Financial Data and Key Metrics Changes - LifeMD reported record third quarter performance with consolidated net revenues of $38.6 million, a 23% increase year-over-year and a 7% increase sequentially [17][18] - Consolidated adjusted EBITDA grew to $2.8 million, compared to an adjusted EBITDA loss of $806,000 in the same quarter last year [24] - The company ended the quarter with over $15 million in cash and achieved positive operating cash flow for the second consecutive quarter [17][25] Business Line Data and Key Metrics Changes - The telehealth revenues grew 14% year-over-year and 9% sequentially, with weight management business revenues quadrupling compared to the prior quarter [18][19] - Active telehealth subscribers increased by 22% to approximately 207,000, while WorkSimpli active subscribers grew by 14% to over 170,000 [19] - The gross margin for the third quarter was a record 88%, up 300 basis points from the prior year [20] Market Data and Key Metrics Changes - The weight management program attracted over 16,000 patient subscribers, representing more than $24 million of annual recurring revenue [7][39] - The company anticipates significant growth in brand recognition and insurance coverage for GLP-1 medications, which are expected to drive further growth [9][12] Company Strategy and Development Direction - LifeMD is focused on four major strategic initiatives: accelerating weight management program growth, expanding B2B enterprise programs, enrolling in commercial insurance plans, and enhancing lifestyle healthcare business [7][10][12][13] - The company plans to introduce new complementary products in 2024, including those for hormone replacement therapy and cardiovascular health [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining momentum and accelerating growth into 2024, with expectations for a record-setting year [7][29] - The company is optimistic about the potential for downward pressure on GLP-1 medication prices and is working on partnerships to enhance patient access [56][58] Other Important Information - LifeMD is in the process of onboarding additional healthcare providers to support growth in its services [46][79] - The company is evaluating options for its WorkSimpli business, with expectations for a substantial exit that would benefit shareholders [86] Q&A Session Summary Question: What are your expectations for life count heading into next year and retention rates? - Management indicated that they currently charge around $100 a month, with initial retention falling off by 25% to 30% within the first 30 days, but strong retention of 80% to 90% thereafter [35][40] Question: Can you discuss pricing for various products and potential margin benefits from upcoming patent expirations? - Management noted that they are optimistic about pricing dynamics and potential partnerships with major diet companies to enhance offerings [41][59] Question: What is the status of clinical recruitment and staff allocation between weight management and primary care? - Management is onboarding additional providers and is confident in recruiting high-quality staff to support growth [46][79] Question: How do you expect weight management revenue to grow in the future? - Management anticipates significant growth in weight management revenue, with expectations for more than 100% sequential growth in the next quarter [85] Question: What is the outlook for commercial insurance programs? - Management expects to contract with major plans in all 10 states by the end of the year, with broader coverage anticipated in Q1 of the following year [74]

Financial Performance & Guidance - LifeMD expects full year 2023 consolidated net revenue to be between $148 million and $149 million, representing a 24%-25% increase compared to the $119 million in 2022[17, 76] - The company anticipates consolidated adjusted EBITDA of $10 million to $11 million for 2023, a significant improvement from the $(15) million in 2022[1, 2, 17] - Gross margins are projected to reach 87% in 2023, up from 84% in 2022[17] - WorkSimpli is expected to generate $15 million to $18 million in adjusted EBITDA for full year 2023[73] Business Highlights - LifeMD's virtual care platform has facilitated over 800,000 virtual consults[23] - The company has approximately 207,000 active patients[23] - WorkSimpli has over 170,000 subscribers and is available in approximately 20 languages globally[73] - LifeMD maintains over 73% ownership in WorkSimpli, representing potential future exit value exceeding $100 million[36, 80] Strategic Focus - LifeMD's strategy focuses on scaling high-value revenue streams through virtual primary care, RexMD, and partnerships[53, 78]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (unaudited)](index=4&type=section&id=ITEM%201.%20Financial%20Statements%20(unaudited)) The unaudited financial statements for September 30, 2023, present increased assets and cash, a net loss, and continued going concern uncertainty [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2023, total assets reached **$40.7 million**, liabilities **$51.8 million**, and stockholders' deficit improved to **$(11.1) million** Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | Sep 30, 2023 (Unaudited USD) | Dec 31, 2022 (USD) | | :--- | :--- | :--- | | **Assets** | | | | Cash | $15,288,330 | $3,958,957 | | Total Current Assets | $24,886,286 | $11,311,357 | | Total Assets | $40,691,024 | $25,665,853 | | **Liabilities & Stockholders' Deficit** | | | | Total Current Liabilities | $32,521,927 | $31,374,151 | | Long-term debt, net | $18,827,283 | - | | Total Liabilities | $51,775,281 | $32,971,356 | | Total Stockholders' Deficit | $(11,084,257) | $(11,871,325) | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2023 total revenues grew **23%** to **$38.6 million**, narrowing operating loss to **$(4.6) million** and net loss to **$(6.9) million** Statement of Operations Summary (Three Months Ended Sep 30) | Metric | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | | Total revenues, net | $38,613,911 | $31,412,469 | | Gross profit | $33,832,405 | $26,695,627 | | Operating loss | $(4,569,381) | $(7,065,701) | | Net loss attributable to LifeMD, Inc. common stockholders | $(6,898,998) | $(8,058,236) | | Basic and Diluted loss per share | $(0.20) | $(0.26) | Statement of Operations Summary (Nine Months Ended Sep 30) | Metric | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | | Total revenues, net | $107,687,158 | $90,913,804 | | Gross profit | $94,142,253 | $76,313,476 | | Operating loss | $(12,317,737) | $(33,076,840) | | Net loss attributable to LifeMD, Inc. common stockholders | $(19,193,579) | $(35,929,997) | | Basic and Diluted loss per share | $(0.58) | $(1.17) | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20(Deficit)) Stockholders' deficit improved to **$(11.1) million** by September 30, 2023, primarily due to stock compensation and issuances, despite ongoing net losses - The accumulated deficit increased to **$(209.8) million** as of September 30, 2023, from **$(190.6) million** at the start of the year, reflecting ongoing net losses[18](index=18&type=chunk)[19](index=19&type=chunk) - Key equity activities during the first nine months of 2023 included stock compensation expense of **$8.8 million**, issuance of stock for noncontingent consideration payments, conversion of Series B Preferred Stock, and sales under the ATM agreement[18](index=18&type=chunk)[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations turned positive at **$3.1 million** for the nine months ended September 30, 2023, with **$14.7 million** from financing, significantly increasing cash Cash Flow Summary (Nine Months Ended Sep 30) | Cash Flow Activity | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $3,106,602 | $(20,966,110) | | Net cash used in investing activities | $(6,516,645) | $(12,134,718) | | Net cash provided by (used in) financing activities | $14,739,416 | $(2,390,388) | | **Net increase (decrease) in cash** | **$11,329,373** | **$(35,491,216)** | | **Cash at end of period** | **$15,288,330** | **$5,836,823** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's telehealth model, going concern doubts, acquisitions, a new **$40 million** credit facility, and stock-based compensation - The company is a direct-to-patient telehealth company offering virtual care, prescriptions, and OTC products through brands like ShapiroMD, RexMD, and NavaMD[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - Management has determined that conditions raise substantial doubt about the Company's ability to continue as a going concern, citing an accumulated deficit of approximately **$209.8 million** and significant historical losses[37](index=37&type=chunk)[38](index=38&type=chunk) - In March 2023, the company secured a credit facility of up to **$40 million** from Avenue Capital, using initial proceeds to repay other debt and for corporate purposes, with **$20 million** drawn as of September 2023[36](index=36&type=chunk)[100](index=100&type=chunk) - The company operates through two segments: Telehealth and WorkSimpli; for Q3 2023, Telehealth generated **$24.3 million** in revenue with an operating loss of **$(7.7) million**, while WorkSimpli generated **$14.3 million** in revenue with an operating income of **$3.1 million**[155](index=155&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2023 revenue growth to **$38.6 million** and narrowed operating loss, reiterating going concern doubts and financing dependence [Business Overview and Strategy](index=30&type=section&id=Business%20Overview%20and%20Strategy) LifeMD is a direct-to-patient telehealth company with a **73.32%** stake in WorkSimpli, focused on building a diverse portfolio to meet patient demand - The company's platform integrates EMR, CRM, lab testing, digital prescriptions, and pharmacy fulfillment to manage patient care across various conditions[168](index=168&type=chunk) - LifeMD has served approximately **803,000** customers and patients to date, with recurring subscriptions accounting for about **93%** of total revenue[170](index=170&type=chunk)[172](index=172&type=chunk) - The company's majority-owned subsidiary, WorkSimpli, has seen **65%** year-over-year revenue growth and has **100%** recurring revenue[170](index=170&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q3 2023 total revenue grew **23%** to **$38.6 million**, gross margin expanded to **88%**, and operating loss narrowed to **$(4.6) million** Comparison of Three Months Ended September 30, 2023 and 2022 | Metric | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue, net | $38.6M | $31.4M | +23% | | Gross Profit | $33.8M | $26.7M | +27% | | Operating Loss | $(4.6)M | $(7.1)M | -35% | | Net Loss Attributable to Common Shareholders | $(6.9)M | $(8.1)M | -15% | - The increase in revenue was driven by a **42%** rise in WorkSimpli revenue and a **14%** increase in Telehealth revenue, attributed to higher demand, marketing expansion, and for Telehealth, a decrease in refunds and rebates[185](index=185&type=chunk) - Operating expenses increased by **$4.6 million** (**14%**), mainly due to a **$2.6 million** rise in selling and marketing expenses to support sales growth[188](index=188&type=chunk)[189](index=189&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity remains challenging with **$12.9 million** cash, a **$40 million** credit facility, and a **$58.6 million** ATM, with operations dependent on sales and financing - The company has an accumulated deficit of **$209.8 million** and has historically funded operations through equity and debt financing[202](index=202&type=chunk) - A new convertible senior secured credit facility with Avenue provides up to **$40 million**, with **$20 million** committed and drawn as of September 26, 2023[203](index=203&type=chunk) - The company has an active ATM Sales Agreement and is no longer subject to 'baby shelf limitations', with **$58.6 million** available for issuance as of Sep 30, 2023; an additional **$5.3 million** was raised via the ATM in October and November 2023[208](index=208&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=41&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, LifeMD is not required to provide the information for this item - The company is exempt from this disclosure requirement due to its status as a smaller reporting company[224](index=224&type=chunk) [Controls and Procedures](index=41&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective as of September 30, 2023, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Disclosure controls and procedures were deemed ineffective as of the end of the reporting period[226](index=226&type=chunk) - Material weaknesses identified include inadequate segregation of duties, weak revenue recognition controls, insufficient written accounting policies, and inadequate IT general controls (security, user access, change management)[227](index=227&type=chunk) - A remediation plan is underway, which includes formalizing procedures, implementing new controls, and addressing gaps in IT general controls[227](index=227&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=42&type=section&id=ITEM%201.%20Legal%20Proceedings) The company settled several legal matters, including lawsuits with Harborside Advisors and William Blair, with settlement costs reflected in financial results - The company settled two related lawsuits, Harborside Advisors LLC v. LifeMD, Inc. and Specialty Medical Drugstore, LLC v. LifeMD, Inc., through mediation in September 2022, involving issuing **400,000** shares of common stock in 2022 and an additional **100,000** shares on July 10, 2023[148](index=148&type=chunk)[149](index=149&type=chunk) - A breach of contract lawsuit, William Blair LLC v. LifeMD, Inc., was settled in June 2023 following mediation[152](index=152&type=chunk) [Risk Factors](index=42&type=section&id=ITEM%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 - The company directs investors to review the risk factors detailed in its 2022 Annual Report on Form 10-K, stating there have been no material changes since its filing[231](index=231&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the third quarter of 2023, the company issued unregistered securities, including common stock for services, legal settlements, non-contingent acquisition payments, and Series B Preferred Stock conversion, all in reliance on Securities Act registration exemptions - Issued **137,500** shares of common stock for services to employees and consultants[232](index=232&type=chunk) - Issued **100,000** shares of common stock for a legal settlement[233](index=233&type=chunk) - Issued **1,560,864** shares of common stock upon the conversion of Series B Preferred Stock by PA001 Holdings[235](index=235&type=chunk) [Defaults Upon Senior Securities](index=42&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - The company reported no defaults upon its senior securities during the period[237](index=237&type=chunk) [Mine Safety Disclosures](index=42&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[238](index=238&type=chunk) [Other Information](index=43&type=section&id=ITEM%205.%20Other%20Information) The company reported no other information for this item - The company reported no other information for this item[239](index=239&type=chunk) [Exhibits](index=43&type=section&id=ITEM%206.%20Exhibits) The report lists several exhibits filed with the Form 10-Q, including amendments to credit and employment agreements, CEO and CFO certifications, and XBRL data files - Key exhibits filed include the First Amendment to the Credit Agreement with Avenue, amendments to executive employment agreements, and required certifications by the CEO and CFO[241](index=241&type=chunk)

[Filing Information & Registrant Details](index=1&type=section&id=Filing%20Information%20%26%20Registrant%20Details) - Registrant: **LIFEMD, INC.**[2](index=2&type=chunk) - Filing Type: **Quarterly Report (Form 10-Q)** for the period ended June 30, 2023[2](index=2&type=chunk) Securities Registered | Title of each class | Trading symbol(s) | Name of exchange on which registered | |---|---|---| | Common Stock, par value $.01 per share | LFMD | The Nasdaq Global Market | | 8.875% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share | LFMDP | The Nasdaq Global Market | Filer Status | Filer Status | | |---|---| | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☐ | - As of August 8, 2023, there were **36,032,740 shares** of the registrant's common stock outstanding[6](index=6&type=chunk) [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. Financial Statements (unaudited)](index=3&type=section&id=ITEM%201.%20Financial%20Statements%20(unaudited)) This section presents the company's unaudited condensed consolidated financial statements for the quarter ended June 30, 2023 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Key Balance Sheet Data | Metric | June 30, 2023 | December 31, 2022 | |---|---|---| | Cash | $11,906,741 | $3,958,957 | | Total Current Assets | $20,180,896 | $11,311,357 | | Total Non-current Assets | $15,265,493 | $14,354,496 | | **Total Assets** | **$35,446,389** | **$25,665,853** | | Total Current Liabilities | $31,517,806 | $31,374,151 | | Total Liabilities | $45,651,398 | $32,971,356 | | Total Stockholders' Deficit | $(15,237,938) | $(11,871,325) | - Cash increased by approximately **$7.9 million** from December 31, 2022, to June 30, 2023[10](index=10&type=chunk) - Total assets increased by approximately **$9.8 million**, while total liabilities increased by approximately **$12.7 million**[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Three Months Ended June 30, 2023 vs 2022 | Metric | 2023 | 2022 | Change (YoY) | |---|---|---|---| | Total revenues, net | $35,946,913 | $30,458,498 | +18.0% | | Gross profit | $31,398,483 | $25,823,187 | +21.6% | | Operating loss | $(4,895,546) | $(12,904,125) | -62.1% | | Net loss | $(5,891,216) | $(12,972,961) | -54.6% | | Net loss attributable to LifeMD, Inc. common stockholders | $(7,509,562) | $(13,795,524) | -45.6% | | Basic loss per share | $(0.23) | $(0.45) | -48.9% | Six Months Ended June 30, 2023 vs 2022 | Metric | 2023 | 2022 | Change (YoY) | |---|---|---|---| | Total revenues, net | $69,073,248 | $59,501,335 | +16.1% | | Gross profit | $60,309,849 | $49,617,849 | +21.5% | | Operating loss | $(7,748,356) | $(26,011,140) | -70.2% | | Net loss | $(9,333,689) | $(26,247,910) | -64.5% | | Net loss attributable to LifeMD, Inc. common stockholders | $(12,294,581) | $(27,871,762) | -55.9% | | Basic loss per share | $(0.38) | $(0.91) | -58.2% | - **WorkSimpli revenue significantly increased**, contributing to overall revenue growth, while telehealth revenue remained relatively stable for the three months ended June 30, 2023, and decreased for the six months ended June 30, 2023[14](index=14&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) Stockholders' Deficit Summary | Metric | June 30, 2023 | January 1, 2023 | |---|---|---| | Total LifeMD, Inc. Stockholders' Deficit | $(16,021,557) | $(11,395,777) | | Total Stockholders' Deficit | $(15,237,938) | $(11,871,325) | - Stock compensation expense contributed **$2.66 million (Q1)** and **$2.86 million (Q2)** to additional paid-in capital during the six months ended June 30, 2023[16](index=16&type=chunk)[17](index=17&type=chunk) - Net loss attributable to LifeMD, Inc. was **$(4.01) million for Q1 2023** and **$(6.73) million for Q2 2023**, increasing the accumulated deficit[17](index=17&type=chunk) - Preferred stock dividends of **$(776,563)** were paid in both Q1 and Q2 2023[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (Six Months Ended June 30) | Activity | 2023 | 2022 | |---|---|---| | Net cash provided by (used in) operating activities | $2,030,386 | $(18,190,108) | | Net cash used in investing activities | $(4,112,939) | $(9,893,154) | | Net cash provided by (used in) financing activities | $10,030,337 | $(1,527,475) | | Net increase (decrease) in cash | $7,947,784 | $(29,610,737) | | Cash at end of period | $11,906,741 | $11,717,302 | - **Operating cash flow improved by over $20 million** year-over-year, turning positive in 2023[20](index=20&type=chunk) - Financing activities provided **$10.03 million in cash** in 2023, primarily from **$14.47 million in long-term debt proceeds**, partially offset by debt repayments and preferred stock dividends[20](index=20&type=chunk) - Investing activities used **$4.11 million**, mainly for capitalized software costs ($3.90 million)[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS](index=11&type=section&id=NOTE%201%20%E2%80%93%20NATURE%20OF%20THE%20ORGANIZATION%20AND%20BUSINESS) - LifeMD, Inc. (formerly Immudyne, Inc. and Conversion Labs, Inc.) is a direct-to-patient telehealth company providing virtual healthcare and OTC products, often on a subscription basis[22](index=22&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - The company acquired 51% of LegalSimpli Software, LLC (now WorkSimpli) in June 2018, increasing its ownership to **73.32% by June 30, 2023**, through various restructuring transactions[24](index=24&type=chunk)[25](index=25&type=chunk) - Cleared Technologies, PBC, an allergy telehealth platform, was acquired on January 18, 2022[26](index=26&type=chunk) - As of June 30, 2023, the Company has an accumulated deficit of approximately **$202.9 million** and has experienced significant operating losses, raising **substantial doubt about its ability to continue as a going concern**[37](index=37&type=chunk)[38](index=38&type=chunk) - On March 21, 2023, the Company secured a convertible senior secured credit facility of up to **$40 million** (Avenue Facility), with **$15 million funded at closing**, to repay existing debt and for general corporate purposes[35](index=35&type=chunk)[101](index=101&type=chunk) - The company's public float increased above $75.0 million in June 2023, removing 'baby shelf limitations' and making **$59.5 million available** under its ATM Sales Agreement[40](index=40&type=chunk) [NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=15&type=section&id=NOTE%202%20%E2%80%93%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The consolidated financial statements include LifeMD, Inc., Cleared, WorkSimpli (majority-owned subsidiary, **73.32% ownership** as of June 30, 2023), and LifeMD PC (variable interest entity)[44](index=44&type=chunk)[45](index=45&type=chunk)[49](index=49&type=chunk) - Revenue recognition follows ASC 606, with product-based revenue recognized at shipment/control transfer and subscription-based software revenue recognized over the subscription period[53](index=53&type=chunk)[55](index=55&type=chunk) Disaggregated Revenue (Three Months Ended June 30) | Revenue Type | 2023 ($) | 2023 (%) | 2022 ($) | 2022 (%) | |---|---|---|---|---| | Telehealth revenue | $22,351,128 | 62% | $22,267,963 | 73% | | WorkSimpli revenue | $13,595,785 | 38% | $8,190,535 | 27% | | Total net revenue | $35,946,913 | 100% | $30,458,498 | 100% | Disaggregated Revenue (Six Months Ended June 30) | Revenue Type | 2023 ($) | 2023 (%) | 2022 ($) | 2022 (%) | |---|---|---|---|---| | Telehealth revenue | $42,553,931 | 62% | $44,866,024 | 75% | | WorkSimpli revenue | $26,519,317 | 38% | $14,635,311 | 25% | | Total net revenue | $69,073,248 | 100% | $59,501,335 | 100% | - Deferred revenues were approximately **$5.7 million** as of June 30, 2023, related to unearned product and subscription obligations[57](index=57&type=chunk)[58](index=58&type=chunk) - Capitalized software costs, primarily for internally developed software, increased to **$10.4 million net** as of June 30, 2023, amortized over three years[66](index=66&type=chunk) - Goodwill and intangible assets are tested for impairment; an **$8.0 million goodwill impairment** and **$827 thousand intangible asset impairment** were recorded in 2022 related to Cleared[67](index=67&type=chunk)[68](index=68&type=chunk) - The Company adopted ASU 2016-13 (CECL) and ASU 2021-08 (Business Combinations) as of January 1, 2023, with **no material impact** on financial statements[82](index=82&type=chunk)[83](index=83&type=chunk) [NOTE 3 – ACQUISITIONS](index=23&type=section&id=NOTE%203%20%E2%80%93%20ACQUISITIONS) - Cleared Technologies, PBC, an allergy telehealth platform, was acquired on January 18, 2022, for an initial purchase price of approximately **$9.1 million**[85](index=85&type=chunk)[86](index=86&type=chunk) - An amendment on February 4, 2023, reduced Cleared's total purchase price by **$250 thousand to $3.67 million** and eliminated all earn-out payments[89](index=89&type=chunk) - The reduction in Cleared's contingent consideration by **$5.1 million** and an **$8.0 million goodwill impairment charge** were recorded in 2022 due to revised financial projections and the amendment[90](index=90&type=chunk) - WorkSimpli acquired ResumeBuild, a subscription-based resume building software, in February 2022 for **$4.5 million**, including $500 thousand in contingent consideration[92](index=92&type=chunk) [NOTE 4 – GOODWILL AND INTANGIBLE ASSETS](index=26&type=section&id=NOTE%204%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) - Goodwill related to the Cleared acquisition was **$0** as of June 30, 2023, due to an **$8.0 million impairment charge** recorded in 2022[93](index=93&type=chunk) Amortizable Intangible Assets (Net) | Asset | June 30, 2023 | December 31, 2022 | |---|---|---| | ResumeBuild brand | $4,500,000 | $4,500,000 | | Customer relationship asset | $1,006,840 | $1,006,840 | | Cleared trade name | $133,339 | $133,339 | | Cleared developed technology | $12,920 | $12,920 | | Purchased licenses | $200,000 | $200,000 | | Website domain names | $171,599 | $22,731 | | Less: accumulated amortization | $(2,523,499) | $(2,043,971) | | **Total net amortizable intangible assets** | **$3,501,199** | **$3,831,859** | - Aggregate amortization expense for intangible assets was **$480 thousand** for the six months ended June 30, 2023, compared to $341 thousand for the same period in 2022[93](index=93&type=chunk) [NOTE 5 – ACCRUED EXPENSES](index=26&type=section&id=NOTE%205%20%E2%80%93%20ACCRUED%20EXPENSES) Accrued Expenses | Expense Type | June 30, 2023 | December 31, 2022 | |---|---|---| | Accrued selling and marketing expenses | $5,273,738 | $3,508,883 | | Sales tax payable | $2,501,035 | $2,501,035 | | Purchase price payable | $1,872,037 | $2,463,002 | | Accrued dividends payable | $776,562 | $776,563 | | Accrued compensation | $1,568,737 | $576,027 | | Accrued interest | $4,042 | $448,718 | | Other accrued expenses | $2,765,605 | $1,892,281 | | **Total accrued expenses** | **$14,761,756** | **$12,166,509** | - Accrued selling and marketing expenses increased by approximately **$1.76 million**[94](index=94&type=chunk) - Accrued compensation increased by approximately **$992 thousand**[94](index=94&type=chunk) [NOTE 6 – NOTES PAYABLE](index=26&type=section&id=NOTE%206%20%E2%80%93%20NOTES%20PAYABLE) - Outstanding notes payable, net, decreased from **$2,797,250** at December 31, 2022, to **$735,534** at June 30, 2023[10](index=10&type=chunk) - The **$2 million CRG Financial loan was repaid** on March 21, 2023, using proceeds from the Avenue Facility, incurring a **$325 thousand loss on debt extinguishment**[97](index=97&type=chunk) Working Capital Loans Outstanding | Lender | June 30, 2023 | December 31, 2022 | |---|---|---| | Amazon | $442,000 | $976,000 | | Balanced Management | $294,000 | $1,821,000 | - Total interest expense on notes payable was **$34 thousand** for the six months ended June 30, 2023, compared to $0 in the prior year[99](index=99&type=chunk) [NOTE 7 – LONG-TERM DEBT](index=28&type=section&id=NOTE%207%20%E2%80%93%20LONG-TERM%20DEBT) - On March 21, 2023, the Company closed a **$40 million convertible senior secured credit facility** (Avenue Facility), with **$15 million funded at closing**[100](index=100&type=chunk) - The facility includes warrants to purchase **$1.2 million of common stock** and an option for Avenue to convert up to **$2 million of term loans** into common stock at $1.49 per share[100](index=100&type=chunk) - A total debt discount of **$1.6 million** was recorded and is being amortized over 42 months; amortization was **$154 thousand** for the six months ended June 30, 2023[100](index=100&type=chunk) - The Avenue Facility matures on October 1, 2026, with an interest rate of **12.75%** as of June 30, 2023[101](index=101&type=chunk) - The Company must maintain at least **$5 million in unrestricted cash** and a trailing six-month cash flow of at least **$2 million**, and was in compliance as of the filing date[102](index=102&type=chunk) - Total interest expense on long-term debt was **$694 thousand** for the six months ended June 30, 2023, compared to $0 in the prior year[103](index=103&type=chunk) [NOTE 8 – STOCKHOLDERS' EQUITY](index=28&type=section&id=NOTE%208%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) - As of June 30, 2023, the Company had **32,564,835 common shares issued** and **1,400,000 Series A Preferred Stock shares outstanding**[104](index=104&type=chunk) - The Company's ownership interest in WorkSimpli decreased to **73.32%** as of June 30, 2023, due to option exercises and redemptions[119](index=119&type=chunk) - Preferred stock dividends of **$776,562** were declared and paid quarterly on Series A Preferred Stock[120](index=120&type=chunk) - Total stock-based compensation expense was **$5.5 million** for the six months ended June 30, 2023, down from $8.5 million in the prior year, with **$15.0 million in unamortized expense remaining**[133](index=133&type=chunk) Stock Options Activity (Six Months Ended June 30, 2023) | Metric | 2020 Plan Options | Service-Based Options (Prior Plan) | |---|---|---| | Balance, Dec 31, 2022 | 1,784,587 | 1,439,333 | | Granted | 78,000 | 140,000 | | Cancelled/Forfeited/Expired | (473,167) | - | | Exercised | - | (40,000) | | Balance, June 30, 2023 | 1,389,420 | 1,539,333 | | Weighted Average Exercise Price (June 30, 2023) | $10.09 | $5.84 | RSUs and RSAs Activity (Six Months Ended June 30, 2023) | Metric | 2020 Plan RSUs/RSAs | Outside 2020 Plan RSUs/RSAs | |---|---|---| | Balance, Dec 31, 2022 | 1,028,250 | 715,000 | | Granted | 1,974,500 | 425,000 | | Vested | (322,625) | (165,000) | | Cancelled/Forfeited | (480,000) | - | | Balance, June 30, 2023 | 2,200,125 | 975,000 | Warrants Activity (Six Months Ended June 30, 2023) | Metric | Warrants Outstanding | |---|---| | Balance, Dec 31, 2022 | 3,859,638 | | Granted | 967,742 | | Balance, June 30, 2023 | 4,827,380 | | Weighted Average Exercise Price (June 30, 2023) | $4.74 | [NOTE 9 – LEASES](index=35&type=section&id=NOTE%209%20%E2%80%93%20LEASES) Operating Lease Balances (June 30, 2023) | Metric | Amount | |---|---| | Operating right-of-use assets | $928,696 | | Operating lease liabilities - current | $758,927 | | Operating lease liabilities - noncurrent | $276,340 | | **Total Operating Lease Liabilities** | **$1,035,267** | - Operating lease expenses were **$429 thousand** for the six months ended June 30, 2023, an increase from $404 thousand in the prior year[137](index=137&type=chunk) - The weighted average remaining lease term is **2.36 years**, with a weighted average discount rate of **7.16%** as of June 30, 2023[138](index=138&type=chunk) [NOTE 10 - COMMITMENTS AND CONTINGENCIES](index=36&type=section&id=NOTE%2010%20-%20COMMITMENTS%20AND%20CONTINGENCIES) - The Company has a royalty agreement with Pilaris Laboratories, LLC for PilarisMax shampoo, paying **10% of net income**[139](index=139&type=chunk) - A license agreement with M.ALPHABET, LLC for the PURPUREX business entails a **13% royalty on Gross Receipts**, with no amounts earned or owed as of June 30, 2023[140](index=140&type=chunk) - Implicit purchase commitments with inventory vendors totaled approximately **$168 thousand** as of June 30, 2023[142](index=142&type=chunk) - Legal proceedings, including lawsuits from Harborside Advisors LLC and Specialty Medical Drugstore, LLC, were settled in September 2022, involving the issuance of common stock[144](index=144&type=chunk)[145](index=145&type=chunk) - A breach of contract lawsuit from William Blair LLC was settled in June 2023, with costs reflected in the Company's financial results[147](index=147&type=chunk)[149](index=149&type=chunk) [NOTE 11 – RELATED PARTY TRANSACTIONS](index=39&type=section&id=NOTE%2011%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) - A **$2 million loan facility** with CRG Financial was repaid on March 21, 2023; a LifeMD Board member also serves on CRG Financial's Board[150](index=150&type=chunk) - WorkSimpli paid LegalSubmit Pvt. Ltd. **$1.2 million** for software development services during the six months ended June 30, 2023; LegalSubmit is owned by WorkSimpli's Chief Software Engineer[151](index=151&type=chunk) [NOTE 12 – SEGMENT DATA](index=39&type=section&id=NOTE%2012%20%E2%80%93%20SEGMENT%20DATA) Segment Revenue and Gross Margin (Six Months Ended June 30) | Segment | 2023 Revenue | 2022 Revenue | YoY Change (Revenue) | 2023 Gross Margin | 2022 Gross Margin | |---|---|---|---|---|---| | Telehealth | $42,553,931 | $44,866,024 | -5.1% | 81.1% | 78.7% | | WorkSimpli | $26,519,317 | $14,635,311 | +81.2% | 97.3% | 97.7% | | Consolidated | $69,073,248 | $59,501,335 | +16.1% | 87.3% | 83.4% | Segment Operating Results (Six Months Ended June 30) | Segment | 2023 Operating Loss/Income | 2022 Operating Loss/Income | |---|---|---| | Telehealth Operating loss | $(13,143,226) | $(26,482,656) | | WorkSimpli Operating income | $5,394,870 | $471,516 | | Consolidated Operating loss | $(7,748,356) | $(26,011,140) | - WorkSimpli's operating income increased significantly from **$471,516 in 2022 to $5,394,870 in 2023**[152](index=152&type=chunk) Segment Total Assets | Segment | June 30, 2023 | December 31, 2022 | |---|---|---| | Telehealth | $26,561,946 | $18,163,464 | | WorkSimpli | $8,884,443 | $7,502,389 | | Consolidated | $35,446,389 | $25,665,853 | [NOTE 13 – SUBSEQUENT EVENTS](index=40&type=section&id=NOTE%2013%20%E2%80%93%20SUBSEQUENT%20EVENTS) - In July and August 2023, **112,500 common shares** were issued for vested RSUs and RSAs[153](index=153&type=chunk) - In July 2023, **88,021 common shares** were sold under the ATM Sales Agreement, yielding **$410 thousand in net proceeds**[154](index=154&type=chunk) - On July 10, 2023, **100,000 common shares** were issued to settle legal proceedings[155](index=155&type=chunk) - On July 12, 2023, **2,275 shares of Series B Preferred Stock** were converted into **1,010,170 common shares**[156](index=156&type=chunk) - On July 17, 2023, **158,129 common shares** were issued as a quarterly installment payment for the Cleared acquisition[157](index=157&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, strategic initiatives, and liquidity [Note Regarding Forward-Looking Statements](index=41&type=section&id=Note%20Regarding%20Forward-Looking%20Statements) - Forward-looking statements are based on management's beliefs and assumptions and are subject to risks and uncertainties[159](index=159&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the Company does not intend to update them except as required by law[159](index=159&type=chunk)[160](index=160&type=chunk)[163](index=163&type=chunk) - Risk factors include changes in market acceptance, competition, regulatory conditions, commercialization ability, customer/supplier relationships, technological developments, intellectual property, integration of acquisitions, economic conditions, business interruptions, internal control weaknesses, going concern ability, need for additional funds, personnel recruitment, business plan implementation, and industry regulation[162](index=162&type=chunk) [Corporate History](index=43&type=section&id=Corporate%20History) - LifeMD, Inc. was formed in 1994 as Immudyne, Inc., later becoming Conversion Labs, Inc. in 2018, and LifeMD, Inc. in 2021[166](index=166&type=chunk) - The Company acquired 51% of WorkSimpli in June 2018, increasing its ownership to **73.32% by June 30, 2023**, through various restructuring transactions[166](index=166&type=chunk)[178](index=178&type=chunk) - Cleared, a nationwide allergy telehealth platform, was acquired on January 18, 2022[166](index=166&type=chunk) [Business Overview](index=43&type=section&id=Business%20Overview) - LifeMD is a direct-to-patient telehealth company offering virtual healthcare and OTC products, aiming to elevate the healthcare experience through its proprietary technology platform and affiliated provider network[167](index=167&type=chunk)[168](index=168&type=chunk) - The company's mission is to empower healthier lives by increasing access to high-quality, affordable virtual and in-home healthcare[169](index=169&type=chunk) - LifeMD has served approximately **755,000 customers**, with about **92% of total revenue from recurring subscriptions**[170](index=170&type=chunk) - WorkSimpli, a majority-owned subsidiary (73.32%), operates PDFSimpli, a software-as-a-service platform, and has seen **81% year-over-year revenue growth** with **98% recurring revenue**[170](index=170&type=chunk) [Our Platform and Business Strategy](index=44&type=section&id=Our%20Platform%20and%20Business%20Strategy) - LifeMD's proprietary platform integrates EMR, scheduling, CRM, lab testing, digital prescriptions, and cloud pharmacy to deliver comprehensive virtual healthcare[171](index=171&type=chunk)[172](index=172&type=chunk) - Offerings are sold on a subscription basis, providing recurring revenue streams and discounted pricing for patients[172](index=172&type=chunk) - The platform supports Direct-to-Consumer Virtual Primary Care (LifeMD PC) with **24/7 access to providers in all 50 states**[174](index=174&type=chunk) - Direct-to-Patient Telehealth brands include RexMD (men's health), ShapiroMD (hair loss), NavaMD (tele-dermatology), and Cleared (allergy, asthma, immunology)[175](index=175&type=chunk)[176](index=176&type=chunk) - The company also provides Enterprise Telehealth Offerings to healthcare product companies for digital patient awareness and engagement[177](index=177&type=chunk) - WorkSimpli, a majority-owned subsidiary, operates PDFSimpli, a software-as-a-service platform for document management[178](index=178&type=chunk) [Significant Developments During the Three Months Ended June 30, 2023](index=46&type=section&id=Significant%20Developments%20During%20the%20Three%20Months%20Ended%20June%2030%2C%202023) - The Cleared Stock Purchase Agreement was amended on February 4, 2023, reducing the total purchase price by **$250 thousand to $3.67 million**[179](index=179&type=chunk) - The amendment changed payment timing to five quarterly installments, **removing all earn-out payments**[179](index=179&type=chunk) - The Company issued **337,895 shares** of common stock on February 6, 2023, and **455,319 shares** on April 17, 2023, for the first two quarterly installment payments for Cleared[179](index=179&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) [Comparison of the Three Months Ended June 30, 2023 to the Three Months Ended June 30, 2022](index=46&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202023%20to%20the%20Three%20Months%20Ended%20June%2030%2C%202022) Q2 2023 vs Q2 2022 Financial Highlights | Metric | June 30, 2023 | June 30, 2022 | Change (YoY) | |---|---|---|---| | Total revenue, net | $35,946,913 | $30,458,498 | +18.0% | | Telehealth revenue, net | $22,351,128 | $22,267,963 | +0.4% | | WorkSimpli revenue, net | $13,595,785 | $8,190,535 | +66.0% | | Gross profit | $31,398,483 | $25,823,187 | +21.6% | | Gross profit margin | 87.35% | 84.78% | +2.57 pp | | Selling and marketing expenses | $19,567,903 | $21,817,966 | -10.3% | | General and administrative expenses | $12,119,573 | $13,159,937 | -7.9% | | Operating loss | $(4,895,546) | $(12,904,125) | -62.1% | | Net loss attributable to common shareholders | $(7,509,562) | $(13,795,524) | -45.6% | - The increase in WorkSimpli revenue was attributed to higher demand, increased market awareness, enhanced digital capabilities, and marketing expansion[182](index=182&type=chunk) - Telehealth costs decreased to **18% of associated revenues** in Q2 2023 from 20% in Q2 2022, primarily due to improved pricing[183](index=183&type=chunk) - Customer service expenses increased by **90% ($906 thousand)** due to increased headcount[189](index=189&type=chunk) - Development costs increased by **97% ($680 thousand)** due to technology platform improvements and amortization[189](index=189&type=chunk) - Interest expense, net, increased by **$863 thousand** due to the Avenue Facility and notes payable[186](index=186&type=chunk) [Comparison of the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022](index=49&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202022) YTD June 2023 vs YTD June 2022 Financial Highlights | Metric | June 30, 2023 | June 30, 2022 | Change (YoY) | |---|---|---|---| | Total revenue, net | $69,073,248 | $59,501,335 | +16.1% | | Telehealth revenue, net | $42,553,931 | $44,866,024 | -5.1% | | WorkSimpli revenue, net | $26,519,317 | $14,635,311 | +81.2% | | Gross profit | $60,309,849 | $49,617,849 | +21.5% | | Gross profit margin | 87.31% | 83.39% | +3.92 pp | | Selling and marketing expenses | $36,285,548 | $43,727,791 | -17.1% | | General and administrative expenses | $22,722,336 | $25,372,680 | -10.4% | | Operating loss | $(7,748,356) | $(26,011,140) | -70.2% | | Net loss attributable to common shareholders | $(12,294,581) | $(27,871,762) | -55.9% | - Selling and marketing costs decreased by **$7.4 million (17%)** due to strategic cost reductions and alignment with the recurring revenue subscription model[194](index=194&type=chunk) - General and administrative expenses decreased by **$2.7 million (11%)**, primarily due to a **$3.0 million decrease in stock-based compensation**[194](index=194&type=chunk) - Customer service expenses increased by **$1.5 million (79%)** due to increased headcount[200](index=200&type=chunk) - Development costs increased by **$1.4 million (127%)** due to technology platform improvements and amortization[200](index=200&type=chunk) - Interest expense, net, increased by **$960 thousand** due to the Avenue Facility and notes payable[195](index=195&type=chunk) - A **$325 thousand loss on debt extinguishment** was recorded for the repayment of the CRG Financial loan[196](index=196&type=chunk) [Working Capital](index=52&type=section&id=Working%20Capital) Working Capital Summary | Metric | June 30, 2023 | December 31, 2022 | |---|---|---| | Current assets | $20,180,896 | $11,311,357 | | Current liabilities | $31,517,806 | $31,374,151 | | **Working capital** | **$(11,336,910)** | **$(20,062,794)** | - Working capital increased by approximately **$8.7 million** during the six months ended June 30, 2023[197](index=197&type=chunk) - The increase in current assets was primarily due to a **$7.9 million increase in cash** from the Avenue Facility[197](index=197&type=chunk) - Current liabilities increased by **$144 thousand**, driven by increases in accounts payable and accrued expenses ($2.1 million) and deferred revenue ($120 thousand), partially offset by a $2.1 million decrease in notes payable[197](index=197&type=chunk) [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) Cash Flow Summary (Six Months Ended June 30) | Activity | 2023 | 2022 | |---|---|---| | Net cash provided by (used in) operating activities | $2,030,386 | $(18,190,108) | | Net cash used in investing activities | $(4,112,939) | $(9,893,154) | | Net cash provided by (used in) financing activities | $10,030,337 | $(1,527,475) | | Net increase (decrease) in cash | $7,947,784 | $(29,610,737) | - Net cash provided by operating activities increased by **$20.2 million**, driven by a **$16.9 million decrease in net loss**[199](index=199&type=chunk) - Financing activities provided **$10.0 million**, primarily from **$14.5 million in net proceeds** from the Avenue Facility and **$2.0 million** from the CRG Financial loan[202](index=202&type=chunk) - Investing activities used **$4.1 million**, mainly for capitalized software costs ($3.9 million)[201](index=201&type=chunk) [Liquidity and Capital Resources Outlook](index=54&type=section&id=Liquidity%20and%20Capital%20Resources%20Outlook) - As of June 30, 2023, the Company has an accumulated deficit of approximately **$202.9 million** and has experienced significant operating losses, raising **substantial doubt about its ability to continue as a going concern**[203](index=203&type=chunk)[211](index=211&type=chunk) - The Company secured a **$40 million convertible senior secured credit facility** (Avenue Facility) in March 2023, with **$15 million funded at closing**, for general corporate purposes and debt repayment[204](index=204&type=chunk) - As of June 30, 2023, the Company has **$59.5 million available** under its At Market Issuance Sales Agreement (ATM Sales Agreement) after its public float increased above $75.0 million[209](index=209&type=chunk) - The Company's continued operations are dependent on increasing sales volumes, improving operational efficiencies, and obtaining additional funding[210](index=210&type=chunk) - Management is implementing strategies to strengthen revenues and curtail expenses, and believes the telehealth industry market value is positive[212](index=212&type=chunk) [Critical Accounting Policies and Estimates](index=56&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Revenue recognition follows ASC 606, with product-based revenue recognized upon customer control and subscription-based software revenue recognized over the subscription period[214](index=214&type=chunk)[216](index=216&type=chunk) - Capitalized software costs, primarily for internally developed software, increased by **$1.6 million (18%) to $10.4 million net** as of June 30, 2023, mainly due to development efforts for the LifeMD PC platform[220](index=220&type=chunk) - Goodwill and intangible assets are tested for impairment annually; an **$8.0 million goodwill impairment** and **$827 thousand intangible asset impairment** were recorded in 2022 related to Cleared[221](index=221&type=chunk)[222](index=222&type=chunk) - Long-lived assets are reviewed for impairment when circumstances indicate carrying amounts may not be recoverable; **no impairment was indicated** as of June 30, 2023[223](index=223&type=chunk) - The Company adopted ASU 2016-13 (CECL) and ASU 2021-08 (Business Combinations) as of January 1, 2023, with **no material impact** on financial statements[224](index=224&type=chunk)[225](index=225&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=59&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the company is not required to provide disclosures about market risk - As a smaller reporting company, LifeMD, Inc. is not required to provide disclosures about market risk[226](index=226&type=chunk) [ITEM 4. Controls and Procedures](index=59&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were not effective due to material weaknesses in internal control over financial reporting - Disclosure controls and procedures were deemed **not effective** as of June 30, 2023, due to material weaknesses in internal control over financial reporting[228](index=228&type=chunk) - Material weaknesses identified include **inadequate segregation of duties**, inadequate controls related to revenue recognition, insufficient written policies and procedures for accounting and financial reporting, and inadequate information technology general controls[229](index=229&type=chunk) - Management is implementing remediation measures, including controls for revenue recognition upon shipment, further documentation of control procedures, and addressing gaps in IT general controls[230](index=230&type=chunk) [PART II. OTHER INFORMATION](index=61&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. Legal Proceedings](index=61&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in ordinary routine litigation incidental to its business - Material legal proceedings are described under Note 10, 'Commitments and Contingencies,' in the financial statements[232](index=232&type=chunk) [ITEM 1A. Risk Factors](index=61&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the company's Annual Report on Form 10-K - Investors should review risk factors from the Annual Report on Form 10-K for December 31, 2022[233](index=233&type=chunk) - **No material changes** to risk factors have occurred since the Annual Report filing[233](index=233&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued common shares for option exercises, acquisition payments, and services, relying on registration exemptions - On April 10, 2023, **16,471 common shares** were issued for the cashless exercise of options[234](index=234&type=chunk) - On April 17, 2023, **455,319 common shares** were issued as the second quarterly installment payment for the Cleared acquisition[235](index=235&type=chunk) - On May 1 and May 23, 2023, **53,000 common shares** were issued for services to employees and consultants[236](index=236&type=chunk) - These sales were unregistered, relying on exemptions under **Section 4(a)(2) and/or Regulation D** of the Securities Act[236](index=236&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=61&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[237](index=237&type=chunk) [ITEM 4. Mine Safety Disclosures](index=61&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the registrant[238](index=238&type=chunk) [ITEM 5. Other Information](index=61&type=section&id=ITEM%205.%20Other%20Information) The company reported no other information required by this item - No other information was reported under this item[239](index=239&type=chunk) [ITEM 6. Exhibits](index=62&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including agreements, certifications, and XBRL documents - The exhibits include management contracts, compensatory plans, and certifications (Rule 13a-14(a) / 15d-14(a) and Section 1350) from the CEO and CFO[241](index=241&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase) are also filed[241](index=241&type=chunk) [SIGNATURES](index=63&type=section&id=SIGNATURES) - The report is signed by Justin Schreiber (Chief Executive Officer and Chairman), Marc Benathen (Chief Financial Officer), and Maria Stan (Principal Accounting Officer) on August 9, 2023[246](index=246&type=chunk)

9:41 "| 之 ■ LifeMD! ( Welcome to LifeMD! Explore your LifeMD dashboard. ឞ Check my symptoms See a provider Paid g Today Tomorrow Si ASAP Jan 23 Jan 24 Jai -10 min wait PRESCRIPTIONS Use my discount card Save up to 80% on prescription = medications. View card > MY CHART The Doctor Will See You Now May 2023 NASDAQ: LFMD This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended; Section 21E of the Securities Exchange Act of 1934, as amende ...

LifeMD, Inc. (NASDAQ:LFMD) Q1 2023 Earnings Conference Call May 12, 2023 8:30 AM ET Company Participants Justin Schreiber - Chairman and Chief Executive Officer Marc Benathen - Chief Financial Officer Conference Call Participants David Larsen - BTIG, LLC Operator Good morning. Thank you for joining us today to discuss the results for LifeMD's First Quarter ended March 31, 2023. Joining the call today are Justin Schreiber, Chairman and Chief Executive Officer; and Marc Benathen, Chief Financial Officer of Li ...

Customer Base and Revenue - The company has served approximately 715,000 customers, with total revenue from recurring subscriptions accounting for about 91%[161] - WorkSimpli, a majority-owned subsidiary, has achieved 101% year-over-year revenue growth, with recurring revenue at 98%[161] - Telehealth revenue decreased by 11% to $20.2 million, accounting for 61% of total revenue, while WorkSimpli revenue increased by 101% to $12.9 million, representing 39% of total revenue[172] Telehealth Services - The company's telehealth platform integrates various functionalities, including EMR, CRM, and digital prescriptions, enhancing patient care management[159] - LifeMD's virtual primary care offering provides 24/7 access to high-quality providers across all 50 states, supported by partnerships for discounts on lab work and prescriptions[165] - LifeMD's telehealth offerings aim to connect patients with licensed providers for diagnoses and treatment, addressing various health conditions[159] - The telehealth brands, including RexMD and ShapiroMD, have served over 410,000 and 260,000 customers respectively, with high Trustpilot ratings of 4.7 and 4.9[167] - The company plans to expand its diverse portfolio of telehealth services to meet the needs of a growing patient base[160] Financial Performance - Total revenue for the three months ended March 31, 2023, was approximately $33.1 million, an increase of 14% compared to $29.0 million for the same period in 2022[172] - Gross profit increased by approximately 22% to $28.9 million, with a gross profit margin of 87% for the three months ended March 31, 2023, compared to 82% for the same period in 2022[174] - The company recorded a net loss of approximately $3.4 million for the three months ended March 31, 2023, a significant improvement from a net loss of approximately $13.3 million for the same period in 2022[172] Expenses and Cash Flow - Total expenses decreased by 14% to approximately $31.8 million, primarily due to a reduction in selling and marketing expenses by approximately $5.2 million, or 24%[176] - Net cash used in operating activities was approximately $2.6 million for the three months ended March 31, 2023, compared to $8.1 million for the same period in 2022[181] - Net cash used in investing activities for Q1 2023 was approximately $1.8 million, a decrease of 75.7% from $7.4 million in Q1 2022[182] - Net cash provided by financing activities for Q1 2023 was approximately $12.0 million, compared to a net cash used of approximately $774 thousand in Q1 2022[183] Assets and Liabilities - Working capital increased by approximately $12.2 million during the three months ended March 31, 2023, primarily due to an increase in cash of approximately $7.6 million from the Avenue Facility[178] - Current assets increased to $19.2 million as of March 31, 2023, from $11.3 million as of December 31, 2022[178] - As of March 31, 2023, the company has accrued contract liabilities of approximately $5.9 million, up from $5.5 million as of December 31, 2022[198] Debt and Financing - The Avenue Facility provides a convertible senior secured credit facility of up to $40 million, with $15 million funded at closing and additional amounts available later[171] - The company entered into a Credit Agreement with Avenue for a convertible senior secured credit facility of up to $40 million, maturing on October 1, 2026[185] - The company recorded a loss on debt extinguishment of $325 thousand related to the repayment of the CRG Financial loan during the three months ended March 31, 2023[177] Strategic Focus and Challenges - The company has a strategic focus on enhancing digital patient awareness and engagement for healthcare product companies, addressing unmet needs in the market[168] - The company has begun implementing strategies to strengthen revenues and improve operational efficiencies, although substantial doubt remains about its ability to continue as a going concern[192] Accounting Changes - The Company adopted ASU 2016-13 on January 1, 2023, which requires the use of the current expected credit loss model for estimating lifetime expected credit losses[203] - The adoption of ASU 2016-13 did not have a material impact on the Company's financial statements[203] - The Company adopted ASU 2021-08 on January 1, 2023, affecting the accounting for contract assets and liabilities in business combinations[204] - The adoption of ASU 2021-08 also did not have a material impact on the Company's financial statements[204] Miscellaneous - The company has $18.435 million available under the At Market Issuance Sales Agreement as of March 31, 2023[189] - Customer discounts and allowances on telehealth revenues were approximately $331 thousand in Q1 2023, down from $1.5 million in Q1 2022[196] - The company recorded an $8.0 million goodwill impairment charge related to the Cleared acquisition during the year ended December 31, 2022[200] - As of March 31, 2023, the company has an accumulated deficit of approximately $195.3 million and a current cash balance of approximately $12.8 million[184] - As a smaller reporting company, the Company is not required to provide quantitative and qualitative disclosures about market risk[205]

Financial Data and Key Metrics Changes - LifeMD achieved adjusted EBITDA profitability of $631,000 in Q4 2022, marking a significant improvement from an adjusted EBITDA loss of $8.2 million in the same period the previous year [11][45] - For the full year 2022, revenue totaled $119 million, up 28% compared to 2021, with telehealth net revenues growing by 21% to $82.6 million and WorkSimpli net revenues increasing by 47% to $36.4 million [46] - The company expects revenue growth of approximately 20% to 25% in 2023, with adjusted EBITDA projected to grow to between $12 million and $18 million [11][19] Business Line Data and Key Metrics Changes - LifeMD's virtual primary care business is projected to exceed $5 million in revenue for 2023, a significant increase from just over $500,000 in 2022 [4] - WorkSimpli generated approximately $36 million in revenue and $5 million in EBITDA in 2022, with expectations for 2023 revenue to increase to between $50 million and $55 million and EBITDA to rise to between $15 million and $20 million [7][10] Market Data and Key Metrics Changes - LifeMD's active subscriber base increased by 22% year-over-year, reaching over 169,000 active subscribers, while WorkSimpli's subscriber count rose by 64% to 168,000 [22] - The gross margins for the fourth quarter reached 86%, up 600 basis points compared to the same year-ago period [22] Company Strategy and Development Direction - The company plans to continue investing in and diversifying treatment offerings on its virtual primary care platform while expanding patient access through Medicare participation and private payer contracts [4] - LifeMD aims to position itself as a long-term leader in the telehealth space, leveraging its proprietary technology platform and affiliated medical group to enhance patient engagement and outcomes [5][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future prospects, citing new partnerships and a strong pipeline of opportunities with national organizations seeking to collaborate with LifeMD [6][54] - The company is confident in its ability to eliminate cash burn by mid-2023 and believes its financial position is strong enough to support long-term growth plans [10][50] Other Important Information - LifeMD executed several initiatives in 2022 to strengthen its liquidity and capital position, including closing a credit facility with Avenue Capital that provides up to $40 million [10][50] - The company reduced its marketing expense as a percentage of revenue to 62% in Q4 2022, down from 77% in the same period the previous year [52] Q&A Session Summary Question: Can you talk about the $28 million in revenue that was lower than expected? - Management acknowledged the revenue guidance and explained that the revenue was impacted by a noncash deferral of telehealth order shipments [28][51] Question: What is the revenue split between health care and software for 2023? - The health care segment is expected to be around $100 million, while the WorkSimpli business is projected to contribute approximately $45 million to $50 million [30] Question: What sort of EBITDA margin is expected for the software and health care businesses? - Both businesses are expected to be profitable by mid-year, but specific margins were not disclosed at this time [32] Question: How much of the $40 million credit facility is accessible now? - The company has funded $15 million at closing, with an additional $5 million committed without contingencies, and the remaining $20 million will be accessible upon reaching approximately $150 million in TTM revenue [34][35] Question: What is the payer mix expected to trend towards by Q4 of fiscal '24? - Management speculated that the payer mix could shift to 50% insurance and 50% cash pay, based on survey data from potential patients [47][48] Question: Can you provide details on partnerships with larger entities? - Management confirmed late-stage conversations with multiple national organizations regarding partnerships, emphasizing the strong interest and traction in the business development pipeline [53][55]

Revenue Performance - 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[198] - Telehealth revenue for 2022 was $82.6 million, accounting for 69% of total revenue, with a 21% increase from the previous year[198] - WorkSimpli revenue for 2022 was $36.4 million, representing a 47% increase and accounting for 31% of total revenue[198] Profit and Loss - Gross profit increased by approximately 34% to $100.4 million for 2022, with a gross profit margin of 84% compared to 81% in 2021[201] - Operating loss for 2022 was $(43.4) million, an improvement from $(54.3) million in 2021[198] - Net loss attributable to common stockholders for 2022 was $(48.6) million, compared to $(61.8) million in 2021[198] Expenses - Total expenses for 2022 were approximately $143.8 million, an increase of 11% from approximately $129.2 million in 2021[202] - General and administrative expenses increased by approximately $7.4 million in 2022, primarily due to a $7.0 million increase in payroll expenses[204] Cash Flow and Working Capital - For the year ended December 31, 2022, the company reported a net cash used in operating activities of approximately $23.0 million, a decrease from $33.1 million in 2021[208] - The company's working capital decreased by approximately $42.2 million during the year ended December 31, 2022, resulting in a working capital of $(20.1) million[206] - The company experienced a net decrease in cash of approximately $37.4 million during the year ended December 31, 2022[207] - As of December 31, 2022, the company had a current cash balance of approximately $14.6 million[212] Acquisitions and Impairments - The company acquired Cleared, a nationwide allergy telehealth platform, for approximately $9.1 million in January 2022[187] - WorkSimpli acquired assets associated with ResumeBuild for $4.0 million in February 2022[189] - The company recorded an $8.0 million goodwill impairment charge and an $827 thousand intangible asset impairment charge in 2022[204] - Goodwill of $8.0 million was recognized in conjunction with the Cleared acquisition, with an impairment charge of $8.0 million recorded in 2022[228] - An impairment loss of $827 thousand was recorded related to the Cleared customer relationship intangible asset during the year ended December 31, 2022[229] Capital Expenditures - Net cash used in investing activities for 2022 was approximately $13.9 million, compared to $3.4 million in 2021, mainly due to capitalized software costs of $8.5 million[209] - The Company capitalized $12.1 million in software costs as of December 31, 2022, an increase of $8.5 million or 236% from $3.6 million in 2021[225] Liabilities and Deficits - The company has an accumulated deficit of approximately $190.6 million as of December 31, 2022[212] - As of December 31, 2022, the Company had accrued contract liabilities of approximately $5.5 million, up from $1.5 million in 2021[224] - The company recorded a $5.1 million reduction in contingent consideration related to the Cleared acquisition due to remeasurement of fair value[204] Accounting and Revenue Recognition - The Company is evaluating the effects of the new accounting standards update effective after December 15, 2022, related to business combinations[231] - The Company allows subscribers to cancel their subscription at any point during the billing cycle, impacting revenue recognition[223] - The Company capitalizes certain internal payroll and third-party costs related to internally developed software, amortizing these costs over an estimated useful life of three years[225]

LifeMD, Inc. (NASDAQ:LFMD) Q3 2022 Earnings Conference Call November 10, 2022 4:30 PM ET Company Participants Justin Schreiber – Chief Financial Officer Marc Benathen – Chierf Financial Officer Conference Call Participants David Larsen – BTIG Marc Wiesenberger – B. Riley Securities Operator Good afternoon. Thank you for joining us today to discuss the results for LifeMD’s Third Quarter Ended September 30, 2022. Joining the call today are Justin Schreiber, Chairman and Chief Executive Officer; and Marc Benat ...