclosure Statement (http://bit.ly/ids OPTA VIA) for statistics on actual earnings of Coaches.

In response to the pandemic, many governments implemented policies intended to stop or slow the further spread of the disease, such as social distancing guidelines, shelter-in-place orders and other measures.

Nutritional supplements and health foods have been designated critical/essential infrastructure in the U.S.

As a manufacturer and distributor of these products our manufacturing and distribution facilities remain fully operational to date and we have not experienced any meaningful disruption to our worldwide supply chain.

The Company’s priorities during the COVID-19 pandemic continue to be protecting the health and safety of our employees and OPTA VIA Coaches, and their families, and we have undertaken numerous steps and instituted additional precautions to protect their safety and well-being, including:

• instituting enhanced safety protocols to comply with guidelines from government and health officials, limiting visitation to our plant and distribution center and rolling out additional sick leave (crisis pay) for our onsite essential employees;

• shifting to a hybrid approach for all onsite employees, enabling them to work 2-3 days from our offices with the flexibility to work 2-3 days from their home offices, in order to optimize productivity, foster strong relationships and promote health and well-being;

• implementing additional health and safety precautions in our headquarters, manufacturing and distribution centers, including use of personal protective equipment and frequent hand sanitization;

• establishing controls in relation to social distancing, visitors, travel and quarantine.

Although vaccines are available in various countries where we operate, it is possible the COVID-19 pandemic could further impact our operations and the operations of our suppliers and vendors, particularly in light of the potential of variant strains of the virus to cause a resumption of high levels of infection and hospitalization.

Should that occur, the extent to which the pandemic ultimately impacts the Company’s business, financial condition, results of operations, cash flows, and liquidity may differ from management’s current expectations.

Factors that could cause actual results to differ from management’s expectations include inherent uncertainties regarding the duration and further spread of the outbreak, its severity, government actions taken to contain the virus or treat its impact, changes in consumer behavior resulting from the pandemic and how quickly and to what extent normal economic and operating conditions can resume.

The senior management team meets regularly to review and assess the status of the Company’s operations and the health and safety of its various constituencies, and will continue to proactively respond to the situation and communicate with our supply chain partners to identify and mitigate risk and to manage inventory levels.

The Company may take further actions that alter its business operations as may be required by governmental authorities, or that are determined to be in the best interests of employees, OPTA VIA Coaches and clients.

These uncertainties make it challenging for our management to estimate our future business performance.

However, we continue to actively monitor the impact of COVID-19 and related developments on our business.

Although the COVID-19 pandemic has impacted our business operations in multiple ways, our manufacturing facility remains fully operational to date and we have not experienced any meaningful disruption to our worldwide supply chain.

Additionally, nutritional supplements and health foods have been designated critical/essential infrastructure in the U.S.

and, as such, we have continued to actively manufacture and distribute our products in our markets around the world.

We will continue to communicate with our supply chain partners to identify and mitigate risk and to manage inventory levels.

While our manufacturing and distribution employees continue to work on site, they are following additional health and safety guidelines.

In response to the public health crisis posed by COVID-19, we took numerous actions, including:

● instituting enhanced safety protocols, limited visitation to our plant and distribution center and rolling out additional sick leave (crisis pay) for our onsite essential employees

● successfully implementing a work-from-home plan for all non-essential employees to comply with guidelines from government and health officials and also extended crisis pay;

● changing this year’s OPTA VIA convention from a live event in July to a virtual event;

● prioritizing production to our highest volume products limiting our stock keeping unit (“SKU”) assortment to ensure that we are able to meet anticipated product demand across core items;

● employing incentives and promotions to help OPTA VIA Coaches adjust to the adverse effect of overall economic conditions and the nationwide actions taken to control the spread of the virus;

● providing additional health and safety precautions in our headquarters, manufacturing and distribution centers, including use of personal protective equipment and frequent hand sanitization;

● process controls in relation to social distancing, visitors, travel and quarantine.

The Company’s priorities during the COVID-19 pandemic continue to be protecting the health and safety of our employees and OPTA VIA Coaches, and their families;

maximizing the availability of products that help consumers with their needs;

and the use of our employees’ talents and our resources to help society meet and overcome the current challenges.

The senior management team meets regularly to review and assess the status of the Company’s operations and health and safety of its various constituencies, and will continue to proactively respond to the situation and may take further actions that alter the Company’s business operations as may be required by governmental authorities, or that are determined to be in the best interests of employees, OPTA VIA Coaches and consumers.

However, we intend to continue to actively monitor the impact of COVID-19 and related developments on our business and will update our practices accordingly, as we have done throughout the pandemic.

Table of Conte n t s

Health & Wellness Consumers

We develop and market products for consumers who want to lose weight and adopt a holistic approach to overall health and wellness.

According to the Center for Disease Control and Prevention (“CDC”), over 70.0% of all adults in the United States (US) aged 20 and above were overweight or obese in 2017-2018, and is growing at approximately 2.0% per annum.

According to the most recently published data by the Center for Disease Control and Prevention (“CDC”), over 70% of all adults in the U.S.

aged 20 and above were overweight or obese in 2017-2018, and is growing at approximately 2% per annum.

According to a proprietary analysis, the addressable market for weight loss is large and growing.

It’s worth about $20 billion today with a growth rate of approximately 6% per annum.

Additionally, roughly 75.0% of the US population above 18 wants to lose weight and is open to dieting, and approximately 65.0% of overweight/obese population considers paid meal plans effective.

Additionally, roughly 75% of the U.S.

population above 18 wants to lose weight and is open to dieting, and approximately 65% of overweight/obese population considers paid meal plans effective.

The total potential pool of OPTA VIA clients is sizable;

there are about 175.0 million people looking to lose weight and willing to consider dieting in the US.

2 Consumer and OPTA VIA Client surveys February 2020, NCHS, team analysis

there are about 175 million people looking to lose weight and willing to consider dieting in the U.S.

We offer clients a radically different approach to health, with weight loss and weight management serving as a catalyst to an overall improvement in health, confidence, vitality and general well-being.

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Obesity is defined as a Body Mass Index (“BMI”) of 30 kg/m2 or greater, whereas overweight is defined as a BMI ranging between 25 and 29.9 kg/m.

In the United States, more than two-thirds of the adult population fall within the overweight or obese categories and approximately 42.4% were obese in 2017.

In the U.S., more than two-thirds of the adult population fall within the overweight or obese categories and approximately 42.4% were obese in 2017.

By 2017, only two states and the District of Columbia had an obesity rate that was less than 25%;

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Being overweight and/or obese is linked to a multitude of serious comorbidities including heart disease, stroke, Type 2 diabetes, certain types of cancers, arthritis, sleep apnea and depression.

In fact, the 2016 State of Obesity Report by Trust for America’s Health and the Robert Wood Johnson Foundation estimated approximately 80.0% of people with diabetes were overweight or obese.

Consumers in the United States spend an estimated approximately $190.0 billion annually on obesity-related medical conditions;

In fact, the 2020 National Diabetes Statistics Report from CDC estimated approximately 89% of people with diabetes were overweight or had obesity.

Consumers in the U.S.

spend an estimated $147 billion annually on obesity-related medical conditions according to data reported by CDC's National Center for Chronic Disease Prevention and Health Prevention Division;

the average annual medical costs for those who are obese are more than $1,400 higher than those of people in a normal weight range.

According to a 2019 study by Marketdata Enterprises, the United States weight loss market itself is estimated to be a roughly $73.0 billion per year industry, including consumer spending on diet foods, drinks and low-calorie sweeteners, health clubs, fitness centers and workout videos;

According to a 2020 study by Marketdata Enterprises, the U.S.

weight loss market itself is estimated to be a roughly $61.9 billion per year industry, including consumer spending on diet foods, drinks and low-calorie sweeteners, health clubs, fitness centers and workout videos;

medically supervised and commercial weight loss programs;

children’s weight loss camps;

appetite suppressants and more.

appetite suppressants

2 Consumer and OPTA VIA Client surveys February 2020, NCHS, team analysis

Table of Conte n t s

Portion-controlled, meal-replacement weight management programs are continuing to gain popularity, as consumers search for a safe and effective solution that provides balanced nutrition, effective weight loss, and valuable behavior-modification education.

Direct Sellers

We have created a new business model by combining the most powerful aspects of direct selling, while eliminating those dimensions that have typically challenged other companies.

Our business model combines the most powerful aspects of direct selling, while eliminating those dimensions that have typically challenged other companies.

Our growth does not depend on recruiting thousands of distributors who take on inventory to sell to clients.

Rather, OPTA VIA Coaches help clients adopt healthy habits and learn the benefits of OPTA VIA products, which are shipped directly to the client.

We are often compared to diet and

weight loss-only companies or to multi-level marketing companies, but our model is different.

Rather, OPTA VIA Coaches help clients adopt healthy habits and learn the benefits of OPTA VIA products, which are shipped directly to the clients.

We are often compared to diet and weight loss-only companies or to multi-level marketing companies, but our model is different.

We support clients through independent OPTA VIA Coaches, about 90% of whom were clients first.

Our competitive advantages:

● OPTA VIA’s innovative model is client centric, it has one price and approximately 90.0% of its revenue is from clients.

• OPTA VIA’s innovative model is client-centric and has one sales price to both OPTA VIA Coaches and clients.

There is no tiered pricing.

• OPTA VIA Coaches focus on coaching and supporting clients.

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They promote a holistic wellness program and are not exclusively focused on product sales.

Our competitive commissions are also deliberately structured to incentivize coaching and support client success.

Our competitive OPTA VIA Coach compensation plan is also deliberately structured to incentivize coaching and support client success.

• The field promotes a unified training system that aligns its leaders around a common mission.

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• the opportunity to complement other business pursuits.

The Direct Selling Association (“DSA”) estimates that approximately 6.8 million U.S.

adults participate in the direct selling industry as “sellers” based on 2019 data.

The majority of these direct sellers are women and nearly 90.0% of all direct sellers operate their businesses part-time.

We develop and market products and services that promote the success of our OPTA VIA Coaches, each a micro-entrepreneur who plays an integral role in our operating performance and growth.

OPTA VIA Coaches are effective advocates for our mission and the sale of our nutrition products and health and wellness programs.

We offer direct sellers business essentials, supplies and interactive marketing services that help them launch and organize their direct-selling business as an independent OPTA VIA Coach.

In 2020, we were ranked in the DSA’s Top 20 list, a recognition given annually to the largest direct selling companies in the United States.

Transparency is a core principal at Medifast.

We adhere to the direct-selling industry’s highest ethical standards and best practices.

We are a member in good standing of the DSA, a well-known and widely respected national trade association representing over 100 direct selling companies in the United States.

As a member of the DSA, we underwent a comprehensive and rigorous review that included a detailed analysis of our business model and practices.

United States

The United States is our principal market and continues to represent significant potential for growth given the high percentage of overweight or clinically obese adults, where over 70.0% of adults aged 20 and over were considered overweight or obese in 2017-2018.

is our principal market and continues to represent significant potential for growth given the high percentage of overweight or clinically obese adults, where over 70% of adults aged 20 and over were considered overweight or obese in 2017-2018.

Sales of weight loss and health and wellness products and services are projected to grow at a compound average growth rate (“CAGR”) of approximately 7% in the United States through 2022, according to industry research and analysis.

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The nutrition and weight management segment of the industry continued to dominate the health and wellness market in 2021.

We are targeting our word of mouth and social media marketing toward increasingly younger demographics;

reaching out to important and increasingly diverse communities of health and wellness consumers, and identifying and marketing to consumers who are in varying stages of optimal well-being.

OPTA VIA Coaches are focusing on word of mouth and social media marketing toward increasingly younger demographics, reaching out to important and increasingly diverse communities of health and wellness consumers, and identifying and marketing to consumers who are in varying stages of optimal well-being.

As we previously disclosed, global expansion is an important component of our long-term growth strategy.

In July 2019, we commenced our international operations, entering into the Asia Pacific markets of Hong Kong and Singapore.

The Company outsources a distribution center in Hong Kong to give the Company adequate product distribution capacity for the foreseeable future.

Our decision to enter these markets was based on industry market research that reflects a dynamic shift in how health care is being prioritized and consumed in those countries.

Like the United States, we believe healthy lifestyles have increasingly become a priority to middle-class consumers in the Asia Pacific markets as disposable income grows.

We outsource a distribution center in Hong Kong to provide adequate product distribution capacity for the foreseeable future in these markets.

Table of Conte n t s

Like the U.S., we believe healthy lifestyles have increasingly become a priority to middle-class consumers in the Asia Pacific markets as disposable income grows.

Our research has found that while traditional remedies are still essential, consumers are increasingly incorporating healthy living products into their daily lives.

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We take pride in our scientific heritage.

We authored 17 peer reviewed publications over the past 10 years.

Most recently, we conducted a double blind study that shows the effects that Coaching has on the program, that showed clients speaking with their OPTA VIA Coach more often may help them lose up to twice as much weight.

Our clinically proven plans and our scientifically developed products were developed by physicians, dietitians, and scientists to help consumers achieve a healthy weight.

We have authored 18 peer-reviewed publications over the past 10 years.

Most recently, we conducted a double blind study that shows the effects that OPTA VIA Coaching has on the program;

the results suggested that speaking with their OPTA VIA Coach more often may help clients lose up to twice as much weight.

Our clinically proven plans and our scientifically developed products were developed by physicians, dietitians, and scientists to help clients achieve a healthy weight.

We work closely with our cross-disciplinary Scientific Advisory Board comprised of physicians and scientists who help guide and provide valuable input into the development of our comprehensive portfolio of offerings.

Our products are scientifically designed to deliver proper nutrition at every stage of a person’s journey toward a sustainable, healthy lifestyle.

Fuelings, our hero product, are nutrient dense, portion controlled, and nutritionally interchangeable.

Our exclusive OPTA VIA-branded nutritional products, fuelings, are nutrient-dense, portion-controlled, nutritionally interchangeable and simple to use.

OPTA VIA- BRANDED PRODUCTS

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Each OPTA VIA Essential Fueling is scientifically formulated with the right balance of carbohydrates, protein and fat which helps promote a gentle, but efficient fat-burning state.

Our Fuelings contain high-quality protein which helps our clients retain lean muscle mass and each contains the patented probiotic GanedenBC30 ® to support digestive health as part of a balanced diet and healthy lifestyle.

Our Fuelings contain high-quality protein which helps our clients retain lean muscle mass and each contains the patented probiotic BC30™ to support digestive health as part of a balanced diet and healthy lifestyle.

Our OPTA VIA Coaches market OPTA VIA Essential Fuelings primarily through a suite of scientifically proven Optimal Weight Plans.

Consumers purchase kits tailored to their individual needs on the advice and counsel of their OPTA VIA Coach.

Kits, ranging in price from approximately $415.00 to $458.00, include up to a 30-day supply of Fuelings and are purchased by our clients through either our ecommerce website, their OPTA VIA Coach’s personal website or our call center.

3 Based on the results of a 16-week clinical study, those who participated in at least 75% of their 23 assigned OPTA VIA Coaching calls lost 15.2 lbs.

compared to 6.7 lbs.

for those participating in fewer calls.

Clients purchase kits tailored to their individual needs on the advice and counsel of their OPTA VIA Coach.

Kits, ranging in price from approximately $428.20 to $472.95, include up to a 30-day supply of Fuelings and are purchased by our clients through our e-commerce website, their OPTA VIA Coach’s personalized replicated website or our call center.

• OPTA VIA Select Fuelings .

OPTA VIA Select Fuelings represent our Non-GMO line of products.

These products have unique flavor profiles, work with the same suite of Optimal Weight Plans described above but are formulated for those who desire Non-GMO products.

These products have unique flavor profiles, work with the same suite of Optimal Weight Plans described below but are formulated for those who desire Non-GMO products.

• OPTA VIA Coach Business Kit .

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OPTA VIA- BRANDED PLANS

Our OPTA VIA-branded health and wellness plans help consumers enter a gentle, but efficient fat-burning state.

Our OPTA VIA-branded health and wellness plans help clients enter a gentle, but efficient fat-burning state.

Their success is enhanced by the personal attention, counseling, education, advice and motivation they receive from our OPTA VIA Coaches.

They also benefit from being members of a broader OPTA VIA Community of consumers with

like-minded goals and objectives regarding their health.

We offer consumers incentives to join the OPTA VIA Community, including support calls with a caring community, exclusive offers through our OPTA VIA Premier service that help our clients stay on plan, as well as qualifies them for discounts on purchased products and free shipping.

They also benefit from being members of a broader OPTA VIA Community of clients with like-minded goals and objectives regarding their health.

We offer clients incentives to join the OPTA VIA Community, including support calls with a caring

3 Based on the results of a 16-week clinical study, those who participated in at least 75% of their 23 assigned OPTA VIA Coaching calls lost 15.2 lbs.

compared to 6.7 lbs.

for those participating in fewer calls.

Table of Conte n t s

community, exclusive offers through our OPTA VIA Premier service that help our clients stay on plan, as well as qualifies them for discounts on purchased products and free shipping.

We encourage our clients to embrace our Six Steps to Optimal Health:

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• The potential to live a longer healthier life.

The majority of our OPTA VIA Coaches began as weight-loss clients, who had success on the OPTA VIA program, and became OPTA VIA Coaches, for a number of reasons, including to pay it forward and help others through their transformation journey.

Optimal Weight plans we market to consumers are:

The majority of our OPTA VIA Coaches began as weight-loss clients and became OPTA VIA Coaches for a number of reasons, including to pay it forward and help others through their transformation journey.

Optimal Weight and Health plans we market to clients are:

• The Optimal Weight 5 & 1 Plan ® .

Our proven Optimal Weight 5 & 1 Plan encourages consumers to eat six small meals a day, an important habit that helps maintain healthy weight.

Five daily meals are OPTA VIA Fuelings, offering consumers a choice from more than 50 delicious, convenient, nutritionally interchangeable, scientifically-designed products, including shakes, soups, bars, hot beverages, hearty choices, biscuits, pretzels, pudding and brownies.

Our proven Optimal Weight 5 & 1 Plan encourages clients to eat six small meals a day, an important habit that helps maintain healthy weight.

Five daily meals are OPTA VIA Fuelings, offering clients a choice from more than 50 delicious, convenient, nutritionally interchangeable, scientifically-designed products, including shakes, soups, bars, hot beverages, hearty choices, biscuits, pretzels, pudding and brownies.

OPTA VIA Coaches counsel their clients on which Fuelings to select.

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• Optimal Weight 4 & 2 & 1 Plan ® .

The Optimal Weight 4 & 2 & 1 Plan is designed for consumers who want to continue eating all food groups or want a flexible meal plan to help them achieve a healthy weight.

The Optimal Weight 4 & 2 & 1 Plan is designed for clients who want to continue eating all food groups or want a flexible meal plan to help them achieve a healthy weight.

Under this plan, OPTA VIA Coaches counsel their clients to eat four meals of OPTA VIA Fuelings and prepare two lean and green meals and one healthy snack themselves.

• Optimal Health 3 & 3 Plan ® .

The Optimal Health 3 & 3 plan is designed for consumers who want to sustain a healthy weight.

The Optimal Health 3 & 3 plan is designed for clients who want to sustain a healthy weight.

This plan focuses on nutritionally balanced, small meals eaten every two or three hours, similar to our Optimal Weight plans, while integrating more food choices in the right portions.

Consumers are counseled by their OPTA VIA Coaches to eat three Optimal Health Fuelings and three balanced meals they prepare themselves daily.

4 No one can predict how long you are going to live, but research suggests that making an overall lifestyle change by taking an active role in your choices and behavior, including losing weight, eating healthier, moving more, and reducing stress, has the potential to help you live a longer, healthier life.

Clients are counseled by their OPTA VIA Coaches to eat three Optimal Health Fuelings and three balanced meals they prepare themselves daily.

No matter what plan a client is on, they learn the Habits of Health through the Habits of Health® Transformational System which is a crucial tool for client success and provides the foundation for our community to learn and adopt healthy habits.

The Habits of Health Transformational System is an innovative, mind and body lifestyle approach that encourages and educates consumers to replace unhealthy habits with healthy ones that contribute to their long-term success.

The Habits of Health Transformational System is an innovative, mind and body lifestyle approach that encourages and educates clients to replace unhealthy habits with healthy ones that contribute to their long-term success.

THE MEDIFAST BRAND

While OPTA VIA now accounts for a majority of our revenue, we also have products under the Medifast brand name.

About 16.0% of our consumable units sold in 2020 were tied to the Medifast brand.

As of December 31, 2020, our Medifast meal replacement line includes more than 30 options, including, but not limited to, bars, bites, pretzels, puffs, cereal crunch, drinks, hearty choices, oatmeal, pancakes, pudding, shakes, and soft bakes.

We also offer a variety of weight loss, weight management, and healthy living products under the Medifast, Optimal Health, and Flavors of Home brands.

Consistent with business and brand strategy, we decided to sunset our Medifast Direct channel and Medifast branded products by the end of Q2, 2021.

Consistent with business and brand strategy, the Company has completed the sunset of the Medifast Direct channel and Medifast-branded product line during the second quarter of 2021.

By maintaining our commitment to building capabilities in the areas that matter most to our OPTA VIA Coaches and clients within the OPTA VIA channel, we believe we will enhance our ability to further grow our business over the next several years, enabling robust revenue growth while also maintaining our profitability in the long-term.

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Demand for weight management products and programs are typically seasonal.

Traditionally, the predisposition of consumers not to initiate a weight loss or management program during the holiday season impacts the fourth quarter with fewer sales of weight management products and services during these months.

Traditionally, the predisposition of clients not to initiate a weight loss or management program during the holiday season impacts the fourth quarter with fewer sales of weight

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management products and services during these months.

January and February generally show increases in sales, as these months are considered the commencement of the “diet season.” We believe our sales pattern does not follow the seasonality of our industry, but rather is predicated on the growth of our OPTA VIA Coach network.

SCIENTIFIC ADVISORY BOARD

Our Scientific Advisory Board consists of a multi-disciplinary, international panel that serves as the foundation for scientifically-valid, consumer-centric, high quality innovations for lasting health.

Our Scientific Advisory Board consists of a multi-disciplinary, international panel that serves as the foundation for scientifically-valid, client-centric, high quality innovations for lasting health.

Its mission is to help guide us in making informed decisions regarding medical, nutritional, and scientific matters by providing expertise and information on research and emerging trends.

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The weight loss market is served by a diverse array of competitors.

Potential clients seeking to manage their weight can turn to other traditional center-based competitors, online diet-oriented sites, self-directed dieting and self-administered products such as prescription drugs, over-the-counter drugs and supplements, as well as

medically supervised programs.

We also compete with other direct selling organizations, some of which have a longer operating history, and greater visibility, name recognition and financial resources than we do.

Medifast’s identified publicly-traded peers and competitors in the general health and wellness diet industry include USANA Health Sciences Inc., WW International, Inc.

(formerly Weight Watchers International, Inc.), Nature’s Sunshine Products Inc., Herbalife Nutrition Ltd., and Simply Good Foods Co.

(formerly Weight Watchers International, Inc.), Nature’s Sunshine Products Inc., Herbalife Nutrition Ltd., Simply Good Foods Co., The Hain Celestial Group, Inc., BellRing Brands, Inc., and Beyond Meat, Inc.

We have a competitive advantage over traditional diet companies.

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• Offers lifelong habit development supported by a proprietary integrated system, the Habits of Health Transformational System.

● Has a vibrant health and wellness community that has impacted almost 2.0 million lives.

• Has a vibrant health and wellness community that has impacted more than 2 million lives.

We also have an advantage over traditional direct selling companies:

● OPTA VIA’s innovative model is client centric, it has one price and approximately 90.0% of its revenue is from clients.

● OPTA VIA boasts a health and wellness community, where about 90.0% of coaches come from the client base and have been in their clients’ shoes.

• OPTA VIA’s innovative model is client-centric and has one sales price to both OPTA VIA Coaches and clients.

There is no tiered pricing.

• OPTA VIA boasts a health and wellness community, where about 90% of OPTA VIA Coaches come from the client base and have been in their clients’ shoes.

They promote a holistic health and wellness program and are not focused on product sales.

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Our OPTA VIA Integrated Coaching Model offers the personal support of an OPTA VIA Coach, who is often a person who has achieved success with OPTA VIA and has turned their success into a business opportunity.

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We continue to build and leverage our core brands through multiple marketing strategies.

Customer acquisition and retention strategies include word-of-mouth, digital marketing, public relations, social media, email marketing, events and other means.

These mediums are used to target new clients by stressing Medifast’s and OPTA VIA’s simple and effective approach to weight loss and management and long-term health.

These mediums are used to target new clients by stressing OPTA VIA’s simple and effective approach to weight loss and management and long-term health.

Many of these programs are also utilized to reactivate, encourage and support existing clients and OPTA VIA Coaches.

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MANUFACTURING

Jason Pharmaceuticals, Inc., our wholly-owned subsidiary with a manufacturing facility in Owings Mills, Maryland, is the primary manufacturer of our powder-based products, which account for approximately 46% of our unit sales.

Jason Pharmaceuticals, Inc., our wholly-owned subsidiary with a manufacturing facility in Owings Mills, Maryland, is one of the primary manufacturers of our powder-based products, which account for approximately 17% of our powder-based unit sales.

We purchased the plant in July 2002 and have gradually increased production capacity and improved overall efficiencies with additional investments in blending and packaging equipment.

The remaining 54% of our unit sales are manufactured by third-party vendors in accordance with Medifast proprietary formulas and manufacturing standards.

The remaining 83% of our powder-based unit sales are manufactured by third-party vendors in accordance with Medifast proprietary formulas and manufacturing standards.

Our Owings Mills manufacturing facility is regulated and inspected by the United States Food and Drug Administration (the “FDA”), the United States Department of Agriculture (the “USDA”), the Maryland State Department of Health and Mental Hygiene and Office of Food Protection.

It is certified by the Safe Qualified Food Institute as a Safe Quality

Food Program Level 2 facility compliant with the Global Food Safety Initiative, a global non-profit collaboration to advance food safety.

It is certified by the Safe Qualified Food Institute as a Safe Quality Food Program Level 2 facility compliant with the Global Food Safety Initiative, a global non-profit collaboration to advance food safety.

GOVERNMENTAL REGULATION

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The laws and regulations governing direct selling may be modified or reinterpreted from time to time, which may cause us to modify our sales compensation and business models.

In almost all of our markets, regulations are subject to discretionary interpretation by regulators and judicial authorities.

In almost all of our domestic markets, regulations are subject to discretionary interpretation by regulators and judicial authorities.

There is often ambiguity and uncertainty with respect to the state of direct selling and anti-pyramiding laws and regulations.

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In 2018, the FTC released its nonbinding Business Guidance Concerning Multi-Level Marketing (“MLM Guidance”).

The MLM Guidance explains, among other things, the FTC’s views concerning lawful and unlawful compensation structures, whether personal consumption by participants can be used in determining a MLM organization’s compensation structure, and how a MLM organization should approach representations to current and prospective participants.

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how a MLM organization should approach representations to current and prospective participants.

We believe our current business practices comply with the MLM Guidance.

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The Company maintains insurance against product liability claims with respect to the products it manufactures.

With respect to the retail and direct marketing distribution of products produced by others, the Company’s principal form of insurance consists of arrangements with each of its suppliers of those products to name the Company a covered entity under each

of such vendor’s product liability insurance policies.

With respect to the retail and direct marketing

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distribution of products produced by others, the Company’s principal form of insurance consists of arrangements with each of its suppliers of those products to name the Company a covered entity under each of such vendor’s product liability insurance policies.

The Company does not buy products from suppliers who do not maintain such coverage.

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HUMAN CAPITAL MANAGEMENT

As of December 31, 2020, the Company employed 713 employees, of whom approximately 409 were engaged in manufacturing, logistics and supply chain support, and the remaining 304 in marketing, administrative and corporate support functions.

None of our employees are subject to a collective bargaining agreement with the Company.

We believe that we have a good relationship with our employees.

Of our total employees, 701 were employed in the United States and 12 were employed in Asia Pacific.

At Medifast, we are focused on nurturing a One Team mindset that celebrates strong cross-functional teaming and partnering.

Our culture emphasizes the importance of strong relationships between our team members to facilitate trust, understanding and empathy.

As of December 31, 2021, the Company employed 984 team members, of whom 624 were engaged in manufacturing, logistics and supply chain support, and 360 in marketing, administrative and corporate support functions.

None of our team members are subject to a collective bargaining agreement with the Company.

We actively foster an organizational culture centered around strong cross-functional relationships and are focused on driving an excellent employee experience.

Of our total team members, 974 are employed in the United States and 10 are employed in Asia Pacific.

At Medifast, we nurture a one team mindset that celebrates strong cross-functional teaming and partnering.

Our culture emphasizes the importance of building community and strong relationships to facilitate trust, understanding and empathy.

We have a Culture Compass that expresses:

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• Our Operating Principles … how we make choices

Together, these cultural elements enable us to prioritize our work, plan for the future and harness our combined energy to accomplish our company objectives.

Our Culture Compass is embedded in our core human capital processes to ensure our team members understand how their success translates to the success of the greater team and ultimately to amazing Coach and Client Experiences.

Our Community (Coach Community & our team members) is united by our values – we are one team with one mission, guided by clear, shared behaviors that help us stay aligned as we grow and enable us to prioritize our work, plan for the future and harness our combined energy to accomplish our company objectives.

Our Compass is fully embedded in our core human capital processes to ensure our team members understand how their success translates to the success of the greater team and ultimately to an amazing Coach & Client Experience.

Building transparency and developing communication channels that allow us to cascade information and connect our teams are critical components of our people strategy.

We leverage our Workplace by the Facebook platform to connect, collaborate, incite conversations around topics that matter to us (like Wellness), foster greater comradery, celebrate our successes and build trust among peers.

We leverage our communication channels to remind team members of the significant impact they have on the Coach & Client Experience, help them understand our business model and get them engaged in opportunities to learn and increase empathy across functional teams.

We leverage our Workplace from Meta platform to connect, collaborate, incite conversations around topics that matter to us (like wellness), foster greater comradery, celebrate our successes and build trust among peers.

We leverage our communication channels to remind team members of the significant impact they have on the Coach and Client Experience, help them understand our business model, get them engaged in opportunities to learn and increase empathy across functional teams.

In 2021, we established a new recognition program (#AcedIt!), to provide team members and people leaders a platform to recognize excellent work that supports our business strategy and applaud behaviors that reinforce our cultural values.

We believe fostering a sense of gratitude is a key component to nurturing strong relationships and building tight-knit communities.

program allows for both social and point-based recognition as well as celebrates team members for achieving important milestones in service.

Diversity is one of Medifast’s Core Values and an important part of our culture.

As an organization, we are committed to generating an open dialog with our team members as well as improving our learning on how we can foster a more inclusive work environment that enables all our team members to have a voice.

Currently, we deploy pulse surveys after significant events or programs so that we can gain a deeper understanding of how we can better serve our team members’ needs, ensure we are staying aligned with our mission and gauge our team members’ understanding of our company strategy and goals.

We regularly review our employees’ feedback to better align our human capital initiatives to the needs of our employees.

In 2020, the company established a relationship with an external partner to assess our work environment and identify

opportunities in the area of Diversity, Equity & Inclusion (“DEI”).

We have also planned leadership training and workshops, to occur in 2021, that will establish the future framework for our DEI program.

On a regular basis, we deploy pulse surveys after significant events or programs so that we can gain a deeper understanding of how we can better serve our team members’ needs, ensure we are staying aligned with our mission and gauge our team members’ understanding of our company strategy and goals.

In 2021, we piloted a listening initiative we call “The Loop”.

The Loop is enabled by a technology platform that will allow us to institutionalize our listening program and have a way to promote communication transparency and ultimately allow us to monitor and improve our organizational health.

We plan to deploy The Loop organization wide in 2022.

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We regularly review our team members’ feedback to better align our human capital initiatives to their needs.

In 2020, the company established a relationship with an external partner to assess our work environment and identify opportunities in the area of Diversity, Equity & Inclusion (“DEI”).

Based on the results of this assessment, in 2021, we planned and deployed leadership training for our executive and senior leadership team and identified the cultural elements most critical for us to nurture in order to strengthen inclusion within our company.

As part of our focus on inclusion and to foster community in a time of 100% remote work, we established a new initiative called Culture Club.

Culture Club is open to all team members and is intended to give team members a platform to connect and learn together as well as socialize and build stronger bonds.

Nurturing growth and learning are also key elements of our culture.

In 2021, we hosted 11 focus groups to understand the capabilities needed by our team members and identified key competencies that will be at the center of future learning and development initiatives.

Our executive leaders also expanded their talent review and succession planning process to reach deeper into the organization and gain an understanding of opportunities and strength areas to further inform development plans and accelerate the learning of top talent.

Medifast is focused on attracting and retaining top talent who are eager to participate in our mission.

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Our variable pay targets are performance based and tied to organizational results.

In 2020, in response to COVID-19, we immediately prioritized the health and wellbeing of our employees.

For our onsite essential employees, we instituted enhanced safety protocols, limited visitation to our plant and distribution center and rolled out additional sick leave (crisis pay) to allow our team members the time needed to cope should they get sick or have a sick family member.

For our non-essential employees, we successfully implemented a work-from-home plan and also extended crisis pay.

We leveraged our collaboration tools and continued to nurture our Medifast community.

In addition to our employees, our Human Capital also includes our independent contractor OPTA VIA Coaches.

In 2021, we continued to prioritize the health and well-being of our team members.

All onsite-essential teams continued to adhere to our enhanced safety protocols and had access to additional sick time.

For our onsite-flexible teams, effective October 2021, we rolled out a hybrid work plan that allowed team members to work 2 to 3 days from the office.

We developed and deployed a Hybrid Playbook to assist people leaders in formulating a plan that enables flexibility and allows them to optimize collaboration across their teams.

We will continue to listen and adjust our plans as we continue on this hybrid work journey.

In addition to our team members, our Human Capital also includes our independent contractor OPTA VIA Coaches.

They support our clients and market our products and services primarily through word of mouth, email and via social media channels such as Facebook, Instagram, Twitter and video conferencing platforms.

For information about our OPTA VIA Coaches, see “Summary” section in this Item 1.

For more information about our OPTA VIA Coaches, see Item 1.

INFORMATION SYSTEMS TECHNOLOGY

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Our corporate website is http://www.medifastinc.com.

All periodic and current reports, registration statements, code of conduct and other material that we are required to file with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act are available free of charge through our investor

relations page at https://ir.medifastinc.com.

All periodic and current reports, registration statements,

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code of conduct and other material that we are required to file with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act are available free of charge through our investor relations page at https://ir.medifastinc.com.

Such documents are available as soon as reasonably practicable after electronic filing of the material with the SEC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business