UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended Quarterly Period Ended September 30, 20172021

ORor

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _________ to _________

Commission file number: 333-184487000-55857

IMMUDYNE,LIFEMD, INC.

(Exact name of registrant as specified in its charter)

Delaware76-0238453

(State or other jurisdiction Jurisdiction

of
incorporation Incorporation or organization)Organization)

(IRSI.R.S. Employer

Identification No.)

1460 Broadway  

800 Third Avenue, Suite 2800, New York, NY

New York, NY

1003610022
(Address of principal executive offices)Principal Executive Offices)(Zip Code)

(914) 244-1777(855)743-6478

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading symbol(s)Name of exchange on which registered
Common Stock, par value $.01 per shareLFMDThe Nasdaq Capital Market

Indicate by checkmarkcheck mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the lastpast 90 days.

YES

Yes ☒ NONo ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes ☒ No ☐

YES  ☒   NO  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smalleror a small reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” a “smaller reporting company,”company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☐☒Smaller reporting company☒
(do not check if a smaller reporting company)
Emerging growth company☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.Act: ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

YES  ☐   NO  ☒

44,393,063 As of November 9, 2021, there were 30,593,269 shares of the registrant’s common stock outstanding as of November 14, 2017.outstanding.

 

 

Immudyne, Inc.LIFEMD, INC.

FORM 10-Q

Table of ContentsFOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

Page
Note about Forward-Looking Statements1
PART I. FINANCIAL INFORMATION
ItemITEM 1.Financial Statements (unaudited)23
Item
Condensed Consolidated Balance Sheets3
Condensed Consolidated Statements of Operations4
Condensed Consolidated Statements of Stockholders’ Deficit5
Condensed Consolidated Statements of Cash Flows7
Notes to Unaudited Condensed Consolidated Financial Statements (unaudited)8
ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations2426
Item
ITEM 3.Quantitative and Qualitative Disclosures about Market Risk2837
Item
ITEM 4.Controls and Procedures2838
PART II. OTHER INFORMATION
ItemITEM 1.Legal Proceedings2939
Item 1A.Risk Factors29
ItemITEM 1A.Risk Factors39
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds2940
Item
ITEM 3.Defaults Upon Senior Securities2940
Item
ITEM 4.Mine Safety Disclosures2940
Item 5.Other Information29
Item 6.ITEM 5.ExhibitsOther Information2940
SignaturesITEM 6.30Exhibits41
Exhibit IndexSIGNATURES3142

2

 

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) regarding our company that include, but are not limited to, projections of earnings, revenue or other financial items; statements of the plans, strategies and objectives of management for future operations; statements concerning proposed new products, services or developments; statements regarding future economic conditions or performance; statements of belief; and statements of assumptions underlying any of the foregoing. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “potential,” “believes,” “seeks,” “hopes,” “estimates,” “should,” “may,” “will,” “with a view to” and variations of these words or similar expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are set forth in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Our Business” and other sections in this report. Other sections of this report include additional factors that could adversely impact our business and financial performance.

Unless otherwise indicated, information in this report concerning economic conditions and our industry is based on information from independent industry analysts and publications, as well as our estimates. Except where otherwise noted, our estimates are derived from publicly available information released by third party sources, as well as data from our internal research, and are based on such data and our knowledge of our industry, which we believe to be reasonable. Unless otherwise indicated, none of the independent industry publication market data cited in this report was prepared on our or our affiliates’ behalf.

The forward-looking statements made in this report are based only on events or information as of the date on which the statements are made in this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents we refer to in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect.

Additional information on the various risks and uncertainties potentially affecting our operating results are discussed in this report and other documents we file with the Securities and Exchange Commission (the “SEC”). We undertake no obligation to revise or update publicly any forward-looking statements for any reason, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements.

As used in this report, “Immudyne,” “Company,” “we,” “our” and similar terms refer to Immudyne, Inc., unless the context indicates otherwise.


PART I.I – FINANCIAL INFORMATION

Item 1. Financial Statements

LIFEMD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

  September 30, 2021  December 31, 2020 
ASSETS        
Current Assets        
Cash $9,446,973  $9,179,075 
Accounts receivable, net  1,497,187   648,421 
Product deposit  911,948   816,765 
Inventory, net  1,587,094   1,264,258 
Other current assets  689,355   154,876 
Total Current Assets  14,132,557   12,063,395 
Non-current Assets        
Equipment, net  67,240   - 
Right of use asset, net  200,670   274,437 
Capitalized software, net  1,929,564   375,983 
Intangible assets, net  21,614   339,840 
 Total Non-current Assets  2,219,088   990,260 
Total Assets $16,351,645  $13,053,655 
         
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT        
         
Current Liabilities        
Accounts payable and accrued expenses $18,377,877  $11,794,084 
Notes payable, net  63,400   779,132 
Deferred revenue  1,435,981   916,880 
Total Current Liabilities  19,877,258   13,490,096 
Long-term Liabilities        
Long-term debt, net  10,819,527   - 
Lease liability  217,238   285,323 
Contingent consideration on purchase of WorkSimpli  100,000   100,000 
Total Liabilities  31,014,023   13,875,419 
Commitments and contingencies (see Note 8)  -     
Mezzanine Equity        
Preferred Stock, $0.0001 par value; 5,000,000 shares authorized Series B Preferred Stock, $0.0001 par value; 5,000 shares authorized, 3,500 and 3,500 shares issued and outstanding, liquidation value approximately, $1,142 and $1,045 per share as of September 30, 2021 and December 31, 2020, respectively  3,996,137   3,655,822 
Stockholders’ Deficit        
Series A Preferred Stock, $0.0001 par value; 1,610,000 shares authorized, 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020  -   - 
Common stock, $0.01 par value; 100,000,000 shares authorized, 26,862,975 and 23,433,663 shares issued, 26,759,935 and 23,330,623 outstanding as of September 30, 2021 and December 31, 2020, respectively  268,630   234,337 
Additional paid-in capital  105,275,494   77,779,370 
Accumulated deficit  (122,938,363)  (80,151,905)
Treasury stock, 103,040 and 103,040 shares, at cost  (163,701)  (163,701)
Total LifeMD, Inc. Stockholders’ Deficit  (17,557,940)  (2,301,899)
Non-controlling interest  (1,100,575)  (2,175,687)
Total Stockholders’ Deficit  (18,658,515)  (4,477,586)
Total Liabilities, Mezzanine Equity and Stockholders’ Deficit $16,351,645  $13,053,655 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

Item 1.

Financial Statements

3

 

Immudyne, Inc.
Consolidated Balance Sheets
       
  September 30, 2017  December 31, 2016 
  (unaudited)    
ASSETS
       
Current Assets      
Cash $562,760  $182,561 
Trade accounts receivable, net  276,992   444,743 
Other receivables  -   2,250 
Product deposit  119,899   - 
Inventory, net  377,800   160,270 
Total Current Assets $1,337,451  $789,824 
         
         
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)        
         
Current Liabilities        
Accounts payable and accrued expenses $699,651  $752,930 
Derivative liabilities  -   192,254 
Convertible notes payable  -   100,000 
Notes payable, net of discount in 2016  77,333   106,365 
Total Current Liabilities  776,984   1,151,549 
         
         
Stockholders’ Equity (Deficit)        
Common stock, $0.01 par value; 100,000,000 shares authorized, 44,257,342 and 35,570,157 shares issued, 43,742,142 and 35,245,157 outstanding as of September 30, 2017 and  December 31, 2016, respectively  442,573   355,701 
Additional paid-in capital  11,218,988   9,070,064 
Accumulated (deficit)  (10,680,261)  (9,693,882)
   981,300   (268,117)
Treasury stock, 515,200 and 325,000 shares, at cost  (163,701)  (87,053)
Total Immudyne, Inc. Stockholders’ (Deficit)  817,599   (355,170)
         
Non-controlling interest  (257,132)  (6,555)
         
Total Stockholders’ (Deficit)  560,467   (361,725)
         
Total Liabilities and Stockholders’ (Deficit) $1,337,451  $789,824 

LIFEMD, INC.

CONDENSED Consolidated STATEMENTS OF OPERATIONS

(Unaudited)

  2021  2020  2021  2020 
  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  2021  2020  2021  2020 
Revenues                
Telehealth revenue, net $18,540,897  $9,438,136  $47,623,822  $20,263,750 
WorkSimpli revenue, net  6,406,302   1,567,627   17,835,100   4,136,608 
Total revenues, net  24,947,199   11,005,763   65,458,922   24,400,358 
Cost of revenues                
Cost of telehealth revenue  4,969,306   1,601,920   12,113,336   4,718,143 
Cost of WorkSimpli revenue  127,181   73,662   314,428   204,241 
Total cost of revenues  5,096,487   1,675,582   12,427,764   4,922,384 
Gross profit  19,850,712   9,330,181   53,031,158   19,477,974 
                 
Expenses                
Selling and marketing expenses  20,293,935   10,528,833   61,372,815   21,669,046 
General and administrative expenses  10,695,663   18,441,756   28,194,305   21,868,097 
Operating expenses  815,378   542,965   2,390,694   654,947 
Customer service expenses  505,880   230,788   1,274,392   488,455 
Development costs  131,160   118,346   435,356   288,813 
Total expenses  32,442,016   29,862,688   93,667,562   44,969,358 
Operating loss  (12,591,304)  (20,532,507)  (40,636,404)  (25,491,384)
Other income (expenses), net  (1,824,777)  (291,096)  (2,681,236)  (1,313,010)
Loss from operations before income taxes  (14,416,081)  (20,823,603)  (43,317,640)  (26,804,394)
Income tax provision (benefit)  -   -   -   - 
Net loss  (14,416,081)  (20,823,603)  (43,317,640)  (26,804,394)
Net loss attributable to noncontrolling interests  (62,706)  (201,233)  (531,182)  (408,180)
Net loss attributable to LifeMD, Inc.  (14,353,375)  (20,622,370)  (42,786,458)  (26,396,214)
Deemed distribution to holders of common and Series B Preferred stock  -   (3,573,636)  -   (4,716,021)
Net loss attributable to LifeMD, Inc. common stockholders $(14,353,375) $(24,196,006) $(42,786,458) $(31,112,235)
Basic loss per share attributable to LifeMD, Inc. from operations $(0.54) $(1.65) $(1.66) $(2.47)
Diluted loss per share attributable to LifeMD, Inc. from operations $(0.54) $(1.65) $(1.66) $(2.47)
Weighted average number of common shares outstanding                
Basic  26,684,591   14,674,693   25,820,478   12,581,401 
Diluted  26,684,591   14,674,693   25,820,478   12,581,401 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.

4

 


Immudyne, Inc.
Consolidated Statements of Operations
(unaudited)
             
  Three Months Ended
Sept 30,		  Nine Months Ended
Sept 30,		 
  2017  2016  2017  2016 
     Restated     Restated 
Net Sales $2,051,734  $1,384,429  $3,583,614  $4,252,704 
                 
Cost of Sales  535,572   388,202   1,068,174   1,268,320 
                 
Gross Profit  1,516,162   996,227   2,515,440   2,984,384 
                 
Operating expenses                
Compensation and related expenses  529,361   361,829   1,131,805   1,077,340 
Professional fees  99,964   82,608   321,548   277,282 
Marketing expenses  882,845   554,536   1,182,715   1,713,337 
General and administrative expenses  277,559   204,958   753,402   382,857 
Total operating expenses  1,789,729   1,203,931   3,389,470   3,450,816 
                 
Operating (Loss)  (273,567)  (207,704)  (874,030)  (466,432)
                 
Change in fair value of derivative liability  (377,213)  -   496,617   - 
Interest (expense)  (1,111)  (9,992)  (650,718)  (15,805)
                 
Net Income (Loss)  (651,891)  (217,696)  (1,028,131)  (482,237)
                 
Net (loss) income attributable to noncontrolling interests  27,172   8,955   (41,752)  6,439 
                 
Net Income (loss) attributable to Immudyne, Inc. $(679,063) $(226,651) $(986,379) $(488,676)
                 
Basic income (loss) per share attributable to Immudyne, Inc. $(0.02) $(0.01) $(0.02) $(0.02)
Diluted income (loss) per share attributable to Immudyne, Inc. $(0.02) $(0.01) $(0.02) $(0.02)
                 
Average number of common shares outstanding                
Basic  44,160,477   34,427,087   40,888,131   31,917,873 
Diluted  44,160,477   34,427,087   40,888,131   31,917,873 

LIFEMD, INC.

CONDENSED Consolidated STATEMENTS of CHANGES IN STOCKHOLDERS’ DEFICIT

(Unaudited)

                                 
  LifeMD, Inc.    
     Additional             
  Common Stock  Paid-in  Accumulated  Treasury     Noncontrolling    
  Shares  Amount  Capital  (Deficit)  Stock  Total  Interest  Total 
Balance, January 1, 2020  10,680,730  $106,807  $15,663,626  $(16,594,919) $(163,701) $(988,187) $(141,056) $(1,129,243)
Stock compensation  -   -   95,900   -   -   95,900   -   95,900 
Cashless exercise of warrants  147,858   1,479   (1,479)  -   -   -   -   - 
Deemed dividend from down-round provision in common stock shares yet to be issued  -   -   -   (106,519)  -   (106,519)  -   (106,519)
Deemed dividend from warrant price adjustments  -   -   1,142,385   (1,142,385)  -   -   -   - 
Distributions to non-controlling interest  -   -   -   -   -   -   (36,000)  (36,000)
Stock issued for services                                
Stock issued for services, shares                                
Purchase of common stock                                
Purchase of common stock, shares                                
Shares issued for share liability                                
Shares issued for share liability, shares                                
Deemed distribution from down-round provision in common stock shares yet to be issued                                
Sale of warrants                                
Exercise of warrants                                
Exercise of warrants, shares                                
Exercise of stock options                                
Exercise of stock options, shares                                
Cashless exercise of stock options                                
Cashless exercise of stock options, shares                                
Shares issued for share liability (proceeds received for prior period)                                
Shares issued for share liability (proceeds received for prior period), shares                                
Deemed dividend from warrants issued and BCF with Series B Preferred Stock                                
Sale of stock in private placement, net                                
Sale of stock in private placement, net, shares                                
Purchase of additional membership interest of WorkSimpli                                
Adjustment of noncontrolling Interest for additional investment                                
Warrants issued for debt instruments                                
Sale of common stock under ATM                                
Sale of common stock under ATM                                
Net loss  -   -   -   (2,394,728)  -   (2,394,728)  (138,816)  (2,533,544)

Balance,

March 31, 2020

  10,828,588   108,286   16,900,432   (20,238,551)  (163,701)  (3,393,534)  (315,872)  (3,709,406)
                                 
Stock issued for services  50,000   500   34,700   -   -   35,200   -   35,200 
Stock compensation  -   -   438,575   -   -   438,575   -   438,575 
Cashless exercise of warrants  843,240   8,432   (8,432)  -   -   -   -   - 
Purchase of common stock  294,120   2,941   247,059   -   -   250,000   -   250,000 
Shares issued for share liability  2,196,740   21,967   1,704,033   -   -   1,726,000   -   1,726,000 
Distributions to non-controlling interest  -   -   -   -   -   -   (85,223)  (85,223)
Deemed distribution from down-round provision in common stock shares yet to be issued  -   -   -   (87,503)  -   (87,503)      (87,503)
Net loss  -   -   -   (3,379,116)  -   (3,379,116)  (68,131)  (3,447,247)

Balance,

June 30, 2020

  14,212,688   142,126   19,316,367   (23,705,170)  (163,701)  (4,410,378)  (469,226)  (4,879,604)
                                 
Stock compensation  -   -   16,376,933   -   -   16,376,933   -   16,376,933 
Sale of warrants  -   -   25,000   -   -   25,000   -   25,000 
Exercise of warrants  379,957   3,800   618,963   -   -   622,763   -   622,763 
Exercise of stock options  335,600   3,356   297,044   -   -   300,400   -   300,400 
Cashless exercise of stock options  331,270   3,313   (3,313)  -   -    -  -   - 
Shares issued for share liability (proceeds received for prior period)  375,447   3,754   409,718   -   -   413,472    -  413,472 
Deemed dividend from warrant price adjustments  -   -   73,636   (73,636)  -   -     - - 
Deemed dividend from warrants issued and BCF with Series B Preferred Stock  -   -   3,500,000   (3,500,000)  -   -   -   - 
Net loss  -   -   -   (20,622,370)  -   (20,622,370)  (201,233)  (20,823,603)

Balance,

September 30, 2020

  15,634,962  $156,349  $40,614,348  $(47,901,176) $(163,701) $(7,294,180) $(670,459) $(7,964,639)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.

5

 


Immudyne, Inc.
Consolidated Statement of Stockholders’ Equity (Deficit)
For the Nine Months Ended September 30, 2017
(unaudited)
                         
  Immudyne, Inc.       
        Additional                
  Common Stock  Paid-in  Accumulated  Treasury  Sub  Noncontrolling    
  Shares  Amount  Capital  (Deficit)  Stock  Total  interest  Total 
                         
Balance at December 31, 2016  35,570,157  $355,701  $9,070,064  $(9,693,882) $(87,053) $(355,170) $(6,555) $(361,725)
                                 
Issuance of common stock for services  1,175,000   11,750   487,181   -   -   498,931   -   498,931 
Sale of common stock and warrants  2,927,156   29,271   643,974   -   -   673,245   -   673,245 
Conversion of non-controlling interest equity for shares and warrants  1,183,490   11,835   260,368   -   -   272,203   (272,203)  - 
Conversion of note payable  755,179   7,552   182,428   -   -   189,980   -   189,980 
Loss on settlement of notes and other payables  -   -   634,325   -   -   634,325   -   634,325 
Conversion of accrued expenses  217,390   2,174   50,038   -   -   52,212   -   52,212 
Issuance of common stock in relation to debt offering  217,391   2,174   54,348   -   -   56,522   -   56,522 
Cashless exercise of options  2,211,579   22,116   (22,116)  -   -   -   -   - 
Purchase of treasury stock  -   -   -   -   (76,648)  (76,648)  -   (76,648)
Issuance of stock options for services  -   -   113,522   -   -   113,522   -   113,522 
Investment in subsidiary by noncontrolling interest, net of distributions  -   -   -   -   -   -   63,378   63,378 
Reclassification of options, warrants and other contracts to derivative liabilities upon issuance  -   -   (255,144)  -   -   (255,144)  -   (255,144)
                                 
Net (loss)  -   -   -   (986,379)  -   (986,379)  (41,752)  (1,028,131)
Balance at September 30, 2017  44,257,342  $442,573  $11,218,988  $(10,680,261) $(163,701) $817,599  $(257,132) $560,467 

LIFEMD, INC.

CONDENSED Consolidated STATEMENTS of CHANGES IN STOCKHOLDERS’ DEFICIT

(Unaudited)

  LifeMD, Inc.       
        Additional                
  Common Stock  Paid-in  Accumulated  Treasury     Noncontrolling    
  Shares  Amount  Capital  (Deficit)  Stock  Total  Interest  Total 
Balance, January 1, 2021  23,433,663  $234,337  $77,779,370  $(80,151,905) $(163,701) $(2,301,899) $(2,175,687) $(4,477,586)
Stock issued for services  1,203,750   12,038   2,313,737   -   -   2,325,775   -   2,325,775 
Cashless exercise of stock options  608,905   6,089   (6,089)  -   -   -   -   - 
Exercise of stock options  30,000   300   23,700   -   -   24,000   -   24,000 
Sale of stock in private placement, net  608,696   6,087   13,489,183   -   -   13,495,270   -   13,495,270 
Distribution to non-controlling interest  -   -   -   -   -   -   (36,000)  (36,000)
Purchase of additional membership interest of WorkSimpli      -   (377,419)  -   -   (377,419)  (66,603)  (444,022)
Adjustment of noncontrolling Interest for additional investment          (1,636,875)  -   -   (1,636,875)  1,780,897   144,022 
Net loss  -   -   -   (11,602,383)  -   (11,602,383)  (270,503)  (11,872,886)
Balance, March 31, 2021  25,885,014   258,851   91,585,607   (91,754,288)  (163,701)  (73,531)  (767,896)  (841,427)
                                 
Stock issued for services  30,000   300   2,547,000   -   -   2,547,300   -   2,547,300 
Exercise of stock options  391,000   3,910   738,840   -   -   742,750   -   742,750 
Cashless exercise of stock options  264,142   2,641   (2,641)  -   -   -   -   - 
Exercise of warrants  65,684   657   311,342   -   -   311,999   -   311,999 
Warrants issued for debt instruments  -   -   6,270,710   -   -   6,270,710   -   6,270,710 
Distribution to non-controlling interest  -   -   -   -   -   -   (36,000)  (36,000)
Net loss  -   -   -   (16,830,700)  -   (16,830,700)  (197,973)  (17,028,673)
Balance, June 30, 2021  26,635,840   266,359   101,450,858   (108,584,988)  (163,701)  (7,031,472)  (1,001,869)  (8,033,341)
                                 
Stock issued for services  30,000   300   3,110,516   -   -   3,110,816   -   3,110,816 
Exercise of stock options  30,000   300   53,700   -   -   54,000   -   54,000 
Exercise of warrants  96,349   963   167,647   -   -   168,610   -   168,610 
Sale of common stock under ATM  70,786   708   492,773   -   -   493,481   -   493,481 
Distribution to non-controlling interest  -   -   -   -   -   -   (36,000)  (36,000)
Net loss  -   -   -   (14,353,375)  -   (14,353,375)  (62,706)  (14,416,081)
Balance, September 30, 2021  26,862,975  $268,630  $105,275,494  $(122,938,363) $(163,701) $(17,557,940) $(1,100,575) $(18,658,515)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.

6

 


Immudyne, Inc.
Consolidated Statements of Cash Flows
(unaudited)
       
  Nine Months Ended 
  September 30, 
  2017  2016 
       
CASH FLOWS FROM OPERATING ACTIVITIES      
Net (loss) attributable to Immudyne, Inc. $(986,379) $(488,676)
Net (loss) attributable to noncontrolling interests  (41,752)  6,439 
Net (Loss)  (1,028,131)  (482,237)
Adjustments to reconcile net (loss) to net cash (used) by operating activities        
Change in fair value of derivative liability  (496,617)  - 
Bad debt recovery  (49,119)  (43,558)
Amortization of debt discount  81,558   5,990 
Loss on settlement of notes and other payables  634,325   - 
Stock compensation expense  162,741   493,218 
Issuance of warrants for services  -   20,585 
Common stock issued for services  498,930   - 
Changes in Assets and Liabilities        
Trade accounts receivable  216,870   (276,930)
Other receivables  2,250   - 
Product deposit  (119,899)  - 
Inventory  (217,530)  (69,479)
Accounts payable and accrued expenses  (1,067)  240,713 
Net cash (used) by operating activities  (315,689)  (111,698)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Investment in subsidiary by noncontrolling interest, net  63,378   161,355 
Proceeds from notes payable  386,376   150,000 
Repayment of convertible note payable  (100,000)  - 
Repayment of notes payable  (250,463)  - 
Sale of common stock and warrants  673,245   46,000 
Purchase of treasury stock  (76,648)  (4,720)
Net cash provided by financing activities  695,888   352,635 
         
Net increase in cash  380,199   240,937 
         
Cash at beginning of the period  182,561   232,984 
         
Cash at end of the period $562,760  $473,921 
         
Supplemental Disclosure of Cash Flow Information        
Cash paid during the period for interest $4,723  $8,563 
         
Issuance of company stock for notes and other payables $242,192  $- 
Issuance of common stock for conversion of debt $-  $- 
Issuance of common stock in relation to debt offering $-  $41,875 
Issuance of common stock for services  -   581,093 
Conversion of equity invested in subsidiary to common stock and warrants $272,203  $- 
Reclassification of options, warrants and other contracts to derivative liabilities upon issuance $255,144  $- 

LIFEMD, INC.

CONDENSED Consolidated STATEMENTS OF CASH FLOWS

(Unaudited)

  2021  2020 
  Nine Months Ended September 30, 
  2021  2020 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net loss $(43,317,640) $(26,804,394)
Adjustments to reconcile net loss to net cash used in operating activities:        
Amortization of debt discount  2,090,236   817,118 
Amortization of capitalized software  177,926   36,001 
Amortization of intangibles  340,457   251,709 
Write-down of inventory  57,481   - 
Depreciation of fixed assets  2,865   - 
Acceleration of debt discount  -   500,145 
Bad debt expense  -   58,470 
Sales return and allowances  -   211,000 
Inventory reserves  -   44,981 
Gain on forgiveness of debt  (184,914)  - 
Operating lease payments  73,767   5,452 
Liability to issue shares for services  -   32,500 
Stock issued for services  -   35,200 
Stock compensation expense  7,983,891   16,898,733 
Changes in assets and liabilities        
Accounts receivable  (848,766)  (586,364)
Product deposit  (95,183)  (943,388)
Inventory  (380,317)  (953,467)
Other current assets  (534,479)  72,893 
Change in operating lease liability  (68,085)  (1,737)
Deferred revenue  519,101   303,064 
Accounts payable and accrued expenses  6,924,110   4,426,702 
Net cash used in operating activities  (27,259,550)  (5,595,382)
CASH FLOWS FROM INVESTING ACTIVITIES        
Cash paid for capitalized software costs  (1,731,507)  (330,586)
Purchase of equipment  (70,105)  - 
Purchase of intangible assets  (22,231)  - 
Payment to seller for contingent consideration  -   (400,000)
Net cash used in investing activities  (1,823,843)  (730,586)
CASH FLOWS FROM FINANCING ACTIVITIES        
Cash proceeds from private placement offering, net  13,495,270   - 
Cash proceeds from Series B Preferred Stock  -   2,892,500 
Proceeds from convertible notes payable  -   2,350,000 
Proceeds from issuance of debt instruments  15,000,000   - 
Cash proceeds from sale of common stock under ATM  493,481   2,338,349 
Cash proceeds from exercise of warrants  480,609   622,763 
Cash proceeds from exercise of options  820,750   300,400 
Cash proceeds from sale of warrants  -   25,000 
Purchase of membership interest of WorkSimpli  (300,000)  - 
Distributions to non-controlling interest  (108,000)  (121,223)
Proceeds from notes payable  963,965   242,000 
Repayment of notes payable  (1,494,784)  (2,498,808)
Debt issuance costs  -   (15,000)
Net cash provided by financing activities  29,351,291   6,135,981 
Net increase (decrease) in cash  267,898   (189,987)
Cash at beginning of period  9,179,075   1,106,624 
Cash at end of period $9,446,973  $916,637 
Cash paid for interest        
Cash paid during the period for interest $120,062  $592,961 
Non-cash investing and financing activities        
Cashless exercise of options $8,730  $- 
Cashless exercise of warrants $-  $49,551 
Principal of Paycheck Protection Program loans forgiven $184,914  $- 
Additional purchase of membership interest in WorkSimpli issued in performance options $144,002  $- 
Deemed dividend from warrant price adjustments $-  $1,216,021 
Deemed distribution from warrants issued with Series B Preferred Stock $-  $3,500,000 
Warrants issued for debt instruments $6,270,710  $- 
Stock yet to be issued for capitalized costs $-  $40,000 
Deemed distribution from down-round provision on unissued shares $-  $194,022 
Liability to issue common stock $-  $76,348 
Debt issuance costs for liability to issue shares $-  $219,450 
Conversion of convertible notes payable and interest for Series B Preferred Stock $-  $607,500 
Stock issued for capitalized costs $-  $12,675 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.


7

Immudyne, Inc.

 

Notes to Consolidated Financial Statements

September 30, 2017LIFEMD, INC.

(unaudited)

1.Organization and Going Concern

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS

Corporate History

LifeMD, Inc. was formed in the State of Delaware on May 24, 1994, under its prior name, Immudyne, Inc. (the “Company”) is a Delaware corporation establishedThe Company changed its name to develop, manufactureConversion Labs, Inc. on June 22, 2018 and sell natural immune support products containingthen subsequently, on February 22, 2021, changed its name to LifeMD, Inc. Effective February 22, 2021, the trading symbol for the Company’s proprietary yeast beta glucans, a group of beta glucans naturally occurring incommon stock, par value $0.01 per share on The Nasdaq Stock Market LLC changed from “CVLB” to “LFMD”.

On April 1, 2016, the cell walls of yeast that have been shown through testing and analysis to support the immune system. The Company’s products include once a day oral intake tablets and topical creams and gels for skin application. The Company concentrates its sales and marketing efforts on healthcare professionals, distributors for its all-natural raw material ingredient products and direct-to-consumer sales.

In 2015, the Company formed a joint venture domiciled in Puerto Rico, Innate Skincare, LLC (“Innate”). Under the terms of the joint venture agreement, the Company held a 33.3% equity interest, and a 51% controlling voting interest, in Innate. On January 20, 2016, Innate amended its limited liability companyoriginal operating agreement and changed its legal name toof Immudyne PR LLC (“Immudyne PR”), a joint venture to market the Company’s skincare products, was amended and restated and the Company increased its ownership and voting interest in Immudyne PR to 78.2%. Concurrent with the name change of the parent company to Conversion Labs, Inc., Immudyne PR was renamed to Conversion Labs PR LLC. On April 1, 2016, Immudyne PR further amended its25, 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%. On February 22, 2021, concurrent with the name of the parent company to LifeMD, Inc., Conversion Labs PR LLC was renamed to LifeMD PR, LLC.

In June 2018, the Company closed the strategic acquisition of 51% of LegalSimpli Software, LLC, which operates a software as a service (SaaS) application for converting, editing, signing and sharing PDF documents called PDFSimpli. In addition to LegalSimpli Software, LLC’s growth business model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company. On July 15, 2021, LegalSimpli Software, LLC, changed its name to WorkSimpli Software, LLC, (“WorkSimpli”). Effective January 22, 2021, the Company consummated a transaction to restructure the ownership of WorkSimpli (the “WSS Restructuring”) (See Note 7) and concurrently increased its ownership stake in WorkSimpli to 85.6%.

Nature of Business

The Company is a direct-to-patient telehealth technology company that provides a smarter, cost-effective and convenient way for a provider’s patients to access healthcare. The Company believes that 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 telehealth technology companies, like the Company, connect consumers to licensed healthcare professionals for care across numerous indications, including concierge care, men’s sexual health and dermatology, among others.

The Company’s telehealth platform helps patients access their licensed providers for diagnoses, virtual care, and prescription medications, often delivered on a recurring basis. In addition to its telehealth prescription offerings, the Company sells over-the-counter products. All 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 the Company.

The Company believes that brand innovation, customer acquisition and service excellence form the heart of its business. As is exemplified with its first brand, Shapiro MD, it has 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 telehealth platform offering that gives consumers access to virtual medical treatment from their providers and, when appropriate, a full line of oral and topical prescription medications for hair loss. The Company’s men’s brand, Rex MD, currently offers access to provider-based treatment for erectile dysfunction, as well as treatment for other common men’s health issues including premature ejaculation and hair loss. In the first quarter of 2021, the Company launched its newest brand, Nava MD, a tele-dermatology and skincare brand for women. The Company has built a platform that allows it to efficiently launch telehealth and wellness product lines wherever it determines there is a market need.

Business and Subsidiary History

In June 2018, Conversion Labs closed the strategic acquisition of 51% of WorkSimpli, which operates a software as a service (SaaS) application for converting, editing, signing and sharing PDF documents called PDFSimpli. In addition to WorkSimpli’s growth business model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company. The Company subsequently increased its ownership stake in WorkSimpli to its current 85.6%.

8

In early 2019, the Company had launched a service-based business under the name Conversion Labs Media LLC (“CVLB Media”), a Puerto Rico limited liability company, which was to be used to run e-commerce marketing campaigns for other online businesses. However, this business initiative was terminated in early 2019 in order to focus on its core business as well as the expansion of our telehealth opportunities. In June 2019, a strategic joint venture with GoGoMeds.com (“GoGoMeds”) was formed in order to help facilitate the launch of our telehealth business. GoGoMeds is a nationwide pharmacy licensed to dispense prescription medications directly to consumers in all 50 states and the District of Columbia. However, on August 7, 2020, the Company terminated its Strategic Partnership Agreement with GoGoMeds. The joint venture with GoGoMeds had not initiated activities, and its termination did not have an impact on the Company’s operations.

Conversion Labs Rx, LLC (“CVLB Rx”), a Puerto Rico limited liability company, and Conversion Labs Asia Limited (“Conversion Labs Asia”), a Hong Kong company, had no activity during both the nine months ended September 30, 2021 and the year ended December 31, 2020. CVLB Rx was dissolved during the year ended December 31, 2020.

Unless otherwise indicated, the terms “LifeMD,” “Company,” “we,” “us,” and “our” refer to LifeMD, Inc. (formerly known as Conversion Labs, Inc.), our wholly subsidiary LifeMD PR, LLC (formerly Immudyne PR increasingLLC, and “Conversion Labs PR”), a Puerto Rico limited liability company (“Conversion Labs PR”, or “CLPR”), LifeMD Southern Patient Medical Care (“LifeMD PC”), the Company’s professional physician corporation and our majority-owned subsidiary, WorkSimpli. The Company facilitates the delivery of telehealth services to LifeMD PC’s patients via the upcoming LifeMD primary care platform and holds a variable interest in LifeMD PC. Unless otherwise specified, all dollar amounts are expressed in United States dollars.

Partnerships

On July 13, 2021, the Company, on behalf of its ownershipcustomers, entered into an agreement to 78.1667% resultingengage Quest Diagnostics Incorporated (“Quest Diagnostics”) as the Company’s laboratory services provider to perform certain clinical laboratory diagnostic services based on orders submitted to Quest Diagnostics by licensed health care providers who are under contract with the Company and are authorized under U.S. federal or state law to order laboratory tests. Patients of LifeMD Inc.’s affiliated providers gain access to more than 150 of the most ordered laboratory tests at preferential prices, and which can be completed in the comfort, safety, and convenience of their home or office or at any one of Quest Diagnostics’ 2,000 facilities.

On July 14, 2021, the Company entered into an agreement to engage Axle Health Inc. (“Axle Health”) to assist the Company in establishing a chargeplatform to noncontrolling interestenable patients of the Company’s medical practice clients (“MP Clients”) to schedule certain nursing services, including blood draws, injections, and additional paid-in-capitalother basic healthcare services, and to furnish operational support services to medical practices using the platform. In connection therewith, Axle Health granted the Company a revocable, nontransferable, non-exclusive right and license, with the right to grant sublicenses, to install and use the software and other technology relating to the platform developed, owned, or with the right to grant sublicenses to install and use the software and/or other technology developed, owned, or licensed by Axle Health, including the platform, to facilitate the scheduling and provision of $91,612. Immudyne PRcertain nursing services to patients of MP Clients.

On August 4, 2021, the Company entered into a partnership agreement with Particle Health, a state-of-the-art, digital health company with a HIPAA-compliant technology platform that converts electronic medical records data into a user-friendly Fast Healthcare Interoperability Resource (“FHIR”) format. Particle Health enables healthcare companies by offering simple, secure access to vital medical data. With Particle Health’s platform, and patient consent, licensed medical providers on the upcoming LifeMD primary care platform gain instant access to comprehensive patient health records from a database covering over 90% of the US population, therefore enabling best-in-class, personalized care through a deeper understanding of their patients’ medical histories.

On August 30, 2021, the Company signed a letter of intent with Prescryptive Health (“Prescryptive”), a healthcare technology company empowering consumers by improving the way healthcare is delivered. The partnership is expected to accelerate growth for both companies by combining LifeMD’s expanding direct-to-patient telehealth brands and upcoming LifeMD primary care platform with Prescryptive’s best-in-class digital pharmacy fulfillment and e-prescribing technology platform.

Reverse Stock Split

On October 9, 2020, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of Delaware (the “Amendment”) in order to effectuate a 1-for-5 reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Split” or “Split”). The Reverse Split was formed to launch a complete skin care regime formulated using strategic ingredients providedapproved by the Company. InFinancial Industry Regulatory Authority (FINRA) and became effective in the second quartermarket on October 14, 2020. All references to common shares and common share data in these financial statements and elsewhere in this Form 10-Q as of 2017, Immudyne PR expanded their product lineSeptember 30, 2021 and launched their in-licensed patented hair loss shampoo2020, and conditioner.for the three and nine months then ended, reflect the Reverse Stock Split.

9

 

Liquidity

The Company has funded operations in the past through the sales of its products, issuance of common and preferred stock and through loans and advances from officers and directors.advances. The Company’s continued operations are dependent upon obtaining an increase in its sales volumesale volumes and the continued financial supportobtaining funding from officers and directorsthird-party sources or the issuance of additional shares of common stock.

On February 11, 2021, the Company consummated the closing of a private placement offering (the “February 2021 Offering”), whereby pursuant to the securities purchase agreement (the “February 2021 Purchase Agreement”) entered into by the Company and certain accredited investors on February 11, 2021 the Investors purchased 608,696 shares of the Company’s common stock par value $0.01 per share at a purchase price of $23.00 per share for aggregate gross proceeds of approximately $14.0 million (the “Purchase Price”). The accompanying financial statements have been preparedPurchase Price was funded on the basis thatclosing date and resulted in net proceeds to the Company will continueof approximately $13.5 million after deducting fees payable to the placement agent and other estimated offering expenses payable by the Company. The Company intends to use the net proceeds to fund growth initiatives, as well as for general corporate purposes.

On June 1, 2021, the Company entered into a going concern,securities purchase agreement (the “Purchase Agreement”) with a financial institution (the “Purchaser”), pursuant to which assumes the realizationCompany sold and issued: (i) a senior secured redeemable debenture (the “Debenture”) in the aggregate principal amount of assets$15.0 million (the “Aggregate Principal Amount”), and (ii) warrants to purchase up to an aggregate of 1,500,000 shares of the Company’s common stock at an exercise price of $12.00 per share (the “Warrant”) of which 500,000 warrants were issued to the Purchaser upon closing with the remaining 1,000,000 warrants only issued to the Purchaser in increments of 500,000 if the Debenture remains outstanding for twelve and twenty four months, respectively, following the closing date of the Purchase Agreement. The Warrant has a term of three years, and the satisfactionDebenture has a maturity date of liabilitiesthree years. The Debenture may be paid fully or in part by the Company at any time prior to maturity without penalty to the Company. The Company received gross proceeds of $15.0 million and intends to use such proceeds for working capital, growth investment and general corporate purposes. In October 2021, the Company used a portion of the net proceeds from the October 4, 2021 Preferred and Common Stock Offerings noted below to pay the $15.0 million outstanding on the June 1, 2021 Purchase Agreement.

On June 8, 2021, the Company filed a shelf registration statement on Form S-3 under the Securities Act of 1933, or “Securities Act”, which was declared effective on June 22, 2021 (the “2021 Shelf”). Under the 2021 Shelf at the time of effectiveness, the Company had the ability to raise up to $150 million by selling common stock, preferred stock, debt securities, warrants and units. In conjunction with the 2021 Shelf, the Company also entered into an At Market Issuance Sales Agreement (the “ATM Sales Agreement”) with B. Riley Securities, Inc. (“B. Riley”) and Cantor Fitzgerald & Co. (“Cantor”, and collectively the “Agents”) relating to the sale of its common stock. In accordance with the terms of the ATM Sales Agreement, the Company may, but is not obligated to, offer and sell, from time to time, shares of common stock having an aggregate offering price of up to $60 million, through or to the Agents, acting as agent or principal. Sales of common stock, if any, will be made by any method permitted that is deemed an “at the market offering” as defined in Rule 415 under the Securities Act. The Company intends to use any net proceeds from the sale of securities for our operations and for other general corporate purposes, including, but not limited to, capital expenditures, general working capital and possible future acquisitions. There were 70,786 shares of common stock sold under the ATM Sales Agreement as of September 30, 2021 and net proceeds received were $493,481. The Company had approximately $59.5 million available under the ATM Sales Agreement and $90 million available under the 2021 Shelf as of September 30, 2021.

In September 2021, the Company entered into two underwriting agreements (the “Preferred Underwriting Agreement” and “the Common Underwriting Agreement”) with B. Riley Securities, Inc. (“B.Riley”). Pursuant to the Preferred Underwriting Agreement, the Company agreed to sell 1,400,000 shares of its 8.875% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share, (the “Series A Preferred Stock”) at a public offering price of $25.00 per share, prior to deducting underwriting discounts and commissions and estimated offering expenses (the “Preferred Stock Offering”). In addition, the company granted the underwriters an option to purchase up to an additional 210,000 shares of Series A Preferred Stock within 30 days. Under the Common Underwriting Agreement, the Company agreed to sell to B. Riley 3,833,334 shares of common stock (including 500,000 shares pursuant to B. Riley’s option) (the “Common Shares”), par value $0.01 per share, of the Company at a public offering price of $6.00 per share of common stock, prior to deducting underwriting discounts and commissions and estimated offering expenses (the “Common Stock Offering”). The Preferred Stock Offering and Common Stock Offering collectively referred to as the “Offerings”, closed on October 4, 2021. Net proceeds after deducting the underwriting discounts and commissions, the structuring fee and estimated offering expenses payable by the Company, but before repayment of debt, from the Offerings was approximately $55.3 million. The Company used a portion of the net proceeds to pay the $15.0 million outstanding on the June 1, 2021 Purchase Agreement and intends to use the remaining net proceeds to fund the segregated dividend account, for working capital and general corporate purposes including, but not limited to, new patient customer acquisition expenses and capital expenditures.

The Company will pay cumulative distributions on the Series A Preferred Stock, from the date of original issuance, in the normal courseamount of business. At$2.21875 per share each year, which is equivalent to 8.875% of the $25.00 liquidation preference per share. Dividends on the Series A Preferred Stock will be payable quarterly in arrears, on or about the 15th day of January, April, July and October of each year. The first dividend on the Series A Preferred Stock sold in this offering will be paid on or about January 15, 2022.

10

Liquidity Evaluation

As of September 30, 2017,2021, the Company has an accumulated deficit approximating $10.7$122.9 million and has incurred negativeexperienced significant losses from its operations. Although the Company is showing significant positive revenue trends, the Company expects to incur further losses through the end of 2022. Additionally, the Company expects its burn rate of cash flows from operations. These conditions raise substantial doubt about the Company's ability to continue through the end of 2022; however, the Company expects this burn rate to improve in future quarters. To date, the Company has been funding operations primarily through the sale of equity in private placements and securities purchased by a financial institution. Management is unable to predict if and when the Company will be able to generate significant positive cash flow or achieve profitability. There can be no assurances that we will be successful in increasing revenues, improving operational efficiencies or that financing will be available or, if available, that such financing will be available under favorable terms.

The Company has a current cash balance of approximately $41.4million as a going concern. The accompanying financial statements do not include any adjustments that might resultof the filing date, which includes the $13.5 million of net proceeds from the outcomeFebruary 2021 Offering and the $55.3 million of this uncertainty.

net proceeds from the October 4, 2021 Offerings. Based on the Company's cash balance at September 30, 2017, andCompany’s projected cash needs for 2017,requirements, management estimates that it will needutilize approximately $19 million through the next 12 months from the filing date of this report. The Company reviewed its forecasted operating results and sources and uses of cash used in management’s assessment, which included the available financing, consideration of positive and negative evidence impacting management’s forecasts, market and industry factors. Positive indicators that lead to increase sales revenue and/or raise additional capital to cover operatingits conclusion that the Company will have sufficient cash over the next 12 months following the date of this report include: (1) its continued strengthening of the Company’s revenues and capital requirements forimprovement of operational efficiencies across the business, (2) the expected improvement in its cash burn rate in the remainder of 2021 and over the 2017 year. Managementnext 12 months, (3) the Company’s October 4, 2021 Offerings whereby the Company received total net proceeds of $55.3 million, (4) $59.5 million available under the ATM Sales Agreement and $90 million available under the 2021 Shelf, (5) management’s ability to curtail expenses if necessary and (6) the overall market value of the telehealth industry and how it believes that will needcontinue to raise the additional needed funds through increased sales volume, issuing additional shares of common stock or other equity securities, or obtaining debt financing. Although management has been successful to datedrive interest in raising necessary funding, there can be no assurance that sales revenue will substantially increase or that any required future financing can be successfully completed on a timely basis, or on terms acceptable to the Company.


Immudyne, Inc.

NotesNOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Consolidated Financial Statements

Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete audited financial statements. The accompanying unaudited financial information should be read in conjunction with the audited consolidated financial statements, including the notes thereto, as of and for the year ended December 31, 2020, included in our 2020 Annual Report on Form 10-K filed with the SEC. The information furnished in this report reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for each period presented. The results of operations for the three and nine months ended September 30, 20172021 are not necessarily indicative of the results for the year ending December 31, 2021 or for any future period.

(unaudited)

2.Summary of Significant Accounting Policies

Principles of Consolidation

The Company evaluates the need to consolidate affiliates based on standards set forth in Accounting Standard CodificationASC 810 Consolidation (“ASC”ASC 810”) 810 Consolidation..

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, CLPR, its majority owned subsidiary, Immudyne PR and variable interest entities (VIE’s)WorkSimpli, in whichaddition to LifeMD PC, the Company has been determined to be the primary beneficiary.Company’s professional physician corporation. The non-controlling interest in Immudyne PRWorkSimpli represents the 21.8333%49% equity interest held by other members of the joint venture. subsidiary as of December 31, 2020. During the nine months ended September 30, 2021, the Company purchased an additional 34.6% of WorkSimpli for a total equity interest of approximately 85.6% (see Note 7). CVLB Media, CVLB Rx and Conversion Labs Asia had no activity during both the nine months ended September 30, 2021 and the year ended December 31, 2020. CVLB Rx was dissolved during the year ended December 31, 2020.

All significant consolidatedintercompany transactions and balances have been eliminated in consolidation.

Variable Interest EntitiesCash and Cash Equivalents

The Company follows ASC 810-10-15 guidance with respect to accounting for VIE’s. These entities do not have sufficient equity at risk to finance their activities without additional subordinated financial support from other parties or whose equity investors lack any of the characteristics of a controlling financial interest. A variable interest is an investment or other interest that will absorb portions of a VIE’s expected losses or receive portions of its expected residual returns and are contractual, ownership, or pecuniary in nature and that change with changes in the fair value of the entity’s net assets. A reporting entity is the primary beneficiary of a VIE and must consolidate it when that party has a variable interest, or combination of variable interests, that provides itHighly liquid investments with a controlling financial interest. A party is deemedmaturity of three months or less when purchased are considered to have a controlling financial interest if it meets both of the power and losses/benefits criteria. The power criterion is the ability to direct the activities of the VIE that most significantly impact its economic performance. The losses/benefits criterion is the obligation to absorb losses from, or right to receive benefits from, the VIE that could potentially be significant to the VIE. The VIE model requires an ongoing reconsideration of whether a reporting entity is the primary beneficiary of a VIE due to changes in facts and circumstances.

cash equivalents. As of September 30, 20172021 and December 31, 2016, the Company consolidated nine VIEs.

Immudyne PR as the primary beneficiary of Ace Account Management LLC, Innerwell Skincare LLC, MCD Merchants LLC, One Equity Research LLC, Inate Gems LLC, Retriever Health Products LLC, Spurs 5, LLC, Salus LLC and Huntley LLC which are qualified as VIEs. The assets and liabilities and revenues and expenses of these VIEs are included in the financial statements of Immudyne PR and further included in the consolidated financial statements. As of September 30, 2017, the VIEs had assets of $3,096, liabilities of $10,146, revenues of $1,487, and operating expenses of $2,119. As of December 31, 2016, the VIEs had assets of $10,306, liabilities of $5,748. The assets and liabilities include balances due from and due to the subsidiaries of Immudyne PR. Any inter-company receivables and payables are eliminated upon consolidation of the VIEs with Immudyne PR and Immudyne, Inc. No assets2020, there were pledged or given as collateral against any borrowings.

no cash equivalents. The Company utilizes third party entities to provide and increase credit card processing capacity and optimize corresponding rates and fees. A majoritymaintains deposits in financial institutions in excess of these entities provide this service as independent contractors in exchange for a one percent (1%) fee of the net revenues processed and collected by such contractors from sales initiatedamounts guaranteed by the Company. The VIEs consolidated in the Company’sFederal Deposit Insurance Corporation. Cash and cash equivalents are maintained at financial statements are primarily contractedinstitutions, and at times, balances may exceed federally insured limits. We have never experienced any losses related to provide credit card processing through one or more merchant banks. Upon receipt of funds by each VIE, the collection of receipts less any returns, chargebacks and other fees charged by such merchant bank is transferred to Immudyne PR.these balances.

11

 


Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

2.Summary of Significant Accounting Policies (continued)

 

Use of Estimates

The Company prepares its unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates required to be made by management include the determination of reserves for accounts receivable, returns and allowances, the accounting for derivatives, the valuation of inventory, stockholders’ equity-based transactions, estimates to cash flow projections and stockholders’ equity based transactions.going concern assessment. Actual results could differ from those estimates.

Derivative LiabilitiesReclassifications

Under ASC 815-40-05, Accounting for Derivative Financial Instruments IndexedCertain reclassifications have been made to and Potentially Settled in a Company’s Own Stock,conform the prior year’s data to the current presentation. These reclassifications have no effect on previously reported operating loss, stockholders’ deficit or cash flows. Given the increase in the eventCompany’s software business and to appropriately conform the Company’s presentation of operating results to industry and accounting standards, the Company has changed their categories for reporting operations. As a result, the Company has made reclassifications to the prior year presentation in order to conform it to the current periods’ presentation. These reclassifications include: (1) $844,566 and $1,762,351 of merchant processing fees reclassified from cost of revenues to general and administrative expenses, (2) $214,788 and $48 of reimbursable expenses reclassified from cost of revenues to operating expenses and (3) $7,824 and $8,853 of taxes and licensing fees reclassified from operating expenses to general and administrative expenses for the three and nine months ended September 30, 2020, respectively.

Revenue Recognition

The Company records revenue under the adoption of ASC 606 by analyzing exchanges with its customers using a five-step analysis:

1.Identify the contract
2.Identify performance obligations
3.Determine the transaction price
4.Allocate the transaction price
5.Recognize revenue

For the Company’s product-based contracts with customers, the Company has determined that there is one performance obligation, which is the delivery of the product; this performance obligation is transferred at a discrete point in time. The Company generally records sales of finished products once the customer places and pays for the order, with the product being simultaneously shipped by a third-party fulfillment service provider; in limited cases, title does not pass until the product reaches the customer’s delivery site, in these limited cases, recognition of revenue should be deferred until that time, however the Company does not have a sufficient numberprocess to properly record the recognition of authorizedrevenue if orders are not immediately shipped, and unissued sharesdeems the impact to be immaterial. In all cases, delivery is considered to have occurred when title and risk of common stockloss have transferred to satisfy obligationsthe customer, which is usually commensurate upon shipment of the product. In the case of its product-based contracts, the Company provides a subscription sensitive service based on the recurring shipment of products and records the related revenue under the subscription agreements subsequent to receiving the monthly product order, recording the revenue at the time it fulfills the shipment obligation to the customer.

For its product-based contracts with customers, the Company records an estimate for stock options, warrantsprovisions of discounts, returns, allowances, customer rebates and other instruments potentially convertible into common stock, the fair value of these instruments should beadjustments for its product shipments, and are reflected as contra revenues in arriving at reported as a derivative liability. Pursuant to the outstanding option, warrantnet revenues. The Company’s discounts and convertible debt agreements, there is currently no effective registration statement covering the shares of common stock underlying these agreements, whichcustomer rebates are currently subject to a cashless exercise whereby the holders,known at their option, may surrender their options and warrants to the company in exchange for shares of common stock. The number of shares of common stock into which an option or a warrant would be exchangeable in such a cashless exercise depends on both the exercise price of the options or warrant and the market price of the common stock, each at or near the time of exercise. Because both of these factorssale, correspondingly, the Company reduces gross product sales for such discounts and customer rebates. The Company estimates customer returns and allowances based on information derived from historical transaction detail, and accounts for such provisions, as contra revenue, during the same period in which the related revenues are variable, it is possibleearned. The Company has determined that the population of its product-based contracts with customers are homogenous, supporting the ability to record estimates for returns and allowances to be applied to the entire product-based portfolio population. Customer discounts, returns and rebates on product revenues approximated $871,000 and $823,000 for the three months ended September 30, 2021 and 2020, respectively, and approximated $3,455,000 and $2,157,000 for the nine months ended September 30, 2021 and 2020, respectively.

12

The Company, could have insufficient authorized sharesthrough its majority-owned subsidiary WorkSimpli, offers a subscription-based service providing a suite of software applications to satisfyits subscribers, principally on a cashless exercise. In this scenario, ifmonthly subscription basis. The software suite allows the subscriber/user to convert almost any type of document to another electronic form of editable document, providing ease of editing. For these subscription-based contracts with customers, the Company were unableoffers an initial 14-day trial period which is billed at $1.95, followed by a monthly subscription, or a yearly subscription to obtain shareholder approval to increase the number of authorized shares,Company’s software suite dependent on the subscriber’s enrollment selection. The Company has estimated that there is one product and one performance obligation that is delivered over time, as the Company could be obligatedallows the subscriber to settle such a cashless exercise with cash rather than by issuing sharesaccess the suite of common stock. Further, ASC 815-40-05 requires thatservices for the Company recordtime period of the potential settlement obligation at each reporting date using the current estimated fair value of these contracts, with any changes in fair value being recorded through our statement of operations.subscription purchased. The Company had reportedallows the potential settlement obligationcustomer to cancel at any point during the billing cycle, in which case the customers subscription will not be renewed for the following month or year depending on the original subscription. The Company records the revenue over the customers’ subscription period for monthly and yearly subscribers or at the end of the initial 14-day service period for customers who purchased the initial subscription, as the circumstances dictate. The Company offers a derivative liability. Indiscount for the third quartermonthly or yearly subscriptions being purchased, which is deducted at the time of 2017,payment at the Company obtained a majorityinitiation of shareholders’ approval and amended its Articles of Incorporation to increase the number of shares of its authorized common stock,contract term, therefore the derivative liabilityContract price is no longer applicable.

Sequencing Policy

Under ASC 815-40-35,fixed and determinable at the contract initiation. Monthly and annual subscriptions for the service are recorded net of the Company’s known discount rates. As of September 30, 2021 and December 31, 2020, the Company has adoptedaccrued contract liabilities, as deferred revenue, of approximately $1,436,000 and $917,000, respectively, which represent obligations on in-process monthly or yearly contracts with customers and a sequencing policy whereby,portion attributable to the yet to be recognized initial 14-day trial period collections. Customer discounts and allowances on WorkSimpli revenues approximated $377,000 and $275,000 for the three months ended September 30, 2021 and 2020, respectively, and approximated $1,599,000 and $545,000 for the nine months ended September 30, 2021 and 2020, respectively.

For the three and nine months ended September 30, 2021 and 2020, the Company had the following disaggregated revenue:

SCHEDULE OF DISAGGREGATED REVENUE

  Three Months Ended September 30,  Nine Months Ended September 30, 
  2021  %  2020  %  2021  %  2020  % 
                         
Telehealth revenue $18,540,897   74% $9,438,136   86% $47,623,822   73% $20,263,750   83%
WorkSimpli revenue  6,406,302   26%  1,567,627   14%  17,835,100   27%  4,136,608   17%
Total net revenue $24,947,199   100% $11,005,763   100% $65,458,922   100% $24,400,358   100%

Deferred Revenues

The Company records deferred revenues when cash payments are received or due in advance of its performance. The Company’s deferred revenues relate to payments received for the eventin-process monthly or yearly contracts with customers and a portion attributable to the yet to be recognized initial 14-day trial period collections.

SCHEDULE OF CONTRACT WITH CUSTOMER LIABILITY

  2021  2020  2021  2020 
  Three Months Ended September 30,  Nine Months Ended September 30, 
  2021  2020  2021  2020 
Beginning of period $1,381,938  $303,670  $916,880  $109,552 
Additions  6,020,061   1,695,017   17,233,084   3,833,386 
Revenue recognized  5,966,018   1,586,071   16,713,983   3,530,322 
End of period $1,435,981  $412,616  $1,435,981  $412,616 

Accounts Receivable

Accounts receivable principally consist of amounts due from third-party merchant processors, who process our subscription revenues; the merchant accounts balance receivable represents the charges processed by the merchants that reclassificationhave not yet been deposited with the Company. The unsettled merchant receivable amount normally represents processed sale transactions from the final one to three days of contracts from equitythe month, with collections being made by the Company within the first week of the following month. Management determines the need, if any, for an allowance for future credits to be granted to customers, by regularly evaluating aggregate customer refund activity, coupled with the consideration and current economic conditions in its evaluation of an allowance for future refunds and chargebacks. As of September 30, 2021 and December 31, 2020, the Company had an allowance for bad debt, attributable to the single agent relationship amounting to approximately $133,000 and $133,000, respectively. As of September 30, 2021 and December 31, 2020, the reserve for sales returns and allowances was approximately $470,000 and $349,000, respectively. For all periods presented, as noted above, the sales returns and allowances were recorded as contra assets or liabilities is necessary pursuant to ASC 815 duein arriving at presented accounts receivable, net.

Inventory

As of September 30, 2021 and December 31, 2020, inventory primarily consisted of finished goods related to the Company’s inability to demonstrate it has sufficient authorized shares, shares will be allocated onOTC products included in the basistelehealth revenue section of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of authorized but unissued shares, and all future instruments being classified as a derivative liability, with the exception of instruments related to share-based compensation issued to employees or directors. 

Inventory 

At September 30, 2017 and December 31, 2016, inventory consisted primarily of cosmetic and nutraceutical additives, and finished cosmetic products.table above. Inventory is maintained inat the Company’s leased Kentuckythird-party warehouse location in Wyoming and third party warehousesat the Amazon fulfillment center. The Company also maintains inventory at a related-party warehouse in Pennsylvania and Louisiana.Pennsylvania.

13

 

Inventory is valued at the lower of cost or marketnet realizable value with cost determined on a first-in, first-out (“FIFO”) basis. Management compares the cost of inventory with the net realizable value and an allowance is made for writing down inventory to market value,net realizable, if lower. At September 30, 2017 and December 31, 2016, theThe Company recorded an inventory reserve in the amount of $20,000. Inventory consists$57,481 as of September 30, 2021 and December 31, 2020.

As of September 30, 2021 and December 31, 2020, the Company’s inventory consisted of the following:

SUMMARY OF INVENTORY

   September 30,
2017		  December 31,
2016		 
        
 Raw materials $68,852  $38,460 
 Finished products  308,948   121,810 
   $377,800  $160,270 
  September 30, 2021  December 31, 2020 
       
Finished goods - products $1,570,519   1,172,624 
Raw materials and packaging components  74,056   149,115 
Inventory reserve  (57,481)  (57,481)
Total Inventory - net $1,587,094  $1,264,258 

8

Product Deposit

Immudyne, Inc.

NotesMany of our OTC product vendors require deposits when a purchase order is placed for goods or fulfillment services. These deposits typically range from 10% to Consolidated Financial Statements

33% of the total purchased amount. Our vendors include a credit memo within their final invoice, recognizing the deposit amount previously paid. As of September 30, 2017

(unaudited)

2.Summary of Significant Accounting Policies (continued)

Revenue Recognition

2021 and December 31, 2020, the Company has $911,948 and $816,765, respectively, of product deposits with multiple vendors for the purchase of raw materials or finished goods. The Company’s policy ishistory of product deposits with its inventory vendors, creates an implicit purchase commitment equaling the total expected product acceptance cost in excess of the product deposit. As of September 30, 2021 and December 31, 2020, the Company approximates its implicit purchase commitments to record revenue as earned when a firm commitment, indicating sales quantitybe $3.8 million and price exists, delivery has taken place$1.6 million, respectively. As of September 30, 2021 and collectability is reasonably assured. December 31, 2020, the vast majority of these product deposits are with one vendor that manufacturers the Company’s finished goods inventory for its Shapiro hair care product line.

Capitalized Software Costs

The Company capitalizes certain internal payroll costs and third-party costs related to internally developed software and amortizes these costs using the straight-line method over the estimated useful life of the software, generally records salesthree years. The Company does not sell internally developed software other than through the use of nutraceuticalsubscription service. Certain development costs not meeting the criteria for capitalization, in accordance with Accounting Standards Codification (“ASC”) ASC 350-40 Internal-Use Software, are expensed as incurred. As of September 30, 2021 and cosmetic additives onceDecember 31, 2020, the product is shippedCompany capitalized $2,169,644 and $438,136, respectively, related to internally developed software costs which are amortized over the useful life and included in development costs on our statement of operations.

Intangible Assets

Intangible assets are comprised of: (1) a customer relationship asset (with original cost of approximately $1,007,000) with an estimated useful life of three years, (2) a purchased license (with original cost of $200,000) with an estimated useful life of ten years and (3) a purchased domain name (with an original cost of $22,231) with an estimated useful life of three years. Intangible assets are amortized over their estimated lives using the straight-line method. Costs incurred to renew or extend the term of recognized intangible assets are capitalized and amortized over the useful life of the asset.

Impairment of Long-Lived Assets

Long-lived assets are evaluated for impairment whenever events or changes in circumstances have indicated that an asset may not be recoverable and are grouped with other assets to the customer,lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and for salesliabilities (asset group). If the sum of finished cosmetic products once the customer places the orderprojected undiscounted cash flows (excluding interest charges) of an asset group is less than its carrying value and the productfair value of an asset group is simultaneously shipped, butalso less than its carrying value, the assets will be written down by the amount by which the carrying value of the asset group exceeded its fair value. However, the carrying amount of a finite-lived intangible asset can never be written down below its fair value. Any loss would be recognized in limited cases if title does not pass untilincome from continuing operations in the product reaches the customer’s delivery site, then recognition of revenue is deferred until that time. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Provisions for discounts, returns, allowances, customer rebates and other adjustments are netted with gross sales. The Company accounts for such provisions during the same period in which the related revenuesdetermination is made.

14

Paycheck Protection Program

During the year ended December 31, 2020, the Company received aggregate loan proceeds in the amount of approximately $249,000 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are earned. Customer discounts, returnsforgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and rebates approximated $149,000utilities, and $1,578,000maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period.

The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company intends to use the proceeds for purposes consistent with the PPP. While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, we cannot assure you that we will not take actions that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part.

During the nine months ended September 30, 2017 and 2016, respectively. Customer discounts, returns and rebates approximated $99,000 and $530,000 in2021, the three months ended September 30, 2017 and 2016, respectively. There are no formal sales incentives offered to anyCompany had a total of $184,914 of its PPP loans forgiven by the Company’s customers. Volume discounts may be offered from time to time to customers purchasing large quantities on a per transaction basis.

Revenue for the nine months ended September 30, 2017 consisted of nutraceutical and cosmetic additives ($981,356) and finished cosmetic products ($2,602,258)SBA (see Note 5). Revenue for the nine months ended September 30, 2016 consists of nutraceutical and cosmetic additives ($757,961) and finished cosmetic products ($3,494,743).

Revenue for the three months ended September 30, 2017 consisted of nutraceutical and cosmetic additives ($277,463) and finished cosmetic products ($1,774,271). Revenue for the three months ended September 30, 2016 consists of nutraceutical and cosmetic additives ($229,741) and finished cosmetic products ($1,154,688).

Accounts receivable

Accounts receivable are carried at original invoice amount less an estimate made for holdbacks and doubtful receivables based on a review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions and sets up an allowance for doubtful accounts when collection is uncertain. Customers’ accounts are written off when all attempts to collect have been exhausted. Recoveries of accounts receivable previously written off are recorded as income when received. At September 30, 2017 and December 31, 2016, the accounts receivable reserve was approximately $-0- and $37,800, respectively. As of September 30, 20172021 and December 31, 2016,2020, the reserve for sales returnsPPP loan balance was $63,400 and allowances was approximately $26,000$248,314, respectively, and $50,500, respectively.


Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

2.Summary of Significant Accounting Policies (continued)

Segments

The guidance for disclosures about segments of an enterprise requires that a public business enterprise report financial and descriptive information about its operating segments. Generally, financial information is required to be reportedreflected on the basis used internally for evaluating segment performance and resource allocation. The Company manages its operations in two reportable segments for purposes of assessing performance and making operating decisions. Revenue is generated predominately in the United States, and all significant assets are held in the United States, or United States territories.Company’s consolidated balance sheet as current liabilities, within notes payable, net.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. The Company allocates resources and evaluates the performance of segments based on income or loss from operations, excluding interest, corporate expenses and other income (expenses).

A summary of the company’s reportable segments is as follows:

 Total assets: September 30,
2017		  December 31,
2016		 
 Nutraceutical and Cosmetic Additives $1,615,632  $556,234 
 Finished Cosmetic Products  763,609   422,288 
 Eliminations  (1,041,790)  (188,698)
 Total $1,337,451  $789,824 

   Three months ended  Nine months ended 
   September 30,  September 30,  September 30,  September 30, 
   2017  2016  2017  2016 
 Net sales by segment:            
 Nutraceutical and Cosmetic Additives $277,463  $229,741  $981,356  $780,961 
 Finished Cosmetic Products  1,774,271   1,154,688   2,602,258   3,494,743 
 Eliminations  -   -   -   (23,000)
 Total $2,051,734  $1,384,429  $3,583,614  $4,252,704 

   Three months ended  Nine months ended 
   September 30,  September 30,  September 30,  September 30, 
 Net (loss) income by segment: 2017  2016  2017  2016 
 Nutraceutical and Cosmetic Additives $(1,244) $141  $180,388  $115,083 
 Finished Cosmetic Products  145,563   41,017   (170,119)  171,520 
                  
 Other unallocated amounts:                
 Corporate expenses  (417,886)  (248,862)  (884,299)  (753,035)
 Other income (expense)  (378,324)  (9,992)  (154,101)  (15,805)
                  
 Consolidated net income (loss) $(651,891) $(217,696) $(1,028,131) $(482,237)

Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

2.Summary of Significant Accounting Policies (continued)

Income Taxes

The Company files Corporate Federalcorporate federal, state and Statelocal tax returns. Conversion Labs PR and WorkSimpli file tax returns while Immudyne PR, which was formed as ain Puerto Rico, both are limited liability corporation, files acompanies and file separate tax returnreturns with any tax liabilities or benefits passing through to its members.

The Company records current and deferred taxes in accordance with Accounting Standards Codification (ASC)(“ASC”) 740, “Accounting for Income Taxes.” This ASC requires recognition of deferred tax assets and liabilities for temporary differences between tax basis of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted rates in effect for the year in which the differences are expected to reverse. The Company establishes a valuation allowance, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company periodically assesses the value of its deferred tax asset, a majority of which has been generated by a history of net operating losses and management determines the necessity for a valuation allowance. ASC 740 also provides a recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken in a tax return. Using this guidance, a company may recognize the tax benefit from an uncertain tax position in its financial statements only if it is more likely-than-not (i.e., a likelihood of more than 50%) that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The Company’s tax returns for all years since December 31, 2013,2017, remain open to audit by all related taxing authorities.

Stock-BasedStock-based Compensation

The Company follows the provisions of ASC 718, “Share-Based Payment” and ASC 505-50 “Equity-Based Payments to Non-Employees”. Under this guidance compensation cost generally is recognized at fair value on the date of the grant and amortized over the respective vesting periods.or service period. The fair value of options at the date of grant is estimated using the Black-Scholes option pricing model. The expected option life is derived from assumed exercise rates based upon historical exercise patterns and represents the period of time that options granted are expected to be outstanding. The expected volatility is based upon historical volatility of the Company’s common shares using weekly price observations over an observation period that approximates the expected life of the options. The risk-free interest rate approximates the U.S. Treasury yield curve rate in effect at the time of grant for periods similar to the expected option life. Due to limited history of forfeitures, the estimated forfeiture rate included in the option valuation was zero.Company has elected to account for forfeitures as they occur.

Many of the assumptions require significant judgment and any changes could have a material impact in the determination of stock-based compensation expense.



Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

2.Summary of Significant Accounting Policies (continued)

Earnings (Loss) Per Share

Basic earnings (loss) per common share is based on the weighted average number of shares outstanding during each period presented. The dilutedConvertible securities, warrants and options to purchase common stock are included as common stock equivalents only when dilutive. Potential common stock equivalents are excluded from dilutive earnings per share computation includeswhen the effect, if any, of shares thateffects would be issuable uponantidilutive.

The Company follows the provisions of ASC 260, “Diluted Earnings per Share”. In computing diluted EPS, basic EPS is adjusted for the assumed issuance of all potentially dilutive securities. The dilutive effect of call options, warrants and share-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of outstanding stock options, warrants, derivative liability and convertible debt, reduced by the number ofthese instruments are used to purchase common shares which are assumed to be purchased by the Company from the resulting proceeds at the average market price duringfor the period. The dilutive effect of traditional convertible debt and preferred stock is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, when such amountsand the resulting common shares are dilutive toincluded in the earnings per share calculation.denominator of the diluted EPS calculation for the entire period being presented.

15

 

The weighted averagefollowing table summarizes the number of shares of common stock equivalents not included inissuable pursuant to our convertible securities that were excluded from the diluted income per share, because the effects are anti-dilutive, was 4,907,700 for the three months ended September 30, 2017.

Common stock equivalents comprising shares underlying 9,335,800 options and warrants for the nine months ended September 30, 2017 have not been included in the loss per share calculation asbecause the effects are anti-dilutive. Common stock equivalents comprisingeffect of including these potential shares underlying 12,950,273 options and warrants forwas antidilutive even though the nine months ended September 30, 2016 have not been included inexercise price could be less than the loss per share calculations as the effects are anti-dilutive.

Recent Accounting Pronouncements

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. The new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This pronouncement is effective for annual reporting periods beginning after December 15, 2017 but early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing diversity in practice regarding how certain cash receipts and cash payments are presented in the statement of cash flows. The standard provides guidance on the classificationaverage market price of the following items: (1) debt prepayment or debt extinguishment costs, (2) settlementcommon shares:

SCHEDULE OF POTENTIALLY DILUTIVE SECURITIES

  Three Months Ended September 30,  Nine Months Ended September 30, 
  2021  2020  2021  2020 
             
Series B Preferred Stock  1,076,923   -   1,076,923   - 
Restricted Stock Units (RSUs)  996,375   -   569,417   - 
Stock options  4,170,900   3,423,400   4,193,100   3,920,467 
Warrants  3,888,438   2,507,758   3,807,899   2,280,677 
Potentially dilutive securities  10,132,636   5,931,158   9,647,339   6,201,144 

Fair Value of zero-coupon debtFinancial Instruments

The carrying value of the Company’s financial instruments, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, (6) distributions received from equity method investments, (7) beneficial interests in securitization transactions,including cash, accounts receivable, accounts payable and (8) separately identifiable cash flows. The Company is required to adopt ASU 2016-15 for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017 on a retrospective basis. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of adoption of ASU 2016-15.

In February 2016, a pronouncement was issued that creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation ofaccrued expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the face amount timing, and uncertainty of cash flows arising from leases. The new standard is effectivenotes payable approximate fair value for annual reportingall periods beginning after December 15, 2018, including interim periods within that reporting period, with early application permitted. The new standard is to be applied using a modified retrospective approach. The Company is in the processpresented.

Concentrations of evaluating the impact of the new pronouncement on its consolidated financial statements. At this time, the adoption of this pronouncement is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.Risk


Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

2.Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements (continued)

In May 2014, the Financial Accounting Standards Board ("FASB") issued accounting guidance, "Revenue from Contracts with Customers." The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and clarify guidance for multiple-element arrangements. The standard will be effective for fiscal years and interim periods within those years beginning after December 15, 2017. Accordingly, the Company will adopt this standard in the first quarter of fiscal year 2018. The Company does not expect it to have a material effect on the Company's consolidated financial condition, results of operations, and cash flows because the Company’s business focuses on e-commerce retail sales and commercial sales that do not use written contacts, rather the use of implied contracts recognizing the sale when goods are ordered on our e-commerce platform or invoiced, respectively.

All other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

Noncontrolling Interests

The Company accounts for its less than 100% interest in Immudyne PR in accordance with ASC Topic 810, Consolidation, and accordingly the Company presents noncontrolling interests as a component of equity on its consolidated balance sheet and reports the noncontrolling interest’s share of the Immudyne PR net loss attributable to noncontrolling interests in the consolidated statement of operations.

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Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

2.Summary of Significant Accounting Policies (continued)

Concentration of Credit Risk

The Company grants credit in the normal course of business to its customers. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk.

The Company monitors its positions with, and the credit quality of, the financial institutions with which it invests. The Company, at times, maintains balances in various operating accounts in excess of federally insured limits.

One customer inWe are dependent on certain third-party manufacturers and pharmacies, although we believe that other contract manufacturers or third-party pharmacies could be quickly secured if any of our current manufacturers or pharmacies cease to perform adequately. As of September 30, 2021 and December 31, 2020, we utilized two (2) suppliers for fulfillment services, two (2) suppliers for manufacturing finished goods, one (1) supplier for packaging and bottles and one (1) supplier for labeling. For the nutraceuticalthree and cosmetic additives division accounted for 13% and 13% of consolidated sales for the three-month periodsnine months ended September 30, 20172021 and 2016, respectively.2020, we purchased 100% of our finished goods from two (2) OTC manufacturers.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40); Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”)”, which addresses issues identified as a result of the complexities associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. This customer accountedupdate addresses, among other things, the number of accounting models for 25%convertible debt instruments and 2% of consolidated salesconvertible preferred stock, targeted improvements to the disclosures for convertible instruments and earnings-per-share (“EPS”) guidance and amendments to the guidance for the nine monthderivatives scope exception for contracts in an entity’s own equity, as well as the related EPS guidance. This update applies to all entities that issue convertible instruments and/or contracts in an entity’s own equity. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods endedwithin those fiscal years. Early adoption is permitted, but no earlier than for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year, or January 1, 2021, should the Company elect to early adopt. This standard was adopted on January 1, 2021 and did not have a material impact on the Company’s financial position, results of operations or cash flows.

Other Recent Accounting Pronouncements

All other accounting standards updates that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

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NOTE 3 – INTANGIBLE ASSETS

As of September 30, 2017 and 2016, respectively. This customer also accounted for 36% and 11% of the consolidated accounts receivable at September 30, 20172021 and December 31, 2016, respectively.

In the finished cosmetic products division, none of the credit card processors had a significant concentration of accounts receivable at September 30, 2017. In the finished cosmetic products division, two credit card processors accounted for 35% and 32% of the consolidated accounts receivable at December 31, 2016.

3.Notes Payable

In November 2015,2020, the Company borrowed $100,000 from a commercial lender. The loan incurred interest at 11% and with a maturity date of November 1, 2016. Interest expensehas the following amounts related to this loan for the period ended March 31, 2016 amounted to $3,063. In October 2016, the Company repaid the entire principal balance.intangible assets:

SCHEDULE OF INTANGIBLE ASSETS

  Intangible Assets as at:    
  September 30,  December 31,  Amortizable 
  2021  2020  Life 
Amortizable Intangible Assets            
Customer relationship asset $1,006,840  $1,006,840   3 years 
Purchased licenses  200,000   200,000   10 years 
Website domain name  22,231   -   3 years 
Less: accumulated amortization  (1,207,457)  (867,000)    
Total net amortizable intangible assets $21,614  $339,840     

In the third quarter of 2016 the Company commenced an offering pursuant to which it offered 11% subordinated promissory notes in fifty thousand ($50,000) dollar increments combined with 62,500 sharesThe aggregate amortization expense of the Company’s Common Stock for a maximum offering amount of $200,000 (the “Offering”). In August and September 2016, the Company sold promissory notes totaling $150,000 to three unrelated individuals. Two of the promissory notes totaling $100,000 were payable in February 2017 and one promissory note for $50,000 was payable in March 2017. In October 2016, the Company sold promissory notes totaling $50,000 to two unrelated individuals. These promissory notes are payable in October 2017. In connection with these promissory notes sold, pursuant to the Offering, the Company issued 250,000 shares of common stock valued at $58,750 which was recorded as a debt discount and will be amortized over the term of these notes. Amortization of the debt discountsintangible assets for the nine months ended September 30, 20172021 and 2020 was $25,035.$340,457 and $251,709, respectively. Total amortization expense for the remainder of 2021 is $1,853. Total amortization expense for 2022 through 2023 is $7,410 per year and $4,941 for 2024. There was nois 0 intangible asset amortization to be recognized thereafter.

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

As of debt discount during the third quarter of 2017. During 2016,September 30, 2021 and December 31, 2020, the Company repaid $68,600has the following amounts related to accounts payable and accrued expenses:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

  September 30,  December 31, 
  2021  2020 
Accounts payable $9,257,314  $10,408,172 
Accrued compensation  5,227,957   237,036 
Accrued selling and marketing expenses  405,459   60,870 
Accrued legal and professional fees  -   209,009 
Accrued interest payable  314,986   - 
Sales tax payable  2,000,000   125,000 
Other accrued expenses  1,172,161   753,997 
Total accounts payable and accrued expenses $18,377,877  $11,794,084 

NOTE 5 – NOTES PAYABLE

PPP Loan and Forgiveness

In June 2020, the Company and its subsidiaries received three loans in the aggregate amount of approximately $248,314 (the “PPP Loan”) under the Paycheck Protection Program legislation administered by the U.S. Small Business Administration. These loans bear interest at one percent per annum (1.0%) and mature five years from the date of the principal balance. Interestfirst disbursement. The proceeds of the PPP Loan must be used for payroll costs, lease payments on agreements entered into before February 15, 2020 and utility payments under lease agreements entered into before February 1, 2020. At least 60% of the proceeds must be used for payroll costs and certain other expenses and no more than 40% may be used on non-payroll expenses. Proceeds from the PPP Loan used by the Company for the approved expense related to these notescategories may be fully forgiven by the Small Business Administration if the Company satisfies applicable employee headcount and compensation requirements. The Company currently believes that a majority of the PPP Loan proceeds will qualify for debt forgiveness; however, there can be no assurance that the Company will qualify for forgiveness from the Small Business Administration until it occurs. During the nine months ended 2017 amounted to $131,117. During 2017,September 30, 2021, the Company repaid $81,420had a total of $184,914 of its PPP loans forgiven by the principal balance and converted the remaining balance of $49,980 into 196,000 shares of common stock and 98,000 warrants,SBA which satisfied the note in full. The fair market value of the shares and warrants issued upon conversion was determined to be $179,384, of which $129,404 wasis included in interest expense as lossgain on settlementdebt forgiveness on the accompanying unaudited condensed consolidated statement of notes payable.


Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

3.Notes Payable (continued)

In December 2016, the Company borrowed $100,000 from an officer and issued a convertible promissory note with a maturity date of February 28, 2017. The loan incurs no interest. This note is convertible if not repaid by the maturity date at a conversion price of $0.23 per Unit. Each Unit shall consist of one share of the Company’s common stock and one three-year common-stock warrant to purchase one-half of one share of the Company’s common stock with an exercise price of $0.40 per share. In March 2017, the Company repaid the entire outstanding balance of this note.

In January 2017, the Company borrowed $200,000 and issued a promissory note with a 5% original issue discount for a total principal amount of $210,000. The loan incurred 11% interest per annum and matured in various tranches from February 2017 through April 2017. In addition, the Company issued 217,391 shares of common stock related to this note. In February 2017, the Company repaid $70,000 of the principal balance of this note. In March 2017, the Company converted the remaining $140,000 of the principal balance of this note and accrued interest of $2,212 in exchange for 559,179 shares of common stock and 304,348 warrants which satisfied the note in full. The fair market value of the shares and warrants issued upon conversion was determined to be $566,030, of which $423,818 was included in interest expense as loss on settlement of notes payable.

In February 2017, the Company borrowed $25,000 from an American Express working capital line with 60 days maturity. The interest for this loan is a flat fee of $250. On April 17, 2017, the Company repaid this loan. In June 2017, the Company borrowed $74,043 from an American Express working capital line with 90 days maturity. The interest for this loan is a flat fee of $1,111. On August 30, 2017, the Company repaid this loan. In September 2017, the Company borrowed $77,333 from an American Express working capital line with 90 days maturity. The interest for this loan is a flat fee of $1,160.operations. As of September 30, 2017, there were approximately $60,000 available borrowings2021 and December 31, 2020, the PPP loan balance was $63,400 and $248,314, respectively, and is reflected on the Company’s unaudited condensed consolidated balance sheet as current liabilities, within notes payable, net.

Bank Loan

In December 2020, the Company received proceeds of $500,000 under thea short-term working capital line.loan with Chase Bank. The terms of the loan include a service charge of $19,950 (3.99%). The total balance of $519,950 as of December 31, 2020, included in notes payable, net, on the accompanying unaudited condensed consolidated balance sheet, and was repaid in full in January 2021.

Merchant Funding Agreement

On March 17, 2021, the Company entered into a Merchant Funding Agreement with MO Technologies USA, LLC (“MO Tech”), which provides cash advances to the Company based on the Company’s accounts receivable for a total cash advance of $600,000. The terms of the funding agreement include a service charge of 3.99% on cash advances from MO Tech. The total balance owed under this agreement was repaid in full in May 2021.

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Interest

On June 23, 2021, the Company entered into a Merchant Funding Agreement with MO Tech, which provides cash advances to the Company based on the Company’s accounts receivable for a total cash advance of $350,000. The terms of the funding agreement include a service charge of 3.99% on cash advances from MO Tech. The total balance owed under this agreement was repaid in full in August 2021.

Total interest expense related to loans from officers, directors and other related individualson notes payable, inclusive of amortization of debt discounts, amounted to $1,713$0 and $313 for the nine month periods ended September 30, 2017 and 2016, respectively. There was no interest expense$291,096 for the three months ended September 30, 20172021 and 20162020, respectively. Total interest expense on notes payable, inclusive of amortization of debt discounts, amounted to $120,612 and $1,313,010 for the nine months ended September 30, 2021 and 2020, respectively.

NOTE 6 – LONG-TERM DEBT

Securities Purchase Agreement

As noted above, on June 1, 2021, the Company entered into the Purchase Agreement with the Purchaser, pursuant to which the Company sold and issued: (i) the Debenture in the aggregate principal amount of $15.0 million and (ii) warrants to purchase up to an aggregate of 1,500,000 shares of the Company’s common stock at an exercise price of $12.00 per share of which 500,000 warrants were issued to the Purchaser upon closing with the remaining 1,000,000 warrants only issued to the Purchaser in increments of 500,000 if the Debenture remains outstanding for twelve and twenty four months, respectively, following the closing date of the Purchase Agreement. The total fair value of the 500,000 warrants issued to the Purchaser upon closing was $6,270,710. The total fair value was recorded to debt discount and was included as a reduction to long-term debt on the unaudited condensed consolidated balance sheet as of September 30, 2021. The debt discount will be amortized over a twelve-month period. Total amortization of debt discount was $1,567,677 and $2,090,236 for the three and nine months ended September 30, 2021, respectively. The Warrant has a term of three years. The Aggregate Principal Amount of the Debenture, together with interest, is due and payable on June 1, 2024. The Debenture bears interest as follows: (i) for the period beginning on June 1, 2021 and ending on the date that is six (6) months thereafter (the “Initial Interest Rate Period”) shall be six percent (6%), (ii) for the period beginning the date following the Initial Interest Rate Period and ending on the date that is three (3) months thereafter (the “Second Interest Rate Period”), nine percent (9%), and (iii) for the period beginning the date following the Second Interest Rate Period and ending on June 1, 2024, twelve percent (12%). Until such time as the obligations shall have been paid in full, the Company shall apply thirty-five percent (35%) of the gross proceeds received by the Company from At-The-Market offerings of its Common Stock to partial redemptions of each Debenture on a pro rata basis. The Company received gross proceeds of $15.0 million (net proceeds of $14.9 million) and intends to use such proceeds for working capital and general corporate purposes. In October 2021, the Company used a portion of the net proceeds from the October 4, 2021 Offerings to pay the $15.0 million outstanding on the June 1, 2021 Purchase Agreement.

Total interest expense on long-term debt, inclusive of amortization of debt discounts, amounted to $1,732,663 and $0 for the three months ended September 30, 2021 and 2020, respectively. Total interest expense on long-term debt, inclusive of amortization of debt discounts, amounted to $2,405,222 and $0 for the nine months ended September 30, 2021 and 2020, respectively.

NOTE 7 – STOCKHOLDERS’ EQUITY

The Company has authorized the issuance of up to 100,000,000 shares of common stock, $0.01 par value, and 5,000,000 shares of preferred stock, $0.0001 par value, of which 5,000 shares are designated as Series B Convertible Preferred Stock, 1,610,000 are designated as Series A Preferred Stock and 4,996,500 shares of preferred stock remain undesignated.

On October 9, 2020, the Company effectuated a 1-for-5 reverse stock split (the “Stock Split”) of the Company’s issued and outstanding shares of common stock that became effective in the market on October 14, 2020 (see Note 1). In connection with the Stock Split, the Company issued approximately 632 shares for rounding.

On June 8, 2021, the Company filed the 2021 Shelf. Under the 2021 Shelf at the time of effectiveness, the Company had the ability to raise up to $150 million by selling common stock, preferred stock, debt securities, warrants and units. In conjunction with the 2021 Shelf, the Company also entered into the ATM Sales Agreement whereby the Company may offer and sell, from time to time, shares of common stock having an aggregate offering price of up to $60 million. The Company had approximately $59.5 million available under the ATM Sales Agreement and $90 million available under the 2021 Shelf as of September 30, 2021.

Options and Warrants

During the nine months ended September 30, 2021, the Company issued an aggregate of 873,047 shares of common stock related to loanscashless exercise of options. During the nine months ended September 30, 2021, the Company issued an aggregate of 451,000 shares of common stock related to the exercise of options for gross proceeds of $820,750.

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During the nine months ended September 30, 2021, the Company issued an aggregate of 162,033 shares of common stock related to the exercise of warrants for gross proceeds of $480,609.

Membership Interest Purchase Agreement

On July 31, 2019 the Company entered into a certain membership interest purchase agreement (the “MIPA”) by and between the Company, Conversion Labs PR, a majority owned subsidiary, Taggart International Trust, an entity controlled by the Company’s Chief Executive Officer, Mr. Justin Schreiber, and American Nutra Tech LLC, a company controlled by its Chief Technology and Operating Officer, Mr. Stefan Galluppi (Mr. Schreiber, Taggart International Trust, Mr. Galluppi and American Nutra Tech LLC each a “Related Party” and collectively, the “Related Parties”). Pursuant to the MIPA, the Company purchased 21.83333% of the membership interests (the “Remaining Interests”) of Conversion Labs PR from officers, directorsthe Related Parties, bringing the Company’s ownership of Conversion Labs PR to 100%.

As consideration for the Company’s purchase of the Remaining Interests from the Related Parties, Mr. Schreiber and otherMr. Galluppi agreed to cancel all potential issuances of restricted stock and or options related individualsto their employment with the Company, in exchange for the immediate issuance of 500,000 shares of the Company’s restricted common stock to each of Mr. Schreiber and Mr. Galluppi (the “Initial Issuances”) (equal to 1,000,000 shares in the aggregate). Mr. Schreiber and Mr. Galluppi were also entitled to additional issuances pursuant to certain milestones as there were no loans outstandingfollows: (i) 500,000 shares of the Company’s Common Stock to each of Mr. Schreiber and Mr. Galluppi (1,000,000 shares in the aggregate) on the business day following a consecutive ninety (90) day period, during which the Company’s Common Stock shall have traded at an average price per share equal to or higher than $2.50 (the “First Milestone”), and (ii) an additional 500,000 shares of the Company’s Common Stock to each of Mr. Schreiber and Mr. Galluppi (1,000,000 shares in the aggregate) following a consecutive ninety (90) day period during which the Common Stock shall have traded at an average price per share equal to or higher than $3.75 (the “Second Milestone” and, together with the First Milestones, the “Milestones”). Having achieved the Milestones, the Company, on December 9, 2020, issued an aggregate of 1,000,000 shares of the Company’s Common Stock to each of Mr. Schreiber and Mr. Galluppi (the “Milestone Shares”) (2,000,000 shares in the aggregate). The Milestone Shares are subject to the previously disclosed 180-day Lock-Up Agreement each of Mr. Schreiber and Mr. Galluppi signed on November 3, 2020.

The Company recorded an aggregate expense of $18,060,000 reflected in general and administrative expenses during the three months ended September 30, 2017.2020 for the issuance of these 2,000,000 shares, of which 1,200,000 shares were issued during the nine months ended September 30, 2020.

Common Stock

Common Stock Transactions During the Nine Months Ended September 30, 2021:

On February 11, 2021, the Company consummated the closing of the February 2021 Offering, whereby pursuant to the February 2021 Purchase Agreement entered into by the Company and certain accredited investors on February 11, 2021 the investors purchased 608,696 shares of the Company’s common stock par value $0.01 per share at a purchase price of $23.00 per share for aggregate gross proceeds of approximately $14.0 million.

The Purchase Price was funded on the closing date and resulted in net proceeds to the Company of approximately $13.5 million after deducting fees payable to the placement agent and other estimated offering expenses payable by the Company.

During the nine months ended September 30, 2021, the Company issued an aggregate of 1,263,750 shares of common stock for services expensed in prior periods.

During the nine months ended September 30, 2021, the Company sold 70,786 shares of common stock under the ATM Sales Agreement for net proceeds of $493,481.

Noncontrolling Interest

For the three months ended September 30, 2021 and 2020, the net loss attributed to the non-controlling interest amounted to $62,706 and $201,233, respectively. During the three months ended September 30, 2021 and 2020, the Company paid distributions to non-controlling stockholders of $36,000 and $0, respectively. For the nine months ended September 30, 2021 and 2020, the net loss attributed to the non-controlling interest amounted to $531,182 and $408,180, respectively. During the nine months ended September 30, 2021 and 2020, the Company paid distributions to non-controlling stockholders of $108,000 and $121,223, respectively.

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WorkSimpli Software Restructuring Transaction

Effective January 22, 2021 (the “WSS Effective Date”), the Company consummated a transaction to restructure the ownership of WorkSimpli, (the “WSS Restructuring”). To effect the WSS Restructuring the Company’s wholly-owned subsidiary Conversion Labs PR, entered into a series of membership interest exchange agreements, pursuant to which, Conversion Labs PR exchanged that certain promissory note, dated May 8, 2019 with an outstanding balance of $375,823 (the “CVLBPR Note”), issued by WSS in favor of Conversion Labs PR, for 37,531 newly issued membership interests of WSS (the “Exchange”). Upon consummation of the Exchange the CVLBPR Note was extinguished.

Concurrently, in furtherance of the WSS Restructuring, Conversion Labs PR entered into two Membership Interest Purchase Agreements (the “Founding Members MIPAs”) with two founding members of WSS (the “Founding Members”) whereby Conversion Labs PR purchased from the Founding Members an aggregate of 2,183 membership interests of WSS for an aggregate purchase price of $225,000, paid in December 2020.

In furtherance of the WSS Restructuring, Conversion Labs PR entered into a Membership Interest Purchase Agreement with WSS, (the “CVLB PR MIPA”), pursuant to which Conversion Labs PR purchased 12,000 membership interests of WSS for an aggregate purchase price of $300,000. The CVLB PR 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 Conversion Labs PR. Payment for the first tranche of $100,000 was made upon execution of the CVLB PR MIPA in January 2021. Payments for the second and third tranches were made on the 60-day anniversary and the 120-day anniversary of the WSS Effective Date.

Following the consummation of the WSS Restructuring, Conversion Labs PR increased its ownership of WSS from 51% to approximately 85.58% on a fully diluted basis. WSS entered into an amendment to its operating agreement (the “WSS Operating Agreement Amendment”) to reflect the change in ownership.

Concurrently with the WSS Restructuring, Conversion Labs PR entered into option agreements with Sean Fitzpatrick (the “Fitzpatrick Option Agreement”) and Varun Pathak (the “Pathak Option Agreement” together with Fitzpatrick Option Agreement the “Option Agreements”), pursuant to which Conversion Labs PR granted options to purchase membership interest units of WSS. Upon vesting, the Fitzpatrick Options and the Pathak Options provide for the potential re-purchase of up to an additional 13.25% of WSS by Fitzpatrick and Pathak in the aggregate with Conversion Labs PR ownership ratably reduced to approximately 72.98%.

The Fitzpatrick Option Agreement grants Sean Fitzpatrick the option to purchase 10,300 membership interest units of WSS 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 WSS achieving $2,500,000 of gross sales in any fiscal quarter (ii) 3,434 membership interests upon WSS achieving $4,000,000 of gross sales in any fiscal quarter and (iii) 3,434 membership interests upon WSS 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 WSS achieving $2,500,000 of gross sales in any fiscal quarter (ii) 700 membership interests upon WSS achieving $4,000,000 of gross sales in any fiscal quarter and (iii) 700 membership interests upon WSS achieving $8,000,000 of gross sales with a ten percent (10%) net profit margin in any fiscal quarter.

The first two tranches of performance options granted to Sean Fitzpatrick and Varun Pathak vested immediately after the consummation of the restructuring transaction and therefore have been recorded as part of the acquisition through equity. The third tranche is not deemed probable and therefore has not been recognized to date.

Stock Options

2020 Equity Incentive Plan (the “2020 Plan”)

On January 8, 2021, the Company approved the Company’s 2020 Equity Incentive Plan (the “2020 Plan”). Approval of the 2020 Plan was included as Proposal 1 in the Company’s definitive proxy statement for its Special Meeting of Shareholders filed with the Securities and Exchange Commission on December 7, 2020. The 2020 Plan is administered by the Compensation Committee and initially provided for the issuance of up to 1,500,000 shares of Common Stock. The number of shares of Common Stock available for issuance under the Plan automatically increases by 150,000 shares of Common Stock on January 1st of each year, for a period of not more than ten years, commencing on January 1, 2021. As of January 1, 2021, the 2020 Plan provided for the issuance of up to 1,650,000 shares of Common Stock. Awards under the 2020 Plan can be granted in the form of stock options, non-qualified and incentive options, stock appreciation rights, restricted stock, and restricted stock units. The 2020 Plan will be administered by the Compensation Committee of the Company’s board of directors (the “Board”).

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Total interest expenseOn June 24, 2021, at the Annual Meeting of Stockholders, the stockholders of the Company approved an amendment to the 2020 Plan to increase the maximum number of shares of the Company’s common stock available for issuance under the 2020 Plan by 1,500,000 shares. As of September 30, 2021, total authorization under the 2020 Plan was 3,150,000 shares. Additionally, authorization under the 2020 Plan will automatically increase on notes payable amountedJanuary 1st of each year, for a period of not more than ten years, commencing on January 1, 2021 and ending on (and including) January 1, 2030, in an amount equal to $650,718150,000 shares.

The forms of award agreements to be used in connection with awards made under the 2020 Plan to the Company’s executive officers and $15,805non-employee directors are:

●Form of Non-Qualified Option Agreement (Non-Employee Director Awards)
●Form of Non-Qualified Option Agreement (Employee Awards); and
●Form of Restricted Stock Award Agreement.

Previously, the Company had granted service-based stock options and performance-based stock options separate from this plan.

On January 20, 2020, the Company approved the transition of its Chief Acquisition Officer, to the role of President of WorkSimpli (“President”). In connection with this change in role, the Company amended that certain services agreement entered into on July 23, 2018, by and between the Company and its President, to (i) decrease the number of options to purchase the Company’s common stock previously granted from 1,000,000 options to 500,000 options, 130,000 of which are fully vested as of the effective date and (ii) amend the vesting schedule for the remaining 370,000 performance options to include four performance metrics that, if met, each trigger the vesting of 92,500 options. As a result of amendment, the Company cancelled 500,000 service-based options with an exercise price of $1.50.

During the nine months ended September 30, 2021, the Company issued an aggregate of 1,686,500 stock options to employees and advisory board members. These stock options have a contractual term of 10 years and vest in increments which fully vest the options over a two-to-three-year period, dependent on the specific agreements’ terms.

The following is a summary of outstanding options activity under our 2020 Plan for the nine months ended September 30, 20172021:

SCHEDULE OF OPTION ACTIVITY

  Options Outstanding Number of Shares  Exercise Price per Share  Weighted Average Remaining Contractual Life  Weighted Average Exercise Price per Share 
             
Balance, December 31, 2020  829,000  $5.20 – 8.81   9.75 years  $7.49 
Granted  1,276,500   6.00 – 21.02   9.50 years   10.65 
Exercised  -             
Cancelled/Forfeited/Expired  (11,000)  13.74   9.73 years   13.74 
                 
Balance at September 30, 2021  2,094,500  $5.20 – 21.02   8.42 years  $9.38 
                 
Exercisable at December 31, 2020  76,222  $5.20 – 8.81   9.77 years  $7.74 
Exercisable at September 30, 2021  506,104  $5.20 – 21.02   9.18 years  $8.79 

The total fair value of the options granted was approximately $19,371,408, which was determined by the Black-Scholes Pricing Model with the following assumptions: dividend yield of 0%, expected term of 6.5 years, volatility of 165.44% – 180.12%, and 2016, respectively.risk-free rate of 0.66%–1.26%. Total interestcompensation expense amounted to $1,111under the 2020 Plan options above was approximately $1,566,010 and $9,992$0 for the three months ended September 30, 20172021 and 2016, respectively.

4.Income Taxes

The Company is not expected to have taxable income in 2017 and incurred a loss for the year ended December 31, 2016, and accordingly, no provision for federal income tax has been made in the accompanying financial statements. At September 30, 2017, the Company had available net operating loss carryforwards2020, respectively, with unamortized expense remaining of approximately $5,032,100, expiring during various years through 2037.

A summary of the deferred tax asset using an approximate 34% tax rate is$15,151,135 as follows:

 Net operating loss $1,679,000 
 Accounts receivable reserves  - 
 Inventory reserves  7,000 
 Stock compensation  389,000 
 Net deferred tax asset  2,084,000 
 Valuation allowance  (2,084,000)
 Total $- 

The net operating loss carryforwards could be subject to limitation in any given year in the event of a change in ownership as defined by IRC Section 382.

The difference between the statutory and the effective tax rate is primarily due to a change in valuation allowance on deferred taxes, as well as a permanent difference from the change in derivative liability. The Company has fully reserved the deferred tax asset resulting from available net operating loss carryforwards.


Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

5.Stockholders’ Equity

Common Stock

On April 1, 2016, the Company entered into two agreements with two consultants to provide services over a nine-month period in exchange for 2,300,000 shares of common stock. The Company calculated a fair value of $690,000 based on the market price of the shares on the date of the agreements. During the third quarter of 2016, the Company and the consultants renegotiated the agreements by extending the service requirement to December 31, 2017. For the nine and three months ended September 30, 2017, the Company has recognized expense of $230,000 and $76,667, respectively, in connection with these agreements. For the nine and three months ended September 30, 2016, the Company has recognized expense of $230,000 and $76,667, respectively. As of September 30, 20172021. Total compensation expense under the 2020 Plan options above was approximately $4,000,264 and December 31, 2016, the unamortized portion of these service agreements are $76,667 and $306,667, respectively.

During 2016, the Company purchased 325,000 shares of outstanding Company common stock through an exchange for a price per share of $0.23 to $0.29. During 2017, the Company purchased an additional 190,200 shares of outstanding Company common stock for a price per share of $0.24 to $0.45. As of the September 30, 2017, a total of 515,200 shares are being held by the Company valued at cost is $163,701 and are included in treasury stock in the consolidated balance sheet.

In January 2017, the Company issued 1,183,490 shares of common stock pursuant to a conversion of Immudyne PR equity contributions of $272,203 into equity of Immudyne, Inc. by the noncontrolling interest.

In January 2017, the Company issued 217,391 shares of common stock in relation to issuance of a $210,000 note payable.

In the first quarter of 2017, the Company commenced an offering to sell up to 4,000,000 shares of common stock at a price of $0.23 per share and warrants to purchase up to 2,000,000 shares of common stock excisable any time prior to the secondary anniversary of the issuance. The warrants are paired with the stock on the basis of one warrant for every two shares of stock purchased. During the first quarter of 2017, the Company received subscriptions in the amount of 2,817,156 shares and issued 1,408,578 warrants and proceeds in the amount of $647,944.

In March 2017, the Company issued 755,179 shares of common stock for the conversion of the outstanding balance of three notes payable totaling $499,802 (see Note 3).

On April 24, 2017, the Company, issued 217,390 shares of common stock pursuant to a stock subscription agreement and the Company issued 108,696 warrants with an exercise price of $0.40 per share for the stated consideration and satisfaction of obligation to pay $50,000 on the 180-day anniversary of the execution of the Sole and Exclusive License, Royalty, and Advisory Agreement dated September 1, 2016 with Pilaris Laboratories, LLC. The fair value of the shares and warrants issued were determined to be $131,103, of which $81,103 was included in general and administrative expense as loss on settlement of other payables.

During the second quarter of 2017 the Company received subscriptions in the amount of 110,000 shares and issued 55,000 warrants and proceeds in the amount of $25,300.

On June 1, 2017, the Company entered into an agreement with a consultant to provide services, with a six month term, and issued 125,000 shares of common stock as compensation. The shares were valued at $45,000 and the Company is recognizing the expense over the term of the agreement. For the three months ending September 30, 2017, $22,500 has been expensed and included in compensation and related expenses on the consolidated statement of operations.

In July 2017, the Company and JLS Ventures entered into a separate three year incentivized second amendment to a Service Agreement effective July 1, 2017. As compensation, the Company issued 900,000 shares of common stock valued at $270,000.

In July 2017, Mark McLaughlin, the Company’s President and Chief Executive Officer, exercised 1,500,000 warrants on a cashless basis and was issued 1,140,000 shares of common stock.

In July 2017, Mark McLaughlin exercised 1,000,000 options on a cashless basis and was issued 800,000 shares of common stock.


Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

5.Stockholders’ Equity (continued)

In July 2017, Mark McLaughlin exercised 339,473 options on a cashless basis and was issued 271,579 shares of common stock.

In August 2017, the Company issued 100,000 shares of common stock valued at $40,000 to Acorn Management Partners L.L.C. (“Acorn”) for financial advisory, strategic business planning and other investor relation services. The Company is recognizing the expense over the term of the agreement. For the three months ending September 30, 2017, $26,667 has been expensed and included in compensation and related expenses on the consolidated statement of operations.

In August 2017, the Company issued 50,000 shares of common stock valued at $20,000 to BV Global Fulfillment, LLC (“BV Global”) for fulfillment services.

Noncontrolling Interest

On April 1, 2016, the Company increased its ownership in Immudyne PR to 78.1667% decreasing the minority interest from 66.7% to 21.8333% resulting in a charge to noncontrolling interest and additional paid-in-capital of $91,612.

For the nine months ended September 30, 2017, the net loss of Immudyne PR attributed to the noncontrolling interest amounted to $41,752. For the nine months ended September 30, 2016, the net income of Immudyne PR attributed to the noncontrolling interest amounted to $6,439.

For the three months ended September 30, 2017, the net income of Immudyne PR attributed to the noncontrolling interest amounted to $27,172. For the three months ended September 30, 2016, the net income of Immudyne PR attributed to the noncontrolling interest amounted to $8,955.

Service-Based Stock Options

In May 2016, the Company issued 175,000 service-based options valued at $40,829 to two consultants at exercise prices of $0.20 per share. The options are fully vested and expire in 10 years.

In July 2016, the Company issued 50,000 service-based options valued at $12,397 to a consultant with an exercise price of $0.20 per share. The options are fully vested and expire in 10 years.

In November 2016, the Company issued 50,000 service-based options valued at $9,980 to a consultant with an exercise price of $0.50 per share. The options are fully vested and expire in 2 years.

In February 2017, the Company issued 500,000 service-based options valued at $113,522 to a director with an exercise price of $0.20 per share. The options are fully vested and expire in 10 years.

In July 2017, the Company issued 75,000 service-based options valued at $30,438 to Brunilda McLaughlin as additional compensation in an employment agreement. These options have an exercise price of $0.35 per shares, are fully vested, and expire in 10 years.

In July 2017, the Company issued 300,000 service-based options valued at $121,753 to three directors with an exercise price of $0.35 per share. The options are fully vested and expire in 10 years. The Company is recognizing the expense over the term of the agreements. For the three months ending September 30, 2017, $10,146 has been expensed and included in compensation and related expenses on the consolidated statement of operations.

In July 2017, the Company issued 125,000 service-based options valued at $49,219 to a consultant with an exercise price of $0.40 per share. The options are fully vested and expire in 5 years.

In July 2017, the Company issued Mark McLaughlin a ten year option to buy 750,000 shares at $0.35 vesting one-third or 250,000 shares upon signing, and 250,000 shares on July 1, 2018 and 250,000 shares on July 1, 2019. Once the options are fully vested, they expire in 10 years. The options vested at September 30, 2017 are valued at $101,461.

Accordingly, stock based compensation expense$0 for the nine months ended September 30, 20172021 and 2016 included $406,247 and $40,829, respectively, related to such service-based stock options. Stock based compensation expense for the three months ended September 30, 2017 and 2016 included $292,725 and $40,829, respectively, related to such service-based stock options.


Immudyne, Inc.2020, respectively.

 

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

5.Stockholders’ Equity (continued)

A summary of the outstanding service-based options are as follows:

Number of
Options
Balance at December 31, 201610,700,273
Issued1,250,000
Exercised(1,339,473)
Balance at September 30, 201710,610,800

All outstanding options are exercisable and have a cashless exercise provision, and certain options provide for accelerated vesting provisions and modifications, as defined, if the Company is sold or acquired. The intrinsic value of service based options outstanding and exercisable at September 30, 2017 and December 31, 2016 amounted to $2,079,564 and $704,794, respectively.

Service-Based Stock Options (continued)

The significant assumptions used to determine the fair values of options issued in 2017, using the Black-Scholes option-pricing model are as follows:

Significant assumptions:
Risk-free interest rate at grant date1.49% -1.55%
Expected stock price volatility    214% - 217%
Expected dividend payout—
Expected option life-years3 years
Weighted average grant date fair value$0.23 - 0.43
Forfeiture rate0%

The following is a summary of outstanding service-based options atactivity (prior to the establishment of our 2020 Plan above) for the nine months ended September 30, 2017:2021:

SCHEDULE OF OPTION ACTIVITY

  Options Outstanding Number of Shares  Exercise Price per Share  Weighted Average Remaining Contractual Life  Weighted Average Exercise Price per Share 
             
Balance, December 31, 2020  2,243,400  $0.80 - 7.95   5.14 years  $2.11 
Granted  410,000   4.75 – 19.61   7.09 years   13.17 
Exercised  (100,000)  1.50 – 4.75   9.19 years   2.80 
Cancelled/Forfeited/Expired  (1,022,000)  0.80 – 2.00   2.51 years   1.32 
                 
Balance at September 30, 2021  1,531,400  $1.00 – 19.61   6.06 years  $5.56 
                 
Exercisable December 31, 2020  1,570,428  $1.00 – 7.50   2.57 years  $1.67 
Exercisable at September 30, 2021  914,581  $1.00 – 19.61   5.18 years  $3.15 

21

 

 Exercise Price Number of
Options		  Weighted Average Remaining Contractual Life
       
 $0.10  40,800  1 year
 $0.20 - $0.25  8,620,000  5 years
 $.35  625,000  10 years
 $0.40  1,325,000  4 years
 Total  10,610,800   

Performance-Based Stock OptionsThe total fair value of the options granted was approximately $4,967,380, which was determined by the Black-Scholes Pricing Model with the following assumptions: dividend yield of 0%, expected term of 4 – 6.5 years, volatility of 133.37% – 180.24%, and risk-free rate of 0.73%–1.30%. Total compensation expense under the above service-based option plan was approximately $565,741 and $84,924 for the three months ended September 30, 2021 and 2020, respectively, with unamortized expense remaining of approximately $4,720,399 as of September 30, 2021. Total compensation expense under the above service-based option plan was approximately $1,385,008 and $387,988 for the nine months ended September 30, 2021 and 2020, respectively.

Vested

The Company grantedfollowing is a summary of outstanding performance-based options to purchase 2,925,000 shares of common stock at exercise prices of $0.40. The options expire at various dates between 2021 and 2026 and are exercisable uponactivity for the Company achieving annual sales revenue of $5,000,000.  During the yearnine months ended December 31, 2016, the Company cancelled 287,500 of these service-based options issued to two consultants, valued at $12,457.September 30, 2021:

SCHEDULE OF OPTION ACTIVITY

  Options Outstanding Number of Shares  Exercise Price per Share  Weighted Average Remaining Contractual Life  Weighted Average Exercise Price per Share 
             
Balance at December 31, 2020  1,165,000  $1.25 – 7.50   4.97 years  $1.80 
Granted  -             
Exercised  (235,000)  2.00   0.22 years   2.00 
Cancelled/Expired  (385,000)  1.25 – 2.00   4.19 years   1.67 
                 
Balance at September 30, 2021  545,000  $1.25 – 7.50   5.97 years  $1.80 
                 
Exercisable December 31, 2020  425,000  $2.00   1.18 years  $2.00 
Exercisable at September 30, 2021  90,000  $1.75 – 2.00   2.13 years  $1.96 

During 2016, the Company met the performance criteria and accordingly, recorded stock based

Total compensation expense of $165,241under the above performance-based option plan was approximately $173,397 for both the three and $513,804nine months ended September 30, 2021. NaN compensation expense was recognized on the performance-based option plan above for the three and nine months ended September 30, 2016, respectively.2020 as the performance terms had not been met or were not probable.


Immudyne, Inc.

Restricted Stock Units (RSU)

Notes to Consolidated Financial Statements

The following is a summary of outstanding RSU activity under our 2020 Plan during the nine months ended September 30, 20172021:

(unaudited)

SCHEDULE OF WARRANT AND RESTRICTED STOCK OUTSTANDING AND EXERCISABLE

5.Stockholders’ Equity (continued)RSUs Outstanding Number of Shares
Balance at December 31, 202035,000
Granted431,250
Vested(69,875)
Cancelled/Forfeited/Expired-
Balance at September 30, 2021396,375

UnvestedThe total fair value of the 431,250 RSUs granted was approximately $4,732,500 which was determined using the fair value of the quoted market price on the date of grant. Total compensation expense under the above 2020 Plan RSUs above was approximately $104,325 and $0 for the three months ended September 30, 2021 and 2020, respectively. Total compensation expense under the above 2020 Plan RSUs above was approximately $589,431 and $0 for the nine months ended September 30, 2021 and 2020, respectively, with unamortized expense remaining of approximately $4,578,989 as of September 30, 2021. During the nine months ended September 30, 2021, 69,875 RSUs vested, of which 50,000 RSUs were issued.

In February 2017, theThe Company granted performance-based options to purchase 250,000 shares600,000 RSUs outside of common stock at exercise pricesthe 2020 Plan during the nine months ended September 30, 2021. The total fair value of $0.40. The options expire in 2027these RSUs was approximately $6,612,000 and are exercisable upon0 compensation expense was recorded for both the Company achieving annual sales revenue of $5,000,000. The options are valued at $55,439.

During 2017, the Company is expected to meetthree and nine months ended September 30, 2021, as the performance criteria and accordingly, recorded stock basedterms had not been met or were not probable. Total compensation expense for RSUs outside of $27,719the 2020 Plan was approximately $15,900,000 and $15,972,000 for the three and nine months ended September 30, 2017,2020, respectively.

22

 

The Company granted performance-based options to purchase 900,000 shares of common stock at exercise price of $0.80. The options expire at various dates between 2021 and 2027 and are exercisable upon the Company achieving annual sales revenue of $10,000,000. During 2017, these unvested options were cancelled.

In July 2017, the Company granted performance-based options to purchase 6,000,000 shares of common stock with an exercise prices of $0.35 per share. The options expire in 10 years and are exercisable upon cash received by Immudyne, Inc. from Immudyne PR between $4,000,000 and $7,000,000. The aggregate fair value of these performance-based options is $2,446,739.

In the third quarter of 2017, the Company granted performance-based options to purchase 3,150,000 shares of common stock with an exercise prices of $0.25 per share. The options expire in 10 years and are exercisable upon the company achieving pre-tax earnings benchmarks between $4,000,000 and $7,000,000. The aggregate fair value of these performance-based options is $1,284,538.

Warrants

The following is a summary of outstanding and exercisable warrants:

   Number of Shares  Weighted Average
Exercise Price		  Year of 
Expiration
          
 Balance at December 31, 2016  1,954,891  $0.19  2017 - 2019
 Issued  2,566,367            0.40  2019 - 2020
            
 Exercised  (1,500,000)  0.12   
 Balance at September 30, 2017  3,021,258   0.40  2017 - 2020

In September 2016, the Company issued 100,000 warrants with an exercise price of $0.50 per share, in relation to a sale of common stock. These warrants are fully vested and expire in two years.

In September 2016, the Company issued 100,000 warrants with exercise prices between $0.20 and $0.50 per share, for consulting services. These warrants are fully vested and expire in three years.


Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

5.Stockholders’ Equity (continued)

In December 2016, the Company issued 37,500 warrants with an exercise price of $0.50 per share, in relation to a sale of common stock. These warrants are fully vested and expire in two years.

In December 2016, the Company issued 217,391 warrants with an exercise price of $0.40 per share, in relation to an issuance of common stock. These warrants are fully vested and expire in two years.

In January 2017, the Company issued 591,745 warrants with an exercise price of $0.40 per share, in relation to an issuance of common stock for the conversion of an equity contribution into Immudyne PR by the noncontrolling interest. These warrants are fully vested and expire in two years.

In March 2017, the Company issued 403,348 warrants with an exercise price of $0.40 per share, in relation to an issuance of common stock for the conversion of debt. These warrants are fully vested and expire in two years.

In the first quarter of 2017, the Company issued 1,408,578 warrants with an exercise price of $0.40 per share, in relation to a sale of common stock. These warrants are fully vested and expire in two years.

In April 2017, the Company issued 55,000 warrants with an exercise price of $0.40 per share, in relation to a sale of common stock. These warrants are fully vested and expire in two years.

In April 2017, the Company issued 108,696 warrants with an exercise price of $0.40 per share, in relation to an issuance of common stock for conversion of a payable. These warrants are fully vested and expire in three years.

The fair value of warrants grantedactivity during the periodnine months ended September 30, 2017, was estimated2021:

SCHEDULE OF WARRANT AND RESTRICTED STOCK OUTSTANDING AND EXERCISABLE

  Warrants Outstanding Number of Shares  Exercise Price per Share  Weighted Average Remaining Contractual Life Weighted Average Exercise Price per Share 
Balance at December 31, 2020  3,550,471   $ 1.40 – 5.75  5.58 years $4.56 
Granted  500,000   12.00  4.67 years  12.00 
Exercised/Expired  (162,033)  1.75 – 4.75  1.83 years  2.97 
               
Balance at September 30, 2021  3,888,438   $ 1.40 – 12.00  4.94 years $5.59 
               
Exercisable December 31, 2020  2,144,700   $  1.40 – 5.75  7.67 years $4.29 
Exercisable September 30, 2021  2,621,307   $ 1.40 – 12.00  6.36 years $5.98 

Total compensation expense on the date of grant usingabove warrants for services was approximately $604,974 and $379,183 the Black-Scholes option-pricing model with the following weighted-average assumptions:

Expected volatility125% - 214%
Risk free interest rate1.31% - 2.57%
Expected dividend yield-
Expected term (in years)0.9 - 8.1
Weighted average grant date fair value$0.12 - 0.45

As of December 31, 2016, certain of the Company’s stock options, stock warrantsthree months ended September 30, 2021 and convertible debt instruments were accounted for as derivative liabilities due to insufficient authorized shares of common stock to settle outstanding contracts. At December 31, 2016, the Company estimated the fair value of these stock options, stock warrants2020, respectively, and embedded conversion features using the Black-Scholes option pricing model (“Black-Scholes”) to be $192,254, based on Level 2 valuation inputs.

On September 21, 2017, the Company obtained majority shareholder approval$1,814,922 and amended its Articles of Incorporation to increase the number of shares of its authorized common stock, therefore the derivative liability is no longer applicable.

Stock Based Compensation

The total stock based compensation expense related Service-Based Stock Options and Performance-Based Stock Options and Warrants amounted to $142,045 and $40,829$538,594 for the nine months ended September 30, 20172021 and 2016,2020, respectively. For

Stock-based Compensation

The total stock-based compensation expense related to common stock issued for services, service-based stock options, performance-based stock options, warrants and RSUs amounted to approximately $3,110,816 and $16,364,000 for the three months ended September 30, 20172021 and 2016, total stock based compensation amounted to $28,5232020, respectively, and $40,829, respectively. Such amounts are included in compensationapproximately $7,983,891 and related expenses in the accompanying statement of operations.

Common stock issued for services amounted to $319,313 and $230,000$16,899,000 for the nine months ended September 30, 20172021 and 2016, respectively. For the three months ended September 30, 2017 and 2016, common stock issued for services amounted to $158,480 and $-0-,2020, respectively. Such amounts are included in compensationgeneral and relatedadministrative expenses in the accompanyingconsolidated statement of operations.


Immudyne, Inc.

Notes to Consolidated Financial StatementsNOTE 8 - COMMITMENTS AND CONTINGENCIES

September 30, 2017

(unaudited)Royalty Agreements

6.Royalties

The Company is subject to a royalty agreement based upon sales of certain hair care products. For the three and nine months ended September 30, 2017, the Company recognized $53,206 and $65,318, respectively, in royalty expense related to this agreement. As of September 30, 2017, the $65,318 was included in accounts payable and accrued expenses in regards to this agreement. In addition, the Company shall pay a performance fee in relation to this agreement. In April 2017, the Company issued 217,390 shares of common stock and 108,696 warrants, pursuant to a subscription agreement, for the stated consideration and satisfaction of obligation to pay $50,000 of the performance fee (see Note 7).

7.Commitments and Contingencies

Leases

The Company leases a plant in Kentucky under an operating lease which expired on May 31, 2016. Management is currently discussing renewal lease options for the Kentucky plant and is operating on a month-to-month lease arrangement until a final agreement has been accepted. Monthly base rental payments are approximately $9,000. The Company’s principal executive offices are in office space provided to us by the Company’s President, Mr. McLaughlin, at the rate of $2,000 per month, which includes rents, utilities and other office related expenditures. This arrangement commenced as of January 1, 2016. In addition, Immudyne PR utilizes office space in Puerto Rico which is subleased from Justin Schreiber (President of Immudyne PR) and incurs expense of approximately $4,000 a month for this office space. Rent expense for the nine month periods ended September 30, 2017 and 2016, was $120,161 and $71,606, respectively. Rent expense for the three month periods ended September 30, 2017 and 2016, was $46,061 and $27,706, respectively.

Employment and Consulting Agreements

The Company has entered into various agreements with officers, directors, employees and consultants that expire in one to five years. The agreements provide for annual compensation of up to $145,000 and the issuance of stock options, at exercise prices of $0.40 and $0.80, to purchase 4,400,000 shares of common stock issuable upon the Company’s revenue exceeding $5,000,000 and $10,000,000, as defined. In addition, the agreements provide for bonus compensation to these individuals aggregating up to 15% (with no individual having more than 5%) of the Company’s pretax income.

In August 2017, the Company entered into a Professional Service Agreement with Acorn Management Partners L.L.C. (“Acorn”) for financial advisory, strategic business planning and other investor relation services for a year of one year effective August 8, 2017. During the term of the Agreement, Acorn shall receive $7,500 cash monthly. As additional compensation, the Company shall issue within five (5) days of signing 100,000 shares of the Company’s common stock and upon each three (3) month period thereafter during the term of the Agreement an additional 100,000 shares of the Company’s common stock for a total of 400,000 shares of the Company’s common stock.

Restricted Stock and Options

The Company has entered into two agreements on April 1, 2016 with two consultants of Immudyne PR for business development, marketing and sales related services (the “Consultant Agreements”). The consultants are treated as employees for accounting purposes. Upon signing, each consultant was issued 1,000,000 restricted shares of Immudyne, Inc. common stock. In addition, each consultant shall receive an additional 150,000 restricted shares of Immudyne, Inc. common stock for each $500,000 distributed by Immudyne PR to the Company. For each consultant, the amount of shares to be issued by the Company to the consultants shall be capped at 1,500,000 restricted shares when Immudyne PR has transferred $5,000,000 to the Company, for a combined capped total of 3,000,000 restricted shares. For the three and nine months ended September 30, 2017, -0- restricted shares of common stock have been issued related to these agreements. During 2016, 2,300,000 restricted shares of common stock were issued related to these agreements. The Company valued the shares at their grant date for a value of $0.30 per share for a total of $690,000 to be expensed over the estimated service period ending December 31, 2017.

In addition, the Consulting Agreements provided that each consultant shall receive a bonus of an additional 750,000 restricted shares of Immudyne, Inc. common stock, plus an option to buy 1,000,000 shares of Immudyne, Inc. common stock at $0.20/share (including a cashless exercise feature) when Immudyne PR has transferred to the Company at each of the following three (3) thresholds: $1,250,000, $2,000,000 and $3,000,000 for a total of 2,250,000 of restricted shares of Immudyne, Inc. common stock and options to purchase up to 3,000,000 shares of Immudyne, Inc. common stock at $0.20/share. As of September 30, 2017, no bonus shares have been issued and no options have been granted under these agreements.


Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

7.Commitments and Contingencies (continued)

Sole and Exclusive License, Royalty, and Advisory Agreement

On September 1, 2016 ImmudyneConversion Labs PR entered into a sole and exclusive license, royalty and advisory agreement with Pilaris Laboratories, LLC (“Pilaris”) relating to Pilaris’ PilarisMax shampoo formulation and conditioner. The term of the agreement will be the life of the US Patent held by Pilaris. Pilaris, ten years. As consideration for granting ImmudyneConversion Labs PR this license, Pilaris will receive on quarterly basis, 10%10% of the net income collected by the licensed products based on the following formula: Net Income = total income – cost of goods sold – advertising and operating expenses directly related to the marketing of the licensed products. In addition, Immudyne PR shall pay Pilaris a performance fee As of $50,000 on the 180-day anniversary of the agreement and an additional $50,000 performance fee on the 365-day anniversary of the agreement. For the three and nine months endedboth September 30, 2017, the Company recognized expenses related to the performance fee in the2021 and December 31, 2020, 0 amount of $16,667 and $100,000, respectively. In April 2017, the Company issued 217,390 shares of common stock and 108,696 warrants, pursuant to a subscription agreement, for the stated consideration and satisfaction of obligation to pay $50,000 on the 180-day anniversary of the execution of this agreement. As of September 30, 2017, the balancewas included in accounts payable and accrued expenses is $0 expensein regard to this agreement.

During 2018, the Company entered into a license agreement (the “Alphabet Agreement”) with M.ALPHABET, LLC (“Alphabet”), pursuant to which Alphabet agreed to license its PURPUREX business which consists of methods and compositions developed by Alphabet for the treatment of purpura, bruising, post-procedural bruising and traumatic bruising (the “Product Line”). Pursuant to the license granted under the Alphabet Agreement, Conversion Labs PR obtains an exclusive license to incorporate (i) any intellectual property rights related to this agreement.the Product Line and (ii) all designs, drawings, formulas, chemical compositions and specifications used or useable in the Product Line into one or more products manufactured, sold, and/or distributed by Alphabet for the treatment of purpura, bruising, post-procedural bruising and traumatic bruising and for all other fields of use or purposes (the “Licensed Product(s)”), and to make, have made, advertise, promote, market, sell, import, export, use, offer to sell and distribute the Licensed Product(s) throughout the world with the exception of China, Hong Kong, Japan, and Australia (the “License”). The Company shall pay Alphabet a royalty equal to 13% of Gross Receipts (as defined in the Agreement) realized from the sales of Licensed Products. No amounts were earned or owed as of September 30, 2021.

Upon execution of the Alphabet Agreement, Alphabet was granted a 10-year stock option to purchase 20,000 shares of the Company’s common stock at an exercise price of $2.50. Further, if Licensed Products have gross receipts of $7,500,000 in any calendar year, the Company will grant Alphabet an option to purchase 20,000 shares of the Company’s common stock at an exercise price of $2.50; (ii) if Licensed Products have gross receipts of $10,000,000 in any calendar year, the Company will grant Alphabet an additional option to purchase 20,000 shares of the Company’s common stock at an exercise price of $2.50 and (iii) if Licensed Products have gross receipts of $20,000,000 in any calendar year, the Company will grant Alphabet an option to purchase 40,000 shares of the Company’s common stock at an exercise price of $3.75. The likelihood of meeting these performance goals for the licensed products are remote and, therefore, the Company has not recognized any compensation.

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Purchase Commitments

Many of the Company’s vendors require product deposits when a purchase order is placed for goods or fulfillment services related to inventory requirements. The Company’s history of product deposits with its inventory vendors creates an implicit purchase commitment equaling the total expected product acceptance cost in excess of the product deposit. As of September 30, 2021 and December 31, 2020, the Company approximates its implicit purchase commitments to be $3.8 million and $1.6 million, respectively.

Legal Matters

In the normal course of business operations, the Company may become involved in various legal matters. AtAs of September 30, 2017,2021, other than as set forth below, the Company’s management does not believe that there are any potentialpotentially material pending legal mattersproceedings.

On April 16, 2021, a purported securities class action lawsuit, captioned David L. Owens, Sr. v. LifeMD, Inc. et al., Case No. 21-cv-03384, was filed in the United States District Court for the Southern District of New York against the Company, Justin Schreiber (LifeMD’s Chairman of the Board and Chief Executive Officer), Juan Pinero Dagnery (LifeMD’s former Chief Financial Officer), and Marc Benathen (LifeMD’s current Chief Financial Officer) (the “Owens, Sr. Lawsuit”). The Owens, Sr. Complaint alleges, among other things, that could have anthe defendants made false or misleading statements about, and allegedly failed to disclose material adverse effect onfacts concerning, the Company’s financial position.business, operations, and prospects, and asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Complaint does not quantify damages but seeks to recover damages on behalf of investors who purchased or otherwise acquired LifeMD’s common stock between January 19, 2021 and April 13, 2021. On May 18, 2021, the class action lawsuit filed against the Company was voluntarily dismissed.

8.Related Party Transactions

During 2016, legalSimilarly, on May 5, 2021, a second purported securities class action lawsuit, captioned Cho v. LifeMD, Inc. et al., Case No. 21-cv-04004, was filed in the United States District Court for the Southern District of New York against the same aforementioned parties (the “Cho Lawsuit”). The Cho Complaint makes the same claims as found in the Owens, Sr. Lawsuit, and, business advisory services were providedsimilarly, does not quantify damages and seeks to recover damages on behalf of investors who purchased or otherwise acquired LifeMD’s common stock during the same, aforementioned time period between January 19, 2021 and April 13, 2021. On May 19, 2021, the class action lawsuit filed against the Company was voluntarily dismissed.

On June 7, 2021, a purported Americans with Disabilities class action lawsuit, captioned Sosa v. LifeMD, Inc. et al., Case No. 21-cv-05032, was filed in the United States District Court for the Southern District of New York. The Sosa Complaint alleges, inter alia, that the defendants’ www.rexmd.com has barriers making it inaccessible to the Company by onevisually impaired needing the assistance of its directors. Forscreen-reading software, and therefore, allegedly violates: (i) the threeAmericans with Disabilities Act, 42 U.S.C. § 12181 et seq.; (ii) the New York State Human Rights Law (NYSHRL), N.Y. Exec. Law §§ 292 and nine months ended296; and (iii) the New York City Human Rights Law (NYCHRL), §§ 8-102 and 8-107. The Complaint does not quantify damages but seeks to recover compensatory damages, civil penalties, and attorneys’ fees and costs under the NYSHRL and NYCHRL, as well as punitive damages under the NYCHRL. The Complaint also seeks preliminary and permanent injunctive relief. On September 30, 2016 this director was compensated $6,000 and $15,000, respectively. During 2017, legal and business advisory services were provided to20, 2021, the class action lawsuit filed against the Company by one of its directors. For the three and nine months ended September 30, 2016 this director was compensated $3,000 and $7,500, respectively.voluntarily dismissed.

During the nine months ended September 30, 2017 and 2016, the Company’s President received $18,000 and $20,000, respectively for reimbursement of home office expenditures, including rent, utilities and other related expenses for two offices. During the three months ended September 30, 2017 and 2016, the Company’s President received $6,000 and $6,000, respectively for reimbursement of these expenses.NOTE 9 – RELATED PARTY TRANSACTIONS

Immudyne, Inc. employs the wife of the President of the Company as an accountant and incurs $3,000 per month, plus an annual incentive bonus award equal to 0.5% of the Company’s pre-tax earnings.Chief Executive Officer

Immudyne PR utilizes BV Global Fulfillment, owned by the father of Immudyne PR’s President, and incurred $138,687 and $181,244 for the three and nine months ended September 30, 2017, respectively, for these services. During the three and nine months ended September 30, 2016, Immudyne PR did not utilize BV Global Fulfillment.

Taggart International Trust (“Taggart”), a shareholder, provides credit card processing services through one or more merchant banks. Taggart did not receive any compensation for these services.

JLS Ventures LLC, owned by a shareholder, provides credit card processing services through one or more merchant banks. JLS Ventures LLC did not receive any compensation for these services.

JSDC, Inc., owned by a shareholder, provides credit card processing services through one or more merchant banks. JSDC, Inc. did not receive any compensation for these services.

ImmudyneConversion Labs PR utilizes office space in Puerto Rico, which is subleased from the President of Immudyne PRand CEO, and incurs expense of approximately $4,000$7,500 a month for this office space.space for which the Company and the CEO do not have a written lease agreement. Payments to JLS Ventures, an entity wholly owned by our CEO, for rent on Conversion Labs PR’s Puerto Rico office space amounted to $15,000 for both the three months ended September 30, 2021 and 2020, and $67,500 and $45,000 for the nine months ended September 30, 2021 and 2020, respectively.

9.Subsequent Events

Conversion Labs PR utilizes BV Global Fulfillment, owned by a related person of the Company’s CEO to warehouse a portion of the Company’s finished goods inventory and for fulfillment services. The Company has evaluated subsequent events throughpays a monthly fee of $13,000 to $16,000 for fulfillment services and reimburses BV Global Fulfillment for their direct costs associated with shipping the date these financial statements were issued.Company’s products. The Company reimbursed BV Global Fulfillment a total of $1,079,403 and $642,544 during the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021 and December 31, 2020, the Company owed BV Global Fulfillment $58,296 and $58,943, respectively, which are included in accounts payable and accrued expenses on the accompanying unaudited condensed consolidated balance sheets.

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Consulting Agreement with Chief Operating Officer

On October 2, 2017, Robert Kalkstein was appointed asNovember 27, 2020, the Chief Financial Officer of Immudyne, Inc. The Company entered into a consulting agreement (the “Consulting Agreement”) with Mr. Kalkstein, which provides, among other things,JDM Investments, LLC (“JDM”), an entity solely owned by our COO, whereby JDM will provide consulting services in support of the Company’s day-to-day call center operations. The Consulting Agreement is for a term of thirty-six months and is renewable for additional twelve-month periods upon the mutual agreement of the Company and JDM. As compensation for the services, JDM will receive a monthly fee of $2,750$17,000 and shall be eligible to receive a metric based performance bonus for each calendar quarter during the term of the Consulting Agreement in accordance with metrics to be mutually agreed upon by the Company and JDM. The Company paid a total of $102,000 under this agreement, with no bonus earned or accrued, for the nine months ended September 30, 2021.

On June 15, 2021, the Company and Brad Roberts, our COO, restructured Mr. Roberts’s compensation arrangements. The Company and JDM mutually terminated Mr. Roberts’s Consulting Agreement and Mr. Roberts waived all consulting fees due for the remainder of the term of the Consulting Agreement. In place of the Consulting Agreement, Mr. Roberts and the Company amended his Amended and Restated Employment Agreement dated December 21, 2020 (the “Amendment”) to increase his base salary to $475,000 per month throughcalendar year and to update the terms of his annual bonus, providing for a target amount of $200,000, with any actual bonus to be awarded in the sole discretion of the Board. On June 29, 2021, the Company and Mr. Roberts entered into a Second Amendment (the “Second Amendment”) to the Amended and Restated Employment Agreement dated December 2017, $5,000 per month between January 201821, 2020 to provide that Mr. Roberts is eligible to receive up to 300,000 restricted stock units of the Company’s common stock, par value $0.01 (the “RSUs”), which will vest subject to the Company’s Telemedicine Brands (as defined in the Second Amendment) achieving certain revenue milestones. The RSUs will also vest upon a Change of Control (as defined in the Second Amendment).

Appointment of Chief Financial Officer

On February 4, 2021, the Board appointed Mr. Marc Benathen as the Company’s Chief Financial Officer. In connection with the Appointment, Mr. Benathen entered into an Employment Agreement with the Company. To induce Mr. Benathen to enter into the Employment Agreement, Mr. Benathen was granted a signing bonus of 15,000 RSUs. These RSUs vest in accordance with the following: (i) 3,750 of the RSUs vesting on February 4, 2021 (ii) 3,750 RSUs on February 4, 2022 (iii) 3,750 RSUs on February 4, 2023 and (iv) 3,750 RSUs on February 4, 2024. In addition to the RSUs, Mr. Benathen received stock options to purchase up to 200,000 shares of the Company’s common stock. The stock options shall vest in equal monthly tranches, based on the passage of time, over the 36 months. On March 2018 and $7,500 per month between April 2018 and September 2018. Additionally,18, 2021, we issued 3,750 common shares under this Employment Agreement.

Appointment of President

On June 10, 2021, the Board appointed Mr. KalksteinAlex Mironov as the Company’s President. In connection with the appointment, Mr. Mironov entered into an Employment Agreement with the Company. To induce Mr. Mironov to enter into the Employment Agreement, Mr. Mironov was granted an equity award with a grant date of June 10, 2021 outside of the Company’s 2020 Equity and Incentive Plan. Mironov received options to purchase an aggregate of 200,000 shares of LifeMD, Inc. common stock. The options have an exercise price of $14.04, which is equal to the closing price of LifeMD. Inc. common stock on June 10, 2021. The options will vest ratably, with 1/36th of the shares fully vested on June 10, 2021, and the remainder of the shares vesting ratably each month over a 35-month period that commences on the date of grant, subject to, the employee’s continued employment with LifeMD, Inc. on such vesting dates. The options have a five-year term. Additionally, Mr. Mironov received a performance-based grant of up to 300,000 restricted shares of LifeMD, Inc. common stock, subject to, the employee’s sourcing, and material contribution to the consummation of pharmaceutical deals, as set forth in more detail in the employment agreement.

Board of Director Appointment

On September 8, 2021, the Company appointed Naveen Bhatia as a member of the Board. In connection with the appointment to the Board, the Company and Mr. Bhatia entered into a director agreement (the “Director Agreement”), whereby, as compensation for his services as a member of the Board, Mr. Bhatia shall receive a one-time grant of eightthousand (8,000) restricted stock units of the Company, vesting quarterly beginning on September 30, 2021, pursuant to the Company’s Employee Stock Option Plan. The Company and Mr. Bhatia also entered into a consulting agreement (the “Bhatia Consulting Agreement”), whereby Mr. Bhatia will assist the Company with its capital markets strategy, business development initiatives and growth strategy for a term of one year. Pursuant to the Bhatia Consulting Agreement, Mr. Bhatia will receive a stock option to purchase 500,000 100,000 shares of the Company’s common stock, at $0.40 par value $0.01 per share, subject to the approval of the board of directors of the Company and certain vesting requirements set forth in the consulting agreement.


Immudyne, Inc.

Notes to Consolidated Financial Statements

September 30, 2017

(unaudited)

9.Subsequent Events (continued)

In October 2017, the Company appointed Michael T. Bornstein, MD, PHD to the Board of Directors. As part of the compensation, the Company issued a ten year, fully vested option to purchase 100,000 shares of common stock atwith an exercise price of $0.35 $7.07 per share. In addition, the Company issued ten year options that vest upon the Company achieving pre-tax earnings benchmarks between $4,000,000 and $7,000,000. The exercise price for the options are $0.25 and $0.35 per share.

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In November 2017, the Company issued 135,721 shares of common stock and 67,861 warrants pursuant to a conversion of Immudyne PR equity contributions of $31,216 into equity of Immudyne, Inc. by the noncontrolling interest.

10.Restatement of Financial Statements

The September 30, 2016 financial statements were restated to reclassify marketing expense that was recorded in cost of goods sold to marketing expenses. There were no other changes to the financial statements. These reclassifications have no impact on previously reported net income.

The following table shows the changes made to the September 30, 2016 income statement.

   Three Months Ended  Nine Months Ended 
   September 30, 2016  September 30, 2016 
   As Reported  Adjustment  As Restated  As Reported  Adjustment  As Restated 
 Net sales $1,384,429  $   $1,384,429  $4,252,704  $   $4,252,704 
                          
 Cost of sales  942,738   (554,536)  388,202   2,981,657   (1,713,337)  1,268,320 
                          
 Gross Profit  441,691       996,227   1,271,047       2,984,384 
                          
 Operating expenses                        
 Compensation and related expenses  361,829       361,829   1,077,340       1,077,340 
 Professional fees  82,608       82,608   277,282       277,282 
 Marketing expenses  -   554,536   554,536   -   1,713,337   1,713,337 
 General and administrative expenses  204,958       204,958   382,857       382,857 
 Total operating expenses  649,395       1,203,931   1,737,479       3,450,816 
                          
 Operating Income (Loss)  (207,704)      (207,704)  (466,432)      (466,432)
                          
 Interest (expense)  (9,992)      (9,992)  (15,805)      (15,805)
                          
 Net Income (Loss) Before Taxes  (217,696)      (217,696)  (482,237)      (482,237)
 Deferred income tax benefit  -       - �� -       - 
                          
 Net Income (Loss)  (217,696)      (217,696)  (482,237)      (482,237)
                          
 Net income (loss) attributable to noncontrolling interests  8,955       8,955   6,439       6,439 
                          
 Net Income (loss) attributable to Immudyne, Inc. $(226,651)     $(226,651) $(488,676)     $(488,676)
                          
 Basic and diluted (loss) per share attributable to Immudyne, Inc. $(0.01)     $(0.01) $(0.02)     $(0.02)
                          
 Average number of common shares outstanding                        
 Basic  34,427,087       34,427,087   31,917,873       31,917,873 
 Diluted  34,427,087       34,427,087   31,917,873       31,917,873 

* * * * *


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

The following discussion should be read in conjunction with the financial statements and related notes contained elsewhere in this Quarterly Report on Form 10-Q. Certain statements made in this discussion are “forward-looking statements” within the meaning of 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by the Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not have a duty to update any of the forward-looking statements to conform these statements to actual results.

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our condensed consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

The forward-looking statements made in this report are based only on events, or information as of the date on which the statements are made in this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents we refer to in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. These risks include, by way of example and without limitation:

Item 2.●Management’s Discussionchanges in the market acceptance of our products;
●increased levels of competition;
●changes in political, economic or regulatory conditions generally and Analysisin the markets in which we operate;
●our ability to successfully commercialize our products on a large enough scale to generate profitable operations;
●our ability to maintain and develop relationships with customers and suppliers;
●our ability to quickly and effectively respond to new technological developments;
●our ability to protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of Financial Conditionothers and Resultsprevent others from infringing on our proprietary rights;
●our ability to successfully integrate acquired businesses or new brands;
●the impact of Operationscompetitive products and pricing;
●supply constraints or difficulties;
●general economic and business conditions;
●business interruptions resulting from geo-political actions, including war, and terrorism or disease outbreaks (such as COVID-19);
●our ability to continue as a going concern;
●our need to raise additional funds in the future;

Overview

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●our ability to successfully recruit and retain qualified personnel;
●our ability to successfully implement our business plan;
●our ability to successfully acquire, develop or commercialize new products and equipment;
●being able to scale our telehealth platform built to improve the experience and medical care provided to patients across the country;
●intellectual property claims brought by third parties; and
●the impact of any industry regulation.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission (“SEC”). We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

As used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “Company,” “we,” “us,” and “our” refer to LifeMD, Inc. (formerly known as Conversion Labs, Inc.), our wholly-owned subsidiary LifeMD PR, LLC (formerly Immudyne PR LLC, and Conversion Labs PR), a Puerto Rico limited liability company (“Conversion Labs PR”, or “CLPR”) and our majority-owned subsidiary LegalSimpli Software, LLC, a Puerto Rico limited liability company. On July 15, 2021, LegalSimpli Software, LLC, changed its name to WorkSimpli Software, LLC (“WorkSimpli”). Unless otherwise specified, all dollar amounts are expressed in United States dollars.

Corporate History

We were 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 our name change, we changed our trading symbol to LFMD. In June 2018, the Company closed the strategic acquisition of 51% of WorkSimpli, a company that provides a software as a service (SaaS) for converting, editing, signing and sharing PDF documents called PDFSimpli. Effective January 22, 2021, we consummated a transaction to restructure the ownership of WorkSimpli through a series of agreements as further described below.

Business Overview and Strategy

We are a direct-to-patient telehealth technology company that provides a smarter, cost-effective and convenient way for a provider’s patients 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 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 telehealth. Direct-to-patient telehealth companies, like LifeMD, Inc., connect consumers digitally to licensed healthcare professionals for care across various needs, such as virtual primary care, men’s sexual health, dermatology, and others.

Our telemedicine platform provides patients access to licensed providers for diagnoses, virtual care, and prescription medications, often delivered on a recurring basis. In addition to our telemedicine technology offerings, we sell nutritional supplements and other over-the-counter 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 often 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 420,000 customers and patients, providing them greater access to high-quality, convenient, and affordable care in all 50 states. Our telehealth revenue increased 135% for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 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 SaaS platform for converting, signing, editing and sharing PDF documents. This business has also seen 331% year over year revenue growth, with recurring revenue of 98%.

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Many people can relate to the hassle and inconvenience of seeking medical care. We believe that telehealth platforms like ours will fundamentally shift how a provider’s patients 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 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 technology 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 telemedicine 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 a provider’s 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 over-the-counter (“OTC”) products for male and female hair loss, FDA approved OTC minoxidil, an FDA-cleared medical device, and now a telehealth platform offering that gives consumers access to virtual medical treatment from their providers 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, currently providing prescription medications and OTC products for chronic conditions such as sexual health and wellness company that develops, manufactures,hair loss. Rex MD has recently expanded its services to provide access to primary care and markets innovative consumer products. We manufacture and market a proprietary and patent protected Yeast Beta Glucan that has been shownwill soon offer treatments for additional chronic indications present in clinical studies to support and regulate the human immune system. It has broad applications in skincare and as an immune support supplement. Our majority owned subsidiary is our digital marketing arm and is currently focused on marketing patented products for thicker and fuller hair and a skincare line containing our proprietary Yeast Beta Glucan ingredient.

men’s health. We have performance based contracts with our sales and marketing executives, whichbuilt a platform that allows us to efficiently launch telehealth brands and offerings 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.

In addition to our telehealth business, we own 85.6% of WorkSimpli, which operates PDFSimpli, a rapidly growing SaaS platform for converting, signing, editing and sharing PDF documents.

Our Brand Portfolio

We have built a strategic portfolio of wholly-owned telemedicine platform brands that address large unmet needs in men’s health, hair loss and dermatology. LifeMD is also preparing to offer administrative support to various professional entities that will provide a direct concierge medicine offering to patients under the LifeMD brand. We continue to maintainscale our offerings in a relatively low overhead. calculated manner, ensuring that each brand or indication we launch will enhance current and future patients’ experiences with our platform.

Our priorityprocess across each brand and condition we treat is to pursue opportunitiesguide the provider’s patient through a medical intake process and product selection, after which a licensed U.S. physician within our contracted network conducts a virtual consultation and, if appropriate, prescribes necessary prescription medications and/or recommends over-the-counter products. Prescription medications and over-the-counter products are filled by pharmacy fulfillment partners and shipped directly to marketthe patient. The number of patients and customers we serve across the nation continues to increase at a robust pace, with more than 420,000 individuals having purchased our products and increase sales. We expectservices to date.

Hair Loss: ShapiroMD

Launched in 2017, ShapiroMD offers access to virtual medical treatment, prescription medications, patented doctor formulated over-the-counter products, and an FDA approved medical device for male and female hair loss through our telemedicine platform. ShapiroMD has emerged as a leading destination for hair loss treatment across the United States and has served more than 200,000 customers and patients since inception with a 4.9 star Trustpilot rating. In Q1 2021, ShapiroMD greatly enhanced its offerings for female hair loss treatment with the addition of topical compounded medications to its product portfolio.

Men’s Health: RexMD

Launched in 2019, RexMD is a men’s telehealth platform brand offering access to virtual medical treatment for a variety of men’s health needs. After treatment from a licensed physician, if appropriate, we dispense and ship prescription medications and over-the-counter products directly to a provider’s patients. Since RexMD’s initial launch in the erectile dysfunction treatment market, it has expanded into additional indications, including but not limited to, premature ejaculation and hair loss. Our vision for RexMD is to become a leading telehealth destination for men.

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Dermatology: NavaMD

Launched in the first quarter of 2021, Nava MD 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 anti-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 significant componentleading medical grade skincare technology platform.

Restorsea’s clinically proven skincare technology platform is the result of our selling, generalmore than $50 million invested in R&D and administration expenses going forward will consistintellectual property development, and Restorsea 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 equipment leasing costsDrugs in Dermatology and Journal of Clinical and Aesthetic Dermatology. Nava MD is one of the first direct-to-patient brands to offer this advanced skincare technology. Nava MD offers access to tele-dermatology services to a provider’s patients in all 50 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: WorkSimpli

WorkSimpli operates PDFSimpli, an online software-as-a-service (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 consummated a transaction and increased its ownership of WorkSimpli to 85.6%.

As of September 30, 2021, WorkSimpli was ranked in the top 4,232 websites globally, in which it was also ranked in the top 563 for specific countries with more than 14 million registrants globally. Since its launch, WorkSimpli has converted or edited over 11 terabytes of documents for customers from the legal, financial, real-estate and academic sectors. WorkSimpli had over 139,200 active subscriptions as of September 30, 2021.

Significant Developments During the Three Months Ended September 30, 2021

Partnerships

On July 13, 2021, the Company, on behalf of its customers, entered into an agreement to engage Quest Diagnostics Incorporated (“Quest Diagnostics”) as the Company’s laboratory services provider to perform certain clinical laboratory diagnostic services based on orders submitted to Quest Diagnostics by licensed health care providers who are under contract with the Company and are authorized under U.S. federal or state law to order laboratory tests. Patients of LifeMD Inc.’s affiliated providers gain access to laboratory tests which can be completed in their home or office or at any one of Quest Diagnostics’ 2,000 facilities.

On July 14, 2021, the Company entered into an agreement to engage Axle Health Inc. (“Axle Health”) to assist the Company in establishing a platform to enable patients of the Company’s medical practice clients (“MP Clients”) to schedule certain nursing services, including blood draws, injections, and other basic healthcare services, and to furnish operational support services to medical practices using the platform. In connection therewith, Axle Health granted the Company a revocable, nontransferable, non-exclusive right and license, with the right to grant sublicenses, to install and use the software and other technology relating to the platform developed, owned, or with the right to grant sublicenses to install and use the software and/or other technology developed, owned, or licensed by Axle Health, including the platform, to facilitate the scheduling and provision of certain nursing services to patients of MP Clients.

On August 4, 2021, the Company entered into a partnership agreement with Particle Health, a digital health company with a HIPAA-compliant technology platform that converts electronic medical records data into a user-friendly Fast Healthcare Interoperability Resource (“FHIR”) format. Particle Health offers healthcare companies secure access to vital medical data. With Particle Health’s platform, and patient consent, licensed medical providers on the upcoming LifeMD primary care platform gain access to comprehensive patient health records, therefore enabling personalized care through a deeper understanding of their patients’ medical histories.

On August 30, 2021, the Company entered into a strategic partnership with Prescryptive Health (“Prescryptive”), a healthcare technology company empowering consumers by improving the way healthcare is delivered. The partnership is expected to accelerate growth for both companies by combining LifeMD’s expanding direct-to-patient telehealth brands and upcoming primary care platform with Prescryptive’s best-in-class digital pharmacy fulfillment and e-prescribing technology platform.

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Supply Chain

The continuing impact on business activity brought about by COVID-19 continues to evolve, globally in macro terms, and in micro terms, as such affects the Company. Among other things, our operating efficiencies,supply chain is subject to the effects of COVID-19, as well as conducting new studiesto natural disasters and other events beyond our control, such as raw material, component and labor shortages, global and regional shipping and logistics constraints, work stoppages, power outages and the physical effects of climate change, including changes in weather patterns. In addition, human rights concerns, including forced labor and human trafficking, in foreign countries and associated governmental responses have the potential to disrupt our supply chain and our operations could be adversely impacted. Although we do not believe that raw materials used in the products we sell are sourced from regions with forced labor concerns, any delays or other supply chain disruption resulting from these concerns, associated governmental responses, or a desire to source products, components or materials from other manufacturers or regions could result in shipping delays, cancellations, penalty payments, or loss of revenue and market share, any of which could open new markets. These aforementioned costs, alonghave a material adverse effect on our business, results of operations, cash flows, and financial condition.

In connection with the additional costs resulting fromthese potential impacts on our operationssupply chain, we are, as a public reporting company, could adversely impact our future resultsgeneral matter, seeing a trend of operations. Additional significant factors that we believe will affect our operating results going forward are:increases in (i) protectionpricing on air and ocean freight, as well as for component and product parts, and (ii) the overall time to receive shipments. If these trends continue, many of our intellectual property rights; (ii) impositionestimates and assumptions for the period ended September 30, 2021 may be subject to a material change in future periods.

COVID-19 Vaccine Mandate

We are making preparations to comply with a rule issued by the Occupational Safety and Health Administration (“OSHA”) to ensure that our employees are fully vaccinated against COVID-19 by January 4th or that they test negative for COVID-19 at least once per week. Employees must receive time off to get vaccinated and sick leave to recover from any side effects. Any unvaccinated employees must wear face coverings while at work. We are in the process of more stringent government regulationsassessing the financial and staffing impact of our products; and (iii) marketing expenses.these requirements.

 

In the 2016 fiscal year, we utilized third party entities to provide and increase credit card processing capacity and optimize corresponding rates and fees through one or more merchant bank accounts held by such entities. A majorityResults of these entities providing these services are consolidated as variable interest entities (“VIEs”) which received a one (1%) percent fee eliminated in consolidationOperations

Comparison of the netThree Months Ended September 30, 2021 to the Three Months Ended September 30, 2020

Revenue

Our financial results for the three months ended September 30, 2021 are summarized as follows in comparison to the three months ended September 30, 2020.

  September 30, 2021  September 30, 2020 
  $  % of Sales  $  % of Sales 
Telehealth revenue, net $18,540,897   74.32% $9,438,136   85.76%
WorkSimpli revenue, net  6,406,302   25.68%  1,567,627   14.24%
Total revenues, net  24,947,199   100%  11,005,763   100%
                 
Cost of telehealth revenue  4,969,306   19.92%  1,601,920   14.56%
Cost of WorkSimpli revenue  127,181   0.51%  73,662   0.66%
Total cost of revenue  5,096,487   20.43%  1,675,582   15.22%
                 
Gross profit  19,850,712   79.57%  9,330,181   84.78%
                 
Selling and marketing expenses  20,293,935   81.35%  10,528,833   95.67%
General and administrative expenses  10,695,663   42.87%  18,441,756   167.56%
Other operating expenses  815,378   3.27%  542,965   4.93%
Customer service expenses  505,880   2.03%  230,788   2.10%
Development costs  131,160   0.52%  118,346   1.08%
Total expenses  32,442,016   130.04%  29,862,688   271.34%
                 
Operating loss  (12,591,304)  (50.47)%  (20,532,507)  (186.56)%
Other income (expense), net  (1,824,777)  (7.32)%  (291,096)  (2.65)%
Net loss before provision for income taxes  (14,416,081)  (57.79)%  (20,823,603)  (189.21)%
Provision for income taxes  —   —%  —   —%
Net loss attributable to noncontrolling interests  (62,706)  0.25%  (201,233)  1.83%
Net loss attributable to LifeMD, Inc. $(14,353,375)  (57.54)% $(20,622,370)  (187.38)%

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Revenues for the three months ended September 30, 2021 were approximately $24.9 million, an increase of 127% compared to approximately $11.0 million for the three months ended September 30, 2020. The increase in revenues processedwas attributable to both the increase in telehealth revenue of 97% and collected by such contractors froman increase in revenue for WorkSimpli of 309%. Telehealth revenue accounts for 74% of total revenue and has increased in the three months ended September 30, 2021 due to an increase in online sales initiated by the Company. The remaining entities provided such services as independent contractors,demand, with the majority of the growth of our telehealth brands, RexMD and ShapiroMD. Revenue for WorkSimpli accounts for 26% of total revenue and has steadily increased due to a combination of higher demand, increased market awareness, enhanced digital capabilities and continued marketing campaign expansion.

Total cost of revenues consists of the cost of (1) telehealth revenues, which primarily include product costs, pharmacy fulfillment costs, MD consult fees and shipping costs directly attributable to our prescription and OTC products and (2) the cost of WorkSimpli revenue consisting primarily of information technology fees related to providing the services made available on our online platform. Total cost of revenue increased by approximately 204% to approximately $5.1 million for the three months ended September 30, 2021 compared to approximately $1.7 million for the three months ended September 30, 2020. The combined cost of revenue increase was due to increased costs related to our increased sale volumes when compared to the prior period ended September 30, 2020.

Gross profit increased by approximately 113% to approximately $19.9 million for the three months ended September 30, 2021 compared to approximately $9.3 million for the three months ended September 30, 2020, as a result of increased combined sales. Telehealth costs increased to 27% of associated telehealth revenues during the three months ended September 30, 2021, from 17% of associated telehealth revenues during the three months ended September 30, 2020. WorkSimpli costs decreased to 2% of associated WorkSimpli revenues during the three months ended September 30, 2021, from 5% of associated WorkSimpli revenues during the three months ended September 30, 2020. WorkSimpli revenues as a percentage of total revenues increased to 26% during the three months ended September 30, 2021, from 14% during the three months ended September 30, 2020. Gross profit as a percentage of revenues was 80% for the three months ended September 30, 2021 as compared to 85% for the three months ended September 30, 2020 primarily due to product sales mix and one-time costs associated with the non-cash write-off of legacy product deposits.

Operating Expenses

  Three Months Ended September 30, 
  2021  2020 
Selling and marketing expenses $20,293,935  $10,528,833 
General and administrative expenses  10,695,663   18,441,756 
Other operating expenses  815,378   542,965 
Customer service expenses  505,880   230,788 
Development costs  131,160   118,346 
Total expenses $32,442,016  $29,862,688 

Operating expenses for the three months ended September 30, 2021 were consideredapproximately $32.4 million, as compared to approximately $29.9 million for the three months ended September 30, 2020. This represents an increase of 9%, or $2.6 million. The increase is primarily attributable to:

(i)Selling and marketing expenses: This mainly consists of online marketing and advertising expenses. During the three months ended September 30, 2021, the Company had an increase of approximately $9.8 million, or 93% in selling and marketing costs resulting from additional sales and marketing initiatives to drive the current period’s sales growth reported. This ramp up is expected to both increase and maintain sustained revenue growth in future years, based on the Company’s recurring revenue subscription-based sales model. Selling and marketing expenses as a percentage of revenue was 81.4% for the three months ended September 30, 2021, as compared to 95.7% for the three months ended September 30, 2020. This represents a decrease of 14.3%.

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(ii)General and administrative expenses: During the three months ended September 30, 2021, stock-based compensation expense was $3.1 million, with the majority related to stock compensation expense attributable to service-based stock options, as compared to stock-based compensation expense of $16.4 million for the three months ended September 30, 2020. This category also consists of merchant processing fees, payroll expenses for executive management, amortization expense and legal and professional fees. During the three months ended September 30, 2021, the Company had a decrease of approximately $7.8 million in general and administrative expenses, primarily related to the decrease in stock-based compensation costs referenced above partially offset by an increase in legal and professional fees and other increases in infrastructure expenses incurred to support the sales volume increases.
(iii)Other operating expenses: This consists of rent, insurance, royalty expense, bank charges and IT services. During the three months ended September 30, 2021, the Company had an increase of approximately $272 thousand, or 50%, primarily related to increases in the general cost environment necessary to support the Company’s sales growth.
(iv)Customer service expenses: This consists of payroll and benefit expenses related to the Company’s customer service department located in South Carolina and Puerto Rico. During the three months ended September 30, 2021, the Company had an increase of approximately $275 thousand, primarily related to increases in headcount in the Company’s customer service department.
(v)Development costs: This mainly relates to third-party technology services for developing and maintaining our online platforms. During the three months ended September 30, 2021, the Company had an increase of approximately $13 thousand, primarily resulting from technology platform improvements and amortization expense.

Other (Expenses) / Income

  Three Months Ended September 30, 
  2021  2020 
Interest (expense), net $(1,824,777) $(291,096)
Gain on debt forgiveness  —   — 
Total $(1,824,777) $(291,096)

Other expense, which consists of interest expense increased by approximately $1.5 million due to interest expense and amortization of debt discount recorded related partiesto the June 1, 2021 Purchase Agreement for the three months ended September 30, 2021.

Comparison of the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020

Revenue

Our financial results for the nine months ended September 30, 2021 are summarized as follows in comparison to the nine months ended September 30, 2020.

  September 30, 2021  September 30, 2020 
  $  % of Sales  $  % of Sales 
Telehealth revenues, net $47,623,822   72.75% $20,263,750   83.05%
WorkSimpli revenues, net  17,835,100   27.25%  4,136,608   16.95%
Total revenues, net  65,458,922   100%  24,400,358   100%
                 
Cost of telehealth revenue  12,113,336   18.51%  4,718,143   19.33%
Cost of WorkSimpli revenue  314,428   0.48%  204,241   0.84%
Total cost of revenue  12,427,764   18.99%  4,922,384   20.17%
                 
Gross profit  53,031,158   81.01%  19,477,974   79.83%
                 
Selling and marketing expenses  61,372,815   93.76%  21,669,046   88.81%
General and administrative expenses  28,194,305   43.07%  21,868,097   89.62%
Other operating expenses  2,390,694   3.65%  654,947   2.69%
Customer service expenses  1,274,392   1.95%  488,455   2.00%
Development costs  435,356   0.66%  288,813   1.18%
Total expenses  93,667,562   143.09%  44,969,358   184.30%
                 
Operating loss  (40,636,404)  (62.08)%  (25,491,384)  (104.47)%
Other income (expense), net  (2,681,236)  (4.10)%  (1,313,010)  (5.38)%
Net loss before provision for income taxes  (43,317,640)  (66.18)%  (26,804,394)  (109.85)%
Provision for income taxes  —   —%  —   —%
Net loss attributable to noncontrolling interests  (531,182)  0.82%  (408,180)  1.67%
Net loss attributable to LifeMD, Inc. $(42,786,458)  (65.36)% $(26,396,214)  (108.18)%

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Revenues for the nine months ended September 30, 2021 were approximately $65.5 million, an increase of 168% compared to approximately $24.4 million for the nine months ended September 30, 2020. The increase in revenues was attributable to both the increase in telehealth revenue of 135% and no feean increase in WorkSimpli revenue of 331%. Telehealth revenue accounts for 73% of total revenue and has increased in the nine months ended September 30, 2021 due to an increase in online sales demand, with the majority of the growth from our telehealth brands, RexMD and ShapiroMD. WorkSimpli revenue accounts for 27% of total revenue and has steadily increased quarter over quarter due to a combination of higher demand, increased market awareness, enhanced digital capabilities and continued marketing campaign expansion. While a portion of our growth could be attributable to the COVID-19 pandemic, management strongly believes our growth is primarily a result of the strength of our healthcare brands.

Total cost of revenues consists of the cost of (1) telehealth revenues, which primarily include product costs, pharmacy fulfillment costs, MD consult fees and shipping costs directly attributable to our prescription and OTC products and (2) the cost of WorkSimpli revenue consisting primarily of information technology fees related to providing the services made available on our online platform. Total cost of revenue increased by approximately 152% to approximately $12.4 million for the nine months ended September 30, 2021 compared to approximately $4.9 million for the nine months ended September 30, 2020. The combined cost of revenue increase was paid. Upondue to increased costs related to our increased sale volumes when compared to the prior period ended September 30, 2020.

Gross profit increased by approximately 172% to approximately $53.0 million for the nine months ended September 30, 2021 compared to approximately $19.5 million for the nine months ended September 30, 2020, as a result of increased combined sales. Telehealth costs increased to 25% of associated telehealth revenues during the nine months ended September 30, 2021, from 23% of associated telehealth revenues during the nine months ended September 30, 2020. WorkSimpli costs decreased to 2% of associated WorkSimpli revenues during the nine months ended September 30, 2021, from 5% of associated WorkSimpli revenues during the nine months ended September 30, 2020. WorkSimpli revenues as a percentage of total revenues increased to 27% during the nine months ended September 30, 2021, from 17% during the nine months ended September 30, 2020. Gross profit as a percentage of revenues was 81% for the nine months ended September 30, 2021 compared to 80% for the nine months ended September 30, 2020. The increase of 1% in gross profit was principally attributable to higher WorkSimpli revenues as a percentage of total revenues, partially offset by lower telehealth revenues as a percentage of total revenues.

Operating Expenses

  Nine Months Ended September 30, 
  2021  2020 
Selling and marketing expenses $61,372,815  $21,669,046 
General and administrative expenses  28,194,305   21,868,097 
Other operating expenses  2,390,694   654,947 
Customer service expenses  1,274,392   488,455 
Development costs  435,356   288,813 
Total expenses $93,667,562  $44,969,358 

Operating expenses for the nine months ended September 30, 2021 were approximately $93.7 million, as compared to approximately $45.0 million for the nine months ended September 30, 2020. This represents an increase of 108%, or $48.7 million. The increase is primarily attributable to:

(i)Selling and marketing expenses: This mainly consists of online marketing and advertising expenses. During the nine months ended September 30, 2021, the Company had an increase of approximately $39.7 million, or 183% in selling and marketing costs resulting from additional sales and marketing initiatives to drive the current period’s sales growth reported. This ramp up is expected to both increase and maintain sustained revenue growth in future years, based on the Company’s recurring revenue subscription-based sales model.
(ii)General and administrative expenses: During the nine months ended September 30, 2021, stock-based compensation was approximately $8.0 million, with the majority related to stock compensation expense attributable to service-based stock options, as compared to stock-based compensation expense of $16.9 million for the nine months ended September 30, 2020. This category also consists of merchant processing fees, payroll expenses for corporate employees, amortization expense and legal and professional fees. During the nine months ended September 30, 2021, the Company has had an increase of approximately $6.3 million in general and administrative expenses, primarily related to increases in legal and professional fees and other increases in infrastructure expenses incurred to support the sales volume increases partially offset by a decrease in stock-based compensation costs referenced above.

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(iii)Other operating expenses: This consists of rent, insurance, royalty expense, bank charges and IT services for our online products. During the nine months ended September 30, 2021, the Company had an increase of approximately $1.7 million or 265%, primarily related to increases in the general costs necessary to support the Company’s sales growth.
(iv)Customer service expenses: This consists of payroll and benefit expenses related to the Company’s customer service department located in South Carolina and Puerto Rico. During the nine months ended September 30, 2021, the Company had an increase of approximately $786 thousand, primarily related to increases in headcount in the Company’s customer service department.
(v)Development costs: This mainly relates to third-party technology services for developing and maintaining our online platforms. During the nine months ended September 30, 2021, the Company had an increase of approximately $147 thousand, primarily resulting from technology platform improvements and amortization expense.

Other (Expenses) / Income

  Nine Months Ended September 30, 
  2021  2020 
Interest (expense), net $(2,866,150) $(1,313,010)
Gain on debt forgiveness  184,914   - 
Total $(2,681,236) $(1,313,010)

Other expense, which consists of interest expense, amortization of debt discount recorded related to the June 1, 2021 Purchase Agreement and gain on debt forgiveness of PPP loans increased by approximately $1.4 million and is included in other expense for the nine months ended September 30, 2021. For the nine months ended September 30, 2020, the balance consisted of interest expense.

Working Capital

  September 30, 2021  December 31, 2020 
Current assets $14,132,557  $12,063,395 
Current liabilities  19,877,258   13,490,096 
Working capital $(5,744,701) $(1,426,701)

Working capital decreased by approximately $4.3 million during the period ended September 30, 2021. The increase in current assets is primarily attributable to an increase in accounts receivable of approximately $0.9 million, other current assets of $0.5 million, inventory and product deposits (combined increase of approximately $0.4 million) and an increase in cash of approximately $0.3 million. Current liabilities increased by $6.4 million, which was primarily attributable an increase in accounts payable and accrued liabilities of $6.6 million as a result of the Company extending payables and credit terms with vendors and an increase in deferred revenue of $0.5 million during the period ended September 30, 2021. These increases were partially offset by a decrease in notes payable, net of $0.7 million due to repayments exceeding proceeds received during the nine months ended September 30, 2021.

Liquidity and Capital Resources

  Nine Months Ended September 30, 
  2021  2020 
Net loss $(43,317,640) $(26,804,394)
Net cash used in operating activities $(27,259,550) $(5,595,382)
Net cash used in investing activities $(1,823,843) $(730,586)
Net cash provided by financing activities $29,351,291  $6,135,981 
Net increase (decrease) in cash $267,898  $(189,987)

Since inception, the Company has funded operations through the collections from revenues provided by the sales of its products, issuances of common and preferred stock, receipt of fundsloans and advances from officers and directors and the issuance of convertible notes to third-party investors.

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Net cash used in operating activities was approximately $27.3 million for the nine months ended September 30, 2021, as compared with approximately $5.6 million for the nine months ended September 30, 2020. The significant factors contributing to the cash used in operations during the nine months ended September 30, 2021, include the net loss of approximately $43.3 million (inclusive of approximately $8.0 million in non-cash, stock-based compensation charges) further described above, partially offset by such contractorsthe Company’s increase in accounts payable and accrued expenses of approximately $6.9 million and amortization of debt discount of $2.1 million.

Net cash used in investing activities for the nine months ended September 30, 2021 was approximately $1.8 million, as compared with net cash used in investing activities of $731 thousand for the nine months ended September 30, 2020. Net cash used in investing activities was due to cash paid for capitalized software costs of approximately $1.7 million, the purchase of equipment of $70 thousand and the purchase of an intangible asset of $22 thousand.

Net cash provided by financing activities for the nine months ended September 30, 2021 was approximately $29.4 million as compared with approximately $6.1 million for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, financing activities consisted of: (1) net proceeds of $14.9 million from their respectivethe private placement whereby investors purchased (a) a senior secured redeemable debenture in the aggregate principal amount of $15.0 million and (b) warrants to purchase up to an additional 1,500,000 shares of the Company’s common stock at an exercise price of $12.00 per share, pursuant to the June 1, 2021 Purchase Agreement, (2) net proceeds of $13.5 million from the private placement of 608,696 common shares, at a purchase price of $23.00 per share for aggregate gross proceeds of $14.0 million pursuant to the February 2021 Purchase Agreement, (3) net proceeds from the exercise of options and warrants during the period of approximately $1.3 million, (4) net proceeds from the sale of common stock under the ATM Sales Agreement of approximately $0.5 million, in connection with our filed shelf registration and launch of an at-the-market program on June 8, 2021, and (5) our entry into a merchant banks,funding agreement pursuant to which we may obtain cash advances. Subsequent to the quarter ended September 30, 2021, we closed on the October 4, 2021 Common Stock and Preferred Stock Offerings whereby the Company requiredreceived total net proceeds of $55.3 million. These increases in net cash from financing activities were partially offset by the prompt transferrepayment of fundsnotes payable and the purchase of the additional membership interest of WorkSimpli.

See Notes 1, 5 and 6 to Company controlled accounts. our unaudited condensed consolidated financial statements included in this report for further discussion of certain of these financing activities.

Liquidity and Capital Resources Outlook

The Company reimbursed and/or advanced funds to such contractors for any deficit or charge related to returns, chargeback and other fees charged by such merchant bank. Some of the entities contracted to provide these services have been determined to be variable interest entities and consolidated in the Company’s financial statements.

We historically have expended a significant amount of our funds on obtaining and protecting our patents, trade secrets and proprietary products. 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. For several years, we were involved in complex litigation regarding patents and licenses critical to our products. In 2010, we prevailed on all major legal matters and reached favorable settlements. If additional litigation becomes necessary to protect our intellectual property rights, such litigation may be costly, divert our management’s attention away from our core business and have a negative impact on our operations. Furthermore, there is no guarantee that litigation would result in an outcome favorable to us. In addition, yeast beta glucans are designated as GRAS under current FDA regulations. Future government regulations may prevent or delay the introduction or require the reformulation of our products. Some agencies, such as the FDA, could require us to remove a particular product from the market, delay or prevent the import of raw materials for the manufacture of our products or otherwise disrupt the marketing of our products. Any such government actions could result in additional costs to us, reduced growth prospects, lost sales from products that we are required to remove from the market and potential product liability litigation.

We have historically operated with limited capital and havehas funded operations in the past through the sales of ourits products, issuance of common stock and through loans and advances from Mark McLaughlin, our President,officers and other directors,directors. The Company’s continued operations are dependent upon obtaining an increase in its sale volumes which the Company has been successful in achieving to date. The Company intends to use the net proceeds of the financing activities described above for customer acquisition, as well as from debtfor working capital, general corporate purposes and equity financings.to repay existing indebtedness. See Note 1 to our unaudited condensed consolidated financial statements included in this report for further liquidity evaluation.

Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in the notes to our unaudited condensed consolidated financial statements. We planbelieve that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations.

Revenue Recognition

The Company records revenue under the adoption of ASC 606 by analyzing exchanges with its customers using a five-step analysis:

1.Identify the contract
2.Identify performance obligations
3.Determine the transaction price
4.Allocate the transaction price
5.Recognize revenue

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For the Company’s product-based contracts with customers, the Company has determined that there is one performance obligation, which is the delivery of the product; this performance obligation is transferred at a discrete point in time. The Company generally records sales of finished products once the customer places and pays for the order, with the product being simultaneously shipped by a third-party fulfillment service provider; in limited cases, title does not pass until the product reaches the customer’s delivery site, in these limited cases, recognition of revenue should be deferred until that time; however, the Company does not have a process to properly record the recognition of revenue if orders are not immediately shipped, and deems the impact to be immaterial. In all cases, delivery is considered to have occurred when title and risk of loss have transferred to the customer, which is usually commensurate upon shipment of the product. In the case of its product-based contracts, the Company provides a subscription sensitive service based on our operating business (in conjunctionthe recurring shipment of products and records the related revenue under the subscription agreements subsequent to receiving the monthly product order, recording the revenue at the time it fulfills the shipment obligation to the customer.

For its product-based contracts with proceeds from debt and equity financings completed in 2016 and early 2017) being able to fund our operations through 2017. However, if necessary, we may raise additional capital through a private placementcustomers, the Company records an estimate for provisions of common stock, obtaining debt financing or from advances from our President and/or directors; however, no assurances can be made that we will be successful in our endeavors to raise additional capital. For additional information regarding thesediscounts, returns, allowances, customer rebates and other risks please see “Risk Factors” containedadjustments for its product shipments, and are reflected as contra revenues in our annual reportarriving at reported net revenues. The Company’s discounts and customer rebates are known at the time of sale, correspondingly, the Company reduces gross product sales for such discounts and customer rebates. The Company estimates customer returns and allowances based on information derived from historical transaction detail, and accounts for such provisions, as contra revenue, during the same period in which the related revenues are earned. The Company has determined that the population of its product-based contracts with customers are homogenous, supporting the ability to record estimates for returns and allowances to be applied to the entire product-based portfolio population.

The Company, through its majority-owned subsidiary WorkSimpli, offers a subscription-based service providing a suite of software applications to its subscribers, principally on a monthly subscription basis. The software suite allows the subscriber/user to convert almost any type of document to another electronic form of editable document, providing ease of editing. For these subscription-based contracts with customers, the Company offers an initial 14-day trial period which is billed at $1.95, followed by a monthly subscription, or a yearly subscription to the Company’s software suite dependent on the subscriber’s enrollment selection. The Company has estimated that there is one product and one performance obligation that is delivered over time, as the Company allows the subscriber to access the suite of services for the fiscaltime period of the subscription purchased. The Company allows the customer to cancel at any point during the billing cycle, in which case the customer’s subscription will not be renewed for the following month or year endeddepending on the original subscription. The Company records the revenue over the customers subscription period for monthly and yearly subscribers or at the end of the initial 14-day service period for customers who purchased the initial subscription, as the circumstances dictate. The Company offers a discount for the monthly or yearly subscriptions being purchased, which is deducted at the time of payment at the initiation of the contract term, therefore the Contract price is fixed and determinable at the contract initiation. Monthly and annual subscriptions for the service are recorded net of the Company’s known discount rates. As of September 30, 2021 and December 31, 2016.2020, the Company has accrued contract liabilities, as deferred revenue, of approximately $1,436,000 and $917,000, respectively, which represent obligations on in-process monthly or yearly contracts with customers.


Results of Operations

Three Months Ended September 30, 2017, compared to the Three Months Ended September 30,2016

The following table sets forth the results of our operations for the periods indicated as a percentage of net sales:

  2017  2016 
  $  % of Sales  $  % of Sales 
        Restated    
Net Sales  2,051,734       1,384,429     
Cost of sales  535,572   26%  388,202   28%
Gross profit  1,516,162   74%  996,227   72%
Operating expenses  (1,789,729)  (87)%  (1,203,931)  (87)%
Operating (Loss)  (273,567)  (13)%  (207,704)  (15)%
Change in fair value of derivative liability  (377,213)  (18)%  -   -%
Interest (expense)  (1,111)  -%  (9,992)  (1)%
Net Income (loss)  (651,891)  (32)%  (217,696)  (16)%
Net Income (loss) attributable to noncontrolling interests  27,172   1%  8,955   (1)%
Net Income (loss) attributable to Immudyne, Inc.  (679,063)  (33)%  (226,651)  (16)%

Net Sales

Sales were approximately $2.05 millionCustomer discounts and allowances on WorkSimpli revenues approximated $377,000 and $275,000 for the three months ended September 30, 2017, compared to approximately $1.38 million for the three months ended September 30, 2016. The increase of 50% is attributed to resources we invested into the launch of our in-licensed patented hair loss shampoo, conditioner,2021 and leave in foam during the first quarter of 2017.

Sales in our Nutraceutical2020, respectively, and Cosmetic Additives segment were approximately $277,000 for the three months ended September 30, 2017, compared to approximately $230,000 for the three months ended September 30, 2016. The increase of 21.7% is attributed to increased demand from our existing customers.

Sales in our Finished Cosmetic Products segment were approximately $1.77 million for the three months ended September 30, 2017, compared to approximately $1.15 million for the three months ended September 30, 2016. The increase of 53.9% is attributed to increased direct marketing efforts.

Cost of Sales

Total cost of sales was approximately $536,000 for the three months ended September 30, 2017, compared to $388,000 for the three months ended September 30, 2016. The increase in our cost of sales was due to increased sales from our Finished Cosmetic Products business. Cost of sales consists primarily of material costs, labor costs,approximated $1,599,000 and related overhead directly attributable to the production of our products.

Gross Profit

Gross profit was approximately $1.52 million for the three months ended September 30, 2017, compared to approximately $996,000 for the three months ended September 30, 2016, an increase of 52.2%. The increase in our gross profit was a result of the success of our in-licensed patented hair loss shampoo conditioner and leave-in foam and the increased demand for our additives.

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Operating Expenses

Total operating expenses increased 48.7% to approximately $1.80 million for the three months ended September 30, 2017, from approximately $1.20 million for the three months ended September 30, 2016.The increase in our operating expenses between the periods was mostly attributable to our increased marketing efforts for Finished Cosmetic Products.

Net Income

Net loss for the three months ended September 30, 2017 was approximately $652,000, compared to net loss of approximately $227,000 for the three months ended September 30, 2016. We consolidated the operations of our joint venture, Immudyne PR and reflected a non-controlling interest for 21.8333% of these operations. Net loss attributable to the Company as a percentage of sales was (33)% for the three months ended September 30, 2017, compared to net loss as a percentage of sales of (16)% for the three months ended September 30, 2016. Our net loss during the period was attributable to increasing in marketing efforts and the decrease in the fair value of our derivative liability, which we incurred in the first quarter of 2017 due to our having insufficient authorized shares to satisfy outstanding derivative securities issued by the Company.

Nine Months Ended September 30, 2017, Compared to the Nine Months Ended September 30, 2016

The following table sets forth the results of our operations for the periods indicated as a percentage of net sales:

  2017  2016 
  $  % of Sales  $  % of Sales 
        Restated    
Net Sales  3,583,614       4,252,704     
Cost of sales  1,068,174   30%  1,268,320   30%
Gross profit  2,515,440   70%  2,984,384   70%
Operating expenses  (3,389,470)  (95)%  (3,450,816)  (81)%
Operating (Loss)  (874,030)  (24)%  (466,432)  (11)%
Change in fair value of derivative liability  496,617   14%  -   0%
Interest (expense)  (650,718)  (18)%  (15,805)  0%
Net (loss)  (1,028,131)  (29)%  (482,237)  (11)%
Net (loss) attributable to noncontrolling interests  (41,752)  (1)%  6,439   0%
Net (loss) attributable to Immudyne, Inc.  (986,379)  (28)%  (488,676)  (11)%

Sales$545,000 for the nine months ended September 30, 2017 were approximately $3.58 million, a decrease2021 and 2020, respectively.

Capitalized Software Costs

The Company capitalizes certain internal payroll costs and third-party costs related to internally developed software and amortizes these costs using the straight-line method over the estimated useful life of 15.7% from approximately $4.25 millionthe software, generally three years. The Company does not sell internally developed software other than through the use of subscription service. Certain development costs not meeting the criteria for the same periodcapitalization, in 2016. Our decrease in sales was due to the fact that we invested considerable time and Company resources into the preparation for the launchaccordance with Accounting Standards Codification (“ASC”) ASC 350-40 Internal-Use Software, are expensed as incurred. As of our in-licensed patented hair loss shampoo, conditioner, and leave in foam during the first quarter of 2017. This new product line has been successful to date, having been a meaningful contributor to our revenues in the third quarter of 2017.

Sales in our Nutraceutical and Cosmetic Additives segment were approximately $981,000 for the nine months ended September 30, 2017, compared2021 and December 31, 2020, the Company capitalized $2,169,644 and $438,136, respectively, related to internally developed software costs which is amortized over the useful life and included in development costs on our statement of operations.

Intangible Assets

Intangible assets are comprised of: (1) a customer relationship asset (with original cost of approximately $781,000 for$1,007,000) with an estimated useful life of three years, (2) a purchased license (with original cost of $200,000) with an estimated useful life of ten years and (3) a purchased domain name (with an original cost of $22,231) with an estimated useful life of three years. Intangible assets are amortized over their estimated lives using the nine months ended September 30, 2016. straight-line method. Costs incurred to renew or extend the term of recognized intangible assets are capitalized and amortized over the useful life of the asset.

Income Taxes

The increase of 25.7% is attributedCompany files corporate federal and state tax returns. Conversion Labs PR and WorkSimpli file tax returns in Puerto Rico, both are limited liability companies and file separate tax returns with any tax liabilities or benefits passing through to increased demand from our existing customers.its members.

Sales in our Finished Cosmetic Products segment were approximately $2.60 million for the nine months ended September 30, 2017, compared to approximately $3.47 million for the nine months ended September 30, 2016. The decrease of 25.1% is attributed to stopping sales in this area in early 2017 and re-launching different products late in the second quarter.

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CostThe Company records current and deferred taxes in accordance with Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes.” This ASC requires recognition of Sales

Total costdeferred tax assets and liabilities for temporary differences between tax basis of sales was approximately $1.07 millionassets and liabilities and the amounts at which they are carried in the consolidated financial statements, based upon the enacted rates in effect for the nine months ended September 30, 2017, comparedyear in which the differences are expected to $1.27 millionreverse. The Company establishes a valuation allowance, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company periodically assesses the value of its deferred tax asset, a majority of which has been generated by a history of net operating losses and management determines the necessity for a valuation allowance. ASC 740 also provides a recognition threshold and measurement attribute for the nine months ended September 30, 2016.financial statement recognition of a tax position taken or expected to be taken in a tax return. Using this guidance, a company may recognize the tax benefit from an uncertain tax position in its financial statements only if it is more likely-than-not (i.e., a likelihood of more than 50%) that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The decreaseCompany’s tax returns for all years since December 31, 2017 remain open to audit by all related taxing authorities.

Stock-based Compensation

The Company follows the provisions of ASC 718, “Share-Based Payment”. Under this guidance compensation cost generally is recognized at fair value on the date of the grant and amortized over the respective vesting or service period. The fair value of options at the date of grant is estimated using the Black-Scholes option pricing model. The expected option life is derived from assumed exercise rates based upon historical exercise patterns and represents the period of time that options granted are expected to be outstanding. The expected volatility is based upon historical volatility of the Company’s common stock shares using weekly price observations over an observation period that approximates the expected life of the options. The risk-free rate approximates the U.S. Treasury yield curve rate in our costeffect at the time of sales was due to introducing products with lower cost of goods.

Gross Profit

Gross profit was approximately $2.52 milliongrant for the nine months ended September 30, 2017, compared to approximately $2.98 million for the nine months ended September 30, 2016, a decrease of 15.4%. The decrease in our gross profit was a result of lower sales from our Finished Cosmetic Products segment.

Operating Expenses

Total operating expenses decreased 1.8% to approximately $3.39 million for the nine months ended September 30, 2017, from approximately $3.45 million for the nine months ended September 30, 2016.There was not a significant change in total operating expenses, however, the spending shifted from marketing to general and administrative costs, and professional fees.

Net Income


Net loss for the nine months ended September 30, 2017 was approximately $1.03 million, compared to net loss of $482,000 for the nine months ended September 30, 2016. We consolidated the operations of our joint venture, Immudyne PR and reflected a non-controlling interest for 21.8333% of these operations. Net loss attributableperiods similar to the expected option life. Due to limited history of forfeitures, the Company has elected to account for forfeitures as they occur.

Many of the assumptions require significant judgment and any changes could have a percentage of sales was (27.5)% for the nine months ended September 30, 2017, compared to net loss as a percentage of sales of (11.5)% for the nine months ended September 30, 2016. Our net loss during the period was attributable to our increased operating expenses as we shifted to an internal marketing strategy and increased interest expense to service our debt incurred late in 2016 and early in 2017. We also experienced decreased sales during the first quarter of 2017 as we shifted company resources in efforts to launch our in-licensed patented hair loss shampoo, conditioner, and leave in foam, and to internal marketing strategies.

Liquidity and Capital Resources

Our principal demands for liquidity are to increase sales, purchase inventory and for sales distribution and general corporate purposes. We incurred negative operating cash flows to date in 2017 as well asmaterial impact in the 2016determination of stock-based compensation expense.

Application of New or Revised Accounting Standards—Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and 2015 fiscal years. As a result, we have substantial doubt about our ability to continue as a going concern. LateOther Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in the 2016 fiscal yearEntity’s Own Equity (Subtopic 815-40); Accounting for Convertible Instruments and early in 2017, the Company issued several 11% subordinated promissory notes to accredited investors for total borrowings of $200,000. Additionally, the Company borrowed $200,000 at 11% from an investor and borrowed $100,000 from an officer of the Company. Each of these borrowings have since been satisfied in full with a combination of repayment in cash and conversion of certain amounts outstanding to equity of the Company.

The Company also has access to a working capital line provided by American Express, guaranteed by the Company’s Chief Executive Officer, in the amount of $140,000 with a term of 60 to 90 days and interest at a flat fee of 1.5%. Additionally, in the nine months ended September 30, 2017, the Company issued and sold 2,927,156 shares and 1,414,078 warrants to accredited investorsContracts in an offering pursuant to Regulation D and received proceeds in the amount of $673,245. We plan on our operating business (in conjunction with proceeds from debt and equity financings completed in 2016 and early 2017) being able to fund operations through 2017. However, if necessary, we may raise additional capital through a private placement of common stock, obtaining debt financing or from advances from our President and/or directors; however, no assurances can be made that we will be successful in our endeavors to raise additional capital.

There can be no assurance that required future financing can be successfully completed on a timely basis, or on terms acceptable to us. Any future issuance of equity securities could cause dilution to our shareholders. Any incurrence of indebtedness would increase our debt service obligations and would cause us to be subject to restrictive operating and financial covenants.

We had positive net working capital of $560,467 at September 30, 2017, resulting in an increase in working capital from negative net working capital of $(361,725) at December 31, 2016. The ratio of current assets to current liabilities was 1.72 to 1 at September 30, 2017.

The following is a summary of cash provided by or used in each of the indicated types of activities during the nine months ended September 30, 2017 and 2016:

  2017  2016 
Cash provided by (used in):      
Operating activities $(315,689) $(111,698)
Financing activities  695,888   352,635 

Net cash used by operating activities was approximately $316,000 for the nine months ended September 30, 2017, compared to net cash used in operating activities of approximately $112,000 for the same period in 2016. The increase in the amount of cash used by our operating activities was due primarily to our overall net loss, product deposits and an increase in inventory.

Net cash flows provided by financing activities was approximately $696,000 for the nine months ended September 30, 2017, compared to net cash flows provided by financing activities of $353,000 for the same period in 2016. Our increase in net cash flows provided by financing activities was primarilyEntity’s Own Equity (“ASU 2020-06”)”, which addresses issues identified as a result of the salecomplexities associated with applying U.S. GAAP for certain financial instruments with characteristics of our commonliabilities and equity. This update addresses, among other things, the number of accounting models for convertible debt instruments and convertible preferred stock, targeted improvements to the disclosures for convertible instruments and warrants,earnings-per-share (“EPS”) guidance and proceeds from notes payableamendments to the guidance for the derivatives scope exception for contracts in an entity’s own equity, as well as the first quarterrelated EPS guidance. This update applies to all entities that issue convertible instruments and/or contracts in an entity’s own equity. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. FASB specified that an entity should adopt the guidance as of 2017.


Indebtedness

From time to time, our directors, officers and other related individuals have made short-term advances to us for our operating needs. Late in the 2016beginning of its annual fiscal year, and early in 2017,or January 1, 2021, should the Company issued several 11% subordinated promissory noteselect to accredited investors for total borrowingsearly adopt. The Company is currently evaluating the impact the adoption of $200,000, borrowed $200,000 at 11% from an investor and borrowed $100,000 from an officer of the Company. Each of these borrowingsASU 2020-06 could have since been satisfied in full with a combination of repayment in cash and conversion of certain amounts outstanding to equity of the Company. We also have access to a $140,000 working capital line through American Express, guaranteed byon the Company’s Chief Executive Officer, at rates that are more favorable than those that Company has been able achieve previously.financial statements and disclosures.

Off-Balance Sheet Arrangements

There areWe have no off-balance sheet arrangements between us and any other entity that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.stockholders.

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Critical Accounting Policies

Our significant accounting policies are described more fully in Note 2 to our financial statements, which we believe are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 3.Quantitative and Qualitative Disclosures about Market Risk37

 

Not applicable.

Item 4.Controls and Procedures

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer (“PEO”), and our Principal Financial Officer (“PFO”), of the design and effectiveness of our “disclosure controls and procedures” (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our PEO/PFO concluded that as of the end of the period covered by this report, thesemaintain disclosure controls and procedures were not effective. The conclusion(as that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in disclosure controls and procedures which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment as the Company had only one officer; (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC Guidelines; and (iii) inadequate security and restricted access to computer systems including insufficient disaster recovery plans; and (iv) no written whistleblower policy. If and when sufficient funds are available, our PEO/PFO plans to implement appropriate disclosure controls and procedures to remediate these material weaknesses, including (i) appointing additional qualified personnel to address inadequate segregation of duties and ineffective risk management; (ii) adopt sufficient written policies and procedures for accounting and financial reporting and a whistle blower policy; and (iii) implement sufficient security and restricted access measures regarding our computer systems and implement a disaster recovery plan.  

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f)13a-15(e) and 15d-15(f) of15d-15(e) under the Exchange Act) that occurred duringare designed to ensure that information required to be disclosed in our reports under the quarter ended September 30, 2017,Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that have materially affected, or are reasonably likelysuch information is accumulated and communicated to materially affect, our internal control overmanagement, including our chief executive officer and chief financial reporting.officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognizesnecessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition,

Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures must reflectas of the factend of the period covered by this report. Based upon that there are resource constraintsevaluation and subject to the foregoing, our chief executive officer and chief financial officer concluded that management is required to apply its judgment in evaluating the benefits of possibleour disclosure controls and procedures relativewere not effective due to their costs.the material weaknesses in internal control over financial reporting described below.

The ineffectiveness of the Company’s internal control over financial reporting was due to the following material weaknesses which are indicative of many small companies with small number of staff:

(i)inadequate segregation of duties consistent with control objectives;
(ii)insufficient written policies and procedures for accounting and financial reporting with respects to the requirements and application of both U.S. GAAP and SEC Guidelines;
(iii)inadequate security and restricted access to computer systems including a disaster recovery plan;
(iv)lack of formal written policy for the approval, identification and authorization of related party transactions; and
(v)no written whistleblower policy.

Management’s Plan to Remediate the Material Weakness

Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions planned include:

(i)continue to search for and evaluate qualified independent outside directors;
(ii)the recent addition of functioning audit committee;
(iii)re-design of our accounting processes and control procedures;
(iv)identify gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a publicly-traded company;
(v)review and improve current accounting policies and procedures and develop a thorough document detailing said policies and procedures with respects to the requirements and application of both U.S. GAAP and SEC Guidelines;
(vi)identify and remedy gaps in our security and restricted access policies to computer systems and implement a disaster recovery plan; and
(vii)adoption of a formal written related party transaction policy and whistleblower policy.

We are committed to maintaining a strong internal control environment and believe that these remediation efforts will represent significant improvements in our control environment. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Management’s report on internal control over financial reporting was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit a Smaller Reporting Company to provide only Management’s report in this interim report, which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.II – OTHER INFORMATION

Item 1.Legal Proceedings

We may become involved in various lawsuits and legal proceedings arising inITEM 1. LEGAL PROCEEDINGS

In the ordinary course of our operations, we become involved in ordinary routine litigation incidental to the business. Litigation is subjectMaterial proceedings are described under Note 8, “Commitments and Contingencies” to inherent uncertainties and an adverse resultthe unaudited condensed consolidated financial statements included in these or other matters may arise from time to time that may have an adverse effectthis Quarterly Report on our business, financial conditions or operating results. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.Form 10-Q.

Item 1A.Risk Factors

ITEM 1A. RISK FACTORS

An investment in the Company’s common stock involves a number of very significant risks. You should carefully consider carefully the risk factors discussedincluded in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 30, 2021, in addition to other information contained in our reports and in this quarterly report in evaluating the Company and its business before purchasing shares of our common stock. Except as set forth below, there have been no material changes to our risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2016.2020. The Company’s business, operating results and financial condition could be adversely affected due to any of those risks. In addition:

We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.

As our business strategies develop, we must add additional managerial, operational, financial and other personnel. Future growth will impose significant added responsibilities on members of management, including:

●identifying, recruiting, integrating, maintaining, and motivating additional personnel;
●managing our internal development efforts effectively, while complying with our contractual obligations to contractors and other third parties; and
●improving our operational, financial, and management controls, reporting systems, and procedures.

Our future financial performance will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities. This lack of long-term experience working together may adversely impact our senior management team’s ability to effectively manage our business and growth.

We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors, and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors, and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, we may not be able to advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all. If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop our business initiatives and, accordingly, may not achieve our research, development, and commercialization goals.

While all filed securities class action lawsuits were voluntarily dismissed, there is potential to be subject to additional securities class action lawsuits, which could require significant management time and attention and significant legal expenses and could result in an unfavorable outcome, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are subject to securities class action lawsuits, which may require significant management time and attention and significant legal expenses and may result in an unfavorable outcome, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, there is the potential for additional future litigation, and we could be materially and adversely affected by such matters.

We have insurance policies related to the risks associated with our business, including directors’ and officers’ liability insurance policies. However, there is no assurance that our insurance coverage will be sufficient or that our insurance carriers will cover all claims in any future litigation. If we are not successful in our defense of potential claims asserted in any future litigation and those potential future claims are not covered by insurance or exceed our insurance coverage, we could have to pay damage awards, indemnify our officers from damage awards that could be entered against them and pay the costs and expenses incurred in defense of, or in any settlement of, such potential future claims.

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We may be subject to claims that we are engaged in the corporate practice of medicine or that our contractual arrangements with affiliated physician groups constitute unlawful fee splitting.

We have begun to contract with physician owned professional corporations or professional associations to facilitate the delivery of telehealth services to their patients. We enter into management services agreements with these physician owned professional corporations pursuant to which we provide them with a comprehensive set of non-clinical management and administrative services. The physician owned professional corporations are solely responsible for practicing medicine and all clinical decision-making. These professional corporations will pay us for our management services from the fees they will collect from patients and third-party payors. Our relationships with these physician owned professional corporations are subject to various state laws that prohibit fee splitting or the practice of medicine by lay entities or persons. Corporate practice of medicine laws and enforcement varies by state. In some states, decisions and activities such as contracting with third party payors, setting rates and the hiring and management of non-clinical personnel may implicate the restrictions on the corporate practice of medicine.

In addition, corporate practice of medicine restrictions are subject to broad powers of interpretation and enforcement by state regulators. Some of these requirements may apply to us even if we do not have a physical presence in a state, solely because we provide management services to a provider licensed in the state or facilitate the provision of telehealth to a resident of the state. State medical practice boards, other regulatory authorities, or other parties, including the physicians or other providers with whom we contract, may assert that, despite these arrangements, we are engaged in the corporate practice of medicine or that our contractual arrangements with affiliated physician groups constitute unlawful fee splitting. In this event, failure to comply 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, the need to make changes to the terms of engagement with providers that interfere with our business and other materially adverse consequences.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None.ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following disclosures set forth certain information with respect to all securities sold by the Company during the three months ended September 30, 2021 without registration under the Securities Act:

On July 19, 2021, the Company issued an aggregate of 30,000 shares of common stock for approximately $220 thousand of services expensed in prior periods.

The above transactions did not involve any underwriters, underwriting discounts or commissions, or any public offering. The Company relied upon the exemption from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and/or Regulation D promulgated by the SEC under the Securities Act.

Item 3.Defaults Upon Senior Securities

None.ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4.Mine Safety Disclosures

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.Applicable.

ITEM 5. OTHER INFORMATION

None.

Item 5.

Other Information

40

 

None.

ITEM 6. EXHIBITS

    Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit Filing Date/Period End Date
3.1 Certificate of Designation for Series A Preferred Stock 8-K 1.3 10/4/21
10.1# Director Agreement between LifeMD, Inc. and Naveen Bhatia, dated September 8, 2021 8-K 10.1 9/13/21
10.2# Consulting Services Agreement between Naveen Bhatia and LifeMD, Inc., dated September 8, 2021 8-K 10.2 9/13/21
10.3#* Renewed Director Agreement, dated September 7, 2021, by and between LifeMD, Inc. and John Strawn      
10.4#* Renewed Director Agreement, dated September 20, 2021, by and between LifeMD, Inc. and Dr. Eleanor C. Mariano      
10.5#* Renewed Director Agreement, dated September 21, 2021, by and between LifeMD, Inc. and Dr. Joseph V. DiTrolio      
31.1* Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.      
31.2* Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.      
32.1** Section 1350 Certification of Chief Executive Officer.      
32.2** Section 1350 Certification of Chief Financial Officer.      
101.INS* Inline XBRL Instance Document      
101.SCH* Inline XBRL Taxonomy Extension Schema Document      
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document      
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document      
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document      
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document      
104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS)      

# Indicates management contract or compensatory plan, contract or arrangement.

* Filed herewith.

**Furnished herewith

Item 6.Exhibits41

 

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LIFEMD, INC.

By:IMMUDYNE INC./s/ Justin Schreiber
(Registrant)Justin Schreiber
Date: November 14, 2017By:/s/ Mark McLaughlin
Mark McLaughlin
Chief Executive Officer
Date:

November 10, 2021		(Principal Executive Officer)
By:IMMUDYNEINC./s/ Marc Benathen
(Registrant)Marc Benathen
Date: November 14, 2017By:/s/ Robert Kalkstein
Robert Kalkstein
Chief Financial Officer

(Principal Financial Officer)
Date:November 10, 2021


EXHIBIT INDEX

Exhibit No.Document Description
31.1 †Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1†Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 ‡Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS†XBRL Instance Document
101.SCH†XBRL Schema Document
101.CAL†XBRL Calculation Linkbase Document
101.DEF†XBRL Definition Linkbase Document
101.LAB†XBRL Label Linkbase Document
101.PRE†XBRL Presentation Linkbase Document42

† Filed herewith

‡ Furnished herewith

31