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What changed in LifeMD, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LifeMD, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+283 added−265 removedSource: 10-K (2024-03-11) vs 10-K (2023-03-22)

Top changes in LifeMD, Inc.'s 2023 10-K

283 paragraphs added · 265 removed · 180 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

48 edited+33 added−13 removed44 unchanged
Biggest changeServing as a robust CRM system, and with built in analytics and integrations with best-in-class performance marketing platforms, our platform also enhances our ability to effectively and efficiently acquire new patients and customers and drive brand visibility through strategic media placements, influencer partnerships, and direct response advertising methods across highly scalable marketing channels ( i.e ., national TV, streaming TV, streaming audio, YouTube, podcasts, Out of Home, print, magazines, online search, social media, and digital).
Biggest changeOur platform also includes a robust customer relationship management (“CRM”) system, and performance marketing platform that enables us to acquire and retain new patients and customers at scale by driving brand visibility through strategic media placements, influencer partnerships, and direct response advertising methods across highly visible marketing channels ( i.e ., national TV, streaming TV, streaming audio, YouTube, podcasts, Out of Home, print, magazines, online search, social media, and digital). 4 We leverage our telehealth technology platform and services across the three core areas described below: Direct-to-Consumer Virtual Primary Care In the first quarter of 2022, we launched our flagship virtual primary care offering under the LifeMD brand, LifeMD PC.
Our mission is facilitated by our robust technology platform that is purpose-built to seamlessly connect the touchpoints involved in delivering complex care, including scheduling for a national provider network, EMR capabilities, secure synchronous and asynchronous communication, digital prescriptions, cloud pharmacy, and more.
Our mission is facilitated by our robust technology platform that is purpose-built to seamlessly connect the various touchpoints involved in delivering complex care, including scheduling for a national provider network, EMR capabilities, secure synchronous and asynchronous communication, digital prescriptions, cloud pharmacy and more.
FDA also may refer cases to the Department of Justice to enjoin further manufacture or sale of a product, to issue warning letters, and to institute criminal proceedings. Advertising and product claims regarding the efficacy of products are also regulated by the FTC.
FDA also may refer cases to the Department of Justice to enjoin further manufacture or sale of a product, to issue warning letters, and to institute criminal proceedings. 8 Advertising and product claims regarding the efficacy of products are also regulated by the FTC.
Such regulations include the CAN-SPAM Act, the Telephone Consumer Protection Act of 1991, the criminal healthcare fraud provisions of the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, (“HITECH”), and their implementing regulations, which we collectively refer to as HIPAA, Section 5(a) of the Federal Trade Commission Act, and the California Consumer Privacy Act (“CCPA”).
Such regulations include the CAN-SPAM Act, the Telephone Consumer Protection Act of 1991, the criminal healthcare fraud provisions of the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, (“HITECH”), and their implementing regulations, which we collectively refer to as HIPAA, Section 5(a) of the Federal Trade Commission Act, and the California Consumer Privacy Act (“CCPA”) and the California Privacy Rights Act (“CPRA”).
In addition, HIPAA, which we believe does not currently apply to most of our business as currently operated, imposes on entities within its jurisdiction, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information.
HIPAA, which we believe does not currently apply to most of our business as currently operated, imposes on entities within its jurisdiction, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information.
The content of this website is not part of this Annual Report. Any of these reports or documents may also be obtained by writing to: Investor Relations; c/o LifeMD, Inc., 236 Fifth Avenue, Suite 400, New York, NY 10001. 10
The content of this website is not part of this Annual Report. Any of these reports or documents may also be obtained by writing to: Investor Relations; c/o LifeMD, Inc., 236 Fifth Avenue, Suite 400, New York, NY 10001. 11
We believe the traditional model of visiting a doctor’s office, traveling to a local pharmacy, and returning for follow up care or prescription refills is complex, inefficient, and costly, and discourages many individuals from seeking much needed medical care.
We believe the traditional model of visiting a doctor’s office, traveling to a retail pharmacy, and returning for follow up care or prescription refills is complex, inefficient, and costly, and discourages many individuals from seeking much needed medical care.
After treatment from an affiliated licensed physician, if appropriate, one of our partner pharmacies will dispense and ship prescription medications and OTC products directly to the customer. Since RexMD’s initial launch in the erectile dysfunction treatment market, it has expanded into additional indications, including but not limited to, premature ejaculation, testosterone, and hair loss.
After treatment from an affiliated licensed physician, if appropriate, one of our partner pharmacies will dispense and ship prescription medications and OTC products directly to the customer. Since RexMD’s initial launch in the erectile dysfunction treatment market, it has expanded into additional indications including but not limited to, premature ejaculation, hormone therapy and hair loss.
Our telehealth brands RexMD, ShapiroMD, NavaMD, and Cleared address largely unaddressed or underserved needs and are leading destinations in their respective treatment verticals of men’s health, hair loss, dermatology, and immunology. ○ RexMD is a men’s telehealth platform brand that offers access to virtual medical treatment for a variety of men’s health needs.
Our telehealth brands RexMD, ShapiroMD, NavaMD and Cleared target largely unaddressed or underserved healthcare needs and are leading destinations in their respective treatment verticals of men’s health, hair loss, dermatology, and immunology. ○ RexMD is a men’s telehealth platform brand that offers access to virtual medical treatment for a variety of men’s health needs.
Since we receive, use, transmit, disclose and store personally identifiable information, including health-related information, we are subject to numerous state and federal laws and regulations that address privacy, data protection and the collection, storing, sharing, use, transfer, disclosure and protection of certain types of data.
Since we receive, use, transmit, disclose and store personal information, including health-related information, we are subject to numerous state and federal laws and regulations that address privacy, data protection and the collection, storing, sharing, use, transfer, disclosure and protection of certain types of data.
This offering provides patients in all 50 states with 24/7 access to an affiliated high-quality provider for their primary care, urgent care, and chronic care needs. LifeMD’s virtual primary care offering is a mobile-first full-service destination that provides seamless access to high-quality clinical care including virtual consultations and treatment, prescription medications, diagnostics, and imaging, wellness coaching and more.
This offering provides patients with 24/7 access to an affiliated high-quality provider for their primary care, urgent care, and chronic care needs. LifeMD’s virtual primary care offering is a mobile-first full-service destination that provides seamless access to high-quality clinical care including virtual consultations and treatment, prescription medications, diagnostics and imaging, wellness coaching and more.
Offerings include in-home tests for both environmental and food allergies, prescriptions for allergies and asthma, and FDA-approved immunotherapies for treating chronic allergies. Cleared leverages a network of affiliated medical professionals and providers in all 50 states, various pharmaceutical partners, and treatments and tests that cost up to 50 percent less than the brand-name competition.
Offerings include in-home tests for both environmental and food allergies, prescriptions for allergies and asthma and FDA-approved immunotherapies for treating chronic allergies. Cleared leverages a 50-state network of affiliated medical professionals and providers, various pharmaceutical partners and treatments and tests that cost up to 50% less than the brand-name competition.
We are committed to delivering exceptional care that is convenient and affordable. This is achieved through our provider network, including affiliated, full-time doctors and nurse practitioners, in addition to a dedicated patient care center launched in November 2020 and staffed by LifeMD employees.
We are committed to delivering exceptional care that is convenient and affordable. This is achieved through our provider network, including affiliated, full-time doctors and nurse practitioners, in addition to an internal patient care center launched in November 2020 and staffed by LifeMD employees.
The patient care center includes approximately 114 employees and is led by an experienced operations and customer experience team. We believe the hands-on capabilities of the patient care center, supported by our technology platform, will continue to drive high levels of patient satisfaction like we see today.
The patient care center includes approximately 104 employees and is led by an experienced operations and customer experience team. We believe the hands-on capabilities of the patient care center, supported by our technology platform, will continue to drive high levels of patient satisfaction like we have today.
ShapiroMD has emerged as a leading destination for hair loss treatment across the U.S. and has served more than 260,000 customers and patients since inception with a 4.9-star Trustpilot rating. ○ NavaMD is a female-oriented, tele-dermatology brand that offers access to virtual medical treatment from dermatologists and other providers, and, if appropriate, prescription oral and compounded topical medications to treat dermatological conditions such as aging and acne.
ShapiroMD has emerged as a leading destination for hair loss treatment across the United States (“U.S.”) and has served more than 265,000 customers and patients since inception with a 4.9-star Trustpilot rating. ○ NavaMD is a female-oriented, tele-dermatology brand that offers access to virtual medical treatment from dermatologists and other providers, and, if appropriate, prescription oral and compounded topical medications to treat dermatological conditions such as aging and acne.
Increased competition, shrinking market sizes and challenges reaching patients via the traditional brick and mortar doctor are forcing pharmaceutical, medical device and diagnostic companies to rethink their commercial strategies and focus more on digital patient awareness and engagement initiatives.
Increased competition, shrinking market sizes and challenges reaching patients via the traditional brick-and-mortar physician offices are forcing pharmaceutical, medical device and diagnostic companies to rethink their commercial strategies and increase their focus on digital patient awareness and engagement initiatives.
Our telehealth revenue increased 21% for the year ended December 31, 2022 as compared to the year ended December 31, 2021. Total revenue from recurring subscriptions is approximately 90%. In addition to our telehealth business, we own 73.64% of WorkSimpli, which operates PDFSimpli, a rapidly growing software as a service platform for converting, signing, editing, and sharing PDF documents.
Our telehealth revenue increased 19% for the year ended December 31, 2023 as compared to the year ended December 31, 2022. Total revenue from recurring subscriptions is approximately 95%. In addition to our telehealth business, we own 73.32% of WorkSimpli, which operates PDFSimpli, a rapidly growing software as a service platform for converting, signing, editing, and sharing PDF documents.
The offerings include free consultations, prescription medication, complementary OTC products, and ongoing care from U.S.-licensed allergists and nurses. Enterprise Telehealth Offerings Organizations commercializing healthcare products face a challenging commercial landscape.
The offerings include free consultations, prescription medication, complementary OTC products and ongoing care from U.S.-licensed allergists and nurses. B2B Telehealth Partnerships Organizations selling healthcare products face a challenging commercial landscape.
Our Growth Strategy We have achieved rapid growth since our transformation into a healthcare focused company in 2018, with a compounded annual growth rate in revenue of nearly 112% since 2019 and growth of 28% in 2022 as compared to 2021.
Our Growth Strategy We have achieved rapid growth since our transformation into a healthcare company in 2018, with a compounded annual growth rate in revenue of nearly 87% since 2020 and revenue growth of 28% in 2023 as compared to 2022.
Technology Platform Our telehealth technology platform is continually optimized as we scale, and this flexible infrastructure can be repurposed for any variety of existing or future telehealth offerings. Further, this platform allows for rapid development and scale of new telehealth offerings as we identify attractive opportunities.
Technology Platform Our telehealth technology platform is continually optimized as we scale up to serve more patients, and this flexible infrastructure can be repurposed for a variety of existing or future telehealth offerings. Further, this platform allows for rapid development and the scale up of new telehealth offerings as we identify attractive opportunities.
RexMD is a leading men’s telehealth platform across the U.S. and has served more than 390,000 customers and patients since inception with a 4.6-star Trustpilot rating. ○ ShapiroMD offers access to virtual medical treatment, prescription medications, patented doctor formulated OTC products, topical compounded medications, and Food and Drug Administration (“FDA”) approved medical devices treating male and female hair loss through our telehealth platform.
RexMD has served approximately 500,000 customers and patients since inception with a 4.6-star Trustpilot rating. ○ ShapiroMD offers access to virtual medical treatment, prescription medications, patented doctor formulated OTC products, topical compounded medications and Food and Drug Administration (“FDA”) approved medical devices treating male and female hair loss through our telehealth platform.
ITEM 1. BUSINESS Business Overview We are a direct-to-patient telehealth company providing patients a high-quality, cost-effective, and convenient way of accessing comprehensive, virtual healthcare.
ITEM 1. BUSINESS Business Overview We are a direct-to-patient telehealth company providing a high-quality, cost-effective, and convenient way to access comprehensive, virtual and in-home healthcare.
LifeMD is positioned to elevate the healthcare experience through telehealth with our proprietary technology platform, affiliated provider network, broad treatment capabilities, and unique ability to nurture patient relationships.
LifeMD is improving the delivery of healthcare experience through telehealth with our proprietary technology platform, affiliated and dedicated provider network, broad and expanding treatment capabilities, and unique ability to nurture patient relationships.
WorkSimpli had over 167,000 active subscriptions as of December 31, 2022. 5 Customers Our customer base includes men and women seeking virtual primary care and virtual medical treatment for hair loss, men’s sexual health issues, dermatology, and allergy and asthma. No single customer accounted for more than 10% of net sales for the years ended December 31, 2022 and 2021.
Customers Our customer base includes men and women seeking virtual primary care and virtual medical treatment for hair loss, men’s sexual health issues, dermatology, allergy, asthma and weight loss. No single customer accounted for more than 10% of net sales for the years ended December 31, 2023 and 2022.
Aspects of the CCPA and these other state laws and regulations, as well as their enforcement, remain unclear, and we may be required to modify our practices in an effort to comply with them.
Aspects of these comprehensive privacy laws and consumer health data privacy laws and regulations, as well as their enforcement, remain unclear, and we may be required to modify our practices in an effort to comply with them.
There remains a large underserved market within primary care, hair loss, erectile dysfunction, men’s and women’s health, dermatology, as well as allergies and asthma into which we intend to continue to aggressively scale in 2023 and beyond.
There remains a large underserved market within primary care, weight loss, hair loss, erectile dysfunction, men’s and women’s health, dermatology and hormonal health into which we intend to continue to aggressively scale our business in 2024 and beyond.
We expect headcount to continue to grow in the future, especially as we continue to focus on recruiting employees in technical functions, in various functions related to our operations as a publicly traded company, and to support our continued growth.
We have not experienced any work stoppages, and we consider our relationship with our employees to be good. We expect headcount to continue to grow in the future, especially as we continue to focus on recruiting employees in technical functions, in various functions related to our operations as a publicly traded company, and to support our continued growth.
This offering is also supported by robust partnerships that provide our patients benefits such as substantial discounts on lab work and a prescription discount card that can be presented at over 60,000 pharmacies to save up to 92% on their prescription medication. 4 Direct-to-Patient Telehealth We also leverage our telehealth platform’s provider network, cloud pharmacy, and EMR capabilities across our direct-to-patient telehealth brands.
This offering is also supported by robust partnerships that provide our patients benefits such as substantial discounts on lab work and a prescription discount card that can be presented at over 60,000 pharmacies to save up to 92% on their prescription medication.
Numerous online brands compete with us for customers throughout the U.S. and internationally in virtual primary care, men’s and women’s health, dermatology, and allergy. We also compete with traditional mass merchandisers, drug store chains, and independent pharmacies.
We expect to execute additional partnership opportunities in the future. Competition The markets we serve are large and highly competitive. Numerous online brands compete with us for customers throughout the U.S. and internationally in virtual primary care, weight loss, men’s and women’s health, dermatology and allergy. We also compete with traditional mass merchandisers, drug store chains, and independent pharmacies.
Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. 9 Violations of fraud and abuse laws, including federal and state anti-kickback and false claims laws, may be punishable by criminal and civil sanctions, including fines and civil monetary penalties, the possibility of exclusion from federal healthcare programs (including Medicare and Medicaid), disgorgement and corporate integrity agreements, which impose, among other things, rigorous operational and monitoring requirements on companies.
Violations of fraud and abuse laws, including federal and state anti-kickback and false claims laws, may be punishable by criminal and civil sanctions, including fines and civil monetary penalties, the possibility of exclusion from federal healthcare programs (including Medicare and Medicaid), disgorgement and corporate integrity agreements, which impose, among other things, rigorous operational and monitoring requirements on companies.
A determination of non-compliance could lead to adverse judicial or administrative action against us and/or our providers, civil or criminal penalties, receipt of cease-and-desist orders from state regulators, loss of provider licenses, or a restructuring of our arrangements with our affiliated professional entities.
A determination of non-compliance could lead to adverse judicial or administrative action against us and/or our providers, civil or criminal penalties, receipt of cease-and-desist orders from state regulators, loss of provider licenses, or a restructuring of our arrangements with our affiliated professional entities. 10 Human Capital As of December 31, 2023, we employed 232 employees, of which 207 were full-time, 4 were part-time, and 21 were temporary employees.
The laws and the level of enforcement of such laws in certain foreign countries where we market our products often do not protect our proprietary rights in our products to the same extent as the laws of the U.S. 7 We have two U.S. patents relating to our Shapiro MD products’ method for treatment of hair loss with a combination of natural ingredients with one granted on March 24, 2015 and the other on January 3, 2017.
We have two U.S. patents relating to our Shapiro MD products’ method for treatment of hair loss with a combination of natural ingredients with one granted on March 24, 2015 and the other on January 3, 2017.
If such information that we publish is considered untrue, we may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences.
Consumer protection laws require us to publish statements that describe how we handle personal information and choices individuals may have about the way we handle their personal information. If such information that we publish is considered untrue, we may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences.
As appropriate, prescription medications and OTC products are filled by pharmacy fulfillment partners, and if preferred, shipped directly to the patient. The number of patients and customers we serve across the nation continues to increase at a robust pace, with more than 680,000 individuals having purchased our products and services to date.
The number of patients and customers we serve across the nation continues to increase at a robust pace, with more than 854,000 individuals having purchased our products and services to date.
Spending on digital solutions to facilitate greater access to their end markets accounts for one-third of their collective $30 billion commercial spend in the U.S. We believe LifeMD’s unique telehealth technology platform and virtual clinical expertise is well-positioned to address the unmet needs of healthcare product companies as they relate to digital patient awareness, access to care, adherence and compliance.
We believe LifeMD’s unique telehealth technology platform and virtual care expertise is well-positioned to address the unmet needs of healthcare product companies as they relate to digital patient awareness, access to care, adherence and compliance.
Healthcare Fraud and Abuse Laws Although the consumers who use our offerings do so outside of any medication or other health benefits covered under their health insurance, including any commercial or government healthcare program, we may nonetheless be subject to a number of federal and state healthcare regulatory laws that restrict business practices in the healthcare industry.
Department of Health and Human Services (“HHS”), may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance. 9 Healthcare Fraud and Abuse Laws Although the consumers who use our offerings do so outside of any medication or other health benefits covered under their health insurance, including any commercial or government healthcare program, we may nonetheless be subject to a number of federal and state healthcare regulatory laws that restrict business practices in the healthcare industry.
The CCPA, which went into effect on January 1, 2020, requires, among other things, covered companies to provide new disclosures to California consumers and afford such consumers new abilities to opt-out of certain sales of personal information. Similar legislation has been proposed or adopted in other states.
The CCPA requires, among other things, covered companies to provide certain disclosures to California consumers and afford such consumers abilities to opt-out of certain sales or sharing of personal information.
The CPRA significantly modifies the CCPA, potentially resulting in further uncertainty. 8 Additionally, the FTC, and many state attorneys general are interpreting existing federal and state consumer protection laws to impose evolving standards for the online collection, use, dissemination and security of health-related and other personal information.
Additionally, the FTC, and many state attorneys general are interpreting existing federal and state consumer protection laws to impose evolving standards for the online collection, use, dissemination and security of health-related and other personal information. Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security and access.
Our mission is to empower people to live healthier lives by increasing access to high quality and affordable virtual and in-home healthcare. We believe our success has and will continue to be attributable to an amazing patient experience, retaining the highest-quality providers in the industry, and our end-to-end technology platform.
We believe our success has been, and will continue to be, attributable to an amazing patient experience, made possible by attracting and retaining the highest-quality providers in the country, and our proprietary end-to-end technology platform.
This business has seen 47% year-over-year revenue growth, with recurring revenue of 98%. Our Platform and Business Strategy We are a patient-centric telehealth company dedicated to delivering seamless end-to-end virtual healthcare to consumers.
Our Platform and Business Strategy We are a patient-centric telehealth company dedicated to delivering seamless end-to-end virtual healthcare directly to consumers and through select enterprise (“B2B”) partnerships.
We plan to continue to build a robust operational infrastructure to enable us to not only provide better patient care but also drive better unit economics for our business. Competition The markets we sell into are large and highly competitive.
We plan to continue to build a robust operational infrastructure to enable us not only to provide better patient care, but also to drive better unit economics for our business supported by strong retention of our patient subscriber base. While we are proud of our accomplishments to date, we believe the most exciting opportunities for our growth lie ahead.
Our offerings range from prescription medication fulfilled on a recurring basis, to complementary OTC products, to ongoing care from a team of medical providers.
Our offerings are sold to consumers on a subscription basis thus creating a relationship-driven patient experience to bolster retention rates and recurring revenue. Our offerings range from prescription medication and OTC products fulfilled on a recurring basis, to primary care and weight management clinical services and ongoing care from a team of dedicated medical providers.
Our human capital and know-how, proprietary technology platform, and unique product offerings represent meaningful strengths that we believe will enable us to maintain and grow our market-leading position in the U.S. 6 Our key competitive strengths include: High-Quality Care Our telehealth platform is designed to give patients more control over their healthcare spending, greater convenience in how and when they pursue or receive care, and better outcomes as hurdles to healthcare services are removed for the care or medications they need.
Our human capital and know-how, proprietary technology platform and unique product offerings represent meaningful strengths that we believe will enable us to maintain and grow our market-leading position in the U.S.
Human Capital As of December 31, 2022, we employed 220 employees, of which 199 were full-time, 4 were part-time, and 17 were temporary employees. Of our total employees, 114 were based at our patient care center in Greenville, SC. We use the services of consultants and third-party service providers, where needed.
Of our total employees, 104 were based at our patient care center in Greenville, SC. We use the services of consultants and third-party service providers, where needed. None of our employees are represented by a union or covered by a collective bargaining agreement.
Majority Owned Subsidiary: WorkSimpli WorkSimpli operates PDFSimpli, an online software as a service platform that allows users to create, edit, convert, sign, and share PDF documents. WorkSimpli was acquired through the purchase of 51% of the membership interests of WorkSimpli Software LLC, a Puerto Rico limited liability company, which operates a marketing-driven software solutions business.
We acquired WorkSimpli through the purchase of 51% of the membership interests of WorkSimpli Software LLC, a Puerto Rico limited liability company, which operates a marketing-driven software solutions business. On January 22, 2021, LifeMD consummated a transaction and increased its ownership of WorkSimpli to 85.6%.
As a result, the Company’s ownership interest in WorkSimpli decreased to 73.64%. WorkSimpli was ranked in the top 7,840 websites globally, with more than 40 million registrants. Since its launch, WorkSimpli has converted or edited over 258 terabytes of documents for customers from the legal, financial, real-estate and academic sectors.
Since its launch, WorkSimpli has converted or edited over 276 terabytes of documents for customers from the legal, financial, real-estate and academic sectors. WorkSimpli had over 281,000 active subscriptions as of December 31, 2023.
We plan to build a diverse portfolio of differentiated telehealth service offerings that meet the needs of a growing and diversified patient base. Since inception, we have helped approximately 680,000 customers and patients, providing them greater access to high-quality, convenient, and affordable care in all 50 states.
Since inception, we have helped approximately 854,000 customers and patients by providing them greater access to high-quality, convenient, and affordable care. Our mission is to empower people to live healthier lives by increasing access to high-quality and affordable virtual and in-home healthcare.
In addition to WorkSimpli’s growth business model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company. On January 22, 2021, the Company consummated a transaction and increased its ownership of WorkSimpli to 85.6%. Effective September 30, 2022, two option agreements were exercised which further restructured the ownership of WorkSimpli.
Effective September 30, 2022, two option agreements were exercised which further restructured the ownership of WorkSimpli. As a result, the Company’s ownership interest in WorkSimpli decreased to 73.64%. Effective March 31, 2023, the Company redeemed 500 membership interest units in WorkSimpli and, as a result, the Company’s ownership interest in WorkSimpli increased to 74.06%.
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The LifeMD telehealth platform seamlessly integrates a clinician-centric electronic medical record (“EMR”) system, proprietary algorithms for case-load balancing and scheduling, customer relationship management (“CRM”) functionality, remote and in-home lab testing, and digital prescription capabilities, patient-provider audio/video interfacing, cloud pharmacy fulfillment, and more.
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The LifeMD telehealth platform integrates best-in-class capabilities including a 50-state medical group, a nationwide pharmacy network, nationwide laboratory and diagnostic testing capabilities, a fully integrated electronic medical records (“EMR”) system and an internal patient care and service call center.
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Our proprietary technology platform, combined with our 50-state affiliated provider network, enables the management of virtual treatment offerings and complex patient journeys for hundreds of conditions spanning men’s and women’s health, dermatology, urgent, and primary care, chronic care management and more.
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These capabilities are integrated by an industry-leading, proprietary telehealth technology that supports a broad range of primary care, chronic disease and lifestyle healthcare needs.
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Our telehealth offerings in general seek to connect patients to licensed providers for diagnoses, virtual care, and prescription medications when appropriate. We also offer over-the-counter (“OTC”) products that are complementary to the conditions we treat. Our virtual primary care services are primarily offered on a subscription basis.
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Currently, LifeMD treats over 215,000 active patient subscribers across a range of their medical needs including primary care, men’s sexual health, weight management, sleep, hair loss and hormonal therapy by providing telehealth clinical services and prescription and over-the-counter (“OTC”) treatments, as medically appropriate. Our virtual primary care services are primarily offered on a subscription basis.
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Our proprietary platform also facilitates and accelerates the development and launch of novel offerings throughout clinical protocol establishment, marketing, and fulfillment. Our offerings are sold to consumers on a subscription basis thus creating convenience and discounted pricing opportunities for patients and recurring revenue streams for the Company.
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As we continue to pursue long-term growth, we plan to continue to introduce new telehealth product and service offerings that complement our already expansive treatment areas. During April 2023, we launched a highly successful and differentiated GLP-1 Weight Management offering driven by our existing primary care capabilities that already had more than 22,000 patient subscribers as of December 31, 2023.
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In general, our offerings seek to serve a patient from beginning to end, starting from brand or offering discovery to the medical intake and product selection process, after which a licensed United States (“U.S.”) physician conducts a virtual consultation and determines a treatment plan.
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Patients receive a range of weight loss services including prescriptions for GLP-1 medications, as medically appropriate, lab work services, general primary care and holistic healthcare and coaching. The GLP-1 medically supported weight loss market is rapidly growing and is projected to increase from over $13 billion to over $100 billion by 2030, according to J.P. Morgan Research.
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We leverage our telehealth technology platform and services across the three core areas described below: Direct-to-Consumer Virtual Primary Care In the first quarter of 2022, we launched our flagship virtual primary care offering under the LifeMD brand, LifeMD PC.
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This business experienced 50% year-over-year revenue growth, with recurring revenue of 100%, due to a combination of higher demand, increased market awareness, enhanced digital capabilities, continued marketing campaign expansion and the addition of the ResumeBuild brand in the first quarter of 2022.
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As a result of this focused investment in the customer experience, including allocation of additional resources and expertise, we expect customer repurchase rates and overall customer retention to strengthen.
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In general, our offerings seek to serve a patient throughout the lifecycle of both their general and chronic healthcare needs. As appropriate, prescription medications and OTC products are filled by pharmacy fulfillment partners, and are shipped directly to the patient.
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While we are proud of our accomplishments to date, we believe the most exciting opportunities for our growth story are ahead of us, and we intend to focus in the following areas to help us achieve this growth.
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In April 2023, we launched our rapidly growing GLP-1 Weight Management program providing primary care, weight loss, holistic healthcare, lab work and prescription services, as appropriate, to patients seeking to access a medically supported weight loss solution. Since inception, our Weight Management program has grown exponentially to over 22,000 patient subscribers as of December 31, 2023.
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Existing trademark laws afford only limited practical protection for our product lines.
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We remain at the forefront of the rapidly growing GLP-1 weight loss market, which is expected to exceed $100 billion by 2030, with our highly differentiated and comprehensive offering. Direct-to-Patient Telehealth Brands We also leverage our telehealth platform’s provider network, cloud pharmacy and EMR capabilities across our direct-to-patient telehealth brands.
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Additionally, a new privacy law, the California Privacy Rights Act (“CPRA”), was passed on November 3, 2020 and became effective on January 1, 2023, with a look-back to January 2022.
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It is estimated that spending on digital solutions to facilitate greater access to end markets accounts for one-third of the collective $30 billion commercial spend by these companies in the U.S.
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Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security and access. Consumer protection laws require us to publish statements that describe how we handle personal information and choices individuals may have about the way we handle their personal information.
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To date, LifeMD has executed the following enterprise commercial agreements providing access to our industry leading telehealth platform capabilities. 5 ○ In September 2023, LifeMD executed a partnership agreement with ASCEND Therapeutics, LLC (“ASCEND”), a subsidiary of Besins Healthcare, and a specialty pharmaceutical company concentrating on women’s health, to provide integrated telehealth services to improve access to EstroGel®.
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Department of Health and Human Services (“HHS”), may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance.
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Under the terms of the agreement, LifeMD receives fees related to certain corporate services provided to ASCEND while having our telehealth services featured on the www.estrogel.com website. ○ On December 11, 2023, the Company entered into a collaboration with Medifast, Inc. through and with certain of its wholly-owned subsidiaries (“Medifast”).
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None of our employees are represented by a union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider our relationship with our employees to be good.
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Medifast will utilize the Company’s virtual care technology platform to provide its clients access to a clinically supported weight management program, including GLP-1 medications, which are a class of medications that mainly help manage blood sugar (glucose) levels in people with Type 2 diabetes but can also treat obesity.
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Pursuant to certain agreements between the parties, Medifast has agreed to pay to the Company the amount of $10 million to support the collaboration, funding enhancements to the Company platform, operations and supporting infrastructure, of which $5 million was paid at the closing on December 12, 2023, and the remainder is to be paid in two $2.5 million installments on March 31, 2024 and June 30, 2024 (or earlier upon the Company’s achievement of certain program milestones) (the “Medifast Collaboration”).
Added
In addition, in connection with the Medifast Collaboration, the Company entered into a stock purchase agreement and registration rights agreement with Medifast’s wholly-owned subsidiary, Jason Pharmaceuticals, Inc., whereby the Company issued 1,224,425 shares of its common stock in a private placement (the “Medifast Private Placement”) at a purchase price of $8.1671 per share, for aggregate proceeds of approximately $10 million.
Added
The Company granted Jason Pharmaceuticals the right, for a period contemporaneous with the ongoing collaboration, to appoint one non-voting observer to the Board of Directors of the Company, entitled to attend Board meetings. Majority Owned Subsidiary: WorkSimpli WorkSimpli is a leading provider of workplace and document services for consumers, gig workers and small businesses.
Added
WorkSimpli operates the following brands: (1) PDFSimpli, an online software as a service platform that allows users to create, edit, convert, sign, and share PDF documents, (2) ResumeBuild, a leading provider of digital resume and cover letter services, (3) SignSimpli, a digital signature platform and (4) LegalSimpli, a provider of legal forms for consumers and small businesses.
Added
Effective June 30, 2023, an option agreement was exercised which further restructured the ownership of WorkSimpli. As a result, the Company’s ownership interest in WorkSimpli decreased to 73.32%. WorkSimpli was ranked in the top 25,000 websites globally, with more than 56 million registrants.
Added
We intend to focus on the following areas to help us achieve this growth: Acquire new patients. We are focused on continuing to drive the acquisition of new patients through our performance marketing platform and increased brand visibility across highly scalable marketing channels.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn this event, failure to comply could lead to adverse judicial or administrative action against us and/or our affiliated providers, civil or criminal penalties, receipt of cease-and-desist orders from state regulators, loss of provider licenses, the need to make changes to the terms of engagement with providers that interfere with our business and other materially adverse consequences. 18 In the U.S., we conduct business in a heavily regulated industry, and if we fail to comply with these laws and government regulations, we could incur penalties or be required to make significant changes to our operations or experience adverse publicity, which could have a material adverse effect on our business, financial condition, and results of operations.
Biggest changeIn this event, failure to comply could lead to adverse judicial or administrative action against us and/or our affiliated providers, civil or criminal penalties, receipt of cease-and-desist orders from state regulators, loss of provider licenses, the need to make changes to the terms of engagement with providers that interfere with our business and other materially adverse consequences.
In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act; ● the criminal healthcare fraud provisions of HIPAA, and related rules that prohibit knowingly and willfully executing a scheme or artifice to defraud any healthcare benefit program or falsifying, concealing, or covering up a material fact or making any material false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services.
In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act; and (3) the criminal healthcare fraud provisions of HIPAA, and related rules that prohibit knowingly and willfully executing a scheme or artifice to defraud any healthcare benefit program or falsifying, concealing, or covering up a material fact or making any material false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services.
We expect our costs will increase substantially in the foreseeable future and we expect our losses will continue as we expect to invest significant additional funds towards growing our platform, growing our provider network, enhancing our pharmacy fulfillment system, and operating as a public company and as we continue to invest in increasing our customer base, hiring additional employees, and developing new products and technological capabilities to enhance our customers’ experience on our platform.
We expect our costs will increase in the foreseeable future and we expect our losses will continue as we expect to invest significant additional funds towards growing our platform, growing our provider network, enhancing our pharmacy fulfillment system, and operating as a public company and as we continue to invest in increasing our customer base, hiring additional employees, and developing new products and technological capabilities to enhance our customers’ experience on our platform.
To the extent our current or future remote work policies result in decreased productivity, harm our company culture, or otherwise negatively affect our business, our financial condition and results of operations could be adversely affected. 17 We are at risk that the non-prescription inventory that we store may become damaged, facility disruption may also harm our business.
To the extent our current or future remote work policies result in decreased productivity, harm our company culture, or otherwise negatively affect our business, our financial condition and results of operations could be adversely affected. We are at risk that the non-prescription inventory that we store may become damaged, facility disruption may also harm our business.
Of particular importance are: ● the federal physician self-referral law, commonly referred to as the Stark Law, that, subject to limited exceptions, prohibits physicians from referring Medicare or Medicaid patients to an entity for the provision of certain “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with the entity, and prohibit the entity from billing Medicare or Medicaid for such designated health services; ● the federal Anti-Kickback Statute that prohibits the knowing and willful offer, payment, solicitation, or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing, or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing, or leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid.
Of particular importance are: (1) the federal physician self-referral law, commonly referred to as the Stark Law, that, subject to limited exceptions, prohibits physicians from referring Medicare or Medicaid patients to an entity for the provision of certain “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with the entity, and prohibit the entity from billing Medicare or Medicaid for such designated health services; (2) the federal Anti-Kickback Statute that prohibits the knowing and willful offer, payment, solicitation, or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing, or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing, or leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid.
Interruptions in our services may reduce our revenue, cause us to issue refunds to customers for prepaid and unused subscriptions, subject us to potential liability, or adversely affect client renewal rates. 24 In addition, our ability to deliver our Internet-based services depends on the development and maintenance of the infrastructure of the Internet by third parties.
Interruptions in our services may reduce our revenue, cause us to issue refunds to customers for prepaid and unused subscriptions, subject us to potential liability, or adversely affect client renewal rates. In addition, our ability to deliver our Internet-based services depends on the development and maintenance of the infrastructure of the Internet by third parties.
As a result, your only opportunity to achieve a return on your investment will be if the market price of our common stock appreciates and you sell your shares at a profit. Your ownership interest may be diluted by the future issuance of additional shares of our common stock or preferred stock.
As a result, your only opportunity to achieve a return on your investment will be if the market price of our common stock appreciates and you sell your shares at a profit. 26 Your ownership interest may be diluted by the future issuance of additional shares of our common stock or preferred stock.
If we are unable to successfully compete with existing and potential competitors, our business, financial condition, and results of operations could be adversely affected. We have experienced rapid growth in recent periods and expect to continue to invest in our growth for the foreseeable future.
If we are unable to successfully compete with existing and potential competitors, our business, financial condition, and results of operations could be adversely affected. 15 We have experienced rapid growth in recent periods and expect to continue to invest in our growth for the foreseeable future.
Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property. We strive to protect our intellectual property rights by relying on federal, state, and common law rights and other rights provided under foreign laws.
Moreover, others may independently develop technologies that are competitive to ours or infringe our intellectual property. 23 We strive to protect our intellectual property rights by relying on federal, state, and common law rights and other rights provided under foreign laws.
Practices regarding the registration, collection, processing, storage, sharing, disclosure, use, and security of personal and other information by companies offering an online service like our platform have recently come under increased public scrutiny.
Practices regarding the registration, collection, processing, storage, sharing, disclosure, use, and security of personal and other information by companies offering an online service like our platform have recently come under increased public and regulatory scrutiny.
We cannot assure you that a review of our business by judicial, law enforcement, regulatory, or accreditation authorities will not result in a determination that could adversely affect our operations. 19 State legislative and regulatory changes specific to the area of telehealth law may present the LifeMD PC any remaining third-party medical groups and independent physicians on our platform with additional requirements and state compliance costs, which may create additional operational complexity and increase costs.
We cannot assure you that a review of our business by judicial, law enforcement, regulatory, or accreditation authorities will not result in a determination that could adversely affect our operations. 20 State legislative and regulatory changes specific to the area of telehealth law may present the LifeMD PC any remaining third-party medical groups and independent physicians on our platform with additional requirements and state compliance costs, which may create additional operational complexity and increase costs.
If any of these events occurs, it could have a material adverse effect on our business, financial condition, and results of operations. 11 If we are unable to expand the scope of our offerings, including the number and type of products and services that we offer, the number and quality of healthcare providers serving our customers, and the number and types of conditions capable of being treated through our platform, our business, financial condition, and results of operations may be materially and adversely affected.
If any of these events occurs, it could have a material adverse effect on our business, financial condition, and results of operations. 12 If we are unable to expand the scope of our offerings, including the number and type of products and services that we offer, the number and quality of healthcare providers serving our customers, and the number and types of conditions capable of being treated through our platform, our business, financial condition, and results of operations may be materially and adversely affected.
Any such inappropriate use of social media, emails and text messages could also cause reputational damage and adversely affect our business. 12 Our revenue growth depends on consumers’ willingness to adopt our products, and the failure of our offerings to achieve and maintain market acceptance could result in us achieving revenue below our expectations, which could cause our business, financial condition, and results of operation to be materially and adversely affected.
Any such inappropriate use of social media, emails and text messages could also cause reputational damage and adversely affect our business. 13 Our revenue growth depends on consumers’ willingness to adopt our products, and the failure of our offerings to achieve and maintain market acceptance could result in us achieving revenue below our expectations, which could cause our business, financial condition, and results of operation to be materially and adversely affected.
If these third-party service providers were to increase the cost of their services, we may have to increase the price of our offerings, and our results of operations may be adversely impacted. 16 We depend on a number of other companies to perform functions critical to our ability to operate our platform, generate revenue from customers, and to perform many of the related functions.
If these third-party service providers were to increase the cost of their services, we may have to increase the price of our offerings, and our results of operations may be adversely impacted. 17 We depend on a number of other companies to perform functions critical to our ability to operate our platform, generate revenue from customers, and to perform many of the related functions.
Managing legal proceedings, litigation and audits, even if we achieve favorable outcomes, is time-consuming and diverts management’s attention from our business. 23 The results of regulatory proceedings, litigation, claims, and audits cannot be predicted with certainty, and determining reserves for pending litigation and other legal, regulatory, and audit matters requires significant judgment.
Managing legal proceedings, litigation and audits, even if we achieve favorable outcomes, is time-consuming and diverts management’s attention from our business. 24 The results of regulatory proceedings, litigation, claims, and audits cannot be predicted with certainty, and determining reserves for pending litigation and other legal, regulatory, and audit matters requires significant judgment.
A decline in the price of our common shares or preferred shares could make it more difficult to raise funds through future offerings of our preferred shares, common shares or securities convertible into common shares. We have significant numbers of warrants and stock options outstanding, and incentive awards outstanding under our 2020 Equity Incentive Plan.
A decline in the price of our common shares or preferred shares could make it more difficult to raise funds through future offerings of our preferred shares, common shares or securities convertible into common shares. We have significant numbers of warrants and stock options outstanding, and incentive awards outstanding under our Amended and Restated 2020 Equity and Incentive Plan.
With respect to our telehealth services, the telehealth market is relatively new and unproven, and it is uncertain whether it will achieve and sustain high levels of demand, consumer acceptance and market adoption. The outbreak of the COVID-19 pandemic has increased utilization of telehealth services, but it is uncertain whether such increase in demand will continue.
With respect to our telehealth services, the telehealth market is relatively new and unproven, and it is uncertain whether it will achieve and sustain high levels of demand, consumer acceptance and market adoption. The COVID-19 pandemic increased utilization of telehealth services, but it is uncertain whether such increase in demand will continue.
Moreover, if we are not able to correct our internal control issues and comply with the requirements of Section 404 in a timely manner, or if in the future we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
Moreover, if we are not able to correct our internal control issues and comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm continues to identify deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
In recent years, the U.S. and other significant markets have experienced inflationary pressures and cyclical downturns, and worldwide economic conditions remain uncertain. This has been the case in 2022.
In recent years, the U.S. and other significant markets have experienced inflationary pressures and cyclical downturns, and worldwide economic conditions remain uncertain. This has been the case in 2023.
If our security measures fail or are breached, it could result in unauthorized persons accessing sensitive consumer or partner data (including PHI), a loss of or damage to our data, an inability to access data sources, or process data or provide our services to our customers.
If our security measures fail or are breached, it could result in unauthorized persons accessing sensitive consumer or partner data (including personal information), a loss of or damage to our data, an inability to access data sources, or process data or provide our services to our customers.
We may pursue inorganic methods of growth, including strategic acquisitions and mergers in the future, to add complementary or strategic companies, products, solutions, technologies, or revenue. These transactions could be material to our results of operations and financial condition. We also expect to continue to evaluate and enter into discussions regarding a wide array of potential strategic transactions.
We may continue to pursue inorganic methods of growth, including strategic acquisitions and mergers and collaborations, to add complementary or strategic companies, products, solutions, technologies, or revenue. These transactions could be material to our results of operations and financial condition. We also expect to continue to evaluate and enter into discussions regarding a wide array of potential strategic transactions.
Our current competitors include traditional healthcare providers expanding into the telehealth market, incumbent telehealth providers, as well as new entrants into our market that are focused on direct-to-consumer healthcare. Our competitors include enterprise-focused companies who may enter the direct-to-consumer healthcare industry, as well as direct-to-consumer healthcare providers.
Our current competitors include traditional drug manufacturers and healthcare providers expanding into the telehealth market, incumbent telehealth providers, as well as new entrants into our market that are focused on direct-to-consumer healthcare. Our competitors include enterprise-focused companies who may enter the direct-to-consumer healthcare industry, as well as direct-to-consumer healthcare providers.
We may be subject to legal proceedings and litigation, including intellectual property disputes, which are costly to defend and could materially harm our business and results of operations. We may be party to lawsuits and legal proceedings in the normal course of business. These matters are often expensive and disruptive to normal business operations.
We are subject to legal proceedings and litigation, including intellectual property disputes, which are costly to defend and could materially harm our business and results of operations. From time to time, we are party to lawsuits and legal proceedings in the normal course of business. These matters are often expensive and disruptive to normal business operations.
If customer adoption of telehealth generally, or our platform in particular materially decreases as the COVID-19 restrictions are lifted, or if COVID-19 results in regulatory changes that limit our current activities, our industry, business, and results of operations could be adversely affected. Our business depends on continued and unimpeded access to the internet and mobile networks.
If customer adoption of telehealth generally, or our platform in particular materially decreases after the COVID-19 pandemic, or if COVID-19 results in regulatory changes that limit our current activities, our industry, business, and results of operations could be adversely affected. Our business depends on continued and unimpeded access to the internet and mobile networks.
We face risk that may arise from acquisitions and investments, which could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business, financial condition, and results of operations. Additionally, if we are not able to identify and successfully acquire suitable businesses, our results of operations and prospects could be harmed.
We face risk that may arise from acquisitions, investments and collaborations, which could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business, financial condition, and results of operations. Additionally, if we are not able to identify and successfully consummate these transactions, our results of operations and prospects could be harmed.
We may in the future issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of holders of our common stock and preferred stock. We are currently authorized to issue 100,000,000 shares of common stock and 5,000,000 shares of preferred stock. Additionally, the Board may subsequently approve increases in authorized common stock and preferred stock.
We may in the future issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of holders of our common stock and preferred stock. We are currently authorized to issue 100,000,000 shares of common stock and 5,000,000 shares of preferred stock.
Any of the foregoing consequences could seriously harm our business and our financial results. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to us may limit customers’ use and adoption of, and reduce the overall demand for, our platform.
Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to us may limit customers’ use and adoption of, and reduce the overall demand for, our platform. Any of the foregoing consequences could have a material adverse impact on our business and our financial results.
Our revenue grew from $92.9 million for the year ended December 31, 2021 to $119.0 million for the year ended December 31, 2022. Our number of full-time employees has increased significantly over the last few years, from 56 employees as of December 31, 2020 to 199 employees as of December 31, 2022.
Our revenue grew from $119.0 million for the year ended December 31, 2022 to $153.0 million for the year ended December 31, 2023. Our number of full-time employees has increased significantly over the last few years, from 56 employees as of December 31, 2020 to 207 employees as of December 31, 2023.
Our services involve the storage and transmission of customers’ and our vendors’ proprietary information, sensitive or confidential data, including valuable intellectual property and personal information of employees, consumers, customers, and others, as well as the protected health information, (“PHI”), of our customers.
Our services involve the storage and transmission of customers’ and our vendors’ proprietary information, sensitive or confidential data, including valuable intellectual property and personal information of employees, consumers, customers, and others, as well as the personal information (including health information and other sensitive information as defined under applicable laws) of our customers.
Those negotiations could result in diversion of management time and significant out-of-pocket costs. If we fail to evaluate and execute acquisitions successfully, we may not be able to realize the benefits of these acquisitions, and our results of operations could be harmed.
We may enter into negotiations for transactions that are not ultimately consummated. Those negotiations could result in diversion of management time and significant out-of-pocket costs. If we fail to evaluate and execute transactions successfully, we may not be able to realize the benefits of these transactions, and our results of operations could be harmed.
Achieving and sustaining compliance with these laws may prove costly. Failure to comply with these laws and other laws can result in civil and criminal penalties such as fines, damages, overpayment, recoupment, imprisonment.
Failure to comply with these laws and other laws can result in civil and criminal penalties such as fines, damages, overpayment, recoupment, imprisonment.
As of December 31, 2022, the Company had total liabilities of $33.0 million. As of December 31, 2022, we had availability of $59.5 million available under the ATM Sales Agreement and $32 million available under the 2021 Shelf, after giving effect to letters of credit and borrowing base limitations.
As of December 31, 2023, the Company had total liabilities of $52.9 million. As of December 31, 2023, we had availability of $53.3 million under the ATM Sales Agreement and $32.0 million available under the 2021 Shelf, after giving effect to letters of credit and borrowing base limitations.
Although we maintain a security and privacy damages insurance policy, the coverage under our policies may not be adequate to compensate us for all losses that may occur related to the services provided by our third-party vendors. In addition, we may not be able to continue to obtain adequate insurance coverage at an acceptable cost, if at all.
Although we maintain a security and privacy damages insurance policy, the coverage under our policies may not be adequate to compensate us for all losses that may occur related to the services provided by our third-party vendors.
To attract and retain key personnel, we use various measures, including an equity incentive program for key executive officers and other employees. These measures may not be enough to attract and retain the personnel we require to operate our business effectively.
To attract and retain key personnel, we use various measures, including an equity incentive program for key executive officers and other employees. These measures may not be enough to attract and retain the personnel we require to operate our business effectively. We permit most of our employees to work remotely should their particular positions allow.
Our cash flows from operations were negative for the years ended December 31, 2022 and 2021. We may not generate positive cash flows from operations or achieve profitability in any given period, and our limited operating history may make it difficult to evaluate our current business and our future prospects.
We may not generate positive cash flows from operations or achieve profitability in any given period, and our limited operating history may make it difficult to evaluate our current business and our future prospects.
The potential issuance of such additional shares of common or preferred stock or convertible debt may create downward pressure on the trading price of our already outstanding common stock and preferred stock.
Additionally, the Board of Directors may subsequently approve increases in authorized common stock and preferred stock. The potential issuance of such additional shares of common or preferred stock or convertible debt may create downward pressure on the trading price of our already outstanding common stock and preferred stock.
Any action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business and result in adverse publicity. To enforce compliance with the federal laws, the U.S. Department of Justice and the U.S.
Any action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business and result in adverse publicity. Dealing with investigations can be time- and resource-consuming and can divert management’s attention from the business.
Any new offerings or service enhancements that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, or may not achieve the broad market acceptance necessary to generate sufficient revenue.
Any new offerings or service enhancements that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, or may not achieve the broad market acceptance necessary to generate sufficient revenue. We may use technologies such as generative artificial intelligence (“AI”) to help us develop and market new products.
Failure to meet—or significant changes to—any federal, state, or local requirements attendant to the sales and marketing of a regulated product could result in enforcement actions, impede our ability to provide access to affected products, and have a material adverse effect on our business, financial condition and results of operations. 20 We may be subject to fines, penalties, and injunctions if we are determined to be promoting the use of products for unapproved uses.
Failure to meet—or significant changes to—any federal, state, or local requirements attendant to the sales and marketing of a regulated product could result in enforcement actions, impede our ability to provide access to affected products, and have a material adverse effect on our business, financial condition and results of operations.
For example, the CCPA requires, among other things, covered companies to provide new disclosures to California consumers and afford such consumers new abilities to opt-out of certain sales of personal information. Similar legislation has been proposed or adopted in other states.
For example, the CCPA and thirteen other state consumer privacy laws require, among other things, covered companies to provide certain disclosures to California consumers and afford such consumers new abilities to opt-out or sharing of personal information and limit the use of sensitive information, including health information. Similar legislation has been proposed or adopted in other states.
If customers do not shift to subscription business models and subscription health management tools do not achieve widespread adoption, or if there is a reduction in demand for subscription products and services or subscription health management tools, our business, financial condition, and results of operations could be adversely affected.
If customers do not shift to subscription business models and subscription health management tools do not achieve widespread adoption, or if there is a reduction in demand for subscription products and services or subscription health management tools, our business, financial condition, and results of operations could be adversely affected. 14 Competitive platforms or other technological breakthroughs for the monitoring, treatment, or prevention of medical conditions may adversely affect demand for our offerings.
Certain of the products available through our platform require approval by the FDA and are subject to the limitations placed by FDA on the approved uses in the product prescribing information.
We may be subject to fines, penalties, and injunctions if we are determined to be promoting the use of products for unapproved uses. Certain of the products available through our platform require approval by the FDA and are subject to the limitations placed by FDA on the approved uses in the product prescribing information.
We currently do not intend to pay dividends on our common stock. As a result, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.
Risks Related to Investments in our Securities There can be no assurance that we can continue to pay dividends on our preferred stock. We currently do not intend to pay dividends on our common stock. As a result, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.
It could adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which could negatively affect investor confidence in our company, and, as a result, the value of our common stock could be adversely affected. 25 Risks Related to Investments in our Securities There can be no assurance that we can continue to pay dividends on our preferred stock.
It could adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, which could negatively affect investor confidence in our company, and, as a result, the value of our common stock could be adversely affected.
Accordingly, we may face resistance to our offerings from brick-and-mortar providers until there is overwhelming evidence to convince them to alter their current approach.
Accordingly, we may face resistance to our offerings from brick-and-mortar providers until there is overwhelming evidence to convince them to alter their current approach. Our business is subject to changes in medication pricing and is significantly impacted by pricing structures negotiated by industry participants.
If a competitor develops a product or business that competes with, or is perceived to be superior to our offerings, or if a competitor employs strategies that place downward pressure on pricing within our industry, our revenue may decline significantly or may not increase in line with our forecasts, either of which could adversely affect our business, financial condition, and results of operations. 13 We operate in highly competitive markets and face competition from large, well-established healthcare providers and more traditional retailers and pharmaceutical providers with significant resources, and, as a result, we may not be able to compete effectively.
If a competitor develops a product or business that competes with, or is perceived to be superior to our offerings, or if a competitor employs strategies that place downward pressure on pricing within our industry, our revenue may decline significantly or may not increase in line with our forecasts, either of which could adversely affect our business, financial condition, and results of operations.
If we are unable to successfully address any of these risks, our business, financial condition, or results of operations could be harmed.
If we are unable to successfully address any of these risks, our business, financial condition, or results of operations could be harmed. Economic uncertainty or downturns, particularly as it impacts particular industries, could adversely affect our business and results of operations.
The products we sell and our third-party suppliers are subject to FDA regulations and other state and local requirements, and if we or our third party suppliers fail to comply with federal, state, and local requirements, our ability to fulfill customers’ orders through our platform could be impaired.
If we are required to comply with the Health Care Reform Law and fail to comply or are unable to effectively manage such risks and uncertainties, our financial condition and results of operations could be adversely affected. 21 The products we sell and our third-party suppliers are subject to FDA regulations and other state and local requirements, and if we or our third party suppliers fail to comply with federal, state, and local requirements, our ability to fulfill customers’ orders through our platform could be impaired.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and effective disclosure controls and procedures. In particular, under Section 404 of the Sarbanes-Oxley Act, we are required to perform system and process evaluation and testing on the effectiveness of our internal control over financial reporting.
In particular, under Section 404 of the Sarbanes-Oxley Act, we are required to perform system and process evaluation and testing on the effectiveness of our internal control over financial reporting, and our independent registered public accounting firm is required to report on the effectiveness of our internal control over financial reporting.
If we fail to adequately respond to such changes, including by implementing effective operational and strategic initiatives, or do not do so as effectively as our competitors, our business, operations, and results of operations may be materially adversely affected We cannot predict the enactment or content of new legislation and regulations or changes to existing laws or regulations or their enforcement, interpretation or application, or the effect they will have on our business or results of operations, which could be materially adverse.
We cannot predict the enactment or content of new legislation and regulations or changes to existing laws or regulations or their enforcement, interpretation or application, or the effect they will have on our business or results of operations, which could be materially adverse.
If an actual or perceived breach of our security occurs, or if we are unable to effectively resolve such breaches in a timely manner, the market perception of the effectiveness of our security measures could be harmed and we could lose sales, customers, and vendors which could have a material adverse effect on our business, operations, and financial results. 22 Risks Related to Intellectual Property and Litigation Failure to protect or enforce our intellectual property rights could harm our business and results of operations.
If an actual or perceived breach of our security occurs, or if we are unable to effectively resolve such breaches in a timely manner, the market perception of the effectiveness of our security measures could be harmed and we could lose sales, customers, and vendors which could have a material adverse effect on our business, operations, and financial results. 19 Risks Related to Governmental Regulation We may be subject to claims that we are engaged in the corporate practice of medicine or that our contractual arrangements with our affiliated medical group constitutes unlawful fee splitting.
Such changes may require us to modify our platform, possibly in a material manner, and may limit our ability to develop new offerings, functionality, or features.
Such changes may require us to modify our platform, possibly in a material manner, and may limit our ability to develop new offerings, functionality, or features. Risks Related to Intellectual Property and Litigation Failure to protect or enforce our intellectual property rights could harm our business and results of operations.
Because we derive a vast majority of our revenue from customers who purchase subscription-based prescription products, any material decline in the use of such offerings could have a pronounced impact on our future revenue and results of operations, particularly if we are unable to expand our offerings overall.
Because we derive a vast majority of our revenue from customers who purchase subscription-based prescription products, any material decline in the use of such offerings could have a pronounced impact on our future revenue and results of operations, particularly if we are unable to expand our offerings overall. 18 In the past we have, and in the future we may, actively employ social media and Patient Care Center activities as part of our marketing strategy, which could give rise to regulatory violations, liability, breaches of data security, or reputational damage.
The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to complete acquisitions on favorable terms, if at all.
The identification of suitable acquisition candidates and strategic partners can be difficult, time-consuming, and costly, and we may not be able to complete acquisitions on favorable terms, if at all. The process of integrating an acquired company, business, or technology, or partnering with another company, may create unforeseen operating difficulties and expenditures.
The markets for healthcare are intensely competitive, subject to rapid change and significantly affected by new product and technological introductions and other market activities of industry participants. We compete directly not only with other established telehealth providers but also traditional healthcare providers, pharmacies, and large retailers that sell non-prescription products, including, for example, nutritional supplements, vitamins, and hair care treatments.
We compete directly not only with other established telehealth providers but also traditional drug manufacturers, healthcare providers, pharmacies, and large retailers that sell non-prescription products, including, for example, nutritional supplements, vitamins, and hair care treatments.
Any of the foregoing consequences could have a material adverse impact on our business and our financial results. 21 Public scrutiny of internet privacy and security issues may result in increased regulation and different industry standards, which could deter or prevent us from providing services to our customers, thereby harming our business.
Public scrutiny of internet privacy and security issues may result in increased regulation and different industry standards, which could deter or prevent us from providing services to our customers, thereby harming our business. The regulatory framework for privacy and security issues worldwide is evolving and is likely to remain in flux for the foreseeable future.
Even if we are able to identify an acquisition that we would like to consummate, we may not be able to complete the acquisition on commercially reasonable terms or the target may be acquired by another company. We may enter into negotiations for acquisitions that are not ultimately consummated.
Additionally, competition within our industry for acquisitions of business, technologies, and assets, and for collaborations, may become intense. Even if we are able to identify an acquisition or collaboration that we would like to consummate, we may not be able to complete the transaction on commercially reasonable terms or the target may be acquired by, or partner with, another company.
As the COVID-19 pandemic is ongoing, the complete impact of the pandemic is still unknown and rapidly evolving. 15 Due to COVID-19, telehealth has seen a steep increase in use across the industry, in part due to governmental waivers of statutory and regulatory restrictions that have historically limited how telehealth may be used in delivering care in certain jurisdictions.
Due to COVID-19, telehealth has seen a steep increase in use across the industry, in part due to governmental waivers of statutory and regulatory restrictions that have historically limited how telehealth may be used in delivering care in certain jurisdictions. We do not know if this relaxation of regulatory barriers resulting from COVID-19 will remain or for how long.
Our results of operations, as well as our key metrics, may fluctuate on a quarterly and annual basis, which may result in us failing to meet the expectations of industry and securities analysts or our investors.
In addition, we may not be able to continue to obtain adequate insurance coverage at an acceptable cost, if at all. 25 Risks Related to Our Financial Reporting, Results of Operations and Capital Requirements Our results of operations, as well as our key metrics, may fluctuate on a quarterly and annual basis, which may result in us failing to meet the expectations of industry and securities analysts or our investors.
Complying with these various laws and regulations could cause us to incur substantial costs or require us to change our business practices, systems, and compliance procedures in a manner adverse to our business.
Complying with these various laws and regulations could cause us to incur substantial costs or require us to change our business practices, systems, and compliance procedures in a manner adverse to our business. 22 We also publish statements to our customers through our privacy policy consent to telehealth, and terms and conditions, that describe how we handle health information or other PII.
The process of integrating an acquired company, business, or technology may create unforeseen operating difficulties and expenditures. 14 Future acquisitions could also result in expenditures of significant cash, dilutive issuances of our equity securities, the incurrence of debt, restrictions on our business, contingent liabilities, amortization expenses, or write-offs of goodwill, any of which could harm our financial condition.
Acquisitions and collaborations could also result in expenditures of significant cash, dilutive issuances of our equity securities, the incurrence of debt, restrictions on our business, contingent liabilities, amortization expenses, or write-offs of goodwill, any of which could harm our financial condition. In addition, any transactions we announce could be viewed negatively by customers, providers, partners, suppliers, or investors.
We incurred net losses of $45.0 million and $61.3 million in the years ended December 31, 2022 and 2021, respectively. We had total stockholders’ deficit of approximately $11.9 million as of December 31, 2022.
We incurred net losses of $17.8 million and $45.0 million in the years ended December 31, 2023 and 2022, respectively.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Achieving and sustaining compliance with these laws may prove costly.
This relationship is subject to various state laws that prohibit fee splitting or the practice of medicine by lay entities or persons. Corporate practice of medicine laws and enforcement varies by state.
The affiliated medical group is solely responsible for practicing medicine and all clinical decision-making and will pay us for our management services from the fees collected from patients. This relationship is subject to various state laws that prohibit fee splitting or the practice of medicine by lay entities or persons. Corporate practice of medicine laws and enforcement varies by state.
We have entered into a management services agreement with our affiliated medical group pursuant to which we provide these P.C.’s and P.A.’s with a comprehensive set of non-clinical management and administrative services. The affiliated medical group is solely responsible for practicing medicine and all clinical decision-making and will pay us for our management services from the fees collected from patients.
We have contracted with physician-owned professional corporations (“P.C.’s”) or professional associations (“P.A.’s”) to facilitate the delivery of telehealth services to their patients. We have entered into a management services agreement with our affiliated medical group pursuant to which we provide these P.C.’s and P.A.’s with a comprehensive set of non-clinical management and administrative services.
Aspects of the CCPA and these other state laws and regulations, as well as their enforcement, remain unclear, and we may be required to modify our practices in an effort to comply with them. Additionally, the CPRA was passed on November 3, 2020 and became effective on January 1, 2023, with a look-back to January 2022.
Aspects of the CCPA, the MHMDA, other comprehensive privacy laws, consumer health data privacy laws, and regulations, as well as their enforcement, remain unclear, and we may be required to modify our internal compliance and data-use practices in an effort to comply with them.
If federal or state regulatory authorities or private litigants consider any portion of these statements to be untrue, we may be subject to claims of deceptive practices, which could lead to significant liabilities and consequences, including, without limitation, costs of responding to investigations, defending against litigation, settling claims, and complying with regulatory or court orders.
In each case, violations of these laws could lead to significant liabilities and consequences, including, without limitation, costs of responding to investigations, defending against litigation, settling claims, and complying with regulatory or court orders. Any of the foregoing consequences could seriously harm our business and our financial results.
We cannot predict the timing, strength, or duration of any economic slowdown or any subsequent recovery generally, or in any particular industry. If the conditions in the general economy and the markets in which we operate worsen from present levels, our business, financial condition, and results of operations could be materially adversely affected.
If the conditions in the general economy and the markets in which we operate worsen from present levels, our business, financial condition, and results of operations could be materially adversely affected. 16 The COVID-19 pandemic has increased interest in and customer use of telehealth solutions, including our platform, and we cannot guarantee that this increased interest will continue after the pandemic.
In performing this evaluation and testing our management concluded that our internal control over financial reporting is not effective as of December 31, 2022 because of material weaknesses. Correcting this issue, and thereafter our continued compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts.
In performing this evaluation and testing, both our management and our independent registered public accounting firm concluded that our internal control over financial reporting is not effective as of December 31, 2023 because of material weaknesses and our independent registered public accounting firm expressed an adverse opinion on the effectiveness of our internal control over financial reporting as of December 31, 2023.
The regulatory framework for privacy and security issues worldwide is evolving and is likely to remain in flux for the foreseeable future. Various government and consumer agencies have also called for new regulation and changes in industry practices.
Various government and consumer agencies have also called for new regulation and changes in industry practices and multiple U.S. states have passed comprehensive consumer privacy laws and consumer health privacy laws over the last three years.
Removed
Competitive platforms or other technological breakthroughs for the monitoring, treatment, or prevention of medical conditions may adversely affect demand for our offerings.
Added
Despite our best efforts, AI may generate content that is not relevant or useful to our users and can subject us to risks related to inaccurate content, discrimination, intellectual property infringement or misappropriation, data privacy and cybersecurity breaches, among others.
Removed
In addition, any acquisitions we announce could be viewed negatively by customers, providers, partners, suppliers, or investors. Additionally, competition within our industry for acquisitions of business, technologies, and assets may become intense.
Added
The prescription prices that we present through our platform are based in large part upon pricing structures negotiated by industry participants.
Removed
Expansion into international markets can be a driver of long-term growth, when we expand into international markets, we will face additional business, political, legal, regulatory, operational, financial, and economic risks, any of which could increase our costs and hinder such growth.
Added
We do not control the pricing strategies of drug manufacturers, wholesalers and pharmacies, each of which is motivated by independent considerations and drivers that are outside our control and has the ability to set or significantly impact market prices for different prescription medications.
Removed
Expanding our business to attract customers, providers, and suppliers in countries other than the U.S. is an opportunity for growth for us going-forward. An important part of targeting international markets is increasing our brand awareness and establishing relationships with partners internationally.
Added
While we have contractual and non-contractual relationships with certain industry participants, such as pharmacies and drug manufacturers, these and other industry participants often negotiate complex and multi-party pricing structures, and we have no control over these participants and the policies and strategies that they implement in negotiating these pricing structures.
Removed
Our ability to expand our business and to attract talented employees, customers, providers, partners, and suppliers in various international markets will require considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal systems, alternative dispute resolution systems, regulatory systems, and commercial infrastructures.
Added
Medication pricing is also impacted by health insurance companies and the extent to which a health insurance plan provides for, among other things, covered medications, preferred tiers for different medications and high or low deductibles.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe operate a marketing and sales center in Huntington Beach, California for which the lease expires in 2023 and a patient care center in Greenville, South Carolina for which the lease expires in 2024. Additionally, we lease warehouse space in Lancaster, Pennsylvania for which the lease expires in 2023.
Biggest changeWe operate a marketing and sales center in Huntington Beach, California for which the lease expires in 2024 and a patient care center in Greenville, South Carolina for which the lease expires in 2024. Additionally, we lease warehouse space in Lancaster, Pennsylvania for which the lease expires in 2024.
Our majority-owned subsidiary, WorkSimpli leases office space in Puerto Rico for which the lease expires in 2024. Leased premises range from approximately 1,000 to 14,000 square feet with monthly rents ranging from $2,200 per month to $34,400 per month. We believe that our existing facilities are adequate for current and presently foreseeable operations.
Our majority-owned subsidiary, WorkSimpli leases office space in Puerto Rico for which the lease expires in 2024. Leased premises range from approximately 1,000 to 14,000 square feet with monthly rents ranging from $1,700 per month to $34,400 per month. We believe that our existing facilities are adequate for current and presently foreseeable operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFuture litigation may be necessary to defend ourselves and our customers by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights. For additional information on pending legal proceedings see Note 10—Commitments and Contingencies to our consolidated financial statements included in this report. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 27 PART II
Biggest changeFuture litigation may be necessary to defend ourselves and our customers by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights. For additional information on pending legal proceedings see Note 10—Commitments and Contingencies to our consolidated financial statements included in this report.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRecent Sales of Unregistered Securities Other than any sales that were already disclosed under a Current Report on Form 8-K during the year ended December 31, 2022, there have been no sales of unregistered securities by the Company as of such date. ITEM 6. RESERVED
Biggest changeRecent Sales of Unregistered Securities Other than any sales that were already disclosed under a Current Report on Form 8-K or a Quarterly report on Form 10-Q during the year ended December 31, 2023, there have been no sales of unregistered securities by the Company as of such date except for 543,000 restricted stock awards and 15,000 stock options granted to employees.
Approximate Number of Equity Security Holders As of March 21, 2023, there were approximately 304 holders of record of our common stock, and the last reported sale price of our common stock on the Nasdaq Global Market on March 21, 2023 was $1.17.
Approximate Number of Equity Security Holders As of March 8, 2024, there were approximately 304 holders of record of our common stock, and the last reported sale price of our common stock on the Nasdaq Global Market on March 8, 2024 was $8.00.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021 Our financial results for the year ended December 31, 2022 are summarized as follows in comparison to the year ended December 31, 2021: December 31, 2022 December 31, 2021 $ % of Sales $ % of Sales Telehealth revenue, net $ 82,649,845 69.43 % $ 68,197,128 73.43 % WorkSimpli revenue, net 36,383,675 30.57 % 24,678,678 26.57 % Total revenue, net 119,033,520 100.00 % 92,875,806 100.00 % Cost of telehealth revenue 17,843,754 14.99 % 17,549,550 18.90 % Cost of WorkSimpli revenue 824,274 0.69 % 445,844 0.48 % Total cost of revenue 18,668,028 15.68 % 17,995,394 19.38 % Gross profit 100,365,492 84.32 % 74,880,412 80.62 % Selling and marketing expenses 78,369,430 65.84 % 82,541,956 88.87 % General and administrative expenses 46,960,782 39.45 % 39,534,573 42.57 % Goodwill and intangible asset impairment charges 8,862,596 7.45 % - - % Other operating expenses 6,717,795 5.64 % 3,317,976 3.57 % Customer service expenses 5,033,468 4.23 % 2,838,831 3.06 % Development costs 2,970,202 2.50 % 948,157 1.02 % Change in fair value of contingent consideration (5,101,000 ) (4.29 )% - - % Total expenses 143,813,273 120.82 % 129,181,493 139.09 % Operating loss (43,447,781 ) (36.50 )% (54,301,081 ) (58.47 )% Other expenses, net (1,212,546 ) (1.02 )% (7,015,275 ) (7.55 )% Loss from operations before income taxes (44,660,327 ) (37.52 )% (61,316,356 ) (66.02 )% Income tax provision (360,700 ) (0.30 )% (7,700 ) (0.01 )% Net loss (45,021,027 ) (37.82 )% (61,324,056 ) (66.03 )% Net income (loss) attributable to non-controlling interest 514,632 0.43 % (426,352 ) (0.46 )% Net loss attributable to LifeMD, Inc.
Biggest changeResults of Operations Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 Our financial results for the year ended December 31, 2023 are summarized as follows in comparison to the year ended December 31, 2022: December 31, 2023 December 31, 2022 $ % of Sales $ % of Sales Telehealth revenue, net $ 98,152,919 64.34 % $ 82,649,845 69.43 % WorkSimpli revenue, net 54,394,087 35.66 % 36,383,675 30.57 % Total revenue, net 152,547,006 100.00 % 119,033,520 100.00 % Cost of telehealth revenue 17,480,533 11.46 % 17,843,754 14.99 % Cost of WorkSimpli revenue 1,419,931 0.93 % 824,274 0.69 % Total cost of revenue 18,900,464 12.39 % 18,668,028 15.68 % Gross profit 133,646,542 87.61 % 100,365,492 84.32 % Selling and marketing expenses 76,451,466 50.12 % 78,369,430 65.84 % General and administrative expenses 51,694,232 33.89 % 46,960,782 39.45 % Other operating expenses 6,297,321 4.13 % 6,717,795 5.64 % Customer service expenses 7,632,283 5.00 % 5,033,468 4.23 % Development costs 6,060,513 3.97 % 2,970,202 2.50 % Goodwill and intangible asset impairment charges - - % 8,862,596 7.45 % Change in fair value of contingent consideration - - % (5,101,000 ) (4.29 )% Total expenses 148,135,815 97.11 % 143,813,273 120.82 % Operating loss (14,489,273 ) (9.50 )% (43,447,781 ) (36.50 )% Interest expense, net (2,596,586 ) (1.70 )% (1,275,946 ) (1.07 )% (Loss) gain on debt extinguishment (325,198 ) (0.21 )% 63,400 0.05 % Loss from operations before income taxes (17,411,057 ) (11.41 )% (44,660,327 ) (37.52 )% Income tax provision (428,000 ) (0.28 )% (360,700 ) (0.30 )% Net loss (17,839,057 ) (11.69 )% (45,021,027 ) (37.82 )% Net income attributable to non-controlling interest 2,756,935 1.81 % 514,632 0.43 % Net loss attributable to LifeMD, Inc.
Total cost of revenue consists of the cost of (1) telehealth revenues, which primarily include product costs, pharmacy fulfillment costs, physician consult fees, and shipping costs directly attributable to our prescription and OTC products and (2) the cost of WorkSimpli revenue consisting primarily of information technology fees related to providing the services made available on our online platform.
Total cost of revenue consists of (1) the cost of telehealth revenues, which primarily include product costs, pharmacy fulfillment costs, physician consult fees, and shipping costs directly attributable to our prescription and OTC products and (2) the cost of WorkSimpli revenue consisting primarily of information technology fees related to providing the services made available on our online platform.
The number of shares of Common Stock available for issuance under the Plan automatically increases by 150,000 shares of Common Stock on January 1st of each year, for a period of not more than ten years, commencing on January 1, 2021 and ending on (and including) January 1, 2030.
The number of shares of Common Stock available for issuance under the 2020 Plan automatically increases by 150,000 shares of Common Stock on January 1st of each year, for a period of not more than ten years, commencing on January 1, 2021 and ending on (and including) January 1, 2030.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our audited consolidated financial statements for the period ended December 31, 2022 and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our audited consolidated financial statements for the period ended December 31, 2023 and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations.
This discussion should be read in conjunction with our consolidated financial statements for the two-year period ended December 31, 2022 and related notes included elsewhere in this Annual Report on Form 10-K. These historical financial statements may not be indicative of our future performance.
This discussion should be read in conjunction with our consolidated financial statements for the two-year period ended December 31, 2023 and related notes included elsewhere in this Annual Report on Form 10-K. These historical financial statements may not be indicative of our future performance.
In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the fiscal year ended December 31, 2022, as compared to the fiscal year ended December 31, 2021.
In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the fiscal year ended December 31, 2023, as compared to the fiscal year ended December 31, 2022.
We market branded and generic prescription drugs that are then sold and shipped online directly to consumers in all 50 states and the District of Columbia and Puerto Rico. We have also established a 50-state affiliated medical group that provides virtual consultations to our patients. Since inception, we have treated approximately 680,000 customers and patients nationwide.
We market branded and generic prescription drugs that are then sold and shipped online directly to consumers in all 50 states and the District of Columbia and Puerto Rico. We have also established a 50-state medical group that provides virtual consultations to our patients. Since inception, we have treated approximately 854,000 customers and patients nationwide.
(vi) Change in fair value of contingent consideration: During the year ended December 31, 2022, the Company recorded a $5.1 million reduction to the Cleared contingent consideration as a result of the remeasurement of the fair value.
(iv) Change in fair value of contingent consideration: During the year ended December 31, 2022, the Company recorded a $5.1 million reduction to the Cleared contingent consideration as a result of the remeasurement of the fair value.
WorkSimpli revenue accounts for 31% of total revenue and has steadily increased year over year due to a combination of higher demand, increased market awareness, enhanced digital capabilities, continued marketing campaign expansion and the addition of the ResumeBuild brand in the first quarter of 2022.
WorkSimpli revenue accounts for 36% of total revenue and has steadily increased year over year due to a combination of higher demand, increased market awareness, enhanced digital capabilities, continued marketing campaign expansion and the addition of the ResumeBuild brand in the first quarter of 2022. Total cost of revenue.
The increase is primarily attributable to: (i) General and administrative expenses: During the year ended December 31, 2022, stock-based compensation was $13.7 million, with the majority related to stock compensation expense attributable to service-based stock options and restricted stock units, as compared to stock-based compensation expense of $12.1 million for the year ended December 31, 2021.
The increase is primarily attributable to: (i) General and administrative expenses: During the year ended December 31, 2023, stock-based compensation was $12.5 million, with the majority related to stock compensation expense attributable to service-based stock options and restricted stock units, as compared to stock-based compensation expense of $13.7 million for the year ended December 31, 2022.
The First Amendment was amended to, among other things: (i) reduce the total purchase price by $250 thousand to a total of $3.67 million; (ii) change the timing of the payment of the purchase price to $460 thousand paid at closing (which has already been paid by the Company), with the remaining amount to be paid in five quarterly installments beginning on or before February 6, 2023 and ending January 15, 2024; (iii) removing all “earn-out” payments payable by the Company to the sellers; and (iv) removing certain representations and warranties of the Company and sellers in connection with the transaction (See Note 3—Acquisitions to our consolidated financial statements included in this report).
The Cleared Stock Purchase Agreement was amended to, among other things: (i) reduce the total purchase price by $250 thousand to a total of $3.67 million; (ii) change the timing of the payment of the purchase price to $460 thousand paid at closing, with the remaining amount to be paid in five quarterly installments beginning on or before February 6, 2023 and ending January 15, 2024; (iii) removing all “earn-out” payments payable by the Company to the sellers; and (iv) removing certain representations and warranties of the Company and sellers in connection with the transaction (See Note 3—Acquisitions to our consolidated financial statements included in this report).
Net cash used in investing activities was primarily due to cash paid for capitalized software costs of approximately $8.5 million, cash paid for the purchase of the ResumeBuild brand of approximately $4.0 million, cash paid for the Cleared acquisition of approximately $1.0 million and cash paid for the purchase of equipment of $367 thousand.
Net cash used in investing activities for the year ended December 31, 2022 was primarily due to cash paid for capitalized software costs of approximately $8.5 million, cash paid for the purchase of the ResumeBuild brand of approximately $4.0 million, cash paid for the Cleared acquisition of approximately $1.0 million and cash paid for the purchase of equipment of $367 thousand.
(iv) Customer service expenses: This consists of rent, insurance, payroll and benefit expenses related to the Company’s customer service department located in South Carolina and Puerto Rico. During the year ended December 31, 2022, the Company had an increase of approximately $2.2 million, primarily related to increases in infrastructure costs and headcount in the Company’s customer service department.
(ii) Customer service expenses: This consists of rent, insurance, payroll and benefit expenses related to the Company’s customer service department located in South Carolina and Puerto Rico. During the year ended December 31, 2023, the Company had an increase of approximately $2.6 million, or 52%, primarily related to increases in infrastructure costs and headcount in the Company’s customer service department.
The significant factors contributing to the net cash used in operations during the year ended December 31, 2022, include the net loss of approximately $45.0 million inclusive of the following: (1) $13.7 million in non-cash stock-based compensation charges, (2) $8.9 million in non-cash goodwill and intangible asset impairment charges related to a decline in the estimated fair value of Cleared as a result of a decline in the Cleared financial projections and (3) $3.8 million in non-cash depreciation and amortization, partially offset by a $5.1 million reduction to the Cleared contingent consideration as a result of the remeasurement of the fair value.
The significant factors contributing to the net cash used in operating activities during the year ended December 31, 2022, include $13.7 million in non-cash stock-based compensation charges, $8.9 million in non-cash goodwill and intangible asset impairment charges related to a decline in the estimated fair value of Cleared as a result of a decline in the Cleared financial projections and $3.8 million in non-cash depreciation and amortization, partially offset by a $5.1 million reduction to the Cleared contingent consideration as a result of the remeasurement of the fair value.
Sales of common stock, if any, will be made by any method permitted that is deemed an “at the market offering” as defined in Rule 415 under the Securities Act. As of December 31, 2022, the Company has $59.5 million available under the ATM Sales Agreement and $32 million available under the 2021 Shelf.
Sales of common stock, if any, will be made by any method permitted that is deemed an “at the market offering” as defined in Rule 415 under the Securities Act. As of December 31, 2023, the Company had $53.3 million available under the ATM Sales Agreement and $32.0 million available under the 2021 Shelf.
Net cash used in financing activities for the year ended December 31, 2022 was approximately $528 thousand as compared with net cash provided by financing activities of approximately $68.6 million for the year ended December 31, 2021.
Net cash provided by financing activities for the year ended December 31, 2023 was approximately $29.1 million as compared with net cash used in financing activities of approximately $528 thousand for the year ended December 31, 2022.
(v) Development costs: This mainly relates to third-party technology services for developing and maintaining our online platforms and information technology services for our online products. During the year ended December 31, 2022, the Company had an increase of approximately $2.0 million primarily resulting from technology platform improvements and amortization expenses.
(iii) Development costs: This mainly relates to third-party technology services for developing and maintaining our online platforms and information technology services for our online products. During the year ended December 31, 2023, the Company had an increase of approximately $3.1 million, or 104%, primarily resulting from technology platform improvements and amortization expenses.
These factors contributing to net cash used in operations were partially offset by an increase in deferred revenue of $4.0 million due to increased sales for products which the customer has not yet obtained control due to delivery not commensurate upon shipment of the product and accounts payable of $1.3 million as a result of the Company extending payables and credit terms with vendors.
These factors contributing to net cash used in operations were partially offset by an increase in deferred revenue of $4.0 million due to increased sales for products which the customer has not yet obtained control due to delivery not commensurate upon shipment of the product and accounts payable of $1.3 million as a result of the Company extending payables and credit terms with vendors. 32 Net cash used in investing activities for the year ended December 31, 2023 was approximately $8.7 million, as compared with net cash used in investing activities of $13.9 million for the year ended December 31, 2022.
During the year ended December 31, 2022, the Company had a decrease of approximately $4.2 million in selling and marketing costs resulting from a Company-wide strategic reduction in costs and alignment of sales and marketing initiatives to drive the Company’s recurring revenue subscription-based sales model.
During the year ended December 31, 2023, the Company had a decrease of approximately $1.9 million, or 2%, in selling and marketing costs as a result of a Company-wide strategic reduction in costs and alignment of sales and marketing initiatives to drive the Company’s recurring revenue subscription-based sales model.
Gross profit as a percentage of revenues for telehealth was 78% for the year ended December 31, 2022 compared to 74% for the year ended December 31, 2021, and for WorkSimpli was 98% for both the years ended December 31, 2022 and 2021.
Gross profit as a percentage of revenues for telehealth was 82% for the year ended December 31, 2023 compared to 78% for the year ended December 31, 2022, and for WorkSimpli was 97% for the year ended December 31, 2023 compared to 98% for the year ended December 31, 2022.
In November 2022, the Company received proceeds of $1,930,000 under two 10-month working capital loans with Balanced Management pursuant to the Business Loan and Security Agreement. The terms of the loans include loan origination fees in the amount of $60,000 and total interest of $840,000.
In November 2022, the Company received proceeds of $1.9 million under two 10-month working capital loans with Balanced Management. The terms of the loans include loan origination fees in the amount of $60 thousand and total interest of $840 thousand.
In October 2022, the Company received proceeds of $976,000 under a 12-month working capital loan with Amazon pursuant to the Amazon Lending Agreement. The terms of the loan include interest in the amount of $62,157. The total outstanding balance of $976,000, is included in notes payable, net, on the accompanying consolidated balance sheet as of December 31, 2022.
As of December 31, 2023 and 2022, the outstanding balance was $217 thousand and $0, respectively, and is included in notes payable, net, on the accompanying consolidated balance sheet. In October 2022, the Company received proceeds of $976 thousand under a 12-month working capital loan with Amazon. The terms of the loan include interest in the amount of $62 thousand.
The Company recorded an $8.0 million goodwill impairment charge and an $827 thousand intangible asset impairment charge during the year ended December 31, 2022 related to a decline in the estimated fair value of Cleared as a result of a decline in the Cleared financial projections.
(iii) Goodwill impairment charge: During the year ended December 31, 2022, the Company recorded an $8.9 million goodwill impairment charge related to a decline in the estimated fair value of Cleared as a result of a decline in the Cleared financial projections. Interest expense, net.
Total revenue for the year ended December 31, 2022 was approximately $119.0 million, an increase of 28% compared to approximately $92.9 million for the year ended December 31, 2021. The increase in revenues was attributable to both the increase in telehealth revenue of 21% and an increase in WorkSimpli revenue of 47%.
Revenues for the year ended December 31, 2023 were approximately $152.5 million, an increase of 28% compared to approximately $119.0 million for the year ended December 31, 2022. The increase in revenues was attributable to both the increase in telehealth revenue of 19% and an increase in WorkSimpli revenue of 50%.
Net cash used in investing activities for the year ended December 31, 2021 was primarily due to cash paid for capitalized software costs of approximately $3.1 million, the purchase of equipment of approximately $247 thousand and the purchase of an intangible asset of approximately $22 thousand.
Net cash used in investing activities for the year ended December 31, 2023 was primarily due to cash paid for capitalized software costs of approximately $8.4 million, cash paid for the purchase of equipment of $204 thousand and cash paid for the purchase of intangible assets of approximately $149 thousand.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains numerous forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing, particularly in “Item 1A.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains numerous forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing, particularly in “Item 1A. Risk Factors.” Overview LifeMD, Inc. is a direct-to-patient telehealth company with a portfolio of health and wellness brands.
Awards under the 2020 Plan can be granted in the form of stock options, non-qualified and incentive options, stock appreciation rights, restricted stock, and restricted stock units. 29 On June 24, 2021, at the Annual Meeting of Stockholders, the stockholders of the Company approved an amendment to the 2020 Plan to increase the maximum number of shares of the Company’s common stock available for issuance under the 2020 Plan by 1,500,000 shares.
On June 24, 2021, at the Annual Meeting of Stockholders, the stockholders of the Company approved an amendment to the 2020 Plan to increase the maximum number of shares of the Company’s common stock available for issuance under the 2020 Plan by 1,500,000 shares.
Our primary short-term and long-term requirements for liquidity and capital are for customer acquisitions, fund business acquisitions and investments we may make from time to time, working capital including our noncancelable operating lease obligations, noncontingent consideration, capital expenditures and general corporate purposes. The Company has a current cash balance of approximately $14.6 million as of the filing date.
Our primary short-term and long-term requirements for liquidity and capital are for customer acquisitions, funding business acquisitions and investments we may make from time to time, working capital including our noncancelable operating lease obligations, noncontingent consideration, capital expenditures and general corporate purposes.
Application of New or Revised Accounting Standards—Not Yet Adopted All other accounting standards updates that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 8.
All other accounting standards updates that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
In accordance with the terms of the ATM Sales Agreement, the Company may, but is not obligated to, offer and sell, from time to time, shares of common stock having an aggregate offering price of up to $60 million, through or to the Agents, acting as agent or principal.
Riley Securities, Inc. and Cantor Fitzgerald & Co. relating to the sale of its common stock. In accordance with the terms of the ATM Sales Agreement, the Company may, but is not obligated to, offer and sell, from time to time, shares of common stock, through or to the Agents, acting as agent or principal.
As of December 31, 2022, the Plan provided for the issuance of up to 4,800,000 shares of Common Stock. Remaining authorization under the 2020 Plan was 1,732,163 shares as of December 31, 2022.
As of December 31, 2023, the 2020 Plan, as amended and restated, provided for the issuance of up to 4,950,000 shares of Common Stock. Remaining authorization under the 2020 Plan, as amended and restated, was 61,611 shares as of December 31, 2023.
Total cost of revenue increased by approximately 4% to approximately $18.7 million for the year ended December 31, 2022 compared to approximately $18.0 million for the year ended December 31, 2021. The increased combined cost of revenue was due to increased sales volume when compared to the year ended December 31, 2021.
Total cost of revenue increased by approximately 1% to approximately $18.9 million for the year ended December 31, 2023 compared to approximately $18.7 million for the year ended December 31, 2022.
The decline in the estimated fair value of the Cleared contingent consideration is a result of a decline in the Cleared financial projections and the removal of all earn-out payments payable by the Company from the terms of the First Amendment.
The decline in the estimated fair value of the Cleared contingent consideration is a result of a decline in the Cleared financial projections and the removal of all earn-out payments payable by the Company from the terms of the Cleared First Amendment. 31 These increases in operating expenses were partially offset by decreases in the following: (i) Selling and marketing expenses: This mainly consists of online marketing and advertising expenses.
The increase in sales volume for both telehealth and WorkSimpli and improved pricing have contributed to the increase in gross profit. Total expenses. Operating expenses for the year ended December 31, 2022 were approximately $143.8 million, as compared to approximately $129.2 million for the year ended December 31, 2021. This represents an increase of 11%, or $14.6 million.
The increase in sales volume for both telehealth and WorkSimpli, Medifast Collaboration revenue, improved pricing and a decrease in product refunds and rebates have contributed to the increase in gross profit. Total expenses. Operating expenses for the year ended December 31, 2023 were approximately $148.1 million, as compared to approximately $143.8 million for the year ended December 31, 2022.
Gross profit increased by approximately 34% to approximately $100.4 million for the year ended December 31, 2022 compared to approximately $74.9 million for the year ended December 31, 2021. Gross profit as a percentage of revenues was 84% for the year ended December 31, 2022 compared to 81% for the year ended December 31, 2021.
Gross profit as a percentage of revenues was 88% for the year ended December 31, 2023 compared to 84% for the year ended December 31, 2022.
Risk Factors.” Overview LifeMD, Inc. is a diversified online direct-to-patient marketing and telehealth company with a portfolio of health and wellness brands. Our products are marketed and sold directly to consumers through advertisements on Facebook, Google, Amazon, and other social media and e-commerce platforms. Secondarily, we also sell our products through third party partner channels.
Our subscriptions and products are marketed and sold directly to consumers through advertisements on Facebook, Google, Amazon, and other social media and e-commerce platforms. Secondarily, we also sell our products through third party partner channels.
However, there can be no assurances that we will continue to be successful in increasing revenues, improving operational efficiencies or that financing will be available or, if available, that such financing will be available under favorable terms.
For more information on our operating lease obligations, see Note 9—Leases to our consolidated financial statements included in this report. There can be no assurances that we will be successful in increasing revenues, improving operational efficiencies, or that financing will be available or, if available, that such financing will be available under favorable terms.
During the year ended December 31, 2022, the Company had an increase of approximately $7.4 million in general and administrative expenses, primarily related to an increase in payroll of $7.0 million incurred to support the sales volume increases and growth of the Company and the increase in stock-based compensation costs referenced above, partially offset by a Company-wide strategic reduction in costs.
During the year ended December 31, 2023, the Company had an increase of approximately $4.7 million in general and administrative expenses, primarily related to increases in compensation costs and WorkSimpli dividends paid during the year ended December 31, 2023.
In conjunction with the 2021 Shelf, the Company also entered into an At Market Issuance Sales Agreement (the “ATM Sales Agreement”) with B. Riley Securities, Inc. and Cantor Fitzgerald & Co. relating to the sale of its common stock.
Under the 2021 Shelf at the time of effectiveness, the Company originally had the ability to raise up to $150 million by selling common stock, preferred stock, debt securities, warrants, and units. In conjunction with the 2021 Shelf, the Company also entered into an At Market Issuance Sales Agreement (the “ATM Sales Agreement”) with B.
(45,535,659 ) (38.25 )% (60,897,704 ) (65.57 )% Preferred stock dividends (3,106,250 ) (2.61 )% (871,476 ) (0.94 )% Net loss attributable to common stockholders $ (48,641,909 ) (40.86 )% $ (61,769,180 ) (66.51 )% Total revenue, net.
(20,595,992 ) (13.50 )% (45,535,659 ) (38.25 )% Preferred stock dividends (3,106,250 ) (2.04 )% (3,106,250 ) (2.61 )% Net loss attributable to common stockholders $ (23,702,242 ) (15.54 )% $ (48,641,909 ) (40.86 )% 30 Total revenue, net.
The decrease in current assets is primarily attributable to a decrease in cash of approximately $37.4 million, partially offset by an increase in inventory of $2.1 million due to timing of purchases and an increase in accounts receivable of approximately $1.9 million.
The increase in current assets is primarily attributable to an increase in cash of approximately $29.2 million as a result of the Avenue Facility and the Medifast Collaboration and Private Placement and an increase in accounts receivable of $2.4 million.
To date, the Company has been funding operations primarily through the sales of its products, issuance of common and preferred stock and through loans and advances from officers and directors.
Liquidity and Capital Resources Outlook To date, the Company has been funding operations primarily through the sales of its products, issuance of common and preferred stock, and through loans and advances. The Company’s continued operations are dependent upon obtaining an increase in its sale volumes and obtaining funding from third-party sources or the issuance of additional shares of common stock.
We believe our current segments and brands within our segments complement one another and position us well for future growth. 28 Developments in 2022 Key developments in our business during 2022 are described below: Cleared Acquisition On January 18, 2022, the Company acquired Cleared, a nationwide allergy telehealth platform that provides personalized treatments for allergy, asthma, and immunology.
We believe our current segments and brands within our segments complement one another and position us well for future growth. 28 Developments in 2023 Key developments in our business during 2023 are described below: Medifast Collaboration and Private Placement On December 11, 2023, the Company entered into a collaboration with Medifast, Inc. through and with certain of its wholly-owned subsidiaries (“Medifast”).
During the year ended December 31, 2022, the Company had an increase of approximately $3.4 million, or 102%, primarily related to increases in office supplies and software subscriptions of $1.1 million, insurance of $1 million, and additional lease expense related to a lease entered into at the end of 2021 of $400 thousand.
(ii) Other operating expenses: This consists of rent and lease expense, insurance, office supplies and software subscriptions, royalty expense and bank charges. During the year ended December 31, 2023, the Company had a decrease of approximately $420 thousand, or 6%, primarily related to decreases in office supplies and software subscriptions.
The purchase price was approximately $9.1 million, including cash paid upfront of approximately $1.0 million and payable in the future of approximately $3.0 million, and contingent consideration of $5.1 million. On February 4, 2023, the Company entered into the First Amendment to the Stock Purchase Agreement (the “First Amendment”) between the Company and the sellers of Cleared.
Amendment to the Cleared Stock Purchase Agreement On February 4, 2023, the Company entered into the First Amendment (the ‘Cleared First Amendment”) to the Stock Purchase Agreement, dated January 11, 2022, between the Company and the sellers of Cleared (the “Cleared Stock Purchase Agreement”).
Telehealth costs decreased to 22% of associated telehealth revenues experienced during the year ended December 31, 2022, from 26% of associated telehealth revenues during the year ended December 31, 2021. WorkSimpli costs were 2% of associated WorkSimpli revenues for both the years ended December 31, 2022 and 2021. 30 Gross profit.
WorkSimpli costs increased to 3% of associated WorkSimpli revenues during the year ended December 31, 2023, from 2% of associated WorkSimpli revenues during the year ended December 31, 2022. Gross profit. Gross profit increased by approximately 33% to approximately $133.6 million for the year ended December 31, 2023 compared to approximately $100.4 million for the year ended December 31, 2022.
Telehealth revenue accounts for 69% of total revenue and has increased in the year ended December 31, 2022 due to an increase in online sales demand, with the majority of the growth of our telehealth brands, RexMD and ShapiroMD.
Telehealth revenue accounts for 64% of total revenue and has increased during the year ended December 31, 2023 due to an increase in online sales demand primarily for LifeMD virtual primary care which experienced an increase in revenue of approximately $11.8 million during the year ended December 31, 2023 compared to the year ended December 31, 2022, Medifast Collaboration revenue and a decrease in product refunds and rebates.
Recently Issued Accounting Standards In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations (Topic 805); Accounting for Contract Assets and Contract Liabilities from Contracts with Customers . This new guidance affects all entities that enter into a business combination within the scope of ASC 805-10.
This new guidance affects all entities that enter into a business combination within the scope of ASC 805-10.
Management believes that the overall market value of the telehealth industry is positive and that it will continue to drive interest in the Company. Critical Accounting Policies and Estimates Our significant accounting policies are more fully described in Note 2—Summary of Significant Accounting Policies to our consolidated financial statements included in this report.
There are items within our financial statements that require estimation but are not deemed critical, as defined above. Our significant accounting policies are more fully described in Note 2—Summary of Significant Accounting Policies to our consolidated financial statements included in this report.
On June 8, 2021, the Company filed a shelf registration statement on Form S-3 under the Securities Act, which was declared effective on June 22, 2021 (the “2021 Shelf”). Under the 2021 Shelf at the time of effectiveness, the Company had the ability to raise up to $150 million by selling common stock, preferred stock, debt securities, warrants, and units.
As of December 31, 2023 and 2022, the outstanding balance was $0 and $1.821 million, respectively, and is included in notes payable, net, on the accompanying consolidated balance sheet. On June 8, 2021, the Company filed a shelf registration statement on Form S-3 under the Securities Act, which was declared effective on June 22, 2021 (the “2021 Shelf”).
Net cash provided by financing activities for the year ended December 31, 2021, consisted of (1) net proceeds of $14.9 million from the private placement, pursuant to the June 1, 2021 Purchase Agreement, (2) net proceeds of $13.5 million from the private placement pursuant to the February 2021 Purchase Agreement, (3) net proceeds from the exercise of options and warrants during the period of approximately $1.2 million, (4) net proceeds from the sale of common stock under the ATM Sales Agreement of approximately $0.5 million, in connection with our filed shelf registration and launch of an at-the-market program on June 8, 2021, (5) our entry into a merchant funding agreement, and (6) the October 4, 2021 Offerings whereby the Company received total net proceeds of $55.3 million.
During the year ended December 31, 2023, net cash provided by financing activities consisted of: (1) $19.5 million in net proceeds received from the Avenue Facility, (2) $10 million in proceeds received from the Medifast Private Placement, (3) $6.2 million in net proceeds received from the sale of common stock under the ATM Sales Agreement (as defined below), (4) $2.3 million in proceeds received from notes payable and (5) $95 thousand in proceeds received from the exercise of stock options.
Net cash used in investing activities for the year ended December 31, 2022 was approximately $13.9 million, as compared with net cash used in investing activities of $3.4 million for the year ended December 31, 2021.
Liquidity and Capital Resources Year Ended December 31, 2023 2022 Net cash provided by (used in) operating activities $ 8,820,232 $ (22,935,149 ) Net cash used in investing activities (8,733,284 ) (13,905,733 ) Net cash provided by (used in) financing activities 29,100,820 (528,200 ) Net increase (decrease) in cash 29,187,768 (37,369,082 ) Net cash provided by operating activities was approximately $8.8 million for the year ended December 31, 2023, as compared with net cash used in operating activities of approximately $22.9 million for the year ended December 31, 2022.
Other Expenses, net Year Ended December 31, 2022 2021 Interest expense, net $ (1,275,946 ) $ (3,019,716 ) Gain (loss) on debt forgiveness 63,400 (3,995,559 ) Total $ (1,212,546 ) $ (7,015,275 ) Other expenses, net for the year ended December 31, 2022, consists of interest expensed on the Company’s notes payable and Series B Convertible Preferred Stock partially offset by the gain on debt forgiveness of Paycheck Protection Program loans.
Interest expense, net consists of interest expense related to the Avenue Facility, notes payable and the Series B Preferred Stock for the year ended December 31, 2023 and interest expensed on the Company’s notes payable and Series B Convertible Preferred Stock for the year ended December 31, 2022.
We believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations. 33 Revenue Recognition The Company records revenue under the adoption of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers , by analyzing exchanges with its customers using a five-step analysis: 1. Identify the contract 2.
We believe that these accounting policies are critical for one to fully understand and evaluate our financial condition and results of operations.
Current liabilities increased by $8.5 million, which was primarily attributable to an increase in deferred revenue of approximately $4.0 million due to increased sales for products which the customer has not yet obtained control due to delivery not commensurate upon shipment of the product, an increase in notes payable of $2.7 million, an increase in accounts payable and accrued expenses of $1.6 million as a result of the Company extending payables and credit terms with vendors and accrual of the noncontingent milestone payments related to the Cleared acquisition of $2.6 million due in 2023.
Current liabilities increased by $3.4 million, which was primarily attributable to an increase in deferred revenue of $3.3 million and an increase in accounts payable and accrued expenses of $2.7 million, partially offset by a decrease in notes payable of $2.5 million.
Rising interest rates and inflation may increase the cost of capital and make it more difficult for us to access capital markets. Net cash used in operating activities was approximately $23.0 million for the year ended December 31, 2022, as compared with approximately $33.1 million for the year ended December 31, 2021.
The increase in net cash provided by operating activities was primarily related to the decrease in the Company’s net loss of $27.2 million to $17.8 million for the year ended December 31, 2023, as compared with $45.0 million for the year ended December 31, 2022.
The total outstanding balance of $1,821,250, is included in notes payable, net on the accompanying consolidated balance sheet as of December 31, 2022. During the year ended December 31, 2022, we issued an aggregate of 90,400 shares of common stock for the exercise of stock options for cash proceeds of $90,400.
As of December 31, 2023 and 2022, the outstanding balance was $111 thousand and $976 thousand, respectively, and is included in notes payable, net, on the accompanying consolidated balance sheet. The outstanding balance as of December 31, 2023 was repaid in January 2024.
Removed
ResumeBuild Asset Purchase Agreement In February 2022, our majority-owned subsidiary WorkSimpli closed on an Asset Purchase Agreement (the “ResumeBuild APA”) with East Fusion FZCO, a Dubai, UAE corporation (the “Seller”), whereby WorkSimpli acquired substantially all of the assets associated with the Seller’s business offering subscription-based resume building software through software as a service online platforms.
Added
Medifast will utilize the Company’s virtual care technology platform to provide its clients access to a clinically supported weight management program, including GLP-1 medications, which are a class of medications that mainly help manage blood sugar (glucose) levels in people with Type 2 diabetes but can also treat obesity.
Removed
WorkSimpli paid to the Seller a purchase price $4.0 million. The Seller is also entitled to a minimum of $500 thousand to be paid out in quarterly payments equal to the greater of 15% of net profits (as defined in the ResumeBuild APA) or $62,500, for a two-year period ending on the two-year anniversary of the closing of the acquisition.
Added
Pursuant to certain agreements between the parties, Medifast has agreed to pay to the Company the amount of $10 million to support the collaboration, funding enhancements to the Company platform, operations and supporting infrastructure, of which $5 million was paid at the closing on December 12, 2023, and the remainder is to be paid in two $2.5 million installments on March 31, 2024 and June 30, 2024 (or earlier upon the Company’s achievement of certain program milestones) (the “Medifast Collaboration”).
Removed
WorkSimpli borrowed the purchase price from the Company pursuant to a promissory note with the obligation secured by an equity purchase guarantee agreement and a stock option pledge agreement from Fitzpatrick Consulting, LLC and its sole member Sean Fitzpatrick, who is Co-Founder and President of WorkSimpli.
Added
In addition, in connection with the Medifast Collaboration, the Company entered into a stock purchase agreement and registration rights agreement with Medifast’s wholly-owned subsidiary, Jason Pharmaceuticals, Inc., whereby the Company issued 1,224,425 shares of its common stock in a private placement (the “Medifast Private Placement”) at a purchase price of $8.1671 per share, for aggregate proceeds of approximately $10 million.
Removed
WorkSimpli Software Capitalization Update On September 30, 2022, Sean Fitzpatrick and Varun Pathak exercised their options to purchase 10,300 and 2,100 membership interest units, respectively, of WorkSimpli for an exercise price of $1.00 per membership interest unit pursuant to certain option agreements between Conversion Labs PR and each of Sean Fitzpatrick and Varun Pathak.
Added
The Company granted Jason Pharmaceuticals the right, for a period contemporaneous with the ongoing collaboration, to appoint one non-voting observer to the Board of Directors of the Company, entitled to attend Board meetings.
Removed
Following the exercise of such option agreements, Conversion Labs PR decreased its ownership interest in WorkSimpli from 85.58% to 73.64%. Manufacturing and Supply Chain We have not experienced any material adverse effect on our business as a result of shortages of raw materials or packaging materials used in the manufacturing of our products.
Added
Series B Preferred Stock Conversion On July 10, 2023 and August 14, 2023, PA001 Holdings, LLC (“PA001 Holdings”), the holder of the Company’s Series B Preferred Stock, elected to convert 2,275 and 1,225 shares, respectively, of the Company’s Series B Preferred Stock into common stock, at a price of $3.25 per share of Series B Preferred Stock, pursuant to the terms of the Securities Purchase Agreement dated August 28, 2020 (the “PA001 Securities Purchase Agreement”).
Removed
An unexpected interruption or a shortage in supply could adversely affect our business derived from these products. We are not substantially dependent on any raw material supplier or packaging supplier since alternative sources of materials, with equal quality, could be quickly obtained if any of our current suppliers cease to supply us adequately.
Added
The conversion was calculated based on the original issuance price of the Series B Preferred Stock plus all accrued dividends to date. The conversion resulted in 1,010,170 and 550,694 shares of the Company’s common stock issued to PA001 Holdings, on July 12, 2023 and August 15, 2023, respectively.
Removed
Among other things, our supply chain is subject to the effects of natural disasters and other events beyond our control, such as raw material, component, and labor shortages; global and regional shipping and logistics constraints; work stoppages; power outages; and the physical effects of climate change, including changes in weather patterns.
Added
In connection with the PA001 Securities Purchase Agreement, the Company and PA001 Holdings entered into a registration rights agreement pursuant to which the Company agreed to register the shares of the Company’s common stock underlying the Series B Preferred Stock and associated warrants.
Removed
In addition, human rights concerns, including forced labor and human trafficking, in foreign countries and associated governmental responses have the potential to disrupt our supply chain, and our operations could be adversely impacted.
Added
Avenue Capital Credit Facility On March 21, 2023, the Company entered into and closed on a loan and security agreement (the “Avenue Credit Agreement”), and a supplement to the Credit Agreement (the “Avenue Supplement”), with Avenue Venture Opportunities Fund II, L.P. and Avenue Venture Opportunities Fund, L.P. (collectively, “Avenue”).
Removed
Although we do not believe that raw materials used in the products we sell are sourced from regions with forced labor concerns, any delays or other supply chain disruption resulting from these concerns, associated governmental responses, or a desire to source products, components, or materials from other manufacturers or regions could result in shipping delays, cancellations, penalty payments, or loss of revenue and market share, any of which could have a material adverse effect on our business, results of operations, cash flows, and financial condition.
Added
The Avenue Credit Agreement provides for a convertible senior secured credit facility of up to an aggregate amount of $40 million, comprised of the following: (1) $15 million in term loans funded at closing, (2) $5 million of additional committed term loans which the Company received on September 26, 2023 under the First Amendment to the Avenue Credit Agreement (the “Avenue First Amendment”) and (3) $20 million of additional uncommitted term loans, collectively referred to as the “Avenue Facility”.
Removed
In connection with these potential impacts on our supply chain, we are, as a general matter, seeing a trend of modest increases in (i) pricing on air and ocean freight, as well as for component and product parts, (ii) the overall time to receive shipments, and (iii) the overall time for shipment and delivery to our customers from third-party shippers. 2020 Equity Incentive Plan On January 8, 2021, the Company approved the 2020 Plan.
Added
The Avenue Facility matures on October 1, 2026. The Company issued Avenue warrants to purchase $1.2 million of the Company’s common stock at an exercise price of $1.24, subject to adjustments (the “Avenue Warrants”).
Removed
While a portion of our growth could be attributable to the COVID-19 pandemic, management strongly believes our growth is primarily a result of the strength of our healthcare brands. Total cost of revenue.
Added
In addition, Avenue may convert up to $2 million of the $15 million in term loans funded at closing into shares of the Company’s common stock at any time while the loans are outstanding, at a price per share equal to $1.49.
Removed
(ii) Goodwill and intangible asset impairment charges: During the year ended December 31, 2022, the Company recorded an $8.0 million goodwill impairment charge and an $827 thousand intangible asset impairment charge related to a decline in the estimated fair value of Cleared as a result of a decline in the Cleared financial projections.

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