LIFEMD, INC. (LFMD) Business

Business Overview

LifeMD is a patient-centric, direct-to-patient healthcare company providing a high-quality, cost-effective, and convenient way for patients to access virtual medical care and pharmacy services. We believe the traditional healthcare model requiring patients to visit a physician’s office, travel to a retail pharmacy, and return for follow-up appointments or prescription refills is complex, inefficient, and costly which can discourage individuals from seeking necessary medical care and medications. At the same time, the United States (“U.S.”) continues to experience shortages in primary care key specialty areas.

Through our vertically integrated care model, we combine proprietary technology, affiliated clinical services, pharmacy infrastructure, and artificial intelligence (“AI”)-enabled operational systems to deliver longitudinal care at scale. Our mission is to empower individuals to live healthier lives by expanding access to high-quality virtual and in-home healthcare services. We believe our success is driven by an exceptional patient experience, our affiliated medical group comprised of high-quality and dedicated providers, and our vertically integrated care platform

As of December 31, 2025, LifeMD served approximately 328,000 active patient subscribers across a range of healthcare needs, including primary care, men’s and women’s health, hormone health, weight management, insomnia, dermatology and cardiology. We provide virtual clinical services as well as prescription and over-the-counter (“OTC”) treatments, when medically appropriate.

Our virtual primary care services are primarily offered through a subscription model. Since inception, we have served approximately 1,387,000 patients and customers, expanding access to convenient, and high-quality healthcare.

Telehealth revenue increased 25% for the year ended December 31, 2025 as compared to the year ended December 31, 2024. Approximately 95% of our total revenue is derived from recurring subscriptions.

Our End-to-End Telehealth Platform

LifeMD has developed a proprietary, fully integrated telehealth and pharmacy platform designed to support diagnosis, treatment, prescription fulfillment, and ongoing care management within a unified ecosystem. We believe this vertical integration differentiates LifeMD from point-solution telehealth providers and enables us to deliver more cohesive patient experiences for patients electing to utilize our affiliated pharmacy while maintaining clinical rigor and operational efficiency.

Our telehealth technology platform is continually optimized 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. Our platform integrates core capabilities, including:

● A 50-state affiliated provider network; ● A nationwide pharmacy network; ● A wholly-owned commercial pharmacy; ● Nationwide laboratory and diagnostic integrations; ● A fully integrated patient care center; ● A direct-to-patient marketing infrastructure for acquisition and retention; and ● AI-enabled clinical and operational technologies.

Through our desktop and mobile applications, patients move seamlessly from onboarding and consultation to prescription fulfillment and longitudinal care. We continue to augment our platform with new features selected to better serve our patients.

In June 2024, we began accepting commercial and government health insurance for our virtual primary care services, including obesity-related care for medically qualified patients. As of December 31, 2025, our network covered approximately 112 million lives, including approximately 30 million Medicare Fee-for-Service beneficiaries. By June 1, 2026, we expect to expand coverage to approximately 230 million lives, representing approximately 80% of commercially insured lives in the U.S., 70% of Medicare Advantage beneficiaries, and Medicare Fee-for-Service beneficiaries.

Affiliated Provider Network

Care delivery across the LifeMD platform is supported by an affiliated 50-state medical group composed of licensed physicians and nurse practitioners. A significant portion of this network consists of full-time providers dedicated to LifeMD’s platform and clinical protocols. Our providers deliver synchronous and asynchronous virtual consultations across primary care, chronic disease management, metabolic health, hormone optimization, behavioral health, and other specialty programs. Clinical workflows are supported by our integrated EMR system, case-load balancing algorithms, secure communications infrastructure, and prescription management tools. We believe that maintaining a dedicated affiliated provider network, integrated directly into our proprietary systems, enables consistent clinical standards, operational efficiency, and scalable care delivery across multiple specialty verticals.

Patient Care Center

We have an internal patient care center staffed by LifeMD employees to support clinical coordination and customer experience functions. As of December 31, 2025, the patient care center included approximately 119 employees and is led by an experienced operations and customer experience team. The patient care center provides hands-on support throughout the patient journey, including care coordination, onboarding assistance, follow-up communication, and general support services. This infrastructure is designed to enhance accessibility, improve continuity of care, and support retention within our subscription-based model. We believe the integration of our patient care center with our technology platform strengthens patient engagement, supports adherence to prescribed therapies, and contributes to sustained patient satisfaction as we scale.

Our proprietary technology platform integrates:

● Scheduling across a national provider network; ● Secure patient-provider communications; ● Case-load balancing algorithms; ● Clinical documentation and EMR functionality; and ● Prescription management.

These features support longitudinal care relationships and subscription-based models.

Pharmacy and Fulfillment

To support our telehealth brands, in November 2024 we announced the opening of a state-of-the-art wholly-owned affiliated commercial pharmacy, marking an important milestone in creating a fully integrated, end-to-end telehealth platform. This 22,500-square-foot facility, located in Lancaster, PA and designed to fill up to 5,000 daily prescriptions, allows us to offer patients a more cohesive care journey for relevant conditions from initial consultation to prescription fulfillment within a single integrated ecosystem. In September 2025, we expanded our pharmacy to include advanced non-sterile compounding capabilities for oral and topical medications, so that we could deliver tailored therapies designed to meet evolving patient needs while improving efficiency and reducing reliance on third-party providers.

AI and Data Infrastructure

We have been an early adopter of AI and large language models (“LLMs”) to integrate and analyze data across the Company. These technologies support clinical operations, product development, customer service, and internal workflows. We believe these capabilities have the potential to significantly improve operational efficiency, reduce costs, and increase the agility of our technology, products, operations, and medical teams, if we are able to mitigate accompanying risks addressed under “Risk Factors”.

Our Brands and Specialty Care Programs

We operate three consumer healthcare brands focused on largely unaddressed or underserved healthcare needs.

1) LifeMD

The LifeMD brand is our flagship virtual primary care and specialty platform, having served over 679,000 customers and patients to date. This brand provides patients with access to affiliated high-quality providers for their urgent care and chronic care needs. The LifeMD brand is a mobile-first full-service destination that provides seamless access to comprehensive virtual medical care including on-demand consultations and treatment, prescription medications, diagnostics and imaging, wellness coaching, integration with in-home tools and more. This offering is also supported by partnerships that provide our patients with benefits such as substantial discounts on lab work and direct integrations and collaborations with pharmaceutical manufacturers that offer patients convenient and affordable access to important medications. The LifeMD brand addresses high-growth and historically underserved healthcare verticals through defined specialty care programs as noted below.

Weight Management

Our Weight Management Program, launched in April 2023 with a focus on GLP-1 medications, provides primary care, metabolic coaching, lab work and prescription services (as appropriate) to patients seeking to access a medically supported weight loss solution. In September 2024, we expanded our Weight Management Program to offer personalized, non-GLP-1 treatment plan consisting of three oral medications – metformin, bupropion, and topiramate – which is expected to grow the program’s addressable market. Since inception, our Weight Management Program has grown exponentially to approximately 81,000 patient subscribers as of December 31, 2025.

As part of our commitment to increasing access to branded prescription GLP-1 medications, we have developed an electronic benefits verification program that allows patients to check pharmacy benefits verification upon enrolling in a LifeMD virtual care program. Secondly, we have partnered with an AI-powered platform that optimizes prior authorization submissions and aims to improve approval rates for patients. Thirdly, we have established direct integrations with branded manufacturers who are also committed to lower cost offerings. These enhancements are designed to minimize delays in care, reduce barriers to accessing brand-name medications, and ensure that a broader range of patients can benefit from the LifeMD brand’s offerings.

Women’s Health

LifeMD’s women’s health platform with a focus on perimenopause and menopause, bone health, and hormone optimization. Women’s health conditions often require multi-year, longitudinal management. Our platform is designed to provide continuous, coordinated care across a woman’s lifespan, supported by:

● Highly specialized providers; ● In-Home and remote diagnostics; ● Generic and compounded medications; ● Supplements; ● Diet and lifestyle education and support; and ● Community.

As we expand this platform and shape our strategy, we are engaging with renowned specialists in their field, including a focus on menopause and osteoporosis. We feel LifeMD is uniquely positioned to provide continuous support throughout a woman’s lifespan with our holistic, personalized and accessible care philosophy.

Behavioral Health

LifeMD’s behavioral health program provides teletherapy, psychiatry, and medication management for common mental health conditions. Behavioral health services are delivered through our affiliated provider network and are integrated into our longitudinal care framework. We are focused on expanding insurance coverage across commercial and government payers to reduce financial barriers and improve access. We believe behavioral health represents a significant opportunity to drive improved patient outcomes and deepen engagement within our subscription-based model. According to the National Institute of Mental Health, approximately 59.3 million adults in the U.S. were living with a mental illness in 2022, yet only 50.6% received treatment.

LifeMD+ Membership

LifeMD+ is our membership-based virtual primary care offering, providing 24/7 access to synchronous and asynchronous care for urgent care, urgent prescriptions and refills, diagnostics and more. LifeMD+ is designed to serve as an entry point into the LifeMD ecosystem, expanding customer access through both cash-pay and insurance reimbursement models. This membership forms the foundation of our subscription-based model and supports cross-vertical expansion into our specialty care programs such as weight management.

2) Rex MD

Rex MD is our men’s telehealth platform focused on conditions that are often underdiagnosed or undertreated due to stigma, inconvenience, or limited access to specialized providers. Since launch, Rex MD has served approximately 691,000 customers and patients. The platform delivers virtual diagnosis, treatment, and prescription medications for men’s health conditions including erectile dysfunction, premature ejaculation, hair loss, insomnia, weight loss and performance anxiety. Services are provided through our affiliated licensed medical providers, and prescription therapies are dispensed either through our wholly owned pharmacy or through partner pharmacies, as clinically appropriate.

Testosterone Replacement Therapy (“TRT”)

TRT represents a defined specialty care program within Rex MD and a growing focus area for the brand. Low testosterone is associated with a range of clinical symptoms, including fatigue, decreased libido, reduced muscle mass, and mood changes, and often requires longitudinal evaluation and management. Our TRT program is designed to provide comprehensive, ongoing care rather than episodic prescription access.

The program includes:

● Virtual clinical evaluation and laboratory testing; ● Diagnosis and treatment planning by affiliated providers; ● Ongoing hormone monitoring and dosage management; and ● Prescription fulfillment and follow-up care.

Because TRT typically requires continuous monitoring and long-term management, the TRT program aligns with our subscription-based care model and supports recurring patient engagement. We believe the combination of diagnostic integration, prescription management, pharmacy infrastructure, and longitudinal clinical oversight differentiates our approach from transactional telehealth offerings and positions Rex MD to address a growing segment of men seeking accessible hormone health services.

3) ShapiroMD

ShapiroMD is a legacy brand offering 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. ShapiroMD is a leading destination for hair loss treatment across the U.S. and has served approximately 261,000 customers and patients to date.

B2B Telehealth Partnerships

Organizations selling healthcare products face a challenging commercial landscape. 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. 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. 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.

○ LifeMD executed its integration with LillyDirect’s (“Lilly”) pharmacy provider, Gifthealth, to provide eligible patients with streamlined access to single-dose vials of Lilly’s prescription obesity treatment Zepbound® (tirzepatide). This integration enables a more direct pathway for patients prescribed Zepbound® through LifeMD’s virtual care platform. LifeMD established an integrated pathway within its virtual care platform to facilitate patient access to Wegovy® and Ozempic®. As part of this collaboration, LifeMD integrated with CenterWell Pharmacy, Novo Nordisk’s pharmacy partner, to support prescription fulfillment for eligible patients prescribed Wegovy® for chronic weight management and Ozempic® for type 2 diabetes. . In January 2026, the Company began offering Novo Nordisk’s Wegovy® (semaglutide) pill –an oral GLP-1 therapy for chronic weight management and cardiovascular health. ○ In May 2024, LifeMD executed a partnership agreement with Withings, Inc. (“Withings”) designed to revolutionize weight management patient care by providing LifeMD’s GLP-1 weight-loss patients with Withings advanced in-home health monitoring devices, including the Body Pro 2 scale and the BPM Connect Pro blood pressure monitor. With these devices, LifeMD is setting a new standard in virtual care by providing clinicians with near real-time and actionable patient data that can drive compliance, enhance clinical decision-making, encourage preventive healthcare and, most importantly, improve long-term outcomes. ○ In May 2024, LifeMD launched a partnership with Ash Wellness, a leading at-home, self-collection laboratory health testing platform. Ash Wellness offers a network of over ten Clinical Laboratory Improvement Amendments (“CLIA”) and College of American Pathologists (“CAP”) certified labs, supporting over one hundred biomarkers and multiple collection methods. Application program interface and a fully white labelled experience supports a streamlined and convenient patient experience. Initially introduced as part of our Weight Management Program to monitor and qualify patients for treatment, LifeMD plans to use at-home collection testing across various clinical care scenarios, giving patients greater control over their health and making remote healthcare more inclusive. ○ On December 11, 2023, the Company entered into a collaboration with Medifast, Inc. through and with certain of its wholly-owned subsidiaries (“Medifast”). Medifast utilizes the Company’s virtual care technology platform to provide its clients access to a clinically supported weight management program, including GLP-1 medications. Pursuant to certain agreements between the parties, Medifast paid 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, $2.5 million was paid during the three months ended March 31, 2024, and the remaining $2.5 million was paid during the three months ended June 30, 2024 (the “Medifast Collaboration”). 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. (“Jason Pharmaceuticals”), 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. 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. ○ 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®. 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.

Our Customers

Our customer base includes men and women seeking access to virtual healthcare and pharmacy across a broad set of conditions. No single customer accounted for more than 10% of net sales for the years ended December 31, 2025 and 2024.

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 39% since 2020 and revenue growth of 25% in 2025 as compared to 2024. We believe this validates our significant long-term investments in developing our human capital, technology, brand awareness, omni-channel marketing, and operations infrastructure. We will continue to make wise investments in differentiated telehealth service offerings and in initiatives that will enhance the experience our patients have with our platform. 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.

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, and hair loss. The Presidential administration launched an online platform in February 2026, designed to provide lower cash prices for prescription drugs, with a heavy focus on GLP-1 medications for weight loss and diabetes. We also compete with traditional mass merchandisers, drug store chains, and independent pharmacies. Key to retaining and growing our position in the market is taking a patient-centric approach to telehealth, with a strong emphasis on the quality of care we deliver to our patients. 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.

Our key competitive strengths include:

○ An affiliated 50-state medical group dedicated to the ongoing healthcare needs of our patients, the majority of which are staffed with full-time providers committed to LifeMD’s long-term vision and success. ○ Industry-leading telehealth technology platform capable of supporting the delivery of complex primary care and the treatment of a broad range of chronic conditions. ○ A wholly-owned affiliated commercial pharmacy and fulfillment center capable of supporting highly curated personalized experiences, including customized product offerings that combine prescription and wellness products to meet our patients’ needs. ○ Flexible patient payment options, including increasing commercial and Medicare insurance capabilities for care, pharmacy and medical benefits. ○ An in-house patient service center dedicated to providing patient care and customer support to our rapidly growing subscriber base. ○ Robust CRM, patient acquisition, and retention capabilities supported by real-time data analytics leveraging best-in-class technologies including AI. ○ A compliance-first mindset, ensuring patients have access to their clinical data through a full scale EMR system while ensuring we adhere to strict compliance standards. ○ Established collaborations and platform integrations with leading GLP-1 manufacturers, including Novo Nordisk and Lilly, enabling streamlined access pathways, prescription fulfillment integrations, and enhanced support for patients prescribed branded obesity and diabetes therapies.

On November 4, 2025, we sold our majority ownership interest in WorkSimpli to Lion Buyer, LLC. This transaction represents a key milestone in the Company’s strategic transformation, further positioning the Company as a pure-play healthcare company exclusively focused on expanding its virtual care and pharmacy offerings. WorkSimpli is classified as discontinued operations for all periods presented in these consolidated financial statements included in this Annual Report on Form 10-K. See Note 4—Discontinued Operations to our consolidated financial statements included in this report.

Intellectual Property

We regard our trademarks, copyrights, domain names, trade dress, trade secrets, proprietary technologies, and similar intellectual property as important to our success, and we rely on trademark and copyright law, trade-secret protection and confidentiality, patents, and/or license agreements with our employees, customers, partners and others to protect our proprietary rights. We have licensed in the past, and expect that we may license in the future, certain proprietary rights, technologies or copyrighted materials from third- parties, and we rely on those third-parties to defend their proprietary rights, copyrights, and technologies.

From time-to-time, we register our principal brand names in the U.S. and certain foreign countries. Our material trademarks include RexMD®, LifeMD®, NavaMD®, ShapiroMD Hair Growth Experts® and Cleared®. Trademark applications have been filed and are being prosecuted for IgniteRx and VITA. The steps we take to protect our proprietary rights in our brand names may not be adequate to prevent the misappropriation of our brand names in the U.S. or abroad. Existing trademark laws afford only limited practical protection for our product lines. 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.

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. In order to protect the confidentiality of our intellectual property, including trade secrets, know-how and other proprietary technical and business information, it is our policy to limit access to such information to those who require access in order to perform their functions and to enter into agreements with employees, consultants, and vendors to contractually protect such information.

Manufacturing and Supply Chain

We use third parties to manufacture and package our OTC products according to the formulas and packaging guidelines we dictate. In order to minimize costs, we may elect to purchase raw or bulk materials directly from our suppliers and have them shipped to our manufacturers so that we may incur only tableting, encapsulating, and/or packaging costs and avoid the additional costs associated with purchasing the finished product.

Government Regulation

FDA, Department of Health and Human Services (“HHS”) and Federal Trade Commission (“FTC”)

Our business is heavily regulated by the FDA, HHS and the FTC.

In early 2025, the FDA determined shortages for semaglutide (marketed as Ozempic® and Wegovy®) and tirzepatide (marketed as Mounjaro® and Zepbound®) were resolved, effectively ending the legal basis for mass compounding, and as a result, we promptly shifted our Weight Management Program to facilitating access for patients to branded medications through insurance navigation rather than relying solely on compounded products. Since then, the FDA and HHS have shifted from passive monitoring to enforcement against “mass-marketed” compounded drugs. In late 2025, the FDA issued over 100 warning letters to telehealth providers and compounders for “false and misleading” advertising. In February 2026, the HHS General Counsel referred a competing telehealth firm to the Department of Justice for potential criminal violations of the Food, Drug, and Cosmetic Act. Branded manufacturers like Novo Nordisk have filed lawsuits accusing other telehealth firms of selling “unauthentic and untested knockoffs.” The Company continues to monitor these developments, so that it may modify offerings under its Weight Management Program accordingly and reduce its exposure to legal and regulatory proceedings.

The FDA enforces the Federal Food, Drug and Cosmetic Act (the “FDCA”) and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements are regulated as a category of food, not as drugs. We are not required to obtain FDA pre-market approval to sell our dietary supplement products in the U.S. under current laws. Our OTC hair loss products are regulated as cosmetics under the FDCA.

The FDA imposes Good Manufacturing Practice (“GMP”) guidelines to ensure that prescription drugs and dietary supplements are produced in a quality manner, do not contain contaminants or impurities, and are accurately labelled. GMP guidelines include requirements for establishing quality control procedures, designing, and constructing manufacturing plants, testing ingredients and finished products, record keeping, and handling of consumer product complaints. Some but not all prescription drug products that we prescribe are subject to GMP guidelines. For compounded medications, our affiliated pharmacy and other traditional state-licensed pharmacies are exempt from GMP guidelines but must follow U.S. Pharmacopeia (“USP”) standards and state regulations. The FDA has broad authority to enforce the provisions of federal law applicable to prescription drugs, dietary supplements and cosmetics, including the power to monitor claims made in product labelling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, and to issue warning letters. 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. The FTC regulates the advertising of dietary supplements, cosmetics and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC-launched enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Under current U.S. regulations, our products must comply with certain labelling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In addition to the foregoing, our operations and those of our partners are subject to federal, state and local government laws and regulations, including those relating to the practice of medicine, telehealth and the prescribing of prescription medications. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

Healthcare Insurance Legislation

The impact of the One Big Beautiful Bill Act (the “OBBBA”), which was enacted in July 2025, is expected to be far-reaching, with significant implications for states, their healthcare programs and consumers. Key provisions, the most consequential of which are set to take effect beginning in 2027, include caps on state-directed payments, limits on provider taxes, stricter eligibility checks, financial incentives for accurate state administration and reforms to federal subsidies.

Once the OBBBA is implemented, the Congressional Budget Office anticipates that millions of individuals could lose health insurance between now and 2034. With respect to individuals who purchase Affordable Care Act coverage through state and federal marketplaces, these losses may primarily be attributable to changes in pre-verification requirements and limits to tax credit eligibility. States are awaiting additional guidance from federal agencies on several provisions and are likely to have variation in the details of how they will implement the provisions of the law.

At this time, we cannot estimate the OBBBA’s impact, nor can we predict the timing of that impact, on our future business, financial condition or results of operations, however, we may experience decreased payments (including supplemental payments) from Medicare and other government programs, as well as delays in the timing of payments.

Data Privacy and Security Laws

The data we collect and process is an integral part of our products and services, allowing us to ensure our prices are accurate and relevant, and reach and advertise to consumers with savings information. We collect and may use personal information to help run our business (including for analytical and marketing purposes) and to communicate and otherwise reach our consumers. In some instances, we may use third party service providers to assist us in the above.

We endeavor to treat our consumers’ data with respect and maintain consumer trust. We provide consumers options designed to allow them to control the use and disclosure of their data, such as allowing consumers to opt out of any marketing requests, opt out of the use of marketing cookies, pixels and technologies on our platform, and request deletion of their 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. 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”). 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. Comprehensive state privacy laws have been adopted in nineteen other states, with more privacy and data security laws currently proposed in more than half of the states in the U.S. and various federal legislative drafts in the U.S. Congress. Many new state privacy laws diverge from the CCPA, increasing the complexity of risk by requiring companies to comply with unique state by state obligations.

Several states have also adopted or proposed consumer health data privacy legislation. For example, the Washington State My Health My Data Act (“MHMDA”), creates new obligations with respect to companies’ processing consumer health data not subject to HIPAA that limits, and in some cases, requires consumers to provide opt-in consent to the collection, processing, and sharing consumer health information for certain purposes. The existence of myriad comprehensive privacy laws and consumer health data privacy laws in different states in the country will make our compliance obligations more complex and costly and may increase the likelihood that we may be subject to enforcement actions, litigation, or otherwise incur liability for noncompliance, and may limit our ability to process data for certain purposes. 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.

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. 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. Furthermore, according to the FTC violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act.

HIPAA 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. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured protected health information, a complaint about privacy practices or an audit by U.S. 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.

Artificial Intelligence Laws

We leverage AI in certain aspects of our business operations. Over 20 states have adopted legislation governing various aspects of AI systems, such as disclosures regarding the use and application of AI systems, and the use of AI systems for high risk applications, including certain health care services. These laws require developers and deployers of AI systems to satisfy numerous obligations, including without limitation the completion of annual impact assessments, the provision of consumer facing disclosures, and taking measures to prevent or report instances of algorithmic discrimination. Governmental authorities may investigate and take actions addressing allegations of noncompliance with these laws. States including Colorado, Connecticut and Oregon have amended their privacy laws to broaden the scope, redefine “sensitive” data and increase enforcement, with many new requirements taking effect in 2026. While Congress continues to discuss federal frameworks, such as the American Privacy Rights Act, a comprehensive national law remains pending.

Healthcare Fraud and Abuse Laws

We may be subject to a number of federal and state healthcare regulatory laws that restrict business practices in the healthcare industry. These laws include, but are not limited to, federal and state anti-kickback, false claims, and other healthcare fraud and abuse laws.

The U.S. federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. 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. The majority of states also have anti-kickback laws, which establish similar prohibitions, and in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers and self-pay patients.

The federal false claims laws, including the civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false, fictitious, or fraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or knowingly making a false statement to avoid, decrease, or conceal an obligation to pay money to the U.S. federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Moreover, a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

In addition, the civil monetary penalties statute, subject to certain exceptions, prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program.

The federal Health Insurance Portability and Accountability Act of 1996 created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. 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.

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. Similar sanctions and penalties, as well as imprisonment, also can be imposed upon executive officers and employees of such companies.

State Licensing Requirements

Certain states have enacted laws regulating companies that offer and market discount medical plans, including prescription drug plans, subscription membership programs, or discount cards, such as our prescription offering. These state laws are intended to protect consumers from fraudulent, unfair, or deceptive marketing, sales and enrollment practices by such plans. It is possible that other states may enact new requirements or interpret existing requirements to include our programs. Failure to obtain the required licenses, certifications or registrations to offer and market these subscription discount programs may result in civil penalties, receipt of cease-and-desist orders, or a restructuring of our operations.

State Corporate Practice of Medicine and Fee Splitting Laws

With respect to our telehealth platform, we contract with our physician-owned professional corporation, LifeMD PC, to deliver our telehealth offerings to its patients in the U.S. We entered into a management services agreement with LifeMD PC pursuant to which we provide them with billing, scheduling and a wide range of other services, and they pay us for those services. In addition, our platform enables consumers to opt in to use our prescription offering and/or fill their prescriptions through a third-party mail-order pharmacy. These relationships are subject to various state laws, which are intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment and prohibiting the sharing of professional services income with non-professional or business interests. These laws vary from state to state and are subject to broad interpretation and enforcement by state regulators. 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.

Human Capital

As of December 31, 2025, we employed 389 employees, of which 347 were full-time, 5 were part-time, and 37 were temporary employees. Of our total employees, 119 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. We have not experienced any work stoppages, and we consider our relationship with our employees to be good.

Corporate History

LifeMD, Inc. was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc. We changed our name to Conversion Labs, Inc. on June 22, 2018 and then subsequently, on February 19, 2021, we changed our name to LifeMD, Inc. Further, in connection with changing our name, we changed our trading symbol to LFMD.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports and amendments to these reports that we file with or furnish to the SEC at their website, www.sec.gov, are also available free of charge at our website, https://ir.lifemd.com/, as soon as reasonably practicable after we electronically file these reports with, or furnish these reports to the SEC. 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.

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. 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 which discourages many individuals from seeking much-needed medical care. LifeMD is improving the delivery of the healthcare experience through telehealth with our proprietary technology platform, affiliated and dedicated provider network, broad and expanding treatment capabilities, and the unique ability to nurture patient relationships.

The LifeMD telehealth platform integrates best-in-class capabilities including a 50-state medical group, a nationwide pharmacy network, a wholly-owned affiliated commercial pharmacy, nationwide laboratory and diagnostic testing capabilities, a fully integrated electronic medical records (“EMR”) system and a patient care and service call center. 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. Currently, LifeMD treats approximately 275,000 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. Since inception, we have helped approximately 1,118,000 customers and patients by providing them with 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. 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 vertically integrated care platform. 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. The program had more than 75,000 patient subscribers as of December 31, 2024. Patients receive a range of weight loss services including prescriptions for GLP-1 medications (as medically appropriate) lab work, 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.

Our telehealth revenue increased 61% for the year ended December 31, 2024 as compared to the year ended December 31, 2023. Total revenue from recurring subscriptions is approximately 92%. 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. WorkSimpli revenue from recurring subscriptions is 100%.

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. 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, an EMR, secure synchronous and asynchronous communication, prescriptions, pharmacy and laboratory integrations, and more. Our platform enables us to deliver modern personalized health experiences and offerings through our websites and mobile applications, spanning customer discovery, purchase and connection with licensed providers, to pharmacy and OTC order fulfilment, through ongoing care. We believe that our seamless approach significantly reduces the complication, cost and time burden of healthcare, therefore incentivizing consumers to stick with our brands.

Our offerings are sold to consumers on a primarily 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 delivered by a team of dedicated medical providers. In general, our offerings seek to serve a patient throughout the lifecycle of their urgent, chronic, and lifestyle healthcare needs. As appropriate, prescription medications and OTC products are filled by our in-house mail order pharmacy or third-party pharmacy fulfilment partners, and are shipped directly to patients. The number of patients and customers we serve across the nation continues to increase at a robust pace, with approximately 1,118,000 individuals having purchased our products and services to date.

Our 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).

We leverage our telehealth technology platform and services across the two core areas described below:

Direct-to-Patient Telehealth Brands

We leverage our telehealth platform’s affiliated provider network, pharmacy, and EMR capabilities across our direct-to-patient telehealth brands. Our core telehealth brands LifeMD and Rex MD target largely unaddressed or underserved healthcare needs and are leading destinations in their respective treatment verticals of virtual primary care and men’s health.

○ LifeMD is a telehealth brand that offers access to virtual primary care and telehealth services, offering comprehensive healthcare solutions across more than 200 conditions. This brand provides patients with access to affiliated high-quality providers for their urgent care and chronic care needs. LifeMD’s offering is a mobile-first full-service destination that provides seamless access to comprehensive virtual medical care including on-demand consultations and treatment, prescription medications, diagnostics and imaging, wellness coaching, integration with in-home tools and more. This offering is also supported by partnerships that provide our patients with benefits such as substantial discounts on lab work and a prescription discount card. LifeMD has served approximately 225,000 customers and patients to date. In April 2023, we launched our rapidly growing GLP-1 Weight Management Program providing primary care, metabolic coaching, 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 75,000 patient subscribers as of December 31, 2024, remaining at the forefront of the rapidly growing GLP-1 weight loss market, with our highly differentiated and comprehensive offering. In September 2024, we expanded our Weight Management Program with a personalized, non-GLP-1 treatment plan consisting of three oral medications – metformin, bupropion, and topiramate - which is expected to grow the program’s addressable market. As part of its commitment to increasing access to branded prescription GLP-1 medications, we have developed an electronic benefits verification program that allows patients to check pharmacy benefits verification upon enrolling in a LifeMD virtual care program. Secondly, we have partnered with an AI-powered platform that optimizes prior authorization submissions and appeals to improve approval rates for patients. Thirdly, we are establishing direct integrations with branded manufacturers who are also committed to lower cost offerings. These enhancements are designed to minimize delays in care, reduce barriers to accessing brand-name medications, and ensure that a broader range of patients can benefit from LifeMD’s offerings. More generally, our focus has been, and remains on, providing the best comprehensive care and therapy for our patients. In June 2024, LifeMD began accepting commercial insurance following an extensive buildout of technology, compliance, and revenue cycle management capabilities to support the scaling of this offering effectively and compliantly. The phased expansion includes a goal of broad nationwide coverage by the end of 2025. Additionally, Medicare enrollment is expected in the first half of 2025. ○ Rex MD is a men’s telehealth platform brand that offers access to virtual medical treatment for a variety of men’s health needs, including erectile dysfunction, premature ejaculation 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 Rex MD’s initial launch, it has expanded into additional indications including weight management and testosterone replacement therapy (“HRT”). Specifically, the HRT program was a clinically important and sought after component of building a comprehensive men’s health offering, as over time, men with hypogonadism can develop erectile dysfunction, among other conditions. Additionally, obese men are more likely to have low testosterone levels, with an expansion in waist size notably increasing the odds of conditions associated with low testosterone, an audience we are increasingly engaging with as part of our Weight Management Program. Supported by these strategic synergies, Rex MD has served approximately 607,000 customers and patients to date. ○ ShapiroMD is a legacy brand offering 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. ShapiroMD is a leading destination for hair loss treatment across the United States (“U.S.”) and has served approximately 265,000 customers and patients to date.

To support our telehealth brands, in November 2024 we announced the opening of a state-of-the-art wholly-owned affiliated commercial pharmacy, marking an important milestone in creating a fully integrated, end-to-end telehealth platform. This 22,500-square-foot facility, located in Lancaster, PA and designed to fill up to 5,000 daily prescriptions, allows us to offer patients a more cohesive care journey for relevant conditions from initial consultation to prescription fulfillment within a single integrated ecosystem. The integration of pharmacy services directly within the LifeMD platform is also expected to yield substantial financial benefits, with a projected $5 million in annualized expense savings. As of the first quarter of 2025, the pharmacy is licensed in 49 states and shipping up to 20,000 orders per month. While today the LifeMD Pharmacy is solely focused on prescription shipments for our lifestyle healthcare businesses, we are in the process of building out non-sterile (oral and topical) compounding capabilities during the first half of 2025. This will be a huge advancement for LifeMD and will enable us to service the needs of patients efficiently in a growing list of clinical areas we expect to launch in 2025 and beyond.

B2B Telehealth Partnerships

Organizations selling healthcare products face a challenging commercial landscape. 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. 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. 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. To date, LifeMD has executed the following enterprise commercial agreements providing access to our industry leading telehealth platform capabilities.

○ In May 2024, LifeMD executed a partnership agreement with Withings, Inc. (“Withings”) designed to revolutionize weight management patient care by providing LifeMD’s GLP-1 weight-loss patients with Withings advanced in-home health monitoring devices, including the Body Pro 2 scale and the BPM Connect Pro blood pressure monitor. With these devices, LifeMD is setting a new standard in virtual care by providing clinicians with near real-time and actionable patient data that can drive compliance, enhance clinical decision-making, encourage preventive healthcare and, most importantly, improve long-term outcomes. ○ In May 2024, LifeMD launched a partnership with Ash Wellness, a leading at-home, self-collection laboratory health testing platform. Ash Wellness offers a network of over ten Clinical Laboratory Improvement Amendments (“CLIA”) and College of American Pathologists (“CAP”) certified labs, supporting over one hundred biomarkers and multiple collection methods. Application program interface and a fully white labeled experience supports a streamlined and convenient patient experience. Initially introduced as part of our Weight Management Program to monitor and qualify patients for treatment, LifeMD plans to use at-home collection testing across various clinical care scenarios, giving patients greater control over their health and making remote healthcare more inclusive. ○ On December 11, 2023, the Company entered into a collaboration with Medifast, Inc. through and with certain of its wholly-owned subsidiaries (“Medifast”). Medifast utilizes the Company’s virtual care technology platform to provide its clients access to a clinically supported weight management program, including GLP-1 medications. 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, $2.5 million was paid during the three months ended March 31, 2024, and the remaining $2.5 million was paid during the three months ended June 30, 2024 (the “Medifast Collaboration”). 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. 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. ○ 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®. 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.

Majority Owned Subsidiary: WorkSimpli

WorkSimpli is a leading provider of workplace and document services for consumers, gig workers, and small businesses. 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. 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%. 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 73.6%. 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 74.1%. 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 73.3%.

WorkSimpli was ranked in the top 25,000 websites globally, with more than 78 million registrants. Since its launch, WorkSimpli has converted or edited over 414 terabytes of documents for customers from the legal, financial, real estate, and academic sectors. WorkSimpli had approximately 164,000 active subscriptions as of December 31, 2024.

Our Customers

Our customer base includes men and women seeking virtual medical care for weight loss, sexual health, hormone replacement therapy, hair loss, and other conditions. No single customer accounted for more than 10% of net sales for the years ended December 31, 2024 and 2023.

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 76% since 2020 and revenue growth of 39% in 2024 as compared to 2023. We believe this validates our significant long-term investments in developing our human capital, technology, brand awareness, omni-channel marketing, and operations infrastructure. We will continue to make wise investments in differentiated telehealth service offerings and in initiatives that will enhance the experience our patients have with our platform.

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. 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 example areas to help us achieve this growth.

○ Behavioral Health: This strategic move broadens LifeMD’s service offerings to include teletherapy, psychiatry, and medication management for common mental health conditions. According to the National Institute of Mental Health, approximately 59.3 million U.S. adults, or one in five, were living with a mental illness in 2022. However, only 50.6% received mental health treatment. Our goal is to remove barriers to mental health services by expanding insurance coverage across both commercial and government payers. ○ Women’s Health: In recent years, we have witnessed increasing awareness and recognition of women’s healthcare needs, paving the way for a more holistic approach to women’s health. As we shape our strategy, we are engaging with renowned specialists in their field, including a focus on menopause and osteoporosis. We feel LifeMD is uniquely positioned to provide continuous support throughout a woman’s lifespan with our holistic, personalized and accessible care philosophy.

Other areas of focus include re-launching our virtual primary care program as LifeMD+, providing patients with access to low cost, high-value primary and urgent care. This offering will include synchronous and asynchronous 24/7 general wellness, prescription management and urgent care for patient subscribers and will be available on both a cash pay and insurance basis.

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, and hair loss. We also compete with traditional mass merchandisers, drug store chains, and independent pharmacies. Key to retaining and growing our position in the market is taking a patient-centric approach to telehealth, with a strong emphasis on the quality of care we deliver to our patients. 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.

Our key competitive strengths include:

○ An affiliated 50-state medical group dedicated to the ongoing healthcare needs of our patients, the majority of which are staffed with full-time providers committed to LifeMD’s long-term vision and success. ○ Industry-leading telehealth technology platform capable of supporting the delivery of complex primary care and the treatment of a broad range of chronic conditions. ○ A wholly-owned affiliated commercial pharmacy and fulfillment center capable of supporting highly curated personalized experiences, including customized product offerings that combine prescription and wellness products to meet our patients’ needs. ○ Flexible patient payment options, including increasing commercial and Medicare insurance capabilities for pharmacy and medical benefits. ○ An in-house patient service and call center dedicated to providing patient care and customer support to our rapidly growing subscriber base. ○ Robust CRM, patient acquisition, and retention capabilities supported by real-time data analytics leveraging best-in-class technologies including AI. ○ A compliance-first mindset, ensuring patients have access to their clinical data through a full scale EMR system while ensuring we adhere to strict compliance standards.

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. 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 126 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.

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. Additional key capabilities of this platform include proprietary staffing algorithms for case-load balancing, full CRM functionality, integration with an affiliated 50-state physician network, national third-party pharmacy network, fully integrated EMR system, synchronous and asynchronous communications, AI-enabled support, and more.

Intellectual Property

We regard our trademarks, copyrights, domain names, trade dress, trade secrets, proprietary technologies, and similar intellectual property as important to our success, and we rely on trademark and copyright law, trade-secret protection and confidentiality, patents, and/or license agreements with our employees, customers, partners and others to protect our proprietary rights. We have licensed in the past, and expect that we may license in the future, certain proprietary rights, technologies or copyrighted materials from third- parties, and we rely on those third-parties to defend their proprietary rights, copyrights, and technologies.

From time-to-time, we register our principal brand names in the U.S. and certain foreign countries. Our material trademarks include ShapiroMD Hair Growth Experts® and Cleared®. Trademark applications have been filed and are being prosecuted for RexMD, LifeMD and NavaMD. The steps we take to protect our proprietary rights in our brand names may not be adequate to prevent the misappropriation of our brand names in the U.S. or abroad. Existing trademark laws afford only limited practical protection for our product lines. 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.

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. In order to protect the confidentiality of our intellectual property, including trade secrets, know-how and other proprietary technical and business information, it is our policy to limit access to such information to those who require access in order to perform their functions and to enter into agreements with employees, consultants, and vendors to contractually protect such information.

Manufacturing and Supply Chain

We use third parties to manufacture and package our OTC products according to the formulas and packaging guidelines we dictate. In order to minimize costs, we may elect to purchase raw or bulk materials directly from our suppliers and have them shipped to our manufacturers so that we may incur only tableting, encapsulating, and/or packaging costs and avoid the additional costs associated with purchasing the finished product.

Government Regulation

FDA and Federal Trade Commission (“FTC”)

Our business is heavily regulated by the FDA and the FTC.

FDA potential restrictions on compounding of GLP-1s, including removal of tirzepatide (marketed as Mounjaro® and Zepbound®) and/or semaglutide (marketed as Ozempic® and Wegovy®) from the drug shortage list, have the potential to disrupt patient treatment continuity, by limiting our ability to provide personalized treatment plans that meet individual patient needs, and could adversely impact our financial results. While our Weight Management Program provides eligible patients access to branded GLP-1 therapies, the program also enables access to compounded versions of GLP-1s through relationships with third-party pharmacies for qualifying patients who are unable to access or utilize branded therapies for a variety of reasons, including lack of insurance coverage, affordability concerns, and unique patient needs. Potential compounding restrictions may lead to decreased patient satisfaction, increased attrition rates, and potential legal challenges if patients are unable to access needed medications in a timely manner. Additionally, the inability to offer compounded options may drive patients who do not have insurance coverage, or who are unwilling to pay out-of-pocket, for branded GLP-1 medications to seek other medications and/or alternatives outside of telehealth, adversely impacting the growth and viability of the business.

The regulatory landscape applicable to GLP-1s continues to rapidly evolve in ways that may be adverse to our business. The FDA removed tirzepatide from its shortage list in October 2024, and then reconsidered that decision less than two weeks later, after a compounding industry group filed a lawsuit against the FDA. The FDA ultimately reaffirmed its decision to remove tirzepatide from its shortage list in December 2024, but the lawsuit is ongoing as of February 24, 2025. Additionally, all doses of semaglutide branded under Ozempic and Wegovy became listed as available on the FDA’s shortage list as of October 30, 2024 and on February 21, 2025, the FDA resolved the semaglutide shortage. These developments could limit our ability to continue providing access to compounded drug products containing semaglutide or tirzepatide as an Active Pharmaceutical Ingredient. While the FDA does not limit compounding to drug shortages, and we believe there are paths for compounding pharmacies to continue offering access to certain compounded GLP-1s after the shortage ends consistent with the statutory exemptions from the new drug approval requirements, we cannot guarantee that we will be able to continue enabling access to these compounded products in the same manner, to the same extent, or at all, due to a variety of factors outside our control, including supply chain, intellectual property, regulatory and resource allocation matters. Further, in 2024, the manufacturers of certain FDA-approved GLP-1 products requested that the FDA add semaglutide and tirzepatide to its “Demonstrable Difficulties for Compounding List”. The FDA has never finalized the Demonstrable Difficulties for Compounding List for any drug products, but if the FDA were to add semaglutide or tirzepatide to, and finalize, the list, we could no longer enable access to these compounded products on our platform.

The FDA enforces the Federal Food, Drug and Cosmetic Act (the “FDCA”) and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements are regulated as a category of food, not as drugs. We are not required to obtain FDA pre-market approval to sell our dietary supplement products in the U.S. under current laws. Our OTC hair loss products are regulated as cosmetics under the FDCA.

The FDA imposes Good Manufacturing Practice (“GMP”) guidelines to ensure that prescription drugs and dietary supplements are produced in a quality manner, do not contain contaminants or impurities, and are accurately labeled. GMP guidelines include requirements for establishing quality control procedures, designing, and constructing manufacturing plants, testing ingredients and finished products, record keeping, and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to prescription drugs, dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, and to issue warning letters. 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. The FTC regulates the advertising of dietary supplements, cosmetics and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC-launched enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In addition to the foregoing, our operations and those of our partners are subject to federal, state and local government laws and regulations, including those relating to the practice of medicine, telehealth and the prescribing of prescription medications. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

Data Privacy and Security Laws

The data we collect and process is an integral part of our products and services, allowing us to ensure our prices are accurate and relevant, and reach and advertise to consumers with savings information. We collect and may use personal information to help run our business (including for analytical and marketing purposes) and to communicate and otherwise reach our consumers. In some instances, we may use third party service providers to assist us in the above.

We endeavor to treat our consumers’ data with respect and maintain consumer trust. We provide consumers options designed to allow them to control the use and disclosure of their data, such as allowing consumers to opt out of any marketing requests, opt out of the use of marketing cookies, pixels and technologies on our platform, and request deletion of their 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. 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”). 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. Comprehensive state privacy laws have been adopted in nineteen other states, with more privacy and data security laws currently proposed in more than half of the states in the U.S. and various federal legislative drafts in the U.S. Congress. Many new state privacy laws diverge from the CCPA, increasing the complexity of risk by requiring companies to comply with unique state by state obligations.

Several states have also adopted or proposed consumer health data privacy legislation. For example, the Washington State My Health My Data Act (“MHMDA”), which took effect on March 31, 2024, creates new obligations with respect to companies’ processing consumer health data not subject to HIPAA that limits, and in some cases, requires consumers to provide opt-in consent to the collection, processing, and sharing consumer health information for certain purposes. The existence of myriad comprehensive privacy laws and consumer health data privacy laws in different states in the country will make our compliance obligations more complex and costly and may increase the likelihood that we may be subject to enforcement actions, litigation, or otherwise incur liability for noncompliance, and may limit our ability to process data for certain purposes. 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.

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. 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. Furthermore, according to the FTC violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act.

HIPAA 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. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured protected health information, a complaint about privacy practices or an audit by U.S. 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.

Artificial Intelligence Laws

We may leverage artificial intelligence (“AI”) in certain aspects of our business operations. Some states have adopted legislation governing various aspects of AI systems, such as disclosures regarding the contents of training data, the use and application of AI systems, and the use of AI systems for high risk application. Such laws, like the Colorado AI Act (“CAIA”) which comes into effect on February 1, 2026, apply to the use of AI in high risk applications, including certain health care services. The CAIA requires developers and deployers of AI systems to satisfy numerous obligations, including without limitation the completion of annual impact assessments, the provision of consumer facing disclosures, and taking measures to prevent or report instances of algorithmic discrimination. Governmental authorities may investigate and take actions addressing allegations of noncompliance with these laws. Additional AI laws are currently proposed in a handful of other states in the U.S., with various federal legislative drafts in the U.S. Congress.

Healthcare Fraud and Abuse Laws

We may be subject to a number of federal and state healthcare regulatory laws that restrict business practices in the healthcare industry. These laws include, but are not limited to, federal and state anti-kickback, false claims, and other healthcare fraud and abuse laws.

The U.S. federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. 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. The majority of states also have anti-kickback laws, which establish similar prohibitions, and in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers and self-pay patients.

The federal false claims laws, including the civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false, fictitious, or fraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or knowingly making a false statement to avoid, decrease, or conceal an obligation to pay money to the U.S. federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Moreover, a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

In addition, the civil monetary penalties statute, subject to certain exceptions, prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program.

The federal Health Insurance Portability and Accountability Act of 1996 created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. 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.

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. Similar sanctions and penalties, as well as imprisonment, also can be imposed upon executive officers and employees of such companies.

State Licensing Requirements

Certain states have enacted laws regulating companies that offer and market discount medical plans, including prescription drug plans, subscription membership programs, or discount cards, such as our prescription offering. These state laws are intended to protect consumers from fraudulent, unfair, or deceptive marketing, sales and enrollment practices by such plans. It is possible that other states may enact new requirements or interpret existing requirements to include our programs. Failure to obtain the required licenses, certifications or registrations to offer and market these subscription discount programs may result in civil penalties, receipt of cease-and-desist orders, or a restructuring of our operations.

State Corporate Practice of Medicine and Fee Splitting Laws

With respect to our telehealth platform, we contract with our physician-owned professional corporation, LifeMD PC, to deliver our telehealth offerings to its patients in the U.S. We entered into a management services agreement with LifeMD PC pursuant to which we provide them with billing, scheduling and a wide range of other services, and they pay us for those services. In addition, our platform enables consumers to opt in to use our prescription offering and/or fill their prescriptions through a third-party mail-order pharmacy. These relationships are subject to various state laws, which are intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment and prohibiting the sharing of professional services income with non-professional or business interests. These laws vary from state to state and are subject to broad interpretation and enforcement by state regulators. 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.

Human Capital

As of December 31, 2024, we employed 336 employees, of which 304 were full-time, 3 was part-time, and 29 were temporary employees. Of our total employees, 126 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. 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. We pride ourselves on hiring people who not only have the skills required to perform their respective roles, but also share in the Company’s mission.

To attract and retain key personnel, we use various measures, including an equity incentive program for key executive officers and other employees. We also provide comprehensive benefits, including health insurance for employees and dependents, 401(k) match for employees and unlimited paid time off for exempt employees. In managing our business, we strive to develop and implement policies and programs that support our business goals, maintain competitiveness, promote shared fiscal responsibility among the Company and our employees, strategically align talent within our organization and reward performance, while also managing the costs of such policies and programs. Our employees are supported with training to ensure compliance with our policies. We adhere to our business code of conduct, which sets forth a commitment to our stakeholders, including our employees, to operate with integrity and mutual respect.

Corporate History

LifeMD, Inc. was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc. We changed our name to Conversion Labs, Inc. on June 22, 2018 and then subsequently, on February 19, 2021, we changed our name to LifeMD, Inc. Further, in connection with changing our name, we changed our trading symbol to LFMD.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports and amendments to these reports that we file with or furnish to the SEC at their website, www.sec.gov, are also available free of charge at our website, https://ir.lifemd.com/, as soon as reasonably practicable after we electronically file these reports with, or furnish these reports to the SEC. 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.

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. 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. 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.

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. 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. 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. 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. 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. 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. 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.

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. 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.

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. 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. Our platform enables us to deliver modern personalized health experiences and offerings through our websites and mobile applications, spanning customer discovery, purchase and connection with licensed providers, to pharmacy and OTC order fulfillment, through ongoing care. We believe that our seamless approach significantly reduces the complication, cost and time burden of healthcare, incentivizing consumers to stick with our brands.

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. 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. 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.

Our 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).

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. 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. 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.

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. 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. 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. 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. 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. 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. In addition to the brand’s telehealth offerings, NavaMD’s proprietary products leverage intellectual property and proprietary formulations licensed from Restorsea, a leading medical-grade skincare technology platform. ○ Cleared is a telehealth brand that provides personalized treatments for allergy, asthma and immunology. 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. 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. 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. 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. 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. To date, LifeMD has executed the following enterprise commercial agreements providing access to our industry leading telehealth platform capabilities.

○ 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®. 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”). 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. 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”). 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. 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. 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. 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%. 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%. 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. 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.

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.

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. We believe this validates our significant long-term investments in developing our human capital, technology, brand-awareness, omni-channel marketing and operations infrastructure. We will continue to make wise investments in differentiated telehealth service offerings and in initiatives that will enhance the experience our patients have with our platform.

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. 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. 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 believe the largest opportunity to accelerate new patient growth is in our weight management program given the potential increase in availability of GLP-1 medications through expanded insurance coverage and new growth channels from partnerships such as with Medifast.

Leverage cross-selling capabilities within our existing customer base. Given our diverse service offering, we believe there is a significant opportunity to cross sell to our existing customer base. Specifically, we have had success in cross selling our weight management program to our RexMD customers. In addition, we believe other cross-selling opportunities include cross-selling lab-and-medically-supported hormone therapy programs to our RexMD and NavaMD customers. These cross-selling initiatives should assist in strengthening patient retention rates and revenue growth.

Expand our offering of services and products. We are committed to providing best-in-class services and products and to adding new offerings for our patients and customers. For example, we are building an in-house pharmacy capability to better meet the needs of our patients.

Launch commercial insurance programs followed by Medicare. In 2024, we expect to have our affiliated medical group fully enrolled as an in-network provider participating in major commercial insurance plans with the ability to accept coverage in 10 states. As commercial insurance becomes more embedded within our offerings, out-of-pocket cost of our services to our patients should be lower and result in higher patient satisfaction and retention. Additionally, we are building an industry-leading compliance infrastructure for Medicare participation. We believe that participation in commercial and government insurance programs will bolster significant growth for LifeMD.

Increase our enterprise partnerships. In 2023, we executed several collaborations to further leverage our affiliated medical group, add another channel to acquire new patients and generate licensing fees. These partnerships included agreements with the following: (1) Medifast, the health and wellness company known for its habit-based and coach-guided lifestyle solution OPTAVIA®, to integrate LifeMD’s telehealth platform and GLP-1 offering for medically qualified patients with OPTAVIA’s healthy lifestyle solution, (2) ASCEND Therapeutics, a leader in the hormonal and women’s health markets, which allows ASCEND to leverage LifeMD’s telehealth platform, data capabilities and healthcare marketing expertise to support its products, and (3) IQVIA, a leading global provider of advanced analytics, technology solutions and clinical research services to the life sciences industry, to leverage our telehealth infrastructure in partnership with IQVIA’s comprehensive commercialization solutions. 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. Key to retaining and growing our position in the market is taking a patient-centric approach to telehealth, with a strong emphasis on the quality of care we deliver to our patients. 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.

Our key competitive strengths include:

○ An affiliated 50-state medical group dedicated to the ongoing healthcare needs of our patients. ○ Industry leading, proprietary telehealth platform capable of supporting the delivery of complex primary care and the treatment of a broad range of chronic conditions. ○ An in-house patient service and call center dedicated to providing patient care and customer support to our rapidly growing subscriber base. ○ Robust CRM, patient acquisition and retention capabilities supported by real-time data analytics leveraging best-in-class technologies including artificial intelligence (“AI”). ○ A compliance-first mindset ensuring patients have access to their clinical data through a full scale EMR system while ensuring we adhere to strict compliance standards.

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. 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 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.

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. Additional key capabilities of this platform include proprietary staffing algorithms for case-load balancing, full CRM functionality, integration with an affiliated 50-state physician network, national third-party pharmacy network, fully integrated EMR system, synchronous and asynchronous communications, and more.

Intellectual Property

We regard our trademarks, copyrights, domain names, trade dress, trade secrets, proprietary technologies, and similar intellectual property as important to our success, and we rely on trademark and copyright law, trade-secret protection and confidentiality, patents, and/or license agreements with our employees, customers, partners and others to protect our proprietary rights. We have licensed in the past, and expect that we may license in the future, certain proprietary rights, technologies or copyrighted materials from third- parties, and we rely on those third-parties to defend their proprietary rights, copyrights, and technologies.

From time-to-time, we register our principal brand names in the U.S. and certain foreign countries. Our material trademarks include ShapiroMD Hair Growth Experts® and Cleared®. Trademark applications have been filed and are being prosecuted for RexMD, LifeMD and NavaMD. The steps we take to protect our proprietary rights in our brand names may not be adequate to prevent the misappropriation of our brand names in the U.S. or abroad. Existing trademark laws afford only limited practical protection for our product lines. 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.

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. In order to protect the confidentiality of our intellectual property, including trade secrets, know-how and other proprietary technical and business information, it is our policy to limit access to such information to those who require access in order to perform their functions and to enter into agreements with employees, consultants, and vendors to contractually protect such information.

Manufacturing and Supply Chain

We use third parties to manufacture and package our OTC products according to the formulas and packaging guidelines we dictate. In order to minimize costs, we may elect to purchase raw or bulk materials directly from our suppliers and have them shipped to our manufacturers so that we may incur only tableting, encapsulating, and/or packaging costs and avoid the additional costs associated with purchasing the finished product.

Government and Environmental Regulation

FDA and Federal Trade Commission (“FTC”)

Our business is heavily regulated by the FDA and the FTC. The FDA enforces the Federal Food, Drug and Cosmetic Act (the “FDCA”) and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements are regulated as a category of food, not as drugs. We are not required to obtain FDA pre-market approval to sell our dietary supplement products in the U.S. under current laws. Our OTC hair loss products are regulated as cosmetics under the FDCA.

The FDA imposes Good Manufacturing Practice (“GMP”) guidelines to ensure that prescription drugs and dietary supplements are produced in a quality manner, do not contain contaminants or impurities, and are accurately labeled. GMP guidelines include requirements for establishing quality control procedures, designing, and constructing manufacturing plants, testing ingredients and finished products, record keeping, and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to prescription drugs, dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, and to issue warning letters. 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. The FTC regulates the advertising of dietary supplements, cosmetics and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC-launched enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In addition to the foregoing, our operations and those of our partners are subject to federal, state and local government laws and regulations, including those relating to the practice of medicine, telehealth and the prescribing of prescription medications. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

Data Privacy and Security Laws

The data we collect and process is an integral part of our products and services, allowing us to ensure our prices are accurate and relevant, and reach and advertise to consumers with savings information. We collect and may use personal information to help run our business (including for analytical and marketing purposes) and to communicate and otherwise reach our consumers. In some instances, we may use third party service providers to assist us in the above.

We endeavor to treat our consumers’ data with respect and maintain consumer trust. We provide consumers options designed to allow them to control the use and disclosure of their data, such as allowing consumers to opt out of any marketing requests, opt out of the use of marketing cookies, pixels and technologies on our platform, and request deletion of their 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. 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”). 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. Legislation similar to the CCPA has been adopted in thirteen other states, with similar privacy and data security laws currently proposed in more than half of the states in the U.S. and various federal legislative drafts in the U.S. Congress.

Several states have also adopted or proposed consumer health data privacy legislation. For example, the Washington State My Health My Data Act (“MHMDA”) passed on April 27, 2023 and takes effect on March 31, 2024. The MHMDA creates new obligations with respect to companies’ processing consumer health data not subject to HIPAA that limits, and in some cases, requires consumers to provide opt-in consent to the collection, processing, and sharing consumer health information for certain purposes. The existence of myriad comprehensive privacy laws and consumer health data privacy laws in different states in the country will make our compliance obligations more complex and costly and may increase the likelihood that we may be subject to enforcement actions, litigation, or otherwise incur liability for noncompliance, and may limit our ability to process data for certain purposes. 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.

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. 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. Furthermore, according to the FTC violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act.

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. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured protected health information, a complaint about privacy practices or an audit by U.S. 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.

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. These laws include, but are not limited to, federal and state anti-kickback, false claims, and other healthcare fraud and abuse laws.

The U.S. federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. 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. The majority of states also have anti-kickback laws, which establish similar prohibitions, and in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers and self-pay patients.

The federal false claims laws, including the civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false, fictitious, or fraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or knowingly making a false statement to avoid, decrease, or conceal an obligation to pay money to the U.S. federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Moreover, a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

In addition, the civil monetary penalties statute, subject to certain exceptions, prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program.

The federal Health Insurance Portability and Accountability Act of 1996 created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. 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.

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. Similar sanctions and penalties, as well as imprisonment, also can be imposed upon executive officers and employees of such companies.

State Licensing Requirements

Certain states have enacted laws regulating companies that offer and market discount medical plans, including prescription drug plans, subscription membership programs, or discount cards, such as our prescription offering. These state laws are intended to protect consumers from fraudulent, unfair, or deceptive marketing, sales and enrollment practices by such plans. It is possible that other states may enact new requirements or interpret existing requirements to include our programs. Failure to obtain the required licenses, certifications or registrations to offer and market these subscription discount programs may result in civil penalties, receipt of cease-and-desist orders, or a restructuring of our operations.

State Corporate Practice of Medicine and Fee Splitting Laws

With respect to our telehealth platform, we contract with our physician-owned professional corporation, LifeMD PC, to deliver our telehealth offerings to its patients in the U.S. We entered into a management services agreement with LifeMD PC pursuant to which we provide them with billing, scheduling and a wide range of other services, and they pay us for those services. In addition, our platform enables consumers to opt in to use our prescription offering and/or fill their prescriptions through a third-party mail-order pharmacy. These relationships are subject to various state laws, which are intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment and prohibiting the sharing of professional services income with non-professional or business interests. These laws vary from state to state and are subject to broad interpretation and enforcement by state regulators. 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.

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. 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. 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. We pride ourselves on hiring people who not only have the skills required to perform their respective roles, but also share in the Company’s mission.

To attract and retain key personnel, we use various measures, including an equity incentive program for key executive officers and other employees. We also provide comprehensive benefits, including health insurance for employees and dependents, 401(k) match for employees and unlimited paid time off for exempt employees. In managing our business, we strive to develop and implement policies and programs that support our business goals, maintain competitiveness, promote shared fiscal responsibility among the Company and our employees, strategically align talent within our organization and reward performance, while also managing the costs of such policies and programs. Our employees are supported with training to ensure compliance with our policies. We adhere to our business code of conduct, which sets forth a commitment to our stakeholders, including our employees, to operate with integrity and mutual respect.

Corporate History

LifeMD, Inc. was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc. We changed our name to Conversion Labs, Inc. on June 22, 2018 and then subsequently, on February 19, 2021, we changed our name to LifeMD, Inc. Further, in connection with changing our name, we changed our trading symbol to LFMD.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports and amendments to these reports that we file with or furnish to the SEC at their website, www.sec.gov, are also available free of charge at our website, https://ir.lifemd.com/, as soon as reasonably practicable after we electronically file these reports with, or furnish these reports to the SEC. 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.

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. 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. 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.

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. 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. 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.

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 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. 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. 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 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 platform enables us to deliver modern personalized health experiences and offerings through our websites and mobile applications, spanning customer discovery, purchase, and connection with licensed providers, to pharmacy and OTC order fulfillment, through ongoing care. We believe that our seamless approach significantly reduces the complication, cost and time burden of healthcare, incentivizing consumers to stick with our brands.

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. Our offerings range from prescription medication fulfilled on a recurring basis, to complementary OTC products, to ongoing care from a team of medical providers. 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. 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.

Serving 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).

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. 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 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.

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. 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. 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. 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. 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. In addition to the brand’s telehealth offerings, NavaMD’s proprietary products leverage intellectual property and proprietary formulations licensed from Restorsea, a leading medical grade skincare technology platform. ○ Cleared is a telehealth brand that provides personalized treatments for allergy, asthma, and immunology. 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. 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. 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. 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.

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. 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. 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. WorkSimpli had over 167,000 active subscriptions as of December 31, 2022.

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.

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. We believe this validates our significant long-term investments in developing our human capital, technology, brand-awareness, omni-channel marketing, and operations infrastructure. We will continue to make wise investments in differentiated telehealth service offerings and in initiatives that will enhance the experience our patients have with our platform.

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. 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.

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. 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. 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. Key to retaining and growing our position in the market is taking a patient-centric approach to telehealth, with a strong emphasis on the quality-of-care we deliver to our patients. 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.

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. 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. 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.

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. Additional key capabilities of this platform include proprietary staffing algorithms for case-load balancing, full CRM functionality, integration with an affiliated 50 state physician network, national third-party pharmacy network, fully integrated EMR system, synchronous and asynchronous communications, and more.

Intellectual Property

We regard our trademarks, copyrights, domain names, trade dress, trade secrets, proprietary technologies, and similar intellectual property as important to our success, and we rely on trademark and copyright law, trade-secret protection and confidentiality, patents, and/or license agreements with our employees, customers, partners and others to protect our proprietary rights. We have licensed in the past, and expect that we may license in the future, certain proprietary rights, technologies or copyrighted materials from third-parties, and we rely on those third-parties to defend their proprietary rights, copyrights, and technologies.

From time-to-time, we register our principal brand names in the U.S. and certain foreign countries. Our material trademarks include ShapiroMD Hair Growth Experts® and Cleared®. Trademark applications have been filed and are being prosecuted for RexMD, LifeMD and NavaMD. The steps we take to protect our proprietary rights in our brand names may not be adequate to prevent the misappropriation of our brand names in the U.S. or abroad. Existing trademark laws afford only limited practical protection for our product lines. 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.

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. In order to protect the confidentiality of our intellectual property, including trade secrets, know-how and other proprietary technical and business information, it is our policy to limit access to such information to those who require access in order to perform their functions and to enter into agreements with employees, consultants, and vendors to contractually protect such information.

Manufacturing and Supply Chain

We use third parties to manufacture and package our OTC products according to the formulas and packaging guidelines we dictate. In order to minimize costs, we may elect to purchase raw or bulk materials directly from our suppliers and have them shipped to our manufacturers so that we may incur only tableting, encapsulating, and/or packaging costs and avoid the additional costs associated with purchasing the finished product.

Government and Environmental Regulation

FDA and Federal Trade Commission (“FTC”)

Our business is heavily regulated by the FDA and the FTC. The FDA enforces the Federal Food, Drug and Cosmetic Act (the “FDCA”) and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements are regulated as a category of food, not as drugs. We are not required to obtain FDA pre-market approval to sell our dietary supplement products in the U.S. under current laws. Our OTC hair loss products are regulated as cosmetics under the FDCA.

The FDA imposes Good Manufacturing Practice (“GMP”) guidelines to ensure that prescription drugs and dietary supplements are produced in a quality manner, do not contain contaminants or impurities, and are accurately labeled. GMP guidelines include requirements for establishing quality control procedures, designing, and constructing manufacturing plants, testing ingredients and finished products, record keeping, and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to prescription drugs, dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, and to issue warning letters. 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. The FTC regulates the advertising of dietary supplements, cosmetics and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC-launched enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In addition to the foregoing, our operations and those of our partners are subject to federal, state and local government laws and regulations, including those relating to the practice of medicine, telehealth and the prescribing of prescription medications. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

Data Privacy and Security Laws

The data we collect and process is an integral part of our products and services, allowing us to ensure our prices are accurate and relevant, and reach and advertise to consumers with savings information. We collect and may use personal information to help run our business (including for analytical and marketing purposes) and to communicate and otherwise reach our consumers. In some instances, we may use third party service providers to assist us in the above.

We endeavor to treat our consumers’ data with respect and maintain consumer trust. We provide consumers options designed to allow them to control the use and disclosure of their data, such as allowing consumers to opt out of any marketing requests, opt out of the use of marketing cookies, pixels and technologies on our platform, and request deletion of their data.

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. 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”). 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. 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, 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. The CPRA significantly modifies the CCPA, potentially resulting in further uncertainty.

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. 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. Furthermore, according to the FTC violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act.

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. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured protected health information, a complaint about privacy practices or an audit by U.S. 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.

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. These laws include, but are not limited to, federal and state anti-kickback, false claims, and other healthcare fraud and abuse laws.

The U.S. federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. 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. The majority of states also have anti-kickback laws, which establish similar prohibitions, and in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers and self-pay patients.

The federal false claims laws, including the civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false, fictitious, or fraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or knowingly making a false statement to avoid, decrease, or conceal an obligation to pay money to the U.S. federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Moreover, a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

In addition, the civil monetary penalties statute, subject to certain exceptions, prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program.

The federal Health Insurance Portability and Accountability Act of 1996 created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. 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.

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. Similar sanctions and penalties, as well as imprisonment, also can be imposed upon executive officers and employees of such companies.

State Licensing Requirements

Certain states have enacted laws regulating companies that offer and market discount medical plans, including prescription drug plans, subscription membership programs, or discount cards, such as our prescription offering. These state laws are intended to protect consumers from fraudulent, unfair, or deceptive marketing, sales and enrollment practices by such plans. It is possible that other states may enact new requirements or interpret existing requirements to include our programs. Failure to obtain the required licenses, certifications or registrations to offer and market these subscription discount programs may result in civil penalties, receipt of cease-and-desist orders, or a restructuring of our operations.

State Corporate Practice of Medicine and Fee Splitting Laws

With respect to our telehealth platform, we contract with our physician-owned professional corporation, LifeMD PC, to deliver our telehealth offerings to its patients in the U.S. We entered into a management services agreement with LifeMD PC pursuant to which we provide them with billing, scheduling and a wide range of other services, and they pay us for those services. In addition, our platform enables consumers to opt in to use our prescription offering and/or fill their prescriptions through a third-party mail-order pharmacy. These relationships are subject to various state laws, which are intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment and prohibiting the sharing of professional services income with non-professional or business interests. These laws vary from state to state and are subject to broad interpretation and enforcement by state regulators. 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.

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. 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.

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 pride ourselves on hiring people who not only have the skills required to perform their respective roles, but also share in the Company’s mission.

To attract and retain key personnel, we use various measures, including an equity incentive program for key executive officers and other employees. We also provide comprehensive benefits, including health insurance for employees and dependents, 401(k) match for employees and unlimited paid time off for exempt employees. In managing our business, we strive to develop and implement policies and programs that support our business goals, maintain competitiveness, promote shared fiscal responsibility among the Company and our employees, strategically align talent within our organization and reward performance, while also managing the costs of such policies and programs. Our employees are supported with training to ensure compliance with our policies. We adhere to our business code of conduct, which sets forth a commitment to our stakeholders, including our employees, to operate with integrity and mutual respect.

Corporate History

LifeMD, Inc. was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc. We changed our name to Conversion Labs, Inc. on June 22, 2018 and then subsequently, on February 19, 2021, we changed our name to LifeMD, Inc. Further, in connection with changing our name, we changed our trading symbol to LFMD.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports and amendments to these reports that we file with or furnish to the SEC at their website, www.sec.gov, are also available free of charge at our website, https://ir.lifemd.com/, as soon as reasonably practicable after we electronically file these reports with, or furnish these reports to the SEC. 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.

Business Overview and Strategy

We are a direct-to-patient telehealth technology company that provides a smarter, cost-effective, and convenient way for Americans to access healthcare. We believe the traditional model of visiting a doctor’s office, visiting a local pharmacy, and returning to see a doctor for follow up care or prescription refills is inefficient, costly, and slow, and discourages many individuals from seeking much needed medical care. The U.S. healthcare system is undergoing a paradigm shift, thanks to new technologies and the emergence of telehealth. Direct-to-patient telehealth companies, like LifeMD, Inc., are leading the shift by connecting consumers digitally to licensed healthcare professionals for care across various needs, such as virtual primary care, men’s sexual health, dermatology, and others.

Our telehealth platform provides patients with access to licensed providers for diagnoses, virtual care, and prescription medications, often delivered on a recurring basis. In addition to our telehealth offerings, we sell complementary nutritional supplements and over-the-counter (“OTC”) products. Many of our products are available on a subscription basis, where patients can subscribe to receive regular shipments of prescribed medications or products. This creates convenience and discounted pricing opportunities for patients and recurring revenue streams for us. Our customer acquisition strategy combines strategic brand-building 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).

Since inception, we have helped more than 490,000 customers and patients, providing them greater access to high-quality, convenient, and affordable care in all 50 states. Our telehealth revenue increased 123% for the year ended December 31, 2021 as compared to December 31, 2020. Total revenue from recurring subscriptions is approximately 90%. In addition to our telehealth business, we own 85.6% of WorkSimpli, which operates PDFSimpli, a rapidly growing software-as-a-service (“SaaS”) platform for converting, signing, editing, and sharing PDF documents. This business has seen 267% year over year revenue growth, with recurring revenue of 98%.

We believe that telehealth platforms like ours will fundamentally shift how individuals perceive and access healthcare in the United States, by necessity and by preference. With the average wait time to see a physician in the United States now greater than 29 days, according to a 2018 Merritt Hawkins Survey, and the United States’ projected significant shortfall of licensed physicians by 2030, we believe the U.S. healthcare infrastructure must change to accommodate patients. Timely and convenient access to healthcare and prescription medications is a critical factor in improving quality of care and patient outcomes. Our mission is to radically change healthcare with our portfolio of direct-to-patient telehealth brands that encompass on-demand medical treatment, online pharmacy, and OTC products. We want our brands to be top-of-mind for consumers considering telehealth.

In the United States, healthcare spending is currently $4.0 trillion and is expected to grow to $6.2 trillion by 2028, according to the Centers for Medicare and Medicaid Services. Physician services and prescription medications account for approximately 30% of healthcare spending, or over $1 trillion annually, and we believe that we have the infrastructure, medical expertise, and technical know-how necessary to help shift a substantial portion of this market to an online, virtual format. We believe that we are well positioned to capitalize on this large-scale shift in healthcare.

We believe that an amazing customer experience, incredible healthcare, and new customer acquisition form the heart of our business. As is exemplified with our first brand, Shapiro MD, we have built a full line of proprietary and patented OTC products for male and female hair loss, U.S. Food and Drug Administration (“FDA”) approved OTC minoxidil, and now a telehealth platform offering that gives consumers access to virtual medical treatment and, when appropriate, a full line of oral and topical prescription medications for hair loss. Our men’s brand, RexMD, currently offers access to provider-based treatment through telehealth for men’s health conditions, such as sexual health and hair loss. RexMD continues to expand its treatment offerings to address additional chronic indications present in men’s health. We have built a platform that allows us to efficiently launch telehealth brands and offerings wherever we identify a market need. Our platform is supported by a driven team of digital marketing and branding experts, data analysts, designers, and engineers focused on building enduring brands.

Our Brand Portfolio and Virtual Primary Care Platform

We have built a strategic portfolio of wholly-owned telehealth platform brands supported by an affiliated, 50-state physician network and an integrated national network of third party pharmacies that address large unmet needs in men’s health, hair loss, virtual primary care, and dermatology. We continue to experience aggressive growth across our brands.

Our process across each brand and condition we treat is to guide consumers through a medical intake process and product selection, after which a licensed U.S. physician conducts a virtual consultation and, if appropriate, prescribes prescription medications and/or recommends OTC products. Prescription medications and OTC products are filled by pharmacy fulfillment partners and 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 490,000 individuals having purchased our products and services to date.

Hair Loss: ShapiroMD

Launched in 2017, ShapiroMD is a telehealth platform brand that offers access to virtual medical treatment, prescription medications, patented-doctor formulated OTC products, an FDA approved medical device for male and female hair loss, and female specific topical compounded medications for hair loss through our telehealth platform. ShapiroMD has emerged as a leading destination for hair loss treatment across the United States and has served more than 230,000 customers and patients since inception with a 4.9-star Trustpilot rating.

Men’s Health: RexMD

Launched in 2019, RexMD is a men’s telehealth platform brand that offers access to virtual medical treatment for a variety of men’s health needs. After treatment from a 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. Our vision for RexMD is to become a leading telehealth destination for men. RexMD has emerged as a leading men’s telehealth platform across the United States and has served more than 250,000 customers and patients since inception with a 4.6-star Trustpilot rating.

Variable Interest Entity: LifeMD Primary Care

Beta launched in the fourth quarter of 2021, LifeMD PC is a personalized, subscription-based virtual primary care platform. The LifeMD PC clinic provides patients in all 50 states with 24/7 access to a high-quality provider for their primary care, urgent care and chronic care needs. LifeMD PC offers a mobile first platform that incorporates virtual consultations and treatment, prescription medications, diagnostics, and imaging. LifeMD PC capabilities are supported by robust partnerships as further discussed below. No revenue was recorded related to the LifeMD PC during the year ended December 31, 2021.

Dermatology: NavaMD

Launched in the first quarter of 2021, 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. In addition to the brand’s telehealth offerings, NavaMD’s proprietary products leverage intellectual property and proprietary formulations licensed from Restorsea, a leading medical grade skincare technology platform.

Restorsea’s clinically proven skincare technology platform is the result of more than $50 million invested in R&D and intellectual property development, and Restorsea has received at least 35 patents along with broad industry and academic acclaim, with its breakthrough clinical results having been published in the peer-reviewed Journal of Drugs in Dermatology and Journal of Clinical and Aesthetic Dermatology. NavaMD is one of the first direct-to-patient brands to offer this advanced skincare technology.

Allergy, Asthma & Immunology: Cleared

In January 2022, the Company acquired Cleared, a telehealth brand that provides personalized treatments for allergy, asthma, and immunology. Its 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 medical professionals and providers in all 50 states, a growing pipeline of pharmaceutical partners, and treatments and tests that cost up to 50 percent less than the brand-name competition. The offerings include free consultations and ongoing care from U.S.-licensed allergists and nurses.

Majority Owned Subsidiary: WorkSimpli

WorkSimpli operates PDFSimpli, an online SaaS 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. 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 increased its ownership of WorkSimpli to 85.6%.

WorkSimpli was ranked in the top 4,160 websites globally, in which it was also ranked in the top 563 for specific countries with more than 19 million registrants globally. Since its launch, WorkSimpli has converted or edited over 14 terabytes of documents for customers from the legal, financial, real-estate and academic sectors. WorkSimpli had over 102,000 active subscriptions as of December 31, 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, and allergy and asthma. No single customer accounted for more than 10% of net sales for the years ended December 31, 2021 and 2020.

Industry Overview and Market Opportunity

We are focused on revolutionizing the way that patients access healthcare to positively impact their long-term health and satisfaction. In the United States, healthcare spending is currently $4.0 trillion and is expected to grow to $6.2 trillion by 2028, according to the Centers for Medicare & Medicaid Services. Despite this growing spend, the existing healthcare system is fragmented and inefficient, lacks price transparency, and is generally unfriendly to the consumer. In addition, a myriad of issues related to insurance coverage and other cost barriers stand in the way of many Americans getting the treatment they need in a timely and efficient manner. Patients are at the mercy of a multitude of gatekeepers at every level – with the service provider, in acquiring medication, and in the insurance reimbursement process – leading to confusion and frustration for consumers. A 2018 Journal of Patient Experience paper found that among 9,166 patients surveyed through the national Medical Expenditure Panel Survey Database, only 28% of respondents rated their satisfaction with their healthcare experience as “optimal;” 61% of respondents rated their satisfaction as “average;” and 11% said “poor.” A 2021 PwC Health Research Institute paper found that 75% of consumers would like a wellness visit or physical to be able to happen at home. Additionally, a 2021 SPH Analytics’ ongoing consumer telehealth survey found that 70% of patients prefer virtual visits over an in-person appointment to save time.

We believe that telehealth platforms like LifeMD will fundamentally shift how patients think about and access healthcare in the U.S. – by necessity and by preference. With the average wait time to see a physician in the U.S. now greater than 29 days according to a 2018 Merritt Hawkins Survey and the U.S. projected to have a significant shortfall of licensed physicians by 2030, the U.S. healthcare infrastructure must change to accommodate patients. At the same time, consumers are ready for better options.

We believe we are in the early stages of the digitization of healthcare; additionally, telehealth’s adoption has been rapidly expedited by the emergence of the global coronavirus pandemic. Doctors across the U.S. were forced to close offices and adopt telehealth in short order as the novel coronavirus took hold of the U.S. in 2020. Telehealth, and, more specifically, direct-to-consumer telehealth, has since cemented itself as a mainstream way to access healthcare. A December 2021 report from the U.S. Department of Health and Human Services found that 25.6 million Medicare primary care visits were provided via telehealth in 2020 compared to 400,000 in 2019, an increase of 63 times the number of Medicare primary care visits provided via telehealth in 2019.

Telehealth’s novel approach to offering convenient healthcare helps bridge many of the inefficiencies that plague the U.S. healthcare system today. Telehealth enables more efficient allocation and utilization of existing clinical resources that might otherwise go unused. With an aging population requiring more complex care and a younger generation that is accustomed to digital technology, telehealth offers an efficient way to leverage finite resources. A Journal of General Internal Medicine article from 2016 evaluated patient satisfaction with U.S. telehealth services in comparison to in-office visits: between 94% and 99% of survey respondents reported being “very satisfied” with all telehealth attributes, and over 70% of respondents would use telehealth again and would recommend telehealth to someone else.

The shift to Direct-to-Patient telehealth is in its nascent stage, and we believe we have developed the internal infrastructure, medical expertise, and industry know-how to capitalize on the opportunity to penetrate this large, open, and growing market.

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 173% since 2019 and growth accelerating to 149% in 2021 as compared to 2020. We believe this validates our significant long-term investments in developing our human capital, technology, brand-awareness, operations, and customer acquisition. Our continued investment in, and expansion of, our core brands and their offerings will further create opportunities to acquire new customers and increase the lifetime value of our customers.

We continue to invest heavily in the experience our customers have with our products and their overall satisfaction with our products and our company, and we expect customer repurchase rates and overall customer retention to grow further as we allocate more resources and focus to this component of the business. 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 pursue the following strategies to help us achieve this growth.

Continue to Grow Our Market Share in Indications We Already Treat

There remains a large and unaddressed market within primary care, hair loss, erectile dysfunction, men’s health, dermatology, and in allergies and asthma into which we intend to continue to aggressively scale in 2022 and beyond. We plan to continue to build a robust operational infrastructure to enable us to not only provide better patient care, but drive better unit economics for our business.

Expand Into New Indications

We intend to leverage our infrastructure to launch new offerings within and around our existing brands. A multitude of opportunities exist to expand our product offerings under our current brand portfolio, and we plan to deploy new products and services in 2022 and beyond that will meet the needs of our existing customer base while enabling us to attract new customer patients across a broader range of indications.

Pursue Opportunities for Joint Ventures, Partnerships, and Inorganic Growth Initiatives

We believe that our business model – direct-to-patient telehealth – will be disruptive to the world of traditional healthcare services, pharmaceutical products, medical devices, and diagnostics. Our proven ability to launch and scale telehealth offerings in a capital-efficient manner will likely be valuable to organizations in the traditional healthcare market segment seeking to take advantage of this new delivery model. We believe we are well-positioned to form joint ventures and additional partnerships with existing traditional healthcare companies, and we are actively exploring avenues and partners for new ventures.

Drive Continued Operational Excellence

We are committed to improving productivity and profitability through a number of operational initiatives designed to grow our revenue and expand our margins. Overall, we expect that business profitability will be driven by continued net revenue growth in conjunction with gross margin improvements, continued marketing efficiencies, and generating operating leverage. We believe there is opportunity for continued improvement in gross margins, marketing efficiencies, and operating leverage through these key initiatives:

Optimize Price

Through investment in human capital and technology, we intend to continue building a data-based understanding of price elasticity dynamics, promotional strategies and other price management tools to drive optimized pricing for us and our partners. Based on the strength of our brands and the value proposition of our products, we believe we have pricing power in the market that will only increase through economies of scale.

Reduce Product Returns

We continue to evolve our return policies and believe we have the opportunity to further reduce customer return rates. We have identified several opportunities that span policy change, process improvement, and consumer education to reduce return rates and increase overall customer satisfaction.

Invest in Supply Chain

We plan to continue to make significant investments in our supply chain to meet the requirements of our growing business. Our supply chain is instrumental to both supporting growth and improving business performance. While we currently partner with several third-party manufacturing and logistics companies, physician networks, and prescription medication fulfillment companies, we are evaluating opportunities to further build our own internal capabilities in these areas.

We anticipate that growth of our products and services will span entirely new markets in healthcare, including:

● Services and Content: We plan to offer services that provide customers the opportunity to interact with telehealth in new ways, including digital apps, counseling and family consultations.

● Use Cases: We believe we can broaden the range of use cases addressed by market need, including the treatment of new conditions with the launch of new brands and the expansion of existing brand offerings to covering complementary clinical indications.

Competition

The markets we sell into are large and highly competitive. Numerous online brands compete with us for customers throughout the U.S. and internationally in the hair loss, immune support, men’s health, dermatology, primary care, allergy, and document management verticals. We also compete with traditional mass merchandisers, drug store chains, and independent pharmacies.

Our competitors include, among others, Teledoc, Ro, Thirty Madison, Inc., Icebreaker Health, Inc., Hims & Hers Health, Inc., and GoodRx, Inc. Many of our competitors are substantially larger and more experienced than us, have longer operating histories, higher visibility and brand recognition, and have materially greater financial and other resources than us. We may not be able to successfully compete with them in the marketplace.

Competitive Strengths

We take a patient-centric approach to telehealth, with a strong emphasis on the quality-of-care we deliver to our patients. 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.

Our key competitive strengths include:

High-Quality Care

Our telehealth platform is designed to give consumers 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 patients need. We are committed to exceptional care and an exceptional customer service experience for patients and customers.

Direct-To-Consumer Know-How

We actively seek to acquire, license, and develop brands and products with large, untapped e-commerce potential and proven business models. We acquire our patients in an efficient manner through an omni-channel marketing approach that includes digital advertising through platforms like Facebook and Google, social media platforms, as well as more traditional media channels like television and radio. Since our inception in 2015, we have invested heavily in recruiting experts in direct response marketing and customer acquisition.

Proprietary and Scalable Technology Platform

Our in-house telehealth infrastructure is continually being improved as we scale, and this flexible infrastructure can be repurposed for any variety of existing or future telehealth brands. This flexible platform allows for rapid development and scale of new telehealth brands as we identify attractive specialty verticals. Additional key capabilities of this platform include proprietary staffing algorithms for case-load balancing, full CRM functionality, integration with an affiliated 50 state physician network, national third-party pharmacy network, fully integrated electronic medical record system, synchronous and asynchronous communications, and more.

● Patient Care Center: We launched a dedicated patient care center in November 2020 staffed by LifeMD employees, which includes approximately 135 employees and is led by an experienced operations and customer experience team. We believe the hands-on capabilities of the patient care center will continue to drive high levels of patient satisfaction across our telehealth platforms.

● Drive Marketing Efficiencies: Marketing investments are the result of a disciplined process and are measured against both growth and profitability targets. As we continue to grow and scale, we believe we will continue to improve the efficiency of our marketing investments and improve our return on advertising spend. As our budgets and pool of talent continues to grow, we believe this will result in cheaper media rates and improvements to our proprietary models that inform the strategic decisions that drive product offerings, customer acquisition, retention, and brand awareness.

Management Team

Our management team has deep experience in healthcare services, technology, finance, and direct-to-consumer and traditional advertising such that we believe we are uniquely positioned to expand our patient-base while providing quality services and product offerings at efficient customer-acquisition costs.

Intellectual Property

We regard our trademarks, copyrights, domain names, trade dress, trade secrets, proprietary technologies, and similar intellectual property as important to our success, and we rely on trademark and copyright law, trade-secret protection and confidentiality, patents, and/or license agreements with our employees, customers, partners and others to protect our proprietary rights. We have licensed in the past, and expect that we may license in the future, certain proprietary rights, technologies or copyrighted materials from third-parties, and we rely on those third-parties to defend their proprietary rights, copyrights, and technologies.

From time-to-time, we register our principal brand names in the United States and certain foreign countries. Our material trademarks include ShapiroMD Hair Growth Experts® and Cleared®. Trademark applications have been filed and are being prosecuted for RexMD, LifeMD and NavaMD. The steps we take to protect our proprietary rights in our brand names may not be adequate to prevent the misappropriation of our brand names in the United States or abroad. Existing trademark laws afford only limited practical protection for our product lines. 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 United States.

We rely primarily on proprietary trade secrets and extensive experience to operate our online direct response marketing platform. 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. In order to protect the confidentiality of our intellectual property, including trade secrets, know-how and other proprietary technical and business information, it is our policy to limit access to such information to those who require access in order to perform their functions and to enter into agreements with employees, consultants, and vendors to contractually protect such information.

Manufacturing and Supply Chain

We use third parties to manufacture and package our OTC products according to the formulas and packaging guidelines we dictate. In order to minimize costs, we may elect to purchase raw or bulk materials directly from our suppliers and have them shipped to our manufacturers so that we may incur only tableting, encapsulating, and/or packaging costs and avoid the additional costs associated with purchasing the finished product.

Government and Environmental Regulation

FDA and Federal Trade Commission (“FTC”)

Our business is heavily regulated by the FDA and the FTC. The FDA enforces the Federal Food, Drug and Cosmetic Act (the “FDCA”) and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements are regulated as a category of food, not as drugs. We are not required to obtain FDA pre-market approval to sell our products in the United States under current laws. Our hair loss products are regulated as cosmetics under the FDCA.

The FDA imposes Good Manufacturing Practice (“GMP”) guidelines to ensure that dietary supplements are produced in a quality manner, do not contain contaminants or impurities, and are accurately labeled. GMP guidelines include requirements for establishing quality control procedures, designing, and constructing manufacturing plants, testing ingredients, and finished products and record keeping and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, 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. The FTC regulates the advertising of dietary supplements, cosmetics and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In addition to the foregoing, our operations and those of our partners are subject to federal, state and local government laws and regulations, including those relating to the practice of medicine, telehealth and the prescribing of prescription medications. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

Data Privacy and Security Laws

The data we collect and process is an integral part of our products and services, allowing us to ensure our prices are accurate and relevant, and reach and advertise to consumers with savings information. We collect and may use personal information to help run our business (including for analytical and marketing purposes) and to communicate and otherwise reach our consumers. In some instances, we may use third party service providers to assist us in the above.

We endeavor to treat our consumers’ data with respect and maintain consumer trust. We provide consumers options designed to allow them to control the use and disclosure of their data, such as allowing consumers to opt out of any marketing requests, opt out of the use of marketing cookies, pixels and technologies on our platform, and request deletion of their data.

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. 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, or 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”). 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. 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, a new privacy law, the California Privacy Rights Act (“CPRA”), was passed on November 3, 2020 and will enter into force on January 1, 2023, with a look-back to January 2022. The CPRA will significantly modify the CCPA, potentially resulting in further uncertainty.

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. 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. Furthermore, according to the FTC violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act.

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. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured protected health information, a complaint about privacy practices or an audit by U.S. 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.

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. These laws include, but are not limited to, federal and state anti-kickback, false claims, and other healthcare fraud and abuse laws.

The U.S. federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. 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. The majority of states also have anti-kickback laws, which establish similar prohibitions, and in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers and self-pay patients.

The federal false claims, including the civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false, fictitious, or fraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or knowingly making a false statement to avoid, decrease, or conceal an obligation to pay money to the U.S. federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Moreover, a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

In addition, the civil monetary penalties statute, subject to certain exceptions, prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program.

The federal Health Insurance Portability and Accountability Act of 1996 created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. 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.

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. Similar sanctions and penalties, as well as imprisonment, also can be imposed upon executive officers and employees of such companies.

State Licensing Requirements

Certain states have enacted laws regulating companies that offer and market discount medical plans, including prescription drug plans, subscription membership programs, or discount cards, such as our prescription offering. These state laws are intended to protect consumers from fraudulent, unfair, or deceptive marketing, sales and enrollment practices by such plans. It is possible that other states may enact new requirements or interpret existing requirements to include our programs. Failure to obtain the required licenses, certifications or registrations to offer and market these subscription discount programs may result in civil penalties, receipt of cease-and-desist orders, or a restructuring of our operations.

State Corporate Practice of Medicine and Fee Splitting Laws

With respect to our telehealth platform, we contract with our physician-owned professional corporation, LifeMD PC, to deliver our telehealth offerings to its patients in the United States. We entered into a management services agreement with LifeMD PC pursuant to which we provide them with billing, scheduling and a wide range of other services, and they pay us for those services. In addition, our platform enables consumers to opt in to use our prescription offering and/or fill their prescriptions through a third-party mail-order pharmacy. These relationships are subject to various state laws, which are intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment and prohibiting the sharing of professional services income with non-professional or business interests. These laws vary from state to state and are subject to broad interpretation and enforcement by state regulators. 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.

Human Capital

As of December 31, 2021, we employed 232 employees, of which 196 were full-time, 2 were part-time, and 34 were temporary employees. Of our total employees, 135 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. 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. We pride ourselves on hiring people who not only have the skills required to perform their respective roles, but also share in the Company’s mission.

To attract and retain key personnel, we use various measures, including an equity incentive program for key executive officers and other employees. We also provide comprehensive benefits, including health insurance for employees and dependents, 401(k) match for employees and unlimited paid time off for exempt employees. In managing our business, we strive to develop and implement policies and programs that support our business goals, maintain competitiveness, promote shared fiscal responsibility among the Company and our employees, strategically align talent within our organization and reward performance, while also managing the costs of such policies and programs. Our employees are supported with training to ensure compliance with our policies. We adhere to our business code of conduct, which sets forth a commitment to our stakeholders, including our employees, to operate with integrity and mutual respect.

COVID-19 Response

On March 11, 2020, the United States declared a national emergency in response to the COVID-19 pandemic. Subsequently, states enacted stay-at-home orders to slow the spread of the virus that causes COVID-19, and reduce the burden on the U.S. health care system. In response to COVID-19, our senior leadership assessed the impact across our entire team. Our objective was to ensure the health, safety, and well-being of our employees, customers, and the communities we service. Our response to COVID-19 and financial performance in 2021 was a direct result of the dedication and strength of our team members and our strong culture.

Corporate History

LifeMD, Inc. was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc. We changed our name to Conversion Labs, Inc. on June 22, 2018 and then subsequently, on February 19, 2021, we changed our name to LifeMD, Inc. Further, in connection with changing our name, we changed our trading symbol to LFMD.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports and amendments to these reports that we file with or furnish to the SEC at their website, www.sec.gov, are also available free of charge at our website, https://ir.lifemd.com/, as soon as reasonably practicable after we electronically file these reports with, or furnish these reports to the SEC. 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.

Business Overview and Strategy

LifeMD is a direct-to-patient telehealth company that provides a smarter, cost-effective and convenient way of accessing healthcare. We believe the traditional model of visiting a doctor’s office, receiving a physical prescription, visiting a local pharmacy, and returning to see a doctor for follow up care or prescription refills is inefficient, costly to patients, and discourages many patients from seeking much needed medical care. The U.S. healthcare system is undergoing a paradigm shift, thanks to new technologies and the emergence of direct-to-patient healthcare. Direct-to-patient telemedicine companies, like our company, connect consumers to licensed healthcare professionals for care across numerous indications, including concierge care, men’s sexual health and dermatology, among others.

Our telemedicine platform helps patients access licensed providers for diagnoses, virtual care, and prescription medications, often delivered on a recurring basis. In addition to our telemedicine offerings, we sell nutritional supplements and other over-the-counter products. Many of our products are available on a subscription or membership basis, where a patient can subscribe to receive regular shipments of prescribed medications or products. This creates convenience and often discounted pricing opportunities for patients and recurring revenue streams for us. Our patient acquisition strategy combines strategic brand-building media placements and direct response advertising methods across highly scalable marketing channels (i.e. national TV, streaming TV, streaming audio, podcast, print, magazines, online search, social media, and digital).

Since inception, we have helped more than 300,000 customers and patients, providing them greater access to high-quality, convenient, and affordable care in all 50 states. Our telemedicine revenue increased 208% in 2020 vs. the prior year. Total revenue from recurring subscriptions is approximately 80%. In addition to our telehealth business, we own 85.6% of PDFSimpli, a rapidly growing SaaS platform for converting, signing, editing and sharing PDF documents. This business has also seen 165% year over year growth, with recurring revenue of 100%.

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Many people can relate to the hassle and inconvenience of seeking medical care. We believe that telemedicine platforms like ours will fundamentally shift how patients access healthcare in the U.S., by necessity and by preference. With the average wait time to see a physician in the U.S. now at greater than 29 days, according to a 2018 Merritt Hawkins Survey, and the U.S. projected to have a significant shortfall of licensed physicians by 2030, we believe the U.S. healthcare infrastructure must change to accommodate patients. Timely and convenient access to healthcare and prescription medications is a critical factor in improving quality of care and patient outcomes. Our mission is to radically change healthcare with our portfolio of direct-to-patient telehealth brands that encompass on-demand medical treatment, online pharmacy and over-the-counter products. We want our brands to be top-of-mind for consumers considering telehealth.

In the United States, healthcare spending is currently $4.0 trillion and is expected to grow to $6.2 trillion by 2028, according to the Centers for Medicare and Medicaid Services. Physician services and prescription medications account for approximately 30% of healthcare spending, or over $1 trillion annually, and we believe that we have the infrastructure, medical expertise, and technical know-how to shift a substantial portion of this market to an online, virtual format. Our platforms are fast and convenient, and we believe the adoption of our services has increased rapidly because of these features, including lower out-of-pocket costs for patients and the satisfaction of a simple healthcare process. We believe the opportunities are immense and that we are well positioned to capitalize on these large scale economic shifts in healthcare.

We believe that brand innovation, customer acquisition and service excellence form the heart of our business. As is exemplified with our first brand, Shapiro MD, we have built a full line of proprietary OTC products for male and female hair loss, FDA approved OTC minoxidil, an FDA-cleared medical device, and now a personalized telemedicine offering that gives consumers access to virtual medical treatment and, when appropriate, a full line of oral and topical prescription medications for hair loss. Our men’s telemedicine brand, Rex MD, currently offers treatment for erectile dysfunction, and will soon offer treatments for additional indications present in men’s health. We have built a platform that allows us to efficiently launch telehealth and wellness product lines wherever we determine there is a market need. Our platform is supported by a driven team of digital marketing and branding experts, data analysts, designers, and engineers focused on building enduring brands.

Our Brand Portfolio

We have built a strategic portfolio of wholly-owned telehealth brands that address large unmet needs in men’s health, hair loss and dermatology. We also are preparing to launch a concierge care offering under the LifeMD brand. We continue to scale our offerings in a calculated manner, ensuring that each brand or indication we launch will enhance current and future patients’ experiences with our platform.

Our process across each brand and condition that we treat is to guide the patient through a medical intake process and product selection, after which a licensed U.S. physician within our network conducts a virtual consultation and, if appropriate, prescribes necessary prescription medications and/or recommends over-the-counter products. Prescription and over the counter products are filled by pharmacy fulfillment partners and 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 300,000 individuals having purchased our products and services to date.

Hair Loss: ShapiroMD

Launched in 2017, ShapiroMD offers virtual medical treatment, prescription medications, patented over-the-counter products, and an FDA approved medical device for male and female hair loss. ShapiroMD has emerged as a leading destination for hair loss treatment across the U.S. and has had more than 200,000 customers and patients since inception. In Q1 2021, ShapiroMD greatly enhanced its telemedicine offering for female hair loss with the addition of topical compounded medications to its product portfolio.

On February 21, 2020, ConsumersAdvocate.org ranked ShapiroMD as the third best hair loss treatment provider in the United States, ahead of other household brands such as Bosley, Keeps and Rogaine.

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Men’s Health: RexMD

Launched in 2019, RexMD is a men’s telehealth brand offering virtual medical treatment from licensed providers for a variety of Men’s health needs. After consultation with a physician, if appropriate, we dispense and ship prescription medications and over-the-counter products directly to patients. We initially launched in the erectile dysfunction treatment market. We intend to expand beyond the Sexual health market and launch additional treatment areas in Men’s health in the first half of 2021. Our vision for RexMD is to become a leading telehealth destination for men.

We intend to launch additional indications for many other Men’s health conditions in the first half of 2021. Our vision for RexMD is to become a leading telehealth destination for Men’s health.

Launching in the first quarter of 2021, Nava MD is a female-oriented tele-dermatology and skincare brand that will offer virtual medical treatment from dermatologists and other providers, and, if appropriate, prescription oral and compounded topical medications to treat many common dermatological conditions. In addition to the brand’s telemedicine offerings, NavaMD’s proprietary products leverage intellectual property and proprietary formulations licenseed from Restorsea, a leading medical grade skincare technology platform.

Restoresea’s clinically proven skincare technology platform is the result of more than $50 million invested in R&D and intellectual property development and has received 35 patents along with broad industry and academic acclaim, with its breakthrough clinical results having been published in the peer-reviewed Journal of Drugs in Dermatology and Journal of Clinical and Aesthetic Dermatology. Nava MD will be one the first direct-to-consumer product lines to offer this advanced skincare technology. Nava MD will be positioned as an online skincare and telehealth brand that will offer tele-dermatology services to patients in 47 states.

Immune Health: iNR Wellness MD

Launched in 2018, iNR Wellness MD is a supplement for immune and digestive support. The iNR Wellness product line is a daily nutritional supplement that contains yeast, oat, and mushroom beta glucans.

Majority Owned Subsidiary: PDFSimpli

PDFSimpli is an online software-as-a-service (SAAS) platform that allows users to create, edit, convert, sign and share PDF documents. PDFSimpli was acquired through the purchase of 51% of the membership interests of LegalSimpli Software, LLC, a Puerto Rico limited liability company, which operates a marketing-driven software solutions business. As of December 30, 2020, PDFSimpli was ranked in the top 4,339 websites globally, in which it was also ranked in the top 1,200 for specific countries with more than 9.5 million registrants globally. Since its launch, PDFSimpli has converted or edited over 9 terabytes of documents for customers from the legal, financial, real-estate and academic sectors. PDFSimpli had over 62,600 active subscriptions as of December 30, 2020.

Customers

Our customer base includes men and women seeking hair loss treatment and men’s health issues. In 2021, we expect to broaden this customer base to also include skincare and dermatology products for men and women as well as concierge medicine services. No single customer accounted for more than 10% of net sales for the years ended December 31, 2020 and 2019.

Industry Overview and Market Opportunity

We are focused on revolutionizing the way that patients access healthcare to positively impact their long-term health and satisfaction. In the United States, healthcare spending is currently $4.0 trillion and is expected to grow to $6.2 trillion by 2028, according to the Centers for Medicare & Medicaid Services. Despite this growing spend, the existing healthcare system is fragmented and inefficient, lacks price transparency, and is generally unfriendly to the consumer. In addition, a myriad of issues related to insurance coverage and other cost barriers stand in the way of many Americans getting the treatment they need in a timely and efficient manner. Patients are at the mercy of a multitude of gatekeepers at every level – with the service provider, in acquiring medication, and in the insurance reimbursement process – leading to confusion and frustration for consumers. A 2018 Journal of Patient Experience paper found that among 9,166 patients surveyed through the national Medical Expenditure Panel Survey Database, only 28% of respondents rated their satisfaction with their healthcare experience as “optimal;” 61% of respondents rated their satisfaction as “average;” and 11% said “poor.”

We believe that telehealth platforms like LifeMD will fundamentally shift how patients think about and access healthcare in the U.S. – by necessity and by preference. With the average wait time to see a physician in the U.S. now >29 days according to a 2018 Merritt Hawkins Survey and the U.S. projected to have a significant shortfall of licensed physicians by 2030, the U.S. healthcare infrastructure must change to accommodate patients. At the same time, consumers are ready for better options.

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We believe we are in the early stages of the digitization of healthcare; additionally, telehealth’s adoption has been rapidly expedited by the emergence of the global coronavirus pandemic. Doctors across the U.S. were forced to close offices and adopt telehealth in short order as the novel coronavirus took hold of the U.S. in 2020. Telehealth, and, more specifically, direct-to-consumer telehealth, has since cemented itself as a mainstream way to access healthcare. A July 2020 report from the U.S. Department of Health and Human Services found that 43.5% of Medicare primary care visits were provided via telehealth in April 2020, an increase from less than 0.5% in February of that year prior to the onset of regional stay-at-home restrictions.

Telehealth’s novel approach to offering convenient healthcare helps bridge many of the inefficiencies that plague the U.S. healthcare system today. Telehealth enables more efficient allocation and utilization of existing clinical resources that might otherwise go unused. With an aging population requiring more complex care and a younger generation that is accustomed to digital technology, telehealth offers an efficient way to leverage finite resources. A Journal of General Internal Medicine article from 2016 evaluated patient satisfaction with U.S. telehealth services in comparison to in-office visits: between 94% and 99% of survey respondents reported being “very satisfied” with all telehealth attributes, and over 70% of respondents would use telehealth again and would recommend telehealth to someone else.

The shift to Direct-to-Patient telehealth is in its nascent stage, and we believe we have developed the internal infrastructure, medical expertise, and industry know-how to capitalize on the opportunity to penetrate this large, open, and growing market. Physician services and prescription medications account for approximately 30% of healthcare spending, over $1 trillion annually, and according to a market study by Alliance Bernstein in 2018, 70% of the retail prescription drug market will shift online within the next 5 years, a $200 billion economic shift. The broader global telemedicine market is projected to grow at a 19.3% CAGR through 2026.

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 100% since 2018 and growth accelerating to 208% in 2020 as compared to 2019. We believe this validates our significant long-term investments in developing our human capital, technology, brand-awareness, operations and customer acquisition. Our continued investment in, and expansion of our core brands and their offerings will further increase opportunities to acquire new customers and increase the lifetime value of our customers.

We continue to invest heavily in the experience our customers have with our products and their overall satisfaction with our products and our company, and we expect customer repurchase rates and overall customer retention to grow further as we allocate more resources and focus to this component of the business. 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 pursue the following strategies to help us achieve this growth.

Continue to Grow Our Market Share in Indications We Already Treat

There remains a large and unaddressed market within hair-loss, erectile dysfunction, Men’s health, and dermatology into which we intend to aggressively scale in 2021 and beyond. We plan to continue to build a robust operational infrastructure to enable us to not only provide better patient care but drive better unit economics for our business.

Launch New Treatments

We intend to leverage our existing infrastructure to launch new products within and around our existing brands. In the first quarter 2021, we are launching our dermatology and skincare brand, NavaMD. Additionally, a multitude of opportunities exist to expand our product offerings under our current brand portfolio, and we plan to deploy new products and services in 2021 and beyond that will meet the needs of our existing customer base. In men’s health, for example, we intend to address ED-adjacent indications including common sexually transmitted infections (STI).

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Launch and Scale LifeMD Concierge Care

We intend to launch LifeMD, our cash-pay subscription-based concierge care service, in the first half of 2021. We believe that LifeMD will make virtual and on-demand concierge healthcare available at a price that is affordable to almost anyone. We intend to offer our LifeMD concierge service to our existing patient population, new patients that we acquire for condition-specific treatment, and plan to run national and global direct-response marketing campaigns to rapidly increase awareness of the LifeMD offering.

Pursue Opportunities for Joint Ventures, Partnerships, and Inorganic Growth Initiatives

We believe that our business model – direct-to-patient telemedicine – will be disruptive to the world of traditional healthcare services, pharmaceutical products, medical devices, and diagnostics. Our proven ability to launch and scale telemedicine offerings in a capital-efficient manner will likely be valuable to organizations in the traditional healthcare market segment seeking to take advantage of this new delivery model. We believe we are well-positioned to form joint ventures and partnerships with existing traditional healthcare companies, and we are currently exploring avenues and partners for new ventures.

Drive Continued Operational Excellence

We are committed to improving productivity and profitability through a number of operational initiatives designed to grow our revenue and expand our margins. Overall, we expect that business profitability will be driven by continued net revenue growth in conjunction with gross margin improvements, continued marketing efficiencies, and generating operating leverage. We believe there is opportunity for continued improvement in gross margins, marketing efficiencies, and operating leverage through these key initiatives:

Optimize Price

Through investment in human capital and technology, we intend to continue building a data-based understanding of price elasticity dynamics, promotional strategies and other price management tools to drive optimized pricing for us and our partners. Based on the strength of our brands and the value proposition of our products, we believe we have pricing power in the market that will only increase through economies of scale.

Reduce Product Returns

We continue to evolve our return policies and believe we have the opportunity to reduce customer return rates. We have identified several opportunities that span policy change, process improvement and consumer education to reduce return rates and increase overall customer satisfaction.

Invest in Supply Chain

We plan to continue to make significant investments in our supply chain to meet the requirements of our growing business. Our supply chain is instrumental to both supporting growth and improving business performance. While we currently partner with a number of third-party manufacturing and logistics companies, physician networks, and prescription medication fulfillment companies, we are evaluating opportunities to build our own internal capabilities in these areas.

We anticipate that growth of our products and services will span entirely new markets in healthcare, including:

● Services and Content: We plan to offer services that provide customers the opportunity to interact with telemedicine in new ways, including digital apps, counseling and family consultations.

● Use Cases: We believe we can broaden the range of use cases addressed by market need, including the treatment of new conditions with the launch of new brands, including our first quarter 2021 launch of NavaMD, and the expansion of existing brand offerings to covering complementary clinical indications.

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Competition

The markets we sell into are large and highly competitive. Numerous online brands compete with us for customers throughout the U.S. and internationally in the hair loss, immune support, men’s health and document management verticals. We also compete with traditional mass merchandisers, drug store chains, independent pharmacies and health food stores.

Our competitors include, among others, Teledoc, Ro, Thirty Madison, Inc., Icebreaker Health, Inc., Hims & Hers Health, Inc. and GoodRx, Inc. Many of our competitors are substantially larger and more experienced than us, have longer operating histories, higher visibility and brand recognition and have materially greater financial and other resources than us. We may not be able to successfully compete with them in the marketplace.

Competitive Strengths

We take a patient-focused approach to telemedicine, with an emphasis on the quality-of-care we deliver to our patients. 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.

Our key competitive strengths include:

High-Quality Care

Our telemedicine platform is designed to give consumers 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 patients need. We are committed to exceptional care and an exceptional customer service experience for our patients and customers.

Direct-To-Consumer Know-How

We actively seek to acquire, license, and develop brands and products with large, untapped e-commerce potential and proven business models. We acquire our patients in an efficient manner through an omni-channel marketing approach that includes digital advertising through platforms like Facebook and Google, social media platforms, as well as more traditional media channels like television and radio. Since our inception in 2015, we have invested heavily in recruiting experts in direct response marketing and customer acquisition.

Proprietary and Scalable Technology Platform

Our in-house telemedicine infrastructure is continually being improved as we scale, and this flexible infrastructure can be repurposed for any variety of existing or future telemedicine brands. This flexible platform allows for rapid development and scale of new telemedicine brands as we identify attractive specialty verticals. Additional key capabilities of this platform include proprietary staffing algorithms for case-load balancing, full CRM functionality, synchronous and asynchronous communications, and more.

● Patient Care Center : We launched a dedicated patient care center in November 2020 staffed by LifeMD employees which currently spans approximately 100 employees and is led by an experienced operations and customer experience leader. We believe the hands-on capabilities of the patient care center will continue to add significantly to our company’s performance through increased conversions, customer ratings and retention.

● Drive Marketing Efficiencies: Marketing investments are the result of a disciplined process and are measured against both growth and profitability targets. As we continue to grow and scale, we believe we will continue to improve the efficiency of our marketing investments and improve our return on advertising spend. As our budgets and pool of talent continues to grow, we believe this will result in cheaper media rates and improvements to our proprietary models that inform the strategic decisions that drive product offerings, customer acquisition, retention, and brand awareness.

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Management Team

Our management team has deep experience in healthcare services, technology, and direct-to-consumer and traditional advertising such that we believe we are uniquely positioned to expand our patient-base while providing quality services and product offerings at efficient customer-acquisition costs.

Intellectual Property

We regard our trademarks, copyrights, domain names, trade dress, trade secrets, proprietary technologies and similar intellectual property as important to our success, and we rely on trademark and copyright law, trade-secret protection and confidentiality and/or license agreements with our employees, customers, partners and others to protect our proprietary rights. We have licensed in the past, and expect that we may license in the future, certain proprietary rights, technologies or copyrighted materials from third-parties and we rely on those third-parties to defend their proprietary rights, copyrights and technologies.

From time-to-time, we register our principal brand names in the United States and certain foreign countries. Our material trademarks include ShapiroMD® and iNRWellnessMD®. Trademark applications are in process for RexMD and SOSRx. The steps we take to protect our proprietary rights in our brand names may not be adequate to prevent the misappropriation of our brand names in the United States or abroad. Existing trademark laws afford only limited practical protection for our product lines. 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 United States.

We rely primarily on proprietary trade secrets and extensive experience to operate our online direct response marketing platform. 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. In order to protect the confidentiality of our intellectual property, including trade secrets, know-how and other proprietary technical and business information, it is our policy to limit access to such information to those who require access in order to perform their functions and to enter into agreements with employees, consultants and vendors to contractually protect such information.

Manufacturing

We use third parties to manufacture and package our products according to the formulas and packaging guidelines we dictate. In order to minimize costs, we may elect to purchase raw or bulk materials directly from our suppliers and have them shipped to our manufacturers so that we may incur only tableting, encapsulating and/or packaging costs and avoid the additional costs associated with purchasing the finished product.

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. 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.

Government and Environmental Regulation

Our business is heavily regulated by the FDA and the FTC. The FDA enforces the FDCA and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements are regulated as a category of food, not as drugs. We are not required to obtain FDA pre-market approval to sell our products in the United States under current laws. Our hair loss and scarring products are regulated as cosmetics under the Federal Food, Drug and Cosmetic Act.

The FDA imposes GMP guidelines to ensure that dietary supplements are produced in a quality manner, do not contain contaminants or impurities and are accurately labeled. GMPs include requirements for establishing quality control procedures, designing and constructing manufacturing plants, testing ingredients and finished products and record keeping and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, to enjoin further manufacture or sale of a product, to issue warning letters and to institute criminal proceedings.

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Advertising and product claims regarding the efficacy of products are also regulated by the FTC. The FTC regulates the advertising of dietary supplements, cosmetics and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In addition to the foregoing, our operations and those of our partners are subject to federal, state and local government laws and regulations, including those relating to the practice of medicine, telemedicine and the prescribing of prescription medications. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

Employees

As of December 31, 2020, we had 56 full-time employees. In addition, 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. We have not experienced any work stoppages, and we consider our relationship with our employees to be good.

COVID-19 Response

On March 11, 2020, the United States declared a national emergency in response to the COVID-19 pandemic. Subsequently, states enacted stay-at-home orders to slow the spread of the virus that causes COVID-19, and reduce the burden on the U.S. health care system. In response to COVID-19, our senior leadership assessed the impact across our entire team. Our objective was to ensure the health, safety and well-being of our employees, customers, and the communities we service. Our response to COVID-19 and financial performance in 2020 was a direct result of the dedication and strength of our team members, our strong culture.

Corporate History

LifeMD, Inc. was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc. We changed our name to Conversion Labs, Inc. on June 22, 2018 and then subsequently, on February 22, 2021, we changed our name to LifeMD, Inc. Further, in connection with changing our name, we changed our trading symbol to LFMD. On April 1, 2016, with respect to a limited liability company operating agreement with joint venture partners for one of our skincare products under the legal name Immudyne PR LLC (“Immudyne PR”), such original operating agreement of Immudyne PR was amended and restated and we increased our ownership and voting interest in Immudyne PR to 78.2%. Concurrent with the name change of the parent company to Conversion Labs, Inc. completed in 2018, Immudyne PR was renamed to Conversion Labs PR LLC (now known as “Conversion Labs PR”). On April 25, 2019, the operating agreement of Conversion Labs PR was amended and restated in its entirety to increase the Company’s ownership and voting interest in Conversion Labs PR to 100%.

In June 2018, the Company closed the strategic acquisition of 51% of LegalSimpli Software, LLC (“LegalSimpli”), a software as a service (SaaS) application for converting, editing, signing and sharing PDF documents. In addition to LegalSimpli Software’s growth business model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company. Effective January 22, 2021, we consummated a transaction to restructure the ownership of LegalSimpli (the “LSS Restructuring”). To affect the LSS Restructuring, Conversion Labs PR entered into a series of agreements as further described below.

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Membership Interest Exchange Agreement

Effective January 22, 2021 (the “Effective Date”), in furtherance of the LSS Restructuring, CLPR entered into a Membership Interest Exchange Agreement with LegalSimpli, (the “Exchange Agreement”), pursuant to which CLPR exchanged a promissory note dated May 8, 2019 with an outstanding balance of $375,823 (the “CLPR Note”), issued by LegalSimpli in favor of CLPR, for 37,531 newly issued membership interests of LegalSimpli (the “Exchange”). Upon consummation of the Exchange the CLPR Note was extinguished.

Membership Interest Purchase Agreements

On the Effective Date, in furtherance of the LSS Restructuring, CLPR entered into a Membership Interest Purchase Agreement with LegalSimpli, (the “CLPR MIPA”), pursuant to which CLPR purchased 12,000 membership interests of LegalSimpli for an aggregate purchase price of $300,000. The CLPR MIPA provides that the transaction may be completed in three (3) tranches with a purchase price of $100,000 per tranche to be made at the sole discretion of CLPR. Payment for the first tranche of $100,000 was made upon execution of the CLPR MIPA. Payments for the second and third tranches are due on the 60-day anniversary and the 120-day anniversary of the Effective Date.

Concurrently, in furtherance of the LSS Restructuring, CLPR entered into two Membership Interest Purchase Agreements (the “Founding Members MIPAs”) with two founding members of LegalSimpli (the “Founding Members”) whereby CLPR purchased from the Founding Members an aggregate of 2,183 membership interests of LegalSimpli for an aggregate purchase price of $225,000.

Following the consummation of the LSS Restructuring, CLPR increased its ownership of LegalSimpli from 51% to approximately 85.58% on a fully-diluted basis. LegalSimpli entered into an amendment to its operating agreement (the “LSS Operating Agreement Amendment”) to reflect the foregoing.

LegalSimpli Option Agreements

Concurrently, CLPR entered into option agreements with Sean Fitzpatrick (the “Fitzpatrick Option Agreement”) and Varun Pathak (the “Pathak Option Agreement” and, together with Fitzpatrick Option Agreement, the “Option Agreements”), pursuant to which CLPR granted options to purchase membership interest units of LegalSimpli. The Fitzpatrick Option Agreement grants Sean Fitzpatrick the option to purchase 10,300 membership interest units of LegalSimpli for an exercise price of $1.00 per membership interest unit.

The Fitzpatrick Options vest in accordance with the following (i) 3,434 membership interests upon LegalSimpli achieving $2,500,000 of gross sales in any fiscal quarter (ii) 3,434 membership interests upon LegalSimpli achieving $4,000,000 of gross sales in any fiscal quarter and (iii) 3,434 membership interests upon LegalSimpli achieving $8,000,000 of gross sales with a ten percent (10%) net profit margin in any fiscal quarter.

The Pathak Options shall vest in accordance with the following (i) 700 membership interests upon LegalSimpli achieving $2,500,000 of gross sales in any fiscal quarter (ii) 700 membership interests upon LegalSimpli achieving $,4,000,000 of gross sales in any fiscal quarter and (iii) 700 membership interests upon LegalSimpli achieving $8,000,000 of gross sales with a ten percent (10%) net profit margin in any fiscal quarter.

Upon vesting, the Fitzpatrick Options and the Pathak Options provide for the potential re-purchase of up to an additional 13.25% of LegalSimpli by Fitzpatrick and Pathak in the aggregate with CLPR ownership ratably reduced to approximately 72.98%.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports and amendments to these reports that we file with or furnish to the SEC at their website, www.sec.gov, are also available free of charge at our website, https://ir.lifemd.com/, as soon as reasonably practicable after we electronically file these reports with, or furnish these reports to the SEC. The content of this website is not part of this Annual Report.

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Any of these reports or documents may also be obtained by writing to: Investor Relations; c/o LifeMD, Inc., 800 Third Avenue, Suite 2800, New York, NY 10022.

Corporate History

Conversion Labs, Inc., was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc. We changed our name to Conversion Labs, Inc. on June 22, 2018. Further, in connection with changing its name, the Company changed its trading symbol to CVLB. On April 1, 2016, with respect to a limited liability company operating agreement with joint venture partners for one of our skincare products under the legal name Immudyne PR LLC (“Immudyne PR”), such original operating agreement of Immudyne PR was amended and restated and we increased our ownership and voting interest in Immudyne PR to 78.2%. Concurrent with the name change of the parent company to Conversion Labs, Inc. completed in 2018, Immudyne PR was renamed to Conversion Labs PR LLC (now known as “Conversion Labs PR”). On April 25, 2019, the operating agreement of Conversion Labs PR was amended and restated in its entirety after acquiring the minority interest in the Conversion Labs PR, which is now a wholly-owned subsidiary of the Company.

In June 2018, Conversion Labs closed the strategic acquisition of 51% of LegalSimpli Software, LLC, a software as a service (SaaS) application for converting, editing, signing and sharing PDF documents. In addition to LegalSimpli Software’s growth business model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company.

In early 2019, we also launched a service-based business under the name Conversion Labs Media LLC, which was to be used to run e-commerce marketing campaigns for other online businesses. However, this business was discontinued in 2019 in order to focus on our core business as well the expansion of our telehealth opportunities.

In June 2019, a joint venture with GoGoMeds.com was formed through our majority-owned subsidiary, Conversion Labs Rx, LLC, allowing us to market branded and generic prescription drugs that are then sold and shipped (via GoGoMeds) online directly to consumers in all 50 states and the District of Columbia.

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Business Overview

The Company is a direct response healthcare company that provides a convenient, cost-effective and smarter way for consumers to access high quality OTC products and prescription medications. The U.S. healthcare system is undergoing a paradigm shift largely due to new technologies and the emergence of direct-to-consumer healthcare. We believe the traditional model of visiting a doctor’s office, receiving a physical prescription, visiting a neighborhood pharmacy, and returning to see a doctor for follow up care or prescription refills is inefficient, costly to patients, and discourages many patients from seeking much needed medical care. Direct-to-consumer telemedicine companies, like our Company, offer patients immediate and virtual treatment from licensed physicians, and the home delivery of prescription medications, devices and diagnostics bundled with over-the counter wellness products.

We believe that many people can relate to the hassle and inconvenience of seeking medical care. According to a November 2018 Merritt Hawkins Survey, the average wait time to see a doctor is now 29 days, and in major cities such as Boston, the average wait is now 109 days. With the U.S. projected to be short 121,300 doctors by 2030, wait times are likely to grow worse. Timely and convenient access to healthcare and prescription medications is a critical factor in improving quality of care and patient outcomes. We believe that, because of this importance and the growing demand from patients, telemedicine platforms like ours can fundamentally change the market for healthcare in the U.S. Our mission is to build a portfolio of direct to consumer wellness brands that encompass on-demand medical treatment, online pharmacy and over-the-counter products. We want our brands to be top-of-mind for consumers and sought after for their proprietary characteristics and endorsements by thought leading physicians and influencers.

While not the first in telemedicine, we are an early mover that has made investments in technology and people that we believe will pay long-term dividends. According to a 2018 Euromonitor estimate, the market for direct to consumer healthcare products is estimated at $700 billion in global annual sales. Alliance Bernstein estimates that the disruptable market for online pharmacy in the U.S. is in the $300 billion dollar range, and they estimate that up to 70% of this market will move from traditional pharmacies to online pharmacies over the next ten years. The opportunities are immense, and we believe that we are well positioned to capitalize on these large scale economic shifts in healthcare.

We believe that product innovation and excellence are the heart of our business. As is exemplified with our first brand, Shapiro MD, we have built a full line of proprietary Over The Counter (“OTC”) products for male and female hair loss, FDA approved OTC minoxidil, an FDA-cleared medical device, and now a personalized telemedicine offering that gives consumers access to virtual medical treatment and a full line of oral and topical prescription medications for hair loss. Our men’s telemedicine brand, Rex MD, currently offers treatment for erectile dysfunction, and we will soon offer treatments for longevity, strength and endurance, hair loss, skin care and other products we identify that can improve the lives of patients and customers. We have built a platform that allows us to efficiently launch telehealth and wellness product lines wherever we determine there is a market need. Our platform is supported by a driven team of digital marketing and branding experts, data analysts, designers, and engineers focused on building enduring brands.

Telemedicine Platform

Beginning in 2019, we have made significant investments in our telemedicine technology platform which is the backbone of our physician network, pharmacy provider, CRM software, and third-party advertising platforms. This platform facilitates patient consultations, virtual prescriptions, fulfillment, and follow-up consultations.

Direct-To-Consumer Channel

We actively seek to acquire, license and develop products and brands with large untapped e-commerce potential and proven business models. Our products are marketed and sold directly to consumers through advertisements on Facebook, Google, Amazon, and other social media and e-commerce platforms. We intend to continue to grow revenue and profitability of our four commercial stage consumer and telehealth brands. We also expect that PDFSimpli, our PDF conversion software product, will continue to grow and achieve profitability in the short term. We continue to actively seek new brands to buy or license to expand our product offerings and add to our growth.

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Industry Overview

We believe that the telemedicine economy represents a rapidly growing and fragmented market. Customers are increasingly recognizing and turning to the internet for their medical needs. These needs include physician consultations, prescriptions, and supportive OTC products. With the importance of health and wellness rising in an increasingly educated consumer base, spending on health and wellness products is expected to increase. In conjunction with the Internet’s broad and active userbase, the opportunity to rapidly launch and scale brands in the healthcare space has never been greater. Additionally, due to the breadth and personalized nature of today’s market for healthcare, we believe many untapped markets exist for new direct-to-consumer telemedicine brands.

According to data provided by IMS Health and republished by AllianceBernstein in 2018, the U.S. prescription drug market exceeds $450 billion across all dispensing sites. The market size for retail pharmacy (prescription drugs only, not front of store), and drugs dispensed via mail order, is over $300 billion. According to the 2013-14 Economic Report on Retail, Mail and Specialty Pharmacies by Adam J. Fein, Ph.D., three wholesalers controlled an estimated 92% of the pharmaceutical market and states the online market (for pharmaceuticals) could be 70% of the retail and mail market (approximately a $200 billion market).

Management believes the opportunity for telemedicine is ripe based upon current conditions. Globally and within the U.S., healthcare systems face major challenges such as:

● lack of sufficient access to high-quality, cost-effective healthcare; ● increasing shortage of medical professionals, increasing time to care; ● geographic boundaries creating supply/demand gaps driven by physician and patient demographics; ● and lagging technology adoption by market incumbents and medical providers, resulting in reduced ability to efficiently provide quality healthcare.

The emergence and continued adoption of healthcare-focused technology promises to help alleviate and substantially improve structural, time, and cost limitations currently overburdening the healthcare system. The increased availability of generic medication has created an opportunity for smaller, agile companies, such as ours to conveniently supply consumers with a growing number of medications at favorable and competitive prices. Additionally, macro trends such as rising internet proficiency, improved telecom infrastructure, and continued rise in cost of care, serve to benefit the already significant opportunity for our uniquely branded telemedicine offerings in addressing the cost and access challenges facing consumers today.

Ethos

Our mission is to use telemedicine to put the consumer first in their healthcare journey. We are guided in our commitment in using telemedicine to elevate the standard of healthcare by eliminating much of the opaqueness, bloated costs, and delays we believe are plaguing the healthcare system today. To accomplish this, we aim to be an agile and leading-edge team that uses our skillset as collaborators, builders, visionaries, and leaders to strive to build what we envision consumer-centric healthcare should look and feel like. We believe that our brands are genuine, honest, and transparent, as well as medically grounded and technologically-minded. We believe cost-efficient, time-efficient, and seamless healthcare is the way healthcare should be provided to consumers, and we endeavor to play a key role in making that the standard in how our consumers think about healthcare.

In all of our interactions with consumers, we aim to provide a thoughtful experience that is visible through our branding, marketing, offerings, and services, that conveys a sense of “better” healthcare, or healthcare as it should be. Selecting healthcare is a serious decision, and consumers take time to research options, solicit advice from friends and family, and rely upon their experiences before finalizing their purchase decision. In order to provide our vision of healthcare, we work constantly to better engineer an experience that highlights transparency, seamlessness, and consistency for all of our offerings across all of our brands.

We take a customer-first approach, and we continue that approach by tapping into customer feedback, behavior, and data to inform and iteratively improve our long-term strategy and near-term decision making. We expect to continue to benefit from the feedback and support offered by our customers, peers, and partners as we expand our presence in healthcare and telemedicine.

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Products

We understand that life is more than just survival and that health and wellness should also encompass the way our body feels, looks, and performs. Our brands aim to bring this holistic understanding to the consumer, with messaging that is clear, scientific, and thoughtful. The product offerings behind each brand are thoughtfully considered and tested to ensure they answer consumer needs, preferences, and feedback. Our brands aim for customer satisfaction at every step of the process, from learning, ordering, fulfillment, and reordering. Our current brand portfolio is comprised of brands respectively targeting four market segments: hair loss, immune health, men’s health, and disaster preparedness.

Hair Loss: Shapiro MD

Launched in 2017, Shapiro MD is a brand for hair loss in both men and women. Shapiro MD’s product offerings include both over-the-counter and prescription products and/or ingredients that have been rigorously studied for their effects in treating hair loss. Since beginning with a proprietary patented hair loss product line of shampoo, conditioner, and leave-in-foamer, Shapiro MD’s product portfolio has grown to now include U.S. Food and Drug Administration (“FDA”) approved medications such as minoxidil and finasteride, and an over-the-counter supplement for hair loss. In March of 2020, the Company received FDA 510(k) clearance for the Shapiro MD Laser Hair Restoration Device.

Hair loss is a deeply personal problem that affects people psychologically in addition to its physical effects, this is why we are committed to the continued expansion of Shapiro MD to be one of the leading online destinations for clinically studied and proven solutions for both male and female hair loss. We are currently exploring proprietary compounded prescription products for product portfolio expansion.

On February 21, 2020, ConsumersAdvocate.org ranked Shapiro MD as the third best hair loss treatment provider in the United States, ahead of other household brands such as Bosley, Keeps and Rogaine. We believe that the combination of Shapiro MD’s patented over-the-counter product line with prescription medications and our soon to be FDA-cleared laser hat, will lead to a big increase in brand awareness, customer satisfaction, retention rates and overall profitability.

Immune Health: iNR Wellness MD

Launched in 2018, iNR Wellness MD is a supplement for immune and gut support. The iNR Wellness product line is a daily nutritional supplement that contains yeast, oat, and mushroom beta glucans. Our spokesperson for our iNR Wellness MD brand is Dr. Joseph DiTrolio, a member of the Board of Directors of the Company and an opinion-leading physician, professor of surgery, innovator, and public servant.

Men’s Health: RexMD

Launched in 2019, RexMD is a men’s health brand currently offering personalized treatment plans from licensed physicians in 50 states for erectile dysfunction. After consultation with a physician, if appropriate, we dispense and ship prescription medication directly to patients. We are initially focused on generic Viagra and Cialis but intend to expand our product offering to include treatment for cold sores, mental health, and many other common medical conditions faced by men. Our vision for RexMD is to become a leading telemedicine destination for men.

Disaster Preparedness: SOSRx

SOSRx, launched in the first quarter of 2020, is a telemedicine brand intended to offer prescription medications and over-the-counter emergency preparation supplies for disaster situations such as flu epidemics, bacterial outbreaks, bioterrorism and water supply failure, among others. Our research indicates that vital supplies and prescription medications may be rapidly depleted during high-demand situations caused by disasters, and we believe that pre-prescribing certain medications and supplies can serve to reduce strain during emergency situations.

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Following the launch of this brand, we also intend to target the travel preparedness market with prescription medications that can address common illnesses seen in overseas travel such as traveler’s diarrhea- the most common travel-related illness. We believe strong potential for earned media exists for SOSRx, and are in the process of identifying influencers and opinion leaders in emergency preparation and public health that will serve to drive brand awareness and brand equity upon launch.

Majority Owned Subsidiary: PDFSimpli

PDFSimpli is a PDF conversion software product, which was acquired through the purchase of 51% of the membership interests of LegalSimpli Software, LLC, a Puerto Rico limited liability company, which operates a marketing-driven software solutions business. PDFSimpli enables users to convert, edit and sign PDF documents. As of March 1, 2020, PDFSimpli was ranked in the top 5,750 websites globally, in which it was also ranked in the top 1,200 for specific countries with more than 4.5 million registrants globally. Since its launch, PDFSimpli has converted or edited over 5 terabytes of documents for customers from the legal, financial, real-estate and academic sectors. PDFSimpli has over 39,000 active subscriptions as of March 1, 2020.

Our Growth Strategy

Our approach is to continue to build a portfolio of direct to consumer health and wellness brands that leverage our telemedicine platform across the U.S. to offer cost-effective, convenient and personalized generic and branded prescription drugs as well as clinically studied over the counter products. Our current portfolio includes brands in the hair loss, immune support, men’s health, and disaster-preparedness categories. In the future, we plan to launch additional brands targeting unique unmet needs such as travel, mental health and anxiety, women’s health, skincare, among others.

We have achieved rapid growth over the past 4 years, evidenced by our rank on Deloitte’s Technology Fast 500™, a yearly ranking of the 500 fastest growing technology, media, telecommunications, life sciences, and energy tech companies in North America. We ranked #189 on Deloitte’s 2019 list, for our revenue growth of 583% from 2015 to 2018. We believe this validates our significant long-term investments in developing our human capital, technology, brand-building, and customer acquisition. Our continued investment in, and expansion of our core brands and their product offerings will further increase opportunities to acquire new customers and increase the lifetime value of our customers.

We believe we are creating a meaningful and valuable customer base. As of December 31, 2019, over 35% of customers who have purchased at least once since our inception have made a repeat purchase. We continue to invest heavily in the experience our customers have with our products and their overall satisfaction with our products and our company, and we expect customer repurchase rates and overall customer retention to grow further as we allocate more resources and focus to this component of the business. 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 pursue the following strategies to help us achieve this growth.

● Increase Brand Awareness and Equity with Telehealth & Rx Offering: Increasing brand awareness and growing favorable brand equity among consumers in both existing and new markets has been, and remains, central to our growth. We believe that our new telehealth driven brands that combine proprietary OTC products with generic and branded prescription medications will be transformational to our business, the awareness of our brands and the value consumers associate with our brands. We intend to aggressively pursue the same direct-to-consumer acquisition strategy with RexMD, our men’s health brand and SOS Rx, our disaster and travel preparedness brand. We will also seek to identify additional influencers and opinion leading physicians that can drive the brand awareness and equity value of our overall portfolio. We are excited about the opportunities that we believe will follow as awareness continues to grow. ● Drive Customer Acquisition with Traditional Marketing Channels & International Expansion: We anticipate that we will complement our strong online presence and increase customer acquisition by utilizing traditional advertising channels such as tv, radio, and out-of-home channels. We believe that a multi-channel approach will lower our overall customer acquisition cost and provide greater diversification for our overall growth strategy.

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We intend to sell some or all of our OTC products in traditional retail stores in the U.S. and see retail as a growth opportunity. We have already made investments in packaging and branding to support this strategy and we’re optimistic that we can expand in this area in 2020. We continue to sell our products in international markets and believe that international market expansion represents a significant growth opportunity for the Company. We continue to evaluate potential strategic partnerships and international joint venture opportunities. ● Invest in New Products and Services: We plan to continue to offer products and services through existing or new brands that target large underserved markets in healthcare. We believe this expansion will attract new customer segments and retail partners, as well as enhance average order value, increase attachment rate opportunities, and deliver higher overall customer lifetime value. We believe we sit at the center of our ability to continue bringing innovative and enhanced performance-driven products to market with both speed and excellence. We have unique and effective product offerings that increasingly cover more segments of consumer healthcare, elevate the standard of care, introduce us to new markets and distribution partners, and increase the lifetime value of our customer relationships.

We anticipate that growth of our products and services will span entirely new markets in healthcare, including:

● Services and Content. We plan to offer services that provide customers the opportunity to interact with telemedicine in new ways, including digital apps, counseling and family consultations. ● Use Cases. We believe we can broaden the range of use cases addressed by market need, including additional options for travel, children and babies, and pets.

● Drive Continued Operational Excellence: We are committed to improving productivity and profitability through a number of operational initiatives designed to grow our revenue and expand our margins. Overall, we expect that business profitability will be driven by continued net revenue growth in conjunction with gross margin improvements, continued marketing efficiencies, and generating operating leverage. We believe there is opportunity for continued improvement in gross margins, marketing efficiencies, and operating leverage through these key initiatives:

● Optimize Price. Through investment in human capital and technology, we intend to continue building a data-based understanding of price elasticity dynamics, promotional strategies and other price management tools to drive optimized pricing for us and our partners. Based on the strength of our brands and the value proposition of our products, we believe we have pricing power in the market that will only increase through economies of scale. ● Reduce Product Returns. As a young company, we are still learning about the factors affecting customer returns and believe we have the opportunity to reduce customer return rates. We have identified several opportunities that span policy change, process improvement and consumer education to reduce return rates and increase overall customer satisfaction. ● Invest in Supply Chain. We plan to continue to make significant investments in our supply chain to meet the requirements of our growing business. Our supply chain is instrumental to both supporting growth and improving business performance. While we currently partner with a number of third-party manufacturing and logistics companies, physician networks, and prescription medication fulfillment companies, we are evaluating opportunities to build our own internal capabilities in these areas.

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● Drive Marketing Efficiencies. Marketing investments are the result of a disciplined process and are measured against both growth and profitability targets. As we continue to grow and scale, we believe we will continue to improve the efficiency of our marketing investments and dramatically improve our return on advertising spend. We believe that with larger budgets and deeper experience, we will benefit from lower media rates and increased data that will improve our proprietary models, multi-channel synergies as our retail partnerships grow consumer awareness, purchase occasions as our product and services assortment expands, and purchases from previous repeat consumers. ● Achieve Operating Leverage. We have invested ahead of our growth in all areas of our business, including human capital, technology, and multi-channel and international distribution. As we continue to grow, we have the opportunity to leverage these investments and realize economies of scale.

Competition

The markets we sell into are large and highly competitive. Numerous online brands compete with us for customers throughout the U.S. and internationally in the hair loss, immune support, men’s health and document management verticals. We also compete with traditional mass merchandisers, drug store chains, independent pharmacies and health food stores.

Our competitors include, among others, Thirty Madison, Inc., Icebreaker Health, Inc., Roman Health Ventures, Inc., Hims, Inc. and GoodRx, Inc. Many of our competitors are substantially larger and more experienced than us, have longer operating histories, higher visibility and brand recognition and have materially greater financial and other resources than us. We may not be able to successfully compete with them in the marketplace.

Competitive Strengths

On the consumer products side, we believe that our competitive advantage lies in the quality of our products, endorsements of our products from opinion-leading physicians and experts, and, most importantly, our ability to optimally market our products directly to consumers.

We believe the following strengths differentiate us from our competitors and drive our success:

● Promotion of More Efficient Healthcare Solutions: We believe we are impacting the way healthcare solutions are brought to consumers by leveraging our direct-to-consumer expertise to market low-cost, highly personalized, highly effective healthcare to consumers throughout the U.S. “Traditional” (in-person) healthcare is marked by “friction” from the inconvenience that emerges naturally from time-intensive processes such as setting an appointment, traveling to a doctor for a written physical prescription, and waiting in line to fill said prescription. Telemedicine has made it possible to eliminate much of the friction present in a patient’s journey to effective medical solutions through asynchronous evaluation, prescription, and fulfillment of prescription medication. ● Consumer-Focused Health and Wellness Brands: We’ve built and continue to develop our company based on our evolving understanding of our current and future consumers. Our focus lies on establishing and strengthening long-term relationships where our consumers return again and again to shop for our branded, high-quality healthcare products and medical treatment. We believe our focus on the consumer experience, innovative offerings, and data driven approach have allowed for strong customer relationships with significant lifetime values. From the launch of our direct-to-consumer business through the year-ended December 2019, we have seen more than 35% of customers who have purchased at least once through our direct-to-consumer channel return to repurchase or purchase another product. ● Innovative and Differentiated Brands: Since the launch of our first direct-to-consumer brand, we have distinguished our brands through unique product offerings, combining high quality products with best in class customer service. Our lead brand, Shapiro MD, formulated and sold one of the first DHT-blocking shampoos directly to consumers in the U.S., and we have continued to build upon Shapiro MD’s cornerstone reputation as a source for high quality hair loss products with additional scientifically studied product offerings. We believe Shapiro MD’s cornerstone reputation has been and is a critical driver in creating repeat consumers, which is why we have made sure to set a cornerstone value for each brand we have subsequently launched.

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Our brands seek to address real life healthcare challenges faced by consumers today, including: hair loss, immune health, men’s health, and disaster preparedness, through the use of telemedicine to provide a unique offering resulting from a combination of over-the-counter and prescription medications to address their medical concerns in a medically consistent manner. We also aim to reduce the friction that is typically present in the consumer’s healthcare journey, providing quality service, and seamless follow up to make their telemedicine experience smoother and less stressful. We believe the unique high-quality nature of our offerings and continual improvements have helped drive our repeat customer business. These repeat consumers most frequently return to purchase the same product, such as a Shapiro MD customer returning to purchase a second and third month supply of our shampoo, conditioner, and foamer kit. We believe that, as existing customers return to our brands for additional healthcare solutions, we have the opportunity to offer these customers additional offerings for their other healthcare needs, particularly as our product and brand portfolio and cross-sell capabilities grow.

Intellectual Property

We regard our trademarks, copyrights, domain names, trade dress, trade secrets, proprietary technologies and similar intellectual property as important to our success, and we rely on trademark and copyright law, trade-secret protection and confidentiality and/or license agreements with our employees, customers, partners and others to protect our proprietary rights. We have licensed in the past, and expect that we may license in the future, certain proprietary rights, technologies or copyrighted materials from third-parties and we rely on those third-parties to defend their proprietary rights, copyrights and technologies.

From time-to-time, we register our principal brand names in the United States and certain foreign countries. Our material trademarks include Shapiro MD® and iNR Wellness MD®. Trademark applications are in process for RexMD and SOSRx. The steps we take to protect our proprietary rights in our brand names may not be adequate to prevent the misappropriation of our brand names in the United States or abroad. Existing trademark laws afford only limited practical protection for our product lines. 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 United States.

We rely primarily on proprietary trade secrets and extensive experience to operate our online direct response marketing platform. 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. In order to protect the confidentiality of our intellectual property, including trade secrets, know-how and other proprietary technical and business information, it is our policy to limit access to such information to those who require access in order to perform their functions and to enter into agreements with employees, consultants and vendors to contractually protect such information.

Manufacturing

We use third parties to manufacture and package our products according to the formulas and packaging guidelines we dictate. In order to minimize costs, we may elect to purchase raw or bulk materials directly from our suppliers and have them shipped to our manufacturers so that we may incur only “tableting,” encapsulating and/or packaging costs and avoid the additional costs associated with purchasing the finished product.

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. 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.

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We rely on our contract manufacturers to maintain the quality of product components as new products are assessed and developed. As we evaluate the needs for certain products within existing or new markets, we develop the most effective formulas and rely on our third-party suppliers to provide certain raw materials and our manufacturers to manufacture the product. Products are then sampled and tested for final approval and packaging. To monitor the quality of the raw materials that the suppliers provide and the products that the third-party manufacturers produce, we randomly test our products through independent labs to ensure potency. In addition, we select those manufacturers who themselves adhere to high standards of good manufacturing practices.

Government and Environmental Regulation

Our business is heavily regulated by the FDA and the FTC. The FDA enforces the FDCA and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements are regulated as a category of food, not as drugs. We are not required to obtain FDA pre-market approval to sell our products in the United States under current laws. Our hair loss and scarring products are regulated as cosmetics under the Federal Food, Drug and Cosmetic Act.

The FDA imposes GMP guidelines to ensure that dietary supplements are produced in a quality manner, do not contain contaminants or impurities and are accurately labeled. GMPs include requirements for establishing quality control procedures, designing and constructing manufacturing plants, testing ingredients and finished products and record keeping and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, 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. The FTC regulates the advertising of dietary supplements, cosmetics and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In addition to the foregoing, our operations and those of our partners are subject to federal, state and local government laws and regulations, including those relating to the practice of medicine, telemedicine and the prescribing of prescription medications. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

Employees

As of December 31, 2019, we had 26 full-time employees. Our full-time employees work in the following places:

● Nine in Huntington, Beach, CA under Conversion Labs, Inc. ● Ten in San Juan, PR under Conversion Labs PR LLC ● Seven in San Juan, PR under LegalSimpli LLC

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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General

Conversion Labs, Inc., a Delaware corporation, is the parent company of majority-owned subsidiaries LegalSimpli Software, LLC, a Puerto Rico limited liability company, Conversion Labs PR, LLC (formerly Immudyne PR LLC), a Puerto Rico limited liability company, and Conversion Labs Asia Limited, a Hong Kong company. Conversion Labs, Inc. was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc. We changed our name to Conversion Labs, Inc. on June 22, 2018. Further, in connection with changing its name, the Company changed its trading symbol to CVLB.

Business Overview

Conversion Labs, Inc. is a diversified online direct response marketing company that creates, in-licenses, and acquires proprietary and innovative consumer products that address large unmet needs in the online marketplace. We sell our products directly to consumers through advertisements on Facebook, Google, Amazon, and other social media and e-commerce platforms. Secondarily, we sell our products to traditional retailers, wholesalers and physicians’ offices.

We currently have four commercial stage brands in our portfolio:

● Shapiro MD: Launched in 2017, Shapiro MD is a patented line of shampoo, conditioner and leave-in foamer for thicker, fuller hair. The Shapiro MD line also includes a U.S. Food and Drug Administration (“FDA”) approved minoxidil product and a supplement for hair loss.

● iNR Wellness MD: Launched in 2018, iNR Wellness MD is a beta glucan nutritional supplement for immune support. There are a multitude of published studies, many noted on the National Institute of Health website, relating to the health benefits of beta glucan. The FDA and the European Food Safety Authority have approved health claims related to the maintenance or reduction of blood cholesterol and consumption of 3 grams of beta-glucan daily.

● Scarology: Launched in 2019, Scarology is a proprietary 3 step Scar Care System designed to improve the overall color, texture and appearance of scars. The system consists of a natural fruit acid exfoliator, a proprietary scar healing cream and silicon scar sheets.

● PDF Simpli: Launched in 2018, PDF Simpli is a PDF conversion software-as-a-service (SaaS) product, which was acquired through the purchase of 51% of the membership interests of LegalSimpli Software, LLC, a Puerto Rico limited liability company, which operates a marketing-driven software solutions business.

We launched our online direct marketing business in the fourth quarter of 2015 with the establishment of a partnership with Inate Skincare, LLC (“Inate”). Our initial intention was to launch a skin care line containing our proprietary ingredients and to market such products directly to consumers. We entered into a limited liability company operating agreement with our joint venture partners with respect to Inate under the legal name Immudyne PR LLC (“Immudyne PR”). On April 1, 2016, the original operating agreement of Immudyne PR was amended and restated and we increased our ownership and voting interest in Immudyne PR to 78.2%. Subsequently, concurrent with the name change of the parent company to Conversion Labs, Inc., Immudyne PR was renamed to Conversion Labs PR LLC.

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Our priority is to pursue opportunities to market our products and increase sales. We expect that a significant component of our selling, general and administration expenses going forward will consist of advertising expenses and service fees to maintain skilled professionals to market our products online. These aforementioned costs, along with the additional costs resulting from our operations as a public reporting company, could adversely impact our future results of operations.

Divestiture of Nutraceutical and Cosmetic Additives Business

Throughout 2017, we manufactured, distributed and sold natural immune support products containing our proprietary yeast beta glucans, a group of beta glucans naturally occurring in the cell walls of yeast that have been shown through testing and analysis to support the immune system. Beta glucans, or β-Glucans, are a natural extract that are considered to be “biological response modifiers” that support the immune system. The most common sources of beta glucans are from the cell walls of baker’s yeast, the cellulose in plants, the bran of cereal grains and certain fungi and bacteria.

In the first quarter of 2018 we sold all assets and liabilities related to our legacy business that manufactured raw yeast beta glucan. As a result of this divestiture, we now solely operate our online direct marketing business through our majority-owned operating subsidiary, Conversion Labs PR.

Our Products

We currently have four commercial stage brands. Generally, our business model is to license or acquire innovative products that address large, global unmet needs which can be placed onto our internet based or “online” direct response marketing platform. We seek to protect the market position of our products with intellectual property, trade secrets, trademarks and brand equity. Our brands and products are as follows:

Shapiro MD®

Launched in the second quarter of 2017, Shapiro MD is a patented line of hair products designed to help men and women regain thicker, fuller and healthier looking hair. The products in our Shapiro MD line currently include a shampoo, a conditioner, a leave-in foamer, and a “product” which contains Minoxidil, an FDA-approved product for hair growth. Additionally, we are in the process of adding an FDA-cleared laser cap to our Shapiro MD product line. The Shapiro MD Shampoo and Conditioner are the result of 15 years of research and development by Dr. Steven Shapiro and Dr. Michael Borenstein. The Shapiro MD product line is protected by two U.S. patents and typically contains three naturally-occurring dihydrotestosterone (DHT) blocking ingredients. DHT is widely believed to be the main culprit of balding/hair-loss. Clinical research on the ingredients used in Shapiro MD products has been published in scientific journals, including U.S. National Library of Medicine National Institutes of Health, International Journal of Dermatology and European Hair Research Society.

iNR Wellness MD®

Launched in 2018, iNR Wellness MD is a nutritional supplement for immune support. The iNR Wellness product line is a daily nutritional supplement that contains yeast, oat, and mushroom beta glucans. Beta glucans, or β-Glucans, are a natural extract considered to be “biological response modifiers” that support the immune system. Our three naturally occurring beta glucans have clinically shown to support the human immune system and are commonly used as an OTC supplement to reduce cholesterol levels, maintain healthy blood glucose levels, and support the immune system. Our spokespersons for our iNR Wellness MD brand include Dr. Joseph DiTrolio, Dr. Jack Gilbert, and Dr. Liz Lipski, who are leading doctors/researchers in fields such as urology, microbiology, and nutrition. General scientific research on beta glucans has been conducted in recent years by renowned medical laboratories, including Baylor College of Medicine, U.S. Armed Forces Radiobiology Institute, Stanford University, Harvard University, and North Carolina State University. As more studies are conducted on beta glucans, we believe the potential benefits to human health will continue to emerge. Although the Food and Drug Administration (“FDA”) has historically endorsed the consumption of oat glucan/dietary fiber as an aid to lower cholesterol, most of the testing and analysis or scientific research mentioned in this annual report has not been subject to oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or treating disease. Further, the marketing of beta glucans is not subject to FDA approval, and we are prohibited by Federal Trade Commission (“FTC”) and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

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PDF Simpli

Launched in 2018, PDFSimpli is a PDF conversion software, which we acquired in June 2018 through the purchase of 51% of the membership interests of LegalSimpli Software, LLC, a Puerto Rico limited liability company. PDFSimpli enables users to convert, edit and sign PDF documents and has had over 3 terabytes of documents converted or edited by customers from the legal, financial, real-estate and academic sectors. As of February 28, 2019, PDFSimpli was ranked in the top 100,000 websites globally, in which it was also ranked in the top 2,500 for specific countries and has more than 650,000 registered users globally. PDFSimpli has had over 3 terabytes of documents converted or edited by customers from the legal, financial, real-estate and academic sectors.

Scarology™

Launched in 2018, Scarology is a topically applied scar healing solution delivered through a day and night routine. The system consists of a natural fruit acid exfoliator, a proprietary scar healing cream and silicon scar sheets. The Scarology system was developed by two prominent dermatologists and has been tested extensively in a clinical environment. The current global scar treatment market, per Grand View Research’s 2017 Scar Treatment Industry Market Research Report, is estimated to be more than $10 billion and is expected to grow to more than $34.5 billion by 2025.

Growth Strategy

We actively seek to acquire, license and develop products and brands with large untapped e-commerce potential and proven business models. We intend to continue to grow revenue and profitability of our commercial stage consumer products. We also expect that PDFSimpli will continue to grow and will achieve profitability in 2019. We continue to actively seek new brands to buy or license to expand our product offerings and add to our growth.

We have begun selling all of our products in international markets and we believe this represents a significant growth opportunity for us. We also entered into a strategic partnership in Asia in 2018. Accordingly, we are in the process of building an e-commerce infrastructure in Asia where we anticipate completion in the first half of 2019.

In early 2019, we also launched a service-based business under the name Conversion Labs Media LLC, which will be used to run e-commerce marketing campaigns for other online businesses. Conversion Labs Media LLC intends to develop, run, and optimize advertising and media strategies for third parties looking to continue their growth on online platforms such as Amazon, Google, and Facebook. These services will be monetized through a monthly consulting model or on a revenue share basis.

Marketing

We advertise our products on social media platforms, search engines, Amazon, and third-party websites or selling platforms (the “Marketing Platforms”). We develop marketing content, such as images or videos (the “Marketing Content”), that we pay to have marketed through the Marketing Platforms. We manage the cost per click, customer acquisition cost, and other key performance indicators on the Marketing Platforms to determine if certain campaigns are successful. When a potential customer clicks on the Marketing Content, they are typically taken to landing pages for specific campaigns that show the offer of our brands where they can purchase our products online.

In early 2019, we also launched a service-based business under the name Conversion Labs Media LLC, which will be used to run e-commerce marketing campaigns for other online businesses. Under this entity, we will create similar Marketing Content and landing pages, which we may manage for clients on the Marketing Platforms.

Manufacturing

We use third-parties to manufacture and package our products according to the formulas and packaging guidelines we dictate. In order to minimize costs, we may elect to purchase raw or bulk materials directly from our suppliers and have them shipped to our manufacturers so that we may incur only “tableting,” encapsulating and/or packaging costs and avoid the additional costs associated with purchasing the finished product.

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We are dependent on certain third-party manufacturers, although we believe that other contract manufacturers could be quickly secured if any of our current manufacturers cease to perform adequately. As of December 31, 2018, we utilized two (2) suppliers for finished goods, three (3) suppliers for packaging and bottles and one (1) supplier for labeling. For the period ended December 31, 2018, we purchased 100% of our finished goods from two (2) manufacturers.

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. 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.

We rely on our contract manufacturers to maintain the quality of product components as new products are assessed and developed. As we evaluate the needs for certain products within existing or new markets, we develop the most effective formulas and rely on our third-party suppliers to provide certain raw materials and our manufacturers to manufacture the product. Products are then sampled and tested for final approval and packaging. To monitor the quality of the raw materials that the suppliers provide and the products that the third-party manufacturers produce, we randomly test our products through independent labs to ensure potency. In addition, we select those manufacturers who themselves adhere to high standards of good manufacturing practices.

Competition

The markets we sell into are large and highly competitive. Numerous online brands compete with us for customers throughout the United States and internationally in the hair loss, scarring, immune support and PDF conversion verticals. We also compete with traditional mass merchandisers, drug store chains, independent pharmacies and health food stores.

With respect to our consumer products, we believe that our competitive advantage lies in the quality of our products, endorsements of our products from opinion-leading physicians and experts, and, most importantly, our ability to optimally market our products directly to consumers.

The Company’s competitors include, among others, Guthy Renker LLC, L’Oréal S.A., Atlantic Coast Media Group, LLC, Hims, Inc. and The Estée Lauder Companies Inc. Many of our competitors are substantially larger and more experienced than us, have longer operating histories, higher visibility and brand recognition and have materially greater financial and other resources than us. We may not be able to successfully compete with them in the marketplace.

Intellectual Property

We regard our trademarks, copyrights, domain names, trade dress, trade secrets, proprietary technologies and similar intellectual property as important to our success, and we rely on trademark and copyright law, trade-secret protection and confidentiality and/or license agreements with our employees, customers, partners and others to protect our proprietary rights. We have licensed in the past, and expect that we may license in the future, certain proprietary rights, technologies or copyrighted materials from third-parties and we rely on those third-parties to defend their proprietary rights, copyrights and technologies.

From time-to-time, we register our principal brand names in the United States and certain foreign countries. Our material trademarks include Shapiro MD®, iNR Wellness MD®, Scarology™ and Purpurex®. We currently own these brand names as registered trademarks and substantially all of our net sales were from products bearing these brands. The steps we take to protect our proprietary rights in our brand names may not be adequate to prevent the misappropriation of our brand names in the United States or abroad. Existing trademark laws afford only limited practical protection for our product lines. 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 United States. Because of the rapid pace of the natural product industry’s development, we believe that the legal protection for our product is less significant to our success than the knowledge, technical expertise and marketing skills of our personnel, the frequency of product expansion and pace of market penetration.

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We rely primarily on proprietary trade secrets and extensive experience to operate our online direct response marketing platform. 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. In order to protect the confidentiality of our intellectual property, including trade secrets, know-how and other proprietary technical and business information, it is our policy to limit access to such information to those who require access in order to perform their functions and to enter into agreements with employees, consultants and vendors to contractually protect such information.

Government and Environmental Regulation

Our business is heavily regulated by the FDA and the FTC. The FDA enforces the FDCA and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements are regulated as a category of food, not as drugs. We are not required to obtain FDA pre-market approval to sell our products in the United States under current laws. Our hair loss and scarring products are regulated as cosmetics under the Federal Food, Drug and Cosmetic Act.

The FDA imposes GMP guidelines to ensure that dietary supplements are produced in a quality manner, do not contain contaminants or impurities and are accurately labeled. GMPs include requirements for establishing quality control procedures, designing and constructing manufacturing plants, testing ingredients and finished products and record keeping and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, 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. The FTC regulates the advertising of dietary supplements, cosmetics and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe that we are in compliance with all material government regulations applicable to our products.

In addition to the foregoing, our operations are subject to federal, foreign, state and local government laws and regulations, including those relating to zoning, workplace safety and accommodations for the disabled, and our relationship with our employees is subject to regulations, including minimum wage requirements, anti-discrimination laws, overtime, working conditions and citizenship requirements. We currently do not incur any material costs in connection with our compliance with applicable environmental laws as our manufacturing processes generate minimal discharge. Furthermore, the cost of maintaining compliance with applicable environmental laws has not, and we believe, in the future, will not, have a material adverse effect on our business, results of operations and financial condition. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

Employees

As of March 29, 2019, we have 16 full-time and no part-time employees. Our full-time employees work in the following places:

● Five in Huntington, Beach, CA under Conversion Labs, Inc.

● Seven in San Juan, PR under Conversion Labs PR LLC

● Four in San Juan, PR under Legal Simpli Software LLC

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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We are an internet based direct response marketing company that in-licenses, acquires or creates innovative and proprietary products that can be sold to consumers around the world via our technology infrastructure and relationships with agencies, third party marketers, and online advertising platforms such as Facebook and Google. We currently have two commercial stage products and intend to launch an additional four products in 2018. Our leading product, launched in the second quarter of 2017, is a patented shampoo, conditioner, and leave-in foamer for thicker, fuller hair. Our second product, launched in the first quarter of 2018, is a nutritional supplement for immune support.

We launched our online direct marketing business in the fourth quarter of 2015 with the establishment of a partnership with Inate Skincare, LLC (“Inate”). Our initial intention was to launch a skin care line containing our proprietary ingredients and to market such products directly to consumers. The Company entered into a limited liability company operating agreement with its joint venture partners with respect to Inate under the legal name Immudyne PR LLC (“Immudyne PR”). On April 1, 2016, the original operating agreement of Immudyne PR was amended and restated and we increased our ownership and voting interest in Immudyne PR to 78.16667%.

Divestiture of Yeast Beta Glucan Business

Throughout 2017, we manufactured, distributed and sold natural immune support products containing our proprietary yeast beta glucans, a group of beta glucans naturally occurring in the cell walls of yeast that have been shown through testing and analysis to support the immune system. Beta glucans, or β-Glucans, are a natural extract that are considered to be “biological response modifiers” that support the immune system. The most common sources of beta glucans are from the cell walls of baker’s yeast, the cellulose in plants, the bran of cereal grains and certain fungi and bacteria.

In 2017, our yeast beta glucan nutraceutical and cosmetic product lines consisted of our natural, premium yeast beta glucans in oral and topical applications. We offered our yeast beta glucans as natural raw material ingredients in bulk quantities, our “Nutraceutical and Cosmetic Additives” segment, and finished, consumer products packaged under our brands as well as private label brands, our “Finished Cosmetic Products” segment, which were marketed directly to consumers.

In the first quarter of 2018 we sold assets and certain liabilities related to our legacy business that manufactured raw yeast beta glucan. As a result of this divestiture, we solely operate our online direct marketing business owned by Immudyne PR.

We currently have 2 commercial stage products and 2 development stage product in our portfolio. We have several additional products that we intend to in-license in 2018, subject to negotiations and definitive agreements. Generally, our business model is to license or acquire innovative products that address large, global unmet needs which can be placed onto our internet based or “online” direct response marketing platform. All of our products are proprietary and exclusively marketed by Immudyne and our partners. We seek to protect the market position of our products with intellectual property, trade secrets, trademarks and brand equity.

Shapiro MD

The Shapiro MD product line is a unique hair care aid developed to help men & women regain thicker, fuller and healthier looking hair. Shapiro MD Shampoo & Conditioner are the result of 15 years of research and development by thought-leading dermatologists Dr. Steven Shapiro and Dr. Michael Borenstein.

The Shapiro MD product line is protected by two U.S. patents and contains three naturally-occurring dihydrotestosterone (DHT) blocking ingredients. DHT is widely believed to be the main culprit of balding/hair-loss. Clinical research on the ingredients used in Shapiro MD products has been published in prominent scientific journals, including US National Library of Medicine National Institutes of Health, International Journal of Dermatology and European Hair Research Society.

iNR Wellness

iNR Wellness is a daily nutritional supplement that contains yeast, oat, and mushroom beta glucans. Beta glucans, or β-Glucans, are a natural extract considered to be “biological response modifiers” that support the immune system. Our three naturally occurring beta glucans have clinically shown to support the human immune system and are commonly used as an OTC supplement to reduce cholesterol levels, manage blood glucose levels, and support the immune system.

General scientific research on beta glucan derived from yeast cell walls has been conducted in recent years by renowned medical laboratories, including Baylor College of Medicine, U.S. Armed Forces Radiobiology Institute, Stanford University, Southwest Research Institute, and North Carolina State University. As more studies are conducted on beta glucans, we believe the potential benefits to human health will continue to emerge.

Although the Food and Drug Administration (“FDA”) has historically endorsed the consumption of oat glucan/dietary fiber as an aid to lower cholesterol, most of the testing and analysis or scientific research mentioned in this annual report has not been subject to oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or otherwise treating disease. Further, the marketing of beta glucans is not subject to FDA approval, and we are prohibited by Federal Trade Commission (“FTC”) and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

Scarology

Scarology is a scar healing topical solution delivered through a day and night routine. Three essential ingredients work together to achieve dramatic results in appearance and feel. The product is clinically tested and developed by prominent dermatologists. We expect the Scarology product launch in the second quarter of 2018.

None of the testing and analysis or scientific research mentioned in this annual report on Form 10-K has been subject to the oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of our products. Further, our current products are marketed as cosmetics and nutritional supplements, and we are prohibited by FTC and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

Our sales and marketing strategy primarily consists of utilizing our online direct response platform technology to sell the innovative products that we have licensed, acquired or created. Our priority is to build brand recognition across our product lines and actively pursue opportunities to market our products and increase sales.

We leverage the world’s largest social media and online sales platforms such as Google, Facebook and Amazon to capture customers and market health and wellness products globally. Additionally, we sell our products through our own websites at www.inrwellness.com and www.shapiromd.com.

Our expertise in digital marketing allows us to target consumers most likely to purchase our products, serve these consumers an advertisement, and convert these consumers into customers. We plan to combine this highly scalable paid media business model with other direct to consumer approaches such as television, radio and influencer marketing. We also intend to sell our products in retail stores and through physician offices.

We use third party contractors for the manufacturing, encapsulation, bottling and labeling of our personal care and nutritional supplement products. These contractors are certified to produce organic products, subject to regular government inspections, and to the best of our knowledge, comply with current Good Manufacturing Practices and hold the necessary drug manufacturing licenses and processed food registrations required by their respective state regulators.

We sell our products directly to consumers internationally through online channels. Over 90% of consolidated 2017 sales consisted of customers in the U.S. Penetrating international markets is a significant opportunity for the Company’s near-term growth.

Our priority is to maximize the long-term value of each customer through proper pricing strategies, retargeting, customer service and through database management. We have served over 50,000 customers since implementing direct selling strategies into our business model in 2016.

One customer, M.M.P., accounted for 25% of net sales during 2017.

The markets for nutritional supplements and skin care products are highly competitive, consisting of a large number of manufacturers, distributors and retailers, none of which dominates the fragmented and diverse market. The Company's competitors include, among others, Guthy Renker LLC, L'Oréal S.A., Atlantic Coast Media Group, LLC, Hims, Inc. and The Estée Lauder Companies Inc. Some of our competitors are significantly larger than we are, have a longer operating history, higher visibility and brand recognition, and greater financial resources than we do.

We rely primarily on proprietary trade secrets and know-how to operate our online direct response marketing platform. We have two U.S. patents relating to our Shapiro MD products’ method for treatment of hair loss with a combination of natural ingredients.

In order to protect the confidentiality of our intellectual property, including trade secrets, know-how and other proprietary technical and business information, it is our policy to limit access to such information to those who require access in order to perform their functions and to enter into agreements with employees, consultants and vendors to contractually protect such information.

Our business and the manufacturing, distribution and sale of our beta glucan products are regulated in the U.S. primarily by the FDA and the FTC.

The FDA enforces the FDCA and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements and nutraceuticals are regulated as a category of food, not as drugs. We are not required to obtain FDA pre-market approval to sell our products in the United States under current laws.

The FDA imposes GMP guidelines to ensure that dietary supplements are produced in a quality manner, do not contain contaminants or impurities and are accurately labeled. GMPs include requirements for establishing quality control procedures, designing and constructing manufacturing plants, testing ingredients and finished products and record keeping and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, 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. The FTC regulates the advertising of dietary supplements and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In addition to the foregoing, our operations are subject to federal, foreign, state and local government laws and regulations, including those relating to zoning, workplace safety and accommodations for the disabled, and our relationship with our employees is subject to regulations, including minimum wage requirements, anti-discrimination laws, overtime, working conditions and citizenship requirements. We currently do not incur any material costs in connection with our compliance with applicable environmental laws as our manufacturing processes generate minimal discharge. Furthermore, the cost of maintaining compliance with applicable environmental laws has not, and we believe, in the future, will not, have a material adverse effect on our business, results of operations and financial condition. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

Our website address is www.immudyne.com. We do not intend our website address to be an active link or to otherwise incorporate by reference the contents of the website into this Report. The public may read and copy any materials the Company files with the U.S. Securities and Exchange Commission (the “SEC”) at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC maintains an Internet website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Our Company

We manufacture, distribute and sell natural immune support products containing our proprietary yeast beta glucans, a group of beta glucans naturally occurring in the cell walls of yeast that have been shown through testing and analysis to support the immune system. Our products include once a day oral intake tablets and topical creams and gels for skin application. In addition, in the second quarter of 2017, we have launched an in-licensed patented hair loss shampoo and conditioner. We believe, based on testing and analysis conducted by third parties on our behalf, that the beta glucans derived from yeast we manufacture are superior to any other beta glucans available on the market.

Historically, we have sold our proprietary additive, for both oral and topical use, primarily to large dietary supplement and cosmetic companies. During fiscal year 2015, we saw increased interest in our SGM active agent delivery technology, which we believe may have additional beneficial and marketable uses, and on which we are conducting further testing. In addition, during the fourth quarter of 2015, we established a partnership with Inate Skincare, LLC (“Inate”) to launch a complete skin care regimen containing our proprietary ingredients and to market such products directly to consumers. The Company entered into a limited liability company operating agreement with its joint venture partners with respect to Inate under the legal name Immudyne PR LLC (“Immudyne PR”). On April 1, 2016, the original operating agreement of Immudyne PR was amended and restated and we increased our ownership and voting interest in Immudyne PR to 78.16667%. As a result of our ownership and control of Immudyne PR, we now operate in two business segments, nutraceutical and cosmetic additives and finished cosmetic products.

We were originally incorporated under the laws of British Columbia, Canada, in 1987 under the name Anina Resources, Inc. and subsequently changed our name to Immudyne, Inc. and our jurisdiction to the State of Wyoming by continuance in September 1987. On June 30, 1994, we changed our jurisdiction to Delaware by merger with and into Immudyne, Inc., a Delaware corporation formed on June 21, 1994.

None of the testing and analysis or scientific research mentioned in this report has been subject to the oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or otherwise treating disease. Further, the marketing of beta glucans is not subject to FDA approval, and we are prohibited by Federal Trade Commission (“FTC”) and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

Our Products

We have a developed proprietary approach to produce beta glucans derived from yeast which we believe are superior to any other beta glucans on the market. Our yeast beta glucans are odorless and tasteless, making them suitable for use in a wide variety of oral and topical applications, including in our nutraceutical and cosmetic product lines. As the U.S. and international markets become more aware of the value of our proprietary products, we believe demand for our beta glucans will increase.

Beta Glucans

Beta glucans, or β-Glucans, are a natural extract that are considered to be “biological response modifiers” that support the immune system. The most common sources of beta glucans are from the cell walls of baker’s yeast, the cellulose in plants, the bran of cereal grains and certain fungi and bacteria. The differences between beta glucan chemical structures are significant in regards to solubility and overall biological activity. In fact, beta glucans derived from mushrooms and cereals do not appear to have the same effects on human health as beta glucans derived from yeast.

We derive our high-grade beta glucan from yeast cell walls using proprietary processes in our manufacturing facility. Our beta glucan is generally free of yeast by-product and endotoxins, and has demonstrated reliability in terms of both stability and biological response. In fact, we commissioned an analytical side-by-side comparison by a laboratory which conducts testing and analysis of nutraceutical compounds, between our beta glucan and each of the beta glucans manufactured by our two main competitors. The results of the analytical comparison demonstrated the superiority of our beta glucan which was far less impure and more uniform in composition than those of our competitors.

The health benefits of yeast beta glucans have been demonstrated through extensive testing and analysis and scientific research on yeast beta glucans generally, and we are committed to supporting evidence-based studies that demonstrate the health benefits of our products. General scientific research on beta glucan derived from yeast cell walls has been conducted in recent years by renowned medical laboratories, including Baylor College of Medicine, U.S. Armed Forces Radiobiology Institute, Stanford University, Southwest Research Institute, Case Western Reserve University, University of Arkansas, North Carolina State University, University of Bern, Switzerland, and the China Agricultural University, China. As more studies are conducted on beta glucans, we believe the potential benefits to human health will continue to emerge.

Healthcare professionals, including licensed physicians, alternative medicine practitioners, scientists and researchers have taken an interest in our immune-support products as a means of offering alternative or complementary approaches for maintaining a healthy and active lifestyle. These expressions of interest have often resulted in proposals for research studies and recommendations of our products. We plan to build upon this interest and hope to grow our contacts with licensed physicians who utilize our product in a clinical setting and with researchers who have the resources to conduct testing and analysis on our products.

We also have relationships with medical doctors who in the past have conducted self-funded studies in which we supplied our product free of charge, though we do not have any formal clinical development or research agreements with these institutions and doctors. In addition, Dr. Sven Rohmann, PhD is a director of the Company. Dr. Rohmann is a worldwide authority on innate immunity and has an extensive medical and business background, including having spent 10 years with Merck Serono, where he served as the Global Head, Strategic Marketing, Oncology. Dr. Joseph DiTrolio of the Roseland, New Jersey Surgery Center and St. George’s University School of Medicine is also a director of the Company. Dr. Allan Whitberg, previously of Roger Williams Medical Center in Providence, Rhode Island and currently affiliated with Boston University School of Medicine, and Dr. Stephen Petteruti of The Petteruti Center For Life Extension in Warwick, RI, are among the medical doctors with whom we have relationships and who have conducted self-funded studies on our product. We also have established a relationship with National Jewish Health in Denver, Colorado and we are exploring additional opportunities to have further studies conducted at leading institutions. We have also established a partnership with the leading physicians of the Stone Center of New Jersey to educate patients about the benefits of supplementing their chemotherapy and radiation treatments with our yeast-beta glucan products.

To be sure, none of the testing and analysis or scientific research mentioned in this annual report has been subject to oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or otherwise treating disease. Further, the marketing of beta glucans is not subject to FDA approval, and we are prohibited by FTC and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

Yeast Beta Glucan Product Lines

Our nutraceutical and cosmetic product lines consist of our natural, premium yeast beta glucans in oral and topical applications. We offer our yeast beta glucans as natural raw material ingredients in bulk quantities, our “Nutraceutical and Cosmetic Additives” segment, and finished, consumer products packaged under our brands as well as private label brands, our “Finished Cosmetic Products” segment, which are marketed directly to consumers. We have also launched an in-licensed patented hair loss shampoo and conditioner called ShapiroMD in the second quarter of 2017.

Our principal, branded nutraceutical and cosmetic products for our yeast beta glucans are oral daily supplements and topical lines of rejuvenating serums and creams. Our oral supplements are dietary supplements containing proprietary combinations of our yeast beta glucan to support immune system function. Our skin care serums and creams consist of our patented yeast-derived beta glucan and other natural ingredients intended to support the skin’s immune system response and defense, skin renewal and to repair sun and environmental damage.

Sales and Marketing

We have performance based contracts with our sales and marketing executives, which allows us to continue to maintain a relatively low overhead. Our priority is to actively pursue opportunities to market our products and increase sales. Our sales and marketing strategy primarily consists of building the brand recognition of our product lines and our proprietary yeast beta glucans. We plan to sell our products primarily on a word-of-mouth basis through distributors and our website as standalone product lines, as well as business-to-business as a cosmetic enhancement or dietary supplement.

Our principal products are consumables with the goal of generating a stream of repeat sales with the same end customers over an extended period of time. To reach these customers, our marketing strategy includes several online sales promotions. In addition, we are building our brand recognition with healthcare professionals through further testing and analysis of our products and educating practitioners and clinics on the benefits of our products.

We also market out products direct to consumers through our joint venture with Inate established in October 2015 and through which we intend to develop, launch and market additional SKU’s based on our proprietary beta glucans. Inate benefits from a leadership team that has deep experience in the direct marketing space and a proven track record in creating national brands.

Manufacturing and Sourcing

We have focused on the production of immune system support compounds including our beta glucans derived from yeast for over 20 years. Our staff produces consistently high-grade, particulate and reliable beta glucans which are included in our nutraceutical and cosmetic product lines. For certain of our packaged consumer goods, we use third party contractors for encapsulation, bottling and labeling. These contractors are subject to regular government inspections, and to the best of our knowledge, comply with current GMPs and hold the necessary drug manufacturing licenses and processed food registrations required by their respective state regulators. Such packaging services are readily available from multiple sources.

The raw materials necessary to manufacture our beta glucans principally consist of baker’s yeast and are common and readily available. We hold our suppliers to strict quality and delivery specifications as part of our GMP compliance and quality control procedures, including quality assurance of raw materials used in the production of our products.

Our beta glucan products and manufacturing processes are protected by registered and pending patents and trade secrets. Our manufacturing facilities and practices are compliant with published current GMPs established by the FDA for dietary supplements.

Customers

We sell our products direct to consumers and to pharmaceutical, nutraceutical and consumer product companies principally in the U.S. market, but also have generated sales in Canada. We focus on establishing and growing long-term relationships with our customers, and we believe that the majority of our customers and partners view us as a strategic long-term supplier and value the quality of our beta glucan products. Our sales through distributors typically are made pursuant to supplier agreements executed in the ordinary course of business with individual orders made on purchase orders. As we have sought to expand our sales, we have marketed our nutraceutical and cosmetic product lines through distributors, partnerships, and direct sales to consumers. We do not anticipate a seasonality of sales.

Our largest customer, Michel Mercier Products, Inc. (d/b/a M.M.P, Inc.), accounted for 15% of our consolidated sales in 2016 and 73% our consolidated sales in 2015. Our second largest customer accounted for 2% of our consolidated sales in 2016 and 12% our consolidated sales in 2015. The remainder of our consolidated sales were attributable to our finished cosmetic products segment and which sales were made through our joint venture with Inate, which sales are decreasing our reliance on MMP.

Competition

The markets for nutritional supplements and skin care products are highly competitive, consisting of a large number of manufacturers, distributors and retailers, none of which dominates the fragmented and diverse market. We compete for sales direct to consumers, through distributors and business-to-business.

Although we believe, based on testing and analysis by third parties on our behalf, that our yeast beta glucan is superior to others available on the market, we compete with other companies manufacturing beta glucans from yeast and other sources as well as companies producing other food ingredients and nutritional supplements for human use. Many end consumers may consider such products to be a replacement for the products we manufacture and distribute. Many of our competitors have greater marketing, research and capital resources than us, and may be able to offer their products at lower costs because of their greater purchasing power or lower cost of raw materials and manufacturing.

We anticipate continuing to expand our sales on a meaningful basis as part of our new marketing strategy focusing on our nutraceutical and cosmetic product lines. We anticipate competing in these markets on the basis of quality, our proprietary manufacturing processes, research data and effective marketing campaigns promoting the benefits of our natural immune support products. There are no assurances that our products will be able to compete in these markets, however, or that our marketing strategy will be successful.

Intellectual Property

We rely primarily on proprietary trade secret know how and protect our intellectual property and maintain our competitive position in the marketplace. We maintain trademarks registered in the U.S. for our business name and related to our product brands. In addition, we have registered and maintain internet domain names related to our businesses, including “immudyne.com.”

Governmental and Environmental Regulation

Our business and the manufacturing, distribution and sale of our beta glucan products are regulated in the U.S. primarily by the FDA and the FTC.

The FDA enforces the FDCA and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements and nutraceuticals are regulated as a category of food, not as drugs. The FDA classifies “Yeast extract (Bakers)” as generally recognized as safe (GRAS), which substances by definition are not food additives. Most GRAS substances have no quantitative restrictions as to use, although their use must conform to current GMPs. The FDA promulgates GMP guidelines to ensure that dietary supplements are produced in a quality manner, do not contain contaminants or impurities and are accurately labeled. GMPs include requirements for establishing quality control procedures, designing and constructing manufacturing plants, testing ingredients and finished products and record keeping and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, 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. The FTC regulates the advertising of dietary supplements and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Yeast beta glucans are classified as GRAS by the FDA and our oral and topical-use product lines containing our yeast beta glucan are marketed as dietary supplements and cosmetics, respectively. Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In the EU markets, the European Food Safety Authority (“EFSA”), an advisory panel to the European Commission, performs all scientific assessments of health claims on food and supplement labels. The European Commission will consider the opinions of EFSA in determining whether to include a health claim on a list of permissible claims. Once published, only health claims for ingredients and products included on the list may be used in promotional materials for products marketed and sold in the European Union. The marketability of our products may be limited as we look to expand our sales in the EU if the health claims of our products are not included on the list.

In addition to the foregoing, our operations are subject to federal, foreign, state and local government laws and regulations, including those relating to zoning, workplace safety and accommodations for the disabled, and our relationship with our employees is subject to regulations, including minimum wage requirements, anti-discrimination laws, overtime, working conditions and citizenship requirements. We currently do not incur any material costs in connection with our compliance with applicable environmental laws as our manufacturing processes generate minimal discharge. Furthermore, the cost of maintaining compliance with applicable environmental laws has not, and we believe, in the future, will not, have a material adverse effect on our business, results of operations and financial condition. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

Employees

As of December 31, 2016, we had 11 employees, as well as numerous part-time employees and additional full-time consultants worldwide. All employees and our officers and directors are eligible to participate in our group health and dental insurance plans.

Website Access Disclosure

Our internet website address is http://www.immudyne.com. We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”).

We manufacture, distribute and sell natural immune support products containing our proprietary yeast beta glucans, a group of beta glucans naturally occurring in the cell walls of yeast that have been shown through testing and analysis to support the immune system. Our products include once a day oral intake tablets and topical creams and gels for skin application. We believe, based on testing and analysis conducted by third parties on our behalf, that the beta glucans derived from yeast we manufacture are superior to any other beta glucans available on the market.

Historically, we have sold our proprietary additive, for both oral and topical use, primarily to large dietary supplement and cosmetic companies. During fiscal year 2015 we saw increased interest in our SGM active agent delivery technology, which we believe may have additional beneficial and marketable uses, and on which we are conducting further testing. In addition, during the fourth quarter of 2015, we established a partnership with Innate Skincare, LLC (“Innate Scientific”) to launch a complete skin care regimen containing our proprietary ingredients. We expect this partnership will be a meaningful contributor to our revenues in the 2016 fiscal year.

We were originally incorporated under the laws of British Columbia, Canada, in 1987 under the name Anina Resources, Inc. and subsequently changed our name to Immudyne, Inc. and our jurisdiction to the State of Wyoming by continuance in September 1987. On June 30, 1994, we changed our jurisdiction to Delaware by merger with and into Immudyne, Inc., a Delaware corporation formed on June 21, 1994.

None of the testing and analysis or scientific research mentioned in this report has been subject to the oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or otherwise treating disease. Further, the marketing of beta glucans is not subject to FDA approval, and we are prohibited by Federal Trade Commission (“FTC”) and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

We have a developed proprietary approach to produce beta glucans derived from yeast which we believe are superior to any other beta glucans on the market. Our yeast beta glucans are odorless and tasteless, making them suitable for use in a wide variety of oral and topical applications, including in our nutraceutical and cosmetic product lines. As the U.S. and international markets become more aware of the value of our proprietary products, we believe demand for our beta glucans will increase.

Beta Glucans

Beta glucans, or β-Glucans, are a natural extract that are considered to be “biological response modifiers” that support the immune system. The most common sources of beta glucans are from the cell walls of baker’s yeast, the cellulose in plants, the bran of cereal grains and certain fungi and bacteria. The differences between beta glucan chemical structures are significant in regards to solubility and overall biological activity. In fact, beta glucans derived from mushrooms and cereals do not appear to have the same effects on human health as beta glucans derived from yeast.

We derive our high-grade beta glucan from yeast cell walls using proprietary processes in our manufacturing facility. Our beta glucan is generally free of yeast by-product and endotoxins, and has demonstrated reliability in terms of both stability and biological response. In fact, we commissioned an analytical side-by-side comparison by a laboratory which conducts testing and analysis of nutraceutical compounds, between our beta glucan and each of the beta glucans manufactured by our two main competitors. The results of the analytical comparison demonstrated the superiority of our beta glucan which was far less impure and more uniform in composition than those of our competitors.

The health benefits of yeast beta glucans have been demonstrated through extensive testing and analysis and scientific research on yeast beta glucans generally, and we are committed to supporting evidence-based studies that demonstrate the health benefits of our products. General scientific research on beta glucan derived from yeast cell walls has been conducted in recent years by renowned medical laboratories, including Baylor College of Medicine, U.S. Armed Forces Radiobiology Institute, Stanford University, Southwest Research Institute, Case Western Reserve University, University of Arkansas, North Carolina State University, University of Bern, Switzerland, and the China Agricultural University, China. As more studies are conducted on beta glucans, we believe the potential benefits to human health will continue to emerge.

Healthcare professionals, including licensed physicians, alternative medicine practitioners, scientists and researchers have taken an interest in our immune-support products as a means of offering alternative or complementary approaches for maintaining a healthy and active lifestyle. These expressions of interest have often resulted in proposals for research studies and recommendations of our products. We plan to build upon this interest and hope to grow our contacts with licensed physicians who utilize our product in a clinical setting and with researchers who have the resources to conduct testing and analysis on our products.

We also have relationships with medical doctors who in the past have conducted self-funded studies in which we supplied our product free of charge, though we do not have any formal clinical development or research agreements with these institutions and doctors. In addition, Dr. Sven Rohmann, PhD is our Global Chief Medical Officer and a director of the Company. Dr. Rohmann is a worldwide authority on innate immunity and has an extensive medical and business background, including having spent 10 years with Merck Serono, where he served as the Global Head, Strategic Marketing, Oncology. Dr. Joseph DiTrolio of the Roseland, New Jersey Surgery Center and St. George’s University School of Medicine is also a director of the Company. Dr. Allan Whitberg, previously of Roger Williams Medical Center in Providence, Rhode Island and currently affiliated with Boston University School of Medicine, and Dr. Stephen Petteruti of The Petteruti Center For Life Extension in Warwick, RI, are among the medical doctors with whom we have relationships and who have conducted self-funded studies on our product. We also have established a relationship with National Jewish Health in Denver, Colorado and we are exploring additional opportunities to have further studies conducted at leading institutions. We have also established a partnership with the leading physicians of the Stone Center of New Jersey to educate patients about the benefits of supplementing their chemotherapy and radiation treatments with our yeast-beta glucan products.

To be sure, none of the testing and analysis or scientific research mentioned in this annual report has been subject to oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or otherwise treating disease. Further, the marketing of beta glucans is not subject to FDA approval, and we are prohibited by FTC and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

Yeast Beta Glucan Product Lines

Our nutraceutical and cosmetic product lines consist of our natural, premium yeast beta glucans in oral and topical applications. We offer our yeast beta glucans as natural raw material ingredients in bulk quantities, our “Nutraceutical and Cosmetic Additives” segment, and finished, consumer products packaged under our brands as well as private label brands, our “Finished Nutraceutical and Cosmetic Products” segment.

Our principal, branded nutraceutical and cosmetic products for our yeast beta glucans are oral daily supplements and topical lines of rejuvenating serums and creams. Our oral supplements are dietary supplements containing proprietary combinations of our yeast beta glucan to support immune system function. Our skin care serums and creams consist of our patented yeast-derived beta glucan and other natural ingredients intended to support the skin’s immune system response and defense, skin renewal and to repair sun and environmental damage.

We have performance based contracts with our sales and marketing executives, which allows us to continue to maintain a relatively low overhead. Our priority is to actively pursue opportunities to market our products and increase sales. Our sales and marketing strategy primarily consists of building the brand recognition of our product lines and our proprietary yeast beta glucans. We plan to sell our products primarily on a word-of-mouth basis through distributors and our website as standalone product lines, as well as business-to-business as a cosmetic enhancement or dietary supplement.

Our principal products are consumables that can generate a stream of repeat sales with the same end customers over an extended period, providing significant lifetime value for each customer gained. To reach these customers, our marketing strategy includes several online sales promotions. In addition, we intend to build our brand recognition with healthcare professionals through further testing and analysis of our products and educating practitioners and clinics on the benefits of our products.

We also market out products direct to consumers through our joint venture with Innate Scientific established in October 2015 and through which we intend to develop, launch and market additional SKU’s based on our proprietary beta glucans. Innate Scientific benefits from a leadership team that has deep experience in the direct marketing space and a proven track record in creating national brands. We currently own a 33.33% economic interest and a 51% voting interest in Innate Scientific, and are in discussions to increase our economic and voting interest to over 70% in the near term, although no assurances can be made that these discussions will lead to such an increase.

We have focused on the production of immune system support compounds including our beta glucans derived from yeast for over 20 years. Our staff produces consistently high-grade, particulate and reliable beta glucans which are included in our nutraceutical and cosmetic product lines. For certain of our packaged consumer goods, we use third party contractors for encapsulation, bottling and labeling. These contractors are subject to regular government inspections, and to the best of our knowledge, comply with current GMPs and hold the necessary drug manufacturing licenses and processed food registrations required by their respective state regulators. Such packaging services are readily available from multiple sources.

The raw materials necessary to manufacture our beta glucans principally consist of baker’s yeast and are common and readily available. We hold our suppliers to strict quality and delivery specifications as part of our GMP compliance and quality control procedures, including quality assurance of raw materials used in the production of our products.

Our beta glucan products and manufacturing processes are protected by registered and pending patents and trade secrets. Our manufacturing facilities and practices are compliant with published current GMPs established by the FDA for dietary supplements.

We sell our products direct to consumers and to pharmaceutical, nutraceutical and consumer product companies in the U.S. market. We focus on establishing and growing long-term relationships with our customers, and we believe that the majority of our customers and partners view us as a strategic long-term supplier and value the quality of our beta glucan products. Our sales through distributors typically are made pursuant to supplier agreements executed in the ordinary course of business with individual orders made on purchase orders.

As we have sought to expand our sales, we have marketed our nutraceutical and cosmetic product lines through distributors, partnerships, and direct sales to consumers. We do not anticipate a seasonality of sales.

Our largest customer, Michel Mercier Products, Inc. (d/b/a M.M.P, Inc.), accounted for 73% of our consolidated sales in 2015 and 79% our consolidated sales in 2014. Our second largest customer accounted for 12% of our consolidated sales in 2015 and 12% our consolidated sales in 2014. The remainder of our consolidated sales in 2015 were attributable to our finished cosmetic products segment and which sales were made through our joint venture with Innate Scientific.

The markets for nutritional supplements and skin care products are highly competitive, consisting of a large number of manufacturers, distributors and retailers, none of which dominates the fragmented and diverse market. We compete for sales direct to consumers, through distributors and business-to-business.

Although we believe, based on testing and analysis by third parties on our behalf, that our yeast beta glucan is superior to others available on the market, we compete with other companies manufacturing beta glucans from yeast and other sources as well as companies producing other food ingredients and nutritional supplements for human use. Many end consumers may consider such products to be a replacement for the products we manufacture and distribute. Many of our competitors have greater marketing, research and capital resources than us, and may be able to offer their products at lower costs because of their greater purchasing power or lower cost of raw materials and manufacturing.

We anticipate expanding our sales on a meaningful basis as part of our new marketing strategy focusing on our nutraceutical and cosmetic product lines. We anticipate competing in these markets on the basis of quality, our proprietary manufacturing processes, research data and effective marketing campaigns promoting the benefits of our natural immune support products. There are no assurances that our products will be able to compete in these markets, however, or that our marketing strategy will be successful.

We rely primarily on proprietary trade secret know how and protect our intellectual property and maintain our competitive position in the marketplace. We have several use, process and provisional patents, and intend to apply for additional patents in 2016 as new products, uses and manufacturing processes are developed. We maintain trademarks registered in the U.S. for our business name and related to our product brands. In addition, we have registered and maintain internet domain names related to our businesses, including “immudyne.com.”

Our expertise for many years has been in the enhancement of efficient, stable and cost-effective production systems for beta glucan products derived from yeast. In 2015 we incurred research and development expenses of approximately $24,000. We currently are conducting research and development on our topical products through a partnership with BIO-EC (France), as well as a separate ongoing study in the United States on a unique application of our existing products. We plan to disclose the results of these studies during 2016 as the data becomes available.

Our business and the manufacturing, distribution and sale of our beta glucan products are regulated in the U.S. primarily by the FDA and the FTC.

The FDA enforces the FDCA and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements and nutraceuticals are regulated as a category of food, not as drugs. The FDA classifies “Yeast extract (Bakers)” as generally recognized as safe (GRAS), which substances by definition are not food additives. Most GRAS substances have no quantitative restrictions as to use, although their use must conform to current GMPs. The FDA promulgates GMP guidelines to ensure that dietary supplements are produced in a quality manner, do not contain contaminants or impurities and are accurately labeled. GMPs include requirements for establishing quality control procedures, designing and constructing manufacturing plants, testing ingredients and finished products and record keeping and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, 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. The FTC regulates the advertising of dietary supplements and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Yeast beta glucans are classified as GRAS by the FDA and our oral and topical-use product lines containing our yeast beta glucan are marketed as dietary supplements and cosmetics, respectively. Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In the EU markets, the European Food Safety Authority (“EFSA”), an advisory panel to the European Commission, performs all scientific assessments of health claims on food and supplement labels. The European Commission will consider the opinions of EFSA in determining whether to include a health claim on a list of permissible claims. Once published, only health claims for ingredients and products included on the list may be used in promotional materials for products marketed and sold in the European Union. The marketability of our products may be limited as we look to expand our sales in the EU if the health claims of our products are not included on the list.

In addition to the foregoing, our operations are subject to federal, foreign, state and local government laws and regulations, including those relating to zoning, workplace safety and accommodations for the disabled, and our relationship with our employees is subject to regulations, including minimum wage requirements, anti-discrimination laws, overtime, working conditions and citizenship requirements. We currently do not incur any material costs in connection with our compliance with applicable environmental laws as our manufacturing processes generate minimal discharge. Furthermore, the cost of maintaining compliance with applicable environmental laws has not, and we believe, in the future, will not, have a material adverse effect on our business, results of operations and financial condition. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

As of December 31, 2015, we had 4 employees, as well as part-time employees and numerous additional consultants worldwide. All employees and our officers and directors are eligible to participate in our group health and dental insurance plans.

Our internet website address is http://www.immudyne.com. We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”).

We manufacture, distribute and sell natural immune support products; namely proprietary yeast beta glucans which are natural extracts that have been shown through testing and analysis and scientific research to support the immune system. We believe, based on testing and analysis conducted by third parties on our behalf, that the beta glucans derived from yeast we manufacture are superior to any other beta glucans on the market.

Our beta glucan products and manufacturing processes are protected by patents and trade secrets, and we believe we are compliant with current good manufacturing practices (“GMPs”). Further, yeast beta glucans are classified as generally recognized as safe (“GRAS”) by the Food and Drug Administration (“FDA”). Historically, we have sold our proprietary additives, for both oral and topical use, primarily via business-to-business to large dietary supplement and cosmetic companies. We have also sold our own standalone product lines primarily on a word-of-mouth basis and through our website.

Our plans are to commercialize sales of our products on a more meaningful, global basis. We hired three senior marketing executives late in the fourth quarter of 2014 (and early in 2015). We have performance based contracts with these executives, which allow us to continue to maintain a relatively low overhead. Our priority is to actively pursue opportunities to market our products and increase sales.

We originally incorporated under the laws of British Columbia, Canada, in 1987 under the name Anina Resources, Inc. and subsequently changed our name to Immudyne, Inc. and our jurisdiction to the State of Wyoming by continuance in September 1987. On June 30, 1994, we changed our jurisdiction to Delaware by merger with and into Immudyne, Inc., a Delaware corporation formed on June 21, 1994.

None of the testing and analysis or scientific research mentioned in this report has been subject to the oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or otherwise treating disease. Further, the marketing of beta glucans is not subject to FDA approval, and we are prohibited by Federal Trade Commission (“FTC”) and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

We have a developed proprietary approach to produce what we believe to be superior beta glucans derived from yeast. Our yeast beta glucans are odorless and tasteless, making them suitable for use in a wide variety of oral and topical applications, including in our nutraceutical and cosmetic product lines. As the U.S. and international markets become more aware of the value of our proprietary products, we believe demand for our beta glucans will increase.

Our sales and marketing efforts are now concentrated on our oral (nutraceutical) and topical-use (cosmetic) products for the strategic additive market, as well as our own lines to healthcare professionals, distributors and direct-to-consumer sales.

Beta Glucans

Beta glucans, or β-Glucans, are a natural extract that are considered to be “biological response modifiers” that support the immune system. The most common sources of beta glucans are from the cell walls of baker’s yeast, the cellulose in plants, the bran of cereal grains and certain fungi and bacteria. The differences between beta glucan chemical structures are significant in regards to solubility and overall biological activity. In fact, beta glucans derived from mushrooms and cereals do not appear to have the same effects on human health as beta glucans derived from yeast.

We derive our high-grade beta glucan from yeast cell walls using proprietary processes in our manufacturing facility. Our beta glucan is generally free of yeast by-product and endotoxins, and has demonstrated reliability in terms of both stability and biological response. In fact, we commissioned an analytical side-by-side comparison by a laboratory which conducts testing and analysis of nutraceutical compounds, between our beta glucan and each of the beta glucans manufactured by our two main competitors. The results of the analytical comparison demonstrated the superiority of our beta glucan which was far less impure and more uniform in composition than those of our competitors.

The health benefits of yeast beta glucans have been demonstrated through extensive testing and analysis and scientific research on yeast beta glucans generally, and we are committed to supporting evidence-based studies that demonstrate the health benefits of our products. Scientific research on beta glucan derived from yeast cell walls has been conducted over the years by renowned medical laboratories, including Roger Williams University, Boston University, The Stone Center, Baylor College of Medicine, U.S. Armed Forces Radiobiology Institute, Stanford University, Southwest Research Institute, Case Western Reserve University, University of Arkansas, North Carolina State University, University of Bern, Switzerland, and the China Agricultural University, China. As more studies are conducted on beta glucans, the potential benefits to human health continue to emerge.

In fact, in two studies reviewed in an article published in the Japanese Journal Society Terminal Systemic Diseases in 2000, participants ingesting our yeast beta glucan showed a decreased reoccurrence of cancer in cancer remission patients and increased survival rates in terminally-ill cancer patients. In addition, female study participants testing the effect of our yeast beta glucan in topical applications saw a significant reduction in the number and intensity of skin wrinkles over the eight-week study. We presented the results of these and other studies supporting the efficacy of our products at the BIO-Europe global biotechnology conference in November 2010 and World Immune Regulator Meeting in Davos, Switzerland, in March 2012.

Healthcare professionals, including licensed physicians, alternative medicine practitioners, scientists and researchers have taken an interest in our immune-support products as a means of offering alternative or complementary approaches for maintaining a healthy and active lifestyle. These expressions of interest have often resulted in proposals for research studies and recommendations of our products. We plan to build upon this interest and hope to grow our contacts with licensed physicians who utilize our product in a clinical setting and with researchers who have the resources to conduct testing and analysis on our products.

We also have relationships with medical doctors who in the past have conducted self-funded studies in which we supplied our product free of charge. However, we do not have any formal clinical development or research agreements with these institutions and doctors. Dr. Sven Rohmann, PhD is our Global Chief Medical Officer. Dr. Rohmann is a worldwide authority on innate immunity. Dr. Rohmann has an extensive medical and business background, including having spent 10 years with Merck Serono, where he served as the Global Head, Strategic Marketing, Oncology. Dr. Joseph DiTrolio of the Roseland, New Jersey Surgery Center and St. George’s University School of Medicine and also a director of the Company, Dr. Allan Whitberg, previously of Roger Williams Medical Center in Providence, Rhode Island and currently affiliated with Boston University School of Medicine, and Dr. Stephen Petteruti of The Petteruti Center For Life Extension in Warwick, RI, are among the medical doctors with whom we have relationships and who have conducted self-funded studies on our product. We also have established a relationship with National Jewish Health in Denver, Colorado and we have additional opportunities to have further studies conducted at leading institutions. We have also established a partnership with the leading physicians of the Stone Center of New Jersey to educate patients about the benefits of supplementing their chemotherapy and radiation treatments with our yeast-beta glucan products.

To be sure, none of the testing and analysis or scientific research mentioned in this annual report has been subject to oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or otherwise treating disease. Further, the marketing of beta glucans is not subject to FDA approval, and we are prohibited by FTC and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

Yeast Beta Glucan Product Lines

Our nutraceutical and cosmetic product lines consist of our natural, premium yeast beta glucans in oral and topical applications. Nutraceuticals are plant-derived products, such as our yeast beta glucans, with pharmaceutical-like properties that have biologically-therapeutic effects in humans in addition to the basic nutritional value found in foods. We offer our yeast beta glucans as natural raw material ingredients in bulk quantities and finished, consumer products packaged under our brands and private label brands. The FDA has classified yeast beta glucans as GRAS.

Our principal, branded lines of daily oral supplements are dietary supplements containing proprietary combinations of our yeast beta glucan to support immune system function. Our topical rejuvinating serums and creams consist of our patented yeast-derived beta glucan and other natural ingredients intended to support the skin’s immune system response and defense, skin renewal and repair of sun and environmental damage.

We hired three senior marketing executives late in the fourth quarter of 2014 (and early in 2015). We have performance based contracts with these executives, allowing us to continue to maintain a relatively low overhead. Our priority is to actively pursue opportunities to market our products and increase sales.

Our sales and marketing strategy primarily consists of building the brand recognition of our product lines and our proprietary yeast beta glucans. We plan to sell our products primarily on a word-of-mouth basis through distributors and our website as standalone product lines, as well as business-to-business as a cosmetic enhancement or dietary supplement.

Our principal products are consumables that can generate a stream of repeat sales with the same end customers over an extended period, providing significant lifetime value for each customer gained. To reach these customers, our marketing strategy includes online sales promotions through our website, an affiliate sales program, trade advertising, consumer research and search engine and digital advertising. In addition, we intend to build our brand recognition with healthcare professionals through further testing and analysis of our products and by providing practitioners and clinics with education and support. We believe that the recommendation of our products by healthcare professionals to their patients provides the best possible endorsement.

We also have marketed our products by presenting at international biotechnology and alternative medicine conferences and through nutraceutical industry associations and tradeshows. Notably, we presented the outcome of our cancer studies at the World Immune Regulator Meeting in Davos, Switzerland in 2012. The special focus of the meeting was on innate and adaptive immune response and the role of tissues in immune regulation. Previously, we presented the results of the studies demonstrating the efficacy of our yeast beta glucan in terminally ill cancer patients and cancer remission patients at the BIO-Europe biotechnology partnership conference in Munich, Germany.

We have focused on the production of immune system support compounds including our beta glucans derived from yeast for over 20 years. Our staff produces consistently high-grade, particulate and reliable beta glucan, included in our nutraceutical and cosmetic product lines, in our Kentucky-based production plant. For certain of our packaged consumer goods, we use third party contractors for encapsulation, bottling and labeling. These contractors are subject to regular government inspections, and to the best of our knowledge, comply with current GMPs and hold the necessary drug manufacturing licenses and processed food registrations required by their respective state regulators. Such packaging services are readily available from multiple sources.

The raw materials necessary to manufacture beta glucans in our Kentucky plant, principally consisting of baker’s yeast, are common and readily available. Our principal suppliers are the Lesaffre Group and Brenntag Group. We hold our suppliers to strict quality and delivery specifications as part of our GMP compliance and quality control procedures, including quality assurance of raw materials used in the production of our products.

Our beta glucan products and manufacturing processes are protected by registered and pending patents and trade secrets. We believe our manufacturing facilities and practices are compliant with published current GMPs established by the FDA for dietary supplements.

We sell our products direct to consumers and to pharmaceutical, nutraceutical and consumer product companies in the U.S. market. We plan to expand our sales to the international market. We focus on establishing and growing long-term relationships with our customers, and we believe that the majority of our customers view us as a strategic long-term supplier and value the quality of our beta glucan products. Our sales through distributors typically are made pursuant to supplier agreements executed in the ordinary course of business with individual orders made on purchase orders.

As we have sought to expand our U.S. and global sales, we have marketed our nutraceutical and cosmetic product lines as a raw material ingredient available in bulk quantities and finished, consumer products packaged under our brands and private label brands. We anticipate that our customer mix will change accordingly to include more sales through distributors, and our planned affiliate program, and direct sales to consumers. We also encourage nutriceutical and nutricosmetic manufacturers and formulators purchasing our beta glucans as all-natural raw material ingredients to identify and promote our brand in their products. As our principal products are consumables that typically generate repeat sales streams with the same end customers over an extended period, we historically have not experienced seasonality of sales.

Our largest customer, Michel Mercier Products, Inc. (d/b/a M.M.P, Inc.), accounted for 79% our sales in 2014 and 77% of our sales in 2013. Our second largest customer accounted for 12% our sales in 2014 and 9% of our sales in 2013.

The markets for nutritional supplements and skin care products are highly competitive, consisting of a large number of manufacturers, distributors and retailers, none of which dominates the fragmented and diverse market. We compete for sales direct to consumers, through distributors and business-to-business.

Although we believe, based on testing and analysis by third parties on our behalf, that our yeast beta glucan is superior, we compete with other companies manufacturing beta glucans from yeast and other sources as well as companies producing other food ingredients and nutritional supplements for human use. Many end consumers may consider such products to be a replacement for the products we manufacture and distribute. Many of our competitors have greater marketing, research and capital resources than us, and may be able to offer their products at lower costs because of their greater purchasing power or lower cost of raw materials and manufacturing.

We anticipate expanding our sales on a meaningful basis as part of our new marketing strategy focusing on our nutraceutical and cosmetic product lines. We anticipate competing in these markets on the basis of quality, our proprietary manufacturing processes, research data and effective marketing campaigns promoting the benefits of our natural immune support products. There are no assurances that our products will be able to compete in these markets, however, or that our marketing strategy will be successful.

We rely on the patent and trademark protection laws in the U.S., and trade secrets which are not protected by patents, to protect our intellectual property and maintain our competitive position in the marketplace. We have nine registered U.S. patents, consisting of both use and process patents, with expiration dates ranging from 2015 to 2026. Additionally, we currently have filed four new provisional patents, and we intend to apply for additional patents in the future as new products, uses and manufacturing processes are developed. We maintain trademarks registered in the U.S. for our business name and related to our product brands. In addition, we have registered and maintain internet domain names related to our business, including “immudyne.com.” Collectively, the patents, trademarks and domain names that we hold are of material importance to us. However, at this time we may not be able to adequately defend our intellectual property rights due to our lack of financial resources, though, to date, we have no knowledge of any infringement of our intellectual property.

Our expertise for many years has been in the enhancement of efficient, stable and cost-effective production systems for beta glucan products derived from yeast. While we have not incurred any research and development expenses in our last two fiscal years, we may increase future investments to establish the scientific basis for health claims of our existing products and to develop new products and applications based on our growth and available capital.

Our business and the manufacturing, distribution and sale of our beta glucan products are regulated in the U.S. primarily by the FDA and the FTC.

The FDA enforces the FDCA and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements and nutraceuticals are regulated as a category of food, not as drugs. The FDA classifies “Yeast extract (Bakers)” as GRAS, which substances by definition are not food additives. Most GRAS substances have no quantitative restrictions as to use, although their use must conform to current GMPs. The FDA promulgates GMP guidelines to ensure that dietary supplements are produced in a quality manner, do not contain contaminants or impurities and are accurately labeled. GMPs include requirements for establishing quality control procedures, designing and constructing manufacturing plants, testing ingredients and finished products and record keeping and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, 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. The FTC regulates the advertising of dietary supplements and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Yeast beta glucans are classified as GRAS by the FDA and our oral and topical-use product lines containing our yeast beta glucan are marketed as dietary supplements and cosmetics, respectively. Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In the EU markets, the European Food Safety Authority (“EFSA”), an advisory panel to the European Commission, performs all scientific assessments of health claims on food and supplement labels. The European Commission will consider the opinions of EFSA in determining whether to include a health claim on a list of permissible claims. Once published, only health claims for ingredients and products included on the list may be used in promotional materials for products marketed and sold in the European Union. The marketability of our products may be limited as we look to expand our sales in the EU if the health claims of our products are not included on the list.

In addition to the foregoing, our operations are subject to federal, foreign, state and local government laws and regulations, including those relating to zoning, workplace safety and accommodations for the disabled, and our relationship with our employees is subject to regulations, including minimum wage requirements, anti-discrimination laws, overtime, working conditions and citizenship requirements. We currently do not incur any material costs in connection with our compliance with applicable environmental laws as our manufacturing processes generate minimal discharge. Furthermore, the cost of maintaining compliance with applicable environmental laws has not, and we believe, in the future, will not, have a material adverse effect on our business, results of operations and financial condition. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

As of December 31, 2014, we had 3 full-time employees, 13 part-time employees and additional consultants worldwide. We outsource many of our product marketing activities to consultants who provide services to us on a project basis. We believe that relations with our employees are satisfactory. We have no collective bargaining agreements with our employees. All full-time employees and our officers and directors are eligible to participate in our group health and dental insurance plans.

Our internet website address is http://www.immudyne.com. We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”).

We manufacture, distribute and sell natural immune support products. Our primary products consist of oral dietary supplements and cosmetic serums that contain our proprietary yeast beta glucans. Beta glucans are a natural extract that has been shown through testing and analysis and scientific research to support the immune system.

We believe, based on testing and analysis conducted by third parties on our behalf, that the beta glucans derived from yeast we manufacture are superior to other beta glucans on the market.

Our beta glucan products and manufacturing processes are protected by patents and trade secrets, and are compliant with current good manufacturing practices (“GMPs”). Further, yeast beta glucans are classified as generally recognized as safe (“GRAS”) by the Food and Drug Administration (“FDA”). We sell our products primarily on a word-of-mouth basis through physician networks, distributors and through our website. We believe that we can continue to commercialize sales of these products on a more meaningful, global basis.

We originally incorporated under the laws of British Columbia, Canada, in 1987 under the name Anina Resources, Inc. and subsequently changed our name to Immudyne, Inc. and our jurisdiction to the State of Wyoming by continuance in September 1987. On June 30, 1994, we changed our jurisdiction to Delaware by merger with and into Immudyne, Inc., a Delaware corporation formed on June 21, 1994.

None of the testing and analysis or scientific research mentioned in this report has been subject to the oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or otherwise treating disease. Further, the marketing of beta glucans are not subject to FDA approval, and we are prohibited by Federal Trade Commission (“FTC”) and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

We have a developed proprietary approach to produce what we believe to be superior beta glucans derived from yeast. Our yeast beta glucans are odorless and tasteless, making them suitable for use in a wide variety of oral and topical applications, including in our nutraceutical and cosmetic product lines. As the U.S. and international markets become more aware of the value of our proprietary products, we believe demand for our beta glucans will increase.

Historically, we produced other grades of beta glucan products for the animal feeds industry as a substitute for antibiotics. As of 2013, we exited this lower-margin market for feed-additive products. Our sales and marketing efforts are now concentrated on our oral and topical-use products for healthcare professionals, distributors and direct-to-consumer sales.

Beta Glucans

Beta glucans, or β-Glucans, are a natural extract that are considered to be “biological response modifiers” that support the immune system. The most common sources of beta glucans are from the cell walls of baker’s yeast, the cellulose in plants, the bran of cereal grains and certain fungi and bacteria. The differences between beta glucan chemical structures are significant in regards to solubility and overall biological activity. In fact, beta glucans derived from mushrooms and cereals do not appear to have the same effects on human health as beta glucans derived from yeast.

We derive our high-grade beta glucan from yeast cell walls using proprietary processes in our manufacturing facility. Our beta glucan is generally free of yeast by-product and endotoxins, and has demonstrated reliability in terms of both stability and biological response. In fact, we commissioned an analytical side-by-side comparison by a laboratory which conducts testing and analysis of nutraceutical compounds, between our beta glucan and each of the beta glucans manufactured by our two main competitors. The results of the analytical comparison demonstrated the superiority of our beta glucan which was far less impure and more uniform in composition than those of our competitors.

The health benefits of yeast beta glucans have been demonstrated through extensive testing and analysis and scientific research on yeast beta glucans generally, and we are committed to supporting evidence-based studies that demonstrate the health benefits of our products. General scientific research on beta glucan derived from yeast cell walls has been conducted in recent years by renowned medical laboratories, including Baylor College of Medicine, U.S. Armed Forces Radiobiology Institute, Stanford University, Southwest Research Institute, Case Western Reserve University, University of Arkansas, North Carolina State University, University of Bern, Switzerland, and the China Agricultural University, China. As more studies are conducted on beta glucans, the potential benefits to human health continue to emerge.

In fact, in two studies reviewed in an article published in the Japanese Journal Society Terminal Systemic Diseases, participants ingesting our yeast beta glucan showed a decreased reoccurrence of cancer in cancer remission patients and increased survival rates in terminally-ill cancer patients. In addition, female study participants testing the effect of our yeast beta glucan in topical applications saw a significant reduction in the number and intensity of skin wrinkles over the eight-week study. We presented the results of these and other studies supporting the efficacy of our products at the BIO-Europe global biotechnology conference in November 2010 and World Immune Regulator Meeting in Davos, Switzerland, in March 2012.

Healthcare professionals, including licensed physicians, alternative medicine practitioners, scientists and researchers have taken an interest in our immune-support products as a means of offering alternative or complementary approaches for maintaining a healthy and active lifestyle. These expressions of interest have often resulted in proposals for research studies and recommendations of our products. We plan to build upon this interest and hope to grow our contacts with licensed physicians who utilize our product in a clinical setting and with researchers who have the resources to conduct testing and analysis on our products.

We also have relationships with medical doctors who in the past have conducted self-funded studies in which we supplied our product free of charge. However, we do not have any formal clinical development or research agreements with these institutions and doctors. Dr. Joseph DiTrolio of the Roseland, New Jersey Surgery Center and St. George’s University School of Medicine, and Dr. Allan Whitberg, previously of Roger Williams Medical Center in Providence, Rhode Island and currently affiliated with Boston University School of Medicine, are among the medical doctors with whom we have relationships and who have conducted self-funded studies on our product. We also have established a relationship with National Jewish Health in Denver, Colorado and are exploring possible opportunities to have our products tested at the Boston University Medical Center. Recently, we established a partnership with the leading physicians of the Stone Center of New Jersey to educate patients about the benefits of supplementing their chemotherapy and radiation treatments with a yeast-beta glucan product.

To be sure, none of the testing and analysis or scientific research mentioned in this annual report has been subject to oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or otherwise treating disease. Further, the marketing of beta glucans is not subject to FDA approval, and we are prohibited by FTC and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

Yeast Beta Glucan Product Lines

Our nutraceutical and cosmetic product lines consist of our natural, premium yeast beta glucans in oral and topical applications. Nutraceuticals are plant-derived products, such as our yeast beta glucans, with pharmaceutical-like properties that have biologically-therapeutic effects in humans in addition to the basic nutritional value found in foods. We offer our yeast beta glucans as natural raw material ingredients in bulk quantities and finished, consumer products packaged under our brands and private label brands. The FDA has classified yeast beta glucans as GRAS.

Our principal, branded nutraceutical and cosmetic products for our yeast beta glucans are the iNR line of once-daily oral capsules and NAYAD and SGM line of rejuvenating serums and creams. Our iNR line of once-daily oral capsules are dietary supplements containing proprietary combinations of our yeast beta glucan to support immune system function. Our Skin Care Essentials Rejuvenating Serum and Rejuvenating Cream topical applications consist of our patented yeast-derived beta glucan and other natural ingredients intended to support the skin’s immune system response and defense, skin renewal and repair of sun and environmental damage.

Our sales and marketing strategy primarily consists of building the brand recognition of our product lines and our proprietary yeast beta glucans. We sell our products primarily on a word-of-mouth basis through distributors and our website as standalone product lines, as well as business-to-business as a cosmetic enhancement or dietary supplement.

We believe that we are well positioned to capitalize on our development of proprietary and patented products and can now focus on commercializing sales of these products on a more meaningful, global basis. In the early part of 2014, we opened our newly-designed online stores, www.inrstart.com and www.buynyad.com to offer our products.

In 2013, we appointed Karen Kingston, an experienced marketing consultant with over 15 years of experience building brands and sales strategies within men's health, eye care, skin care, immunology and wellness industries, as our Chief Marketing Officer to lead our sales and marketing efforts.

Our principal products are consumables that can generate a stream of repeat sales with the same end customers over an extended period, providing significant lifetime value for each customer gained. To reach these customers, our marketing strategy includes online sales promotions through our website, an affiliate sales program, trade advertising, consumer research and search engine and digital advertising. In addition, we intend to build our brand recognition with healthcare professionals through further testing and analysis of our products and by providing practitioners and clinics with education and support. We believe that the recommendation of our products by healthcare professionals to their patients provides the best possible endorsement.

We also market our products by presenting at international biotechnology and alternative medicine conferences and through nutraceutical industry associations and tradeshows. In March 2012, we presented the outcome of our cancer studies at the World Immune Regulator Meeting in Davos, Switzerland. The special focus of the meeting was on innate and adaptive immune response and the role of tissues in immune regulation. In November 2010, we presented the results of the studies demonstrating the efficacy of our yeast beta glucan in terminally ill cancer patients and cancer remission patients at the BIO-Europe biotechnology partnership conference in Munich, Germany.

On December 5, 2013, we signed a Memorandum of Understanding (“MOU”) with Adiuvo Investment, S.A., a life-science and healthcare investment company incorporated under the laws of Poland (“Adiuvo”). Under the terms of the MOU we had agreed to negotiate the details of a joint venture with Adiuvo, through which we planned to conduct additional research and to commercialize our products in Europe. However, currently we are exploring the possibility of entering into a license arrangement with Adiuvo in place of the joint venture, by which would market and sell our products in Europe. The negotiations with respect to this potential license are still being negotiated and there can be no assurance that a definitive license will be executed.

We have focused on the production of immune system support compounds including our beta glucans derived from yeast for over 20 years. Our staff produces consistently high-grade, particulate and reliable beta glucan, included in our nutraceutical and cosmetic product lines, in our Kentucky-based production plant. For certain of our packaged consumer goods, such as the iNR product line, we use third party contractors for encapsulation, bottling and labeling. These contractors are subject to regular government inspections, and to the best of our knowledge, comply with current GMPs and hold the necessary drug manufacturing licenses and processed food registrations required by their respective state regulators. Such packaging services are readily available from multiple sources.

The raw materials necessary to manufacture beta glucans in our Kentucky plant, principally consisting of baker’s yeast, are common and readily available. Our principal suppliers are the Lesaffre Group and Brenntag Group. We hold our suppliers to strict quality and delivery specifications as part of our GMP compliance and quality control procedures, including quality assurance of raw materials used in the production of our products.

Our beta glucan products and manufacturing processes are protected by registered and pending patents and trade secrets. Our manufacturing facilities and practices are compliant with published current GMPs established by the FDA for dietary supplements.

We sell our products direct to consumers and to pharmaceutical, nutraceutical and consumer product companies in the U.S. market. We plan to expand our sales to the international market. We focus on establishing and growing long-term relationships with our customers, and we believe that the majority of our customers view us as a strategic long-term supplier and value the quality of our beta glucan products. Our sales through distributors and business-to-business typically are made pursuant to supplier agreements executed in the ordinary course of business with individual orders made on purchase orders.

As we have sought to expand our U.S. and global sales, we have marketed our nutraceutical and cosmetic product lines as a raw material ingredient available in bulk quantities and finished, consumer products packaged under our brands and private label brands. We anticipate that our customer mix will change accordingly to include more sales through distributors, and our planned affiliate program, and direct sales to consumers. We also encourage nutriceutical and nutricosmetic manufacturers and formulators purchasing our beta glucans as all-natural raw material ingredients to identify and promote our brand in their products. As our principal products are consumables that typically generate repeat sales streams with the same end customers over an extended period, we historically have not experienced seasonality of sales.

Our largest customer, Michel Mercier Products, Inc. (d/b/a M.M.P, Inc.), accounted for 77% our sales in 2013 and 73% of our sales in 2012. Our second largest customer accounted for 9% our sales in 2013 and 12% of our sales in 2012.

The markets for nutritional supplements and skin care products are highly competitive, consisting of a large number of manufacturers, distributors and retailers, none of which dominates the fragmented and diverse markets. We compete for sales direct to consumers, through distributors and business-to-business.

Although we believe that our yeast beta glucan is superior, we compete with other companies manufacturing beta glucans from yeast and other sources, as well as companies producing other food ingredients and nutritional supplements for human use. Many end consumers may consider such products to be a replacement for the products we manufacture and distribute. Many of our competitors have greater marketing, research and capital resources than us, and may be able to offer their products at lower costs because of their greater purchasing power or lower cost of raw materials and manufacturing.

We anticipate expanding our sales on a meaningful basis as part of our new marketing strategy focusing on our nutraceutical and cosmetic product lines. We anticipate competing in these markets on the basis of quality, our proprietary manufacturing processes, research data and effective marketing campaigns promoting the benefits of our natural immune support products. There are no assurances that our products will be able to compete in these markets, however, or that our new marketing strategy will be successful.

We rely on the patent and trademark protection laws in the U.S., and trade secrets which are not protected by patents, to protect our intellectual property and maintain our competitive position in the marketplace. We have nine registered U.S. patents, consisting of both use and process patents, with expiration dates ranging from 2015 to 2026. Additionally, we currently have three patent applications filed in the U.S. pending formal review and a second provisional patent application pending, and we intend to apply for additional patents in the future as new products, uses and manufacturing processes are developed. We maintain trademarks registered in the U.S. for our business name and related to our product brands. In addition, we have registered and maintain internet domain names related to our business, including “immudyne.com.” Collectively, the patents, trademarks and domain names that we hold are of material importance to us. However, at this time we may not be able to adequately defend our intellectual property rights due to our lack of financial resources, though, to date, we have no knowledge of any infringement of our intellectual property.

Our expertise for many years has been in the enhancement of efficient, stable and cost-effective production systems for beta glucan products derived from yeast. While we have not incurred any research and development expenses in our last two fiscal years, we may increase future investments to establish the scientific basis for health claims of our existing products and to develop new products and applications based on our growth and available capital.

Our business and the manufacturing, distribution and sale of our beta glucan products are regulated in the U.S. primarily by the FDA and the FTC.

The FDA enforces the FDCA and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements and nutraceuticals are regulated as a category of food, not as drugs. The FDA classifies “Yeast extract (Bakers)” as GRAS, which substances by definition are not food additives. Most GRAS substances have no quantitative restrictions as to use, although their use must conform to current GMPs. The FDA promulgates GMP guidelines to ensure that dietary supplements are produced in a quality manner, do not contain contaminants or impurities and are accurately labeled. GMPs include requirements for establishing quality control procedures, designing and constructing manufacturing plants, testing ingredients and finished products and record keeping and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, 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. The FTC regulates the advertising of dietary supplements and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Yeast beta glucans are classified as GRAS by the FDA and our oral and topical-use product lines containing our yeast beta glucan are marketed as dietary supplements and cosmetics, respectively. Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In the EU markets, the European Food Safety Authority (“EFSA”), an advisory panel to the European Commission, performs all scientific assessments of health claims on food and supplement labels. The European Commission will consider the opinions of EFSA in determining whether to include a health claim on a list of permissible claims. Once published, only health claims for ingredients and products included on the list may be used in promotional materials for products marketed and sold in the European Union. The marketability of our products may be limited as we look to expand our sales in the EU if the health claims of our products are not included on the list.

In addition to the foregoing, our operations are subject to federal, foreign, state and local government laws and regulations, including those relating to zoning, workplace safety and accommodations for the disabled, and our relationship with our employees is subject to regulations, including minimum wage requirements, anti-discrimination laws, overtime, working conditions and citizenship requirements. We currently do not incur any material costs in connection with our compliance with applicable environmental laws as our manufacturing processes generate minimal discharge. Furthermore, the cost of maintaining compliance with applicable environmental laws has not, and we believe, in the future, will not, have a material adverse effect on our business, results of operations and financial condition. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

As of December 31, 2013, we had 3 full-time employees, 11 part-time employees and additional consultants worldwide. We outsource many of our product marketing activities to consultants who provide services to us on a project basis. We believe that relations with our employees are satisfactory. We have no collective bargaining agreements with our employees. All full-time employees and our officers and directors are eligible to participate in our group health and dental insurance plans.

Our internet website address is http://www.immudyne.com. We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”).

We manufacture, distribute and sell natural immune support products. We believe, based on testing and analysis conducted on our behalf, that our beta glucans derived from yeast are superior to other beta glucans. Beta glucans are a natural extract that has been shown through testing and analysis and scientific research to support the immune system.

Our core nutraceutical and cosmetic product lines are the focal points of our business. Our beta glucan products and manufacturing processes are protected by patents and trade secrets, and are compliant with current good manufacturing practices (“GMPs”). Further, yeast beta glucans are classified as generally recognized as safe (“GRAS”) by the Food and Drug Administration (“FDA”). None of the testing and analysis or scientific research mentioned in this annual report, however, has been subject to the oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or otherwise treating disease. Further, the marketing of beta glucans are not subject to FDA approval, and we are prohibited by Federal Trade Commission (“FTC”) and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

Historically, we have sold our products primarily on a word-of-mouth basis through distributors and our website as standalone product lines, as well as business-to-business as a cosmetic product, dietary supplement or feed additive for animal use. We believe that we are well positioned to capitalize on our development of proprietary and patented natural immune support products and can now focus on commercializing sales of these products on a more meaningful, global basis.

We originally incorporated under the laws of British Columbia, Canada, in 1987 under the name Anina Resources, Inc. and subsequently changed our name to Immudyne, Inc. and our jurisdiction to the State of Wyoming by continuance in September 1987. On June 30, 1994, we changed our jurisdiction to Delaware by merger with and into Immudyne, Inc., a Delaware corporation formed on June 21, 1994.

We have developed a proprietary approach to produce, what we believe to be, superior beta glucans derived from yeast. Our yeast beta glucan is odorless and tasteless, making it suitable for use in a wide variety of oral and topical applications. Yeast beta glucans are classified as GRAS by the FDA. As the U.S. and international markets become more aware of the value of our proprietary products, we believe demand for our beta glucans will increase. Our nutraceutical and cosmetic product lines consist of beta glucan products for oral and topical applications. Historically, we produced other grades of beta glucan products for the animal feeds industry as a substitute for antibiotics. As of 2011, we began exiting this lower-margin market for feed-additive products. Our sales and marketing efforts going forward are concentrated on our oral and topical-use products for healthcare professionals, distributors and direct-to-consumer sales.

Beta Glucans

Beta glucans, or β-Glucans, are a natural extract shown through scientific research to be “biological response modifiers” that support the immune system. The potential benefits of beta glucans to human health continue to emerge. Independent scientific research has demonstrated that beta glucans provide defense against bacteria by activating innate immune cells, which fight off infection. In addition, a growing body of scientific literature suggests that beta glucans have a substantial effect on cancer regression, though such literature has not been attested to by the FDA or any comparable regulatory authority. The most common sources of beta glucans are derived from the cell walls of baker’s yeast, the cellulose in plants, the bran of cereal grains and certain fungi and bacteria. The differences between beta glucan chemical structures are significant in regards to solubility and overall biological activity. Beta glucans derived from mushrooms and cereals do not appear to have the same effects on human health as beta glucans derived from yeast.

We derive our high-grade beta glucan from yeast cell walls using proprietary processes in our manufacturing facilities. Our beta glucan is free of yeast by-product and endotoxins, and demonstrates reliability in terms of both stability and biological response. In fact, we commissioned an analytical side-by-side comparison by V-Labs Inc., a laboratory which conducts testing and analysis of nutraceutical compounds, between our beta glucan and each of the beta glucans manufactured by our two main competitors, which demonstrated the superiority of our beta glucan. This side-by-side comparison found that our beta glucan was far less impure and more uniform in composition than those of our competitors and thus had a more predictable immune support potential.

Healthcare professionals, including licensed physicians, alternative medicine practitioners, scientists and researchers have taken an interest in our immune-support products as a means of offering alternative or complementary approaches for maintaining a healthy and active lifestyle. These expressions of interests have often resulted in proposals for research studies and recommendations of our products. We plan to build upon this interest and hope to grow our contacts with licensed physicians who utilize our product in a clinical setting and with researchers who have the resources to conduct testing and analysis on our products.

The health benefits of yeast beta glucans have been demonstrated through extensive testing and analysis and scientific research on yeast beta glucans generally, and we are committed to supporting evidence-based studies that demonstrate the health benefits of our products. General scientific research on beta glucan derived from yeast cell walls has been conducted in recent years by renowned medical laboratories, including Baylor College of Medicine, U.S. Armed Forces Radiobiology Institute, Stanford University, Southwest Research Institute, Case Western Reserve University, University of Arkansas, North Carolina State University, University of Bern, Switzerland, and the China Agricultural University, China.

We also have relationships with medical doctors who in the past have conducted self-funded studies in which we supplied our product free of charge. We do not have any formal clinical development or research agreements with these institutions and doctors. Dr. Joseph DiTrolio of the Roseland, New Jersey surgery center and St. George’s University School of Medicine and Dr. Allan Whitberg, previously of Roger Williams Medical Center in Providence, Rhode Island and currently affiliated with Boston University School of Medicine, are among the medical doctors with whom we have relationships. We also have established a relationship with National Jewish Health in Denver, Colorado and are exploring possible opportunities to have our products tested at the Boston University Medical Center. Additionally, in two studies reviewed in an article published in the Japanese Journal Society Terminal Systemic Diseases in 2000, participants ingesting our yeast beta glucan showed a decreased reoccurrence of cancer in cancer remission patients and increased survival rates in terminally-ill cancer patients. In addition, female study participants testing the effect of our yeast beta glucan in topical applications saw a significant reduction in the number and intensity of skin wrinkles over the eight-week study. We presented the results of these and other studies supporting the efficacy of our products at the BIO-Europe global biotechnology conference in November 2010 and World Immune Regulator Meeting in Davos, Switzerland, in March 2012.

None of the testing and analysis or scientific research mentioned in this annual report has been subject to oversight of the FDA or any comparable regulatory body, and no regulatory body has attested to the efficacy of beta glucans in supporting the immune system or otherwise treating disease. Further, the marketing of beta glucans are not subject to FDA approval, and we are prohibited by FTC and FDA regulations from suggesting in advertisements and product labels that our products mitigate, treat, cure or prevent a specific disease or class of disease.

Yeast Beta Glucan Product Lines

Our MacroForce Plus once-daily oral capsules and Skin Care Essentials line of rejuvenating serums and creams.

Our nutraceutical and cosmetic product lines consist of our all-natural, premium yeast beta glucans in oral and topical applications shown through testing and analysis and scientific research to support the immune system. Neutraceuticals are plant-derived products, such as our yeast beta glucans, with pharmaceutical-like properties that have biologically-therapeutic effects in humans and animals in addition to the basic nutritional value found in foods. Further, yeast beta glucans are classified as GRAS by the FDA and our products are designed to help support the body’s immune system response and defense. We offer our yeast beta glucans as all-natural raw material ingredients in bulk quantities and finished, consumer products packaged under our brands and private label brands.

Our principal, branded nutraceutical and cosmetic products for our yeast beta glucans are the MacroForce line of once-daily oral capsules and Skin Care Essentials line of rejuvenating serums and creams. Our MacroForce line of once-daily oral capsules are dietary supplements containing proprietary combinations of our yeast beta glucan to support immune system function. Our Skin Care Essentials Rejuvenating Serum and Rejuvenating Cream topical applications consist of our patented yeast-derived beta glucan and other natural ingredients to support the skin’s immune system response and defense, skin renewal and repair of sun and environmental damage.

Our sales and marketing strategy is to build brand recognition of our products as superior beta glucans derived from yeast. Historically, we have sold our products primarily on a word-of-mouth basis through distributors and our website as standalone product lines, as well as business-to-business as a cosmetic enhancement, dietary supplement or feed additive for animal use. We have shifted our sales focus to concentrate on our nutraceutical and cosmetic product lines. We believe that we are well positioned to capitalize on our development of proprietary and patented products and can now focus on commercializing sales of these products on a more meaningful, global basis. Our principal products are consumables that can generate a stream of repeat sales with the same end customers over an extended period, providing significant lifetime value for each customer gained. To reach these customers, we anticipate that our marketing strategy will include online sales promotions through our website, commencing an affiliate sales program, trade advertising, consumer research and search engine and digital advertising. In addition, we intend to build our brand recognition with healthcare professionals through testing and analysis and providing practitioners and clinics with education and support. We believe that the recommendation of our products by healthcare professionals to their patients provides the best possible endorsement.

We have appointed Karen Kingston, a distinguished and experienced marketing consultant with over 15 years of experience building brands and sales strategies within men's health, eye care, skin care, immunology and wellness industries, as our Chief Marketing Officer to lead our sales and marketing efforts.

We also market our products by presenting at international biotechnology and alternative medicine conferences and through nutraceutical industry associations and tradeshows. In March 2012, we presented the outcome of our cancer studies at the World Immune Regulator Meeting in Davos, Switzerland. The special focus of the meeting was on innate and adaptive immune response and the role of tissues in immune regulation. In November 2010, we presented the results of the studies demonstrating the efficacy of our yeast beta glucan in terminally ill cancer patients and cancer remission patients at the BIO-Europe biotechnology partnership conference in Munich, Germany.

Over the past 20 years, we have focused on the production of immune system support compounds, including, what we believe to be, are superior beta glucans derived from yeast. Our beta glucan products and manufacturing processes are protected by registered and pending patents and trade secrets. Our highly trained and experienced staff produces consistently high-grade, particulate and reliable beta glucan, including the raw materials for our nutraceutical and cosmetic product lines, in our Kentucky-based production plant. Our manufacturing facilities and practices are compliant with published current GMPs established by the FDA for dietary supplements. For certain of our packaged consumer goods, such as the MacroForce product line, we use third party contractors for encapsulation, bottling and labeling. These contractors are subject to regular government inspections, comply with current GMPs and hold the necessary drug manufacturing licenses and processed food registrations required by their respective state regulators. Such packaging services are readily available from multiple sources.

The raw materials necessary to manufacture beta glucans in our Kentucky plant, principally consisting of baker’s yeast, are common and readily available. Our principal suppliers are the Lesaffre Group and Brenntag Group. We hold our suppliers to strict quality and delivery specifications as part of our GMP compliance and quality control procedures, including quality assurance of raw materials used in the production of our products.

We sell our products direct to consumers and to pharmaceutical, nutraceutical and consumer product companies in the U.S. market, and plan to expand our sales to the international market. Sales through distributors and business-to-business typically are made pursuant to supplier agreements executed in the ordinary course of business with individual orders made on standard purchase orders. We focus on establishing and growing long-term relationships with our customers, and we believe that the majority of our customers view us as a strategic long-term supplier and value the quality of our beta glucan products.

As we seek to expand our U.S. and global sales, our marketing concentrates on our nutraceutical and cosmetic product lines as a raw material ingredient available in bulk quantities and finished, consumer products packaged under our brands and private label brands. We anticipate that our customer mix will change accordingly to include more sales through distributors, and our planned affiliate program, and direct sales to consumers. We encourage nutriceutical and nutricosmetic manufacturers and formulators purchasing our beta glucans as all-natural raw material ingredients to identify and promote our brand in their products. As our principal products are consumables that typically generate repeat sales streams with the same end customers over an extended period, we historically have not experienced seasonality of sales.

Sales of our oral and topical-use products consisted of 99% of our sales in 2012, 80% in 2011, and 38% in 2010. Sales of our animal feed additive products consisted of 1% of our sales in 2012 20% in 2011, and 62% in 2010. We anticipate further decreased sales of our feed-additive products for animals as a percentage of our overall sales as we change our product focus to our oral and topical-use products. Our largest customer, Michel Mercier Products, Inc. (d/b/a M.M.P, Inc.), accounted for 73% our sales in 2012, 53% in 2011, and 23% in 2010.

The markets for nutritional supplements and skin care products are highly competitive, consisting of a large number of manufacturers, distributors and retailers, none of which dominates the fragmented and diverse markets. We compete for sales direct to consumers, through distributors and business-to-business.

Although we believe that our yeast beta glucan is superior, we compete with other companies manufacturing beta glucans from yeast and other sources, as well as companies producing other food ingredients and nutritional supplements for human use and as feed additives. Many end consumers may consider such products to be a replacement for the products we manufacture and distribute. Many of our competitors have greater marketing, research and capital resources than us, and may be able to offer their products at lower costs because of their greater purchasing power or lower cost of raw materials and manufacturing.

We anticipate expanding our sales globally on a meaningful basis as part of our new marketing strategy focusing on our nutraceutical and cosmetic product lines. We believe that we are well positioned to capitalize on our development of proprietary and patented products to compete in the immune support markets. We anticipate competing in these markets on the basis of quality, our proprietary manufacturing processes, research data and effective marketing campaigns promoting the benefits of our natural immune support products. There are no assurances that our products will be able to compete in these markets, however, or that our new marketing strategy will be successful.

We rely on the patent and trademark protection laws in the U.S. to protect our intellectual property and maintain our competitive position in the marketplace. We have six registered U.S. patents, consisting of both use and process patents, with expiration dates ranging from 2013 to 2028. Additionally, we currently have two patent applications filed in the U.S. pending formal review and a second provisional patent application pending, and we intend to apply for additional patents in the future as new products, uses and manufacturing processes are developed. We maintain trademarks registered in the U.S. for our business name and related to our product brands. In addition, we have registered and maintain internet domain names related to our business, including “immudyne.com.” Collectively, the patents, trademarks and domain names that we hold are of material importance to us.

Our expertise for many years has been in the enhancement of efficient, stable and cost-effective production systems for beta glucan products derived from yeast, though we have not incurred any research and development expenses to date. We may increase future investments to establish the scientific basis for health claims of our existing products and to develop new products and applications based on our growth and available capital.

Our business and the manufacturing, distribution and sale of our beta glucan products are regulated in the U.S. primarily by the FDA and the FTC.

The FDA enforces the FDCA and Dietary Supplement Health and Education Act (“DSHEA”) as they pertain to foods, food ingredients, cosmetics and dietary supplement production and marketing. Dietary supplements and nutraceuticals are regulated as a category of food, not as drugs. The FDA classifies “Yeast extract (Bakers)” as GRAS, which substances by definition are not food additives. Most GRAS substances have no quantitative restrictions as to use, although their use must conform to current GMPs. The FDA promulgates GMP guidelines to ensure that dietary supplements are produced in a quality manner, do not contain contaminants or impurities and are accurately labeled. GMPs include requirements for establishing quality control procedures, designing and constructing manufacturing plants, testing ingredients and finished products and record keeping and handling of consumer product complaints. The FDA has broad authority to enforce the provisions of federal law applicable to dietary supplements and cosmetics, including the power to monitor claims made in product labeling, to seize adulterated or misbranded products or unapproved new drugs, to request product recall, 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. The FTC regulates the advertising of dietary supplements and other health-related products to ensure that any advertising is truthful and not misleading, and that an advertiser maintains adequate substantiation for all product claims. FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Yeast beta glucans are classified as GRAS by the FDA and our oral and topical-use product lines containing our yeast beta glucan are marketed as dietary supplements and cosmetics, respectively. Under current U.S. regulations, our products must comply with certain labeling requirements enforced by the FDA and FTC, but otherwise generally are not required to receive regulatory approval prior to introduction into the U.S. market. We believe we are in compliance with all material government regulations applicable to our products.

In the EU markets, the European Food Safety Authority (“EFSA”), an advisory panel to the European Commission, performs all scientific assessments of health claims on food and supplement labels. The European Commission will consider the opinions of EFSA in determining whether to include a health claim on a list of permissible claims. Once published, only health claims for ingredients and products included on the list may be used in promotional materials for products marketed and sold in the European Union. The marketability of our products may be limited as we look to expand our sales in the EU if the health claims of our products are not included on the list.

In addition to the foregoing, our operations are subject to federal, foreign, state and local government laws and regulations, including those relating to zoning, workplace safety and accommodations for the disabled, and our relationship with our employees is subject to regulations, including minimum wage requirements, anti-discrimination laws, overtime, working conditions and citizenship requirements. We currently do not incur any material costs in connection with our compliance with applicable environmental laws as our manufacturing processes generate minimal discharge. Furthermore, the cost of maintaining compliance with applicable environmental laws has not, and we believe, in the future, will not, have a material adverse effect on our business, results of operations and financial condition. We believe we are in substantial compliance with all material governmental regulations applicable to our operations.

As of December 31, 2012, we had 3 full-time employees and 11 part-time employees and consultants worldwide. We outsource many of our research, product development and marketing activities to consultants who provide services to us on a project basis. We believe that relations with our employees are satisfactory. We have no collective bargaining agreements with our employees. All full-time employees and our officers and directors are eligible to participate in our group health and dental insurance plans.