Lifemd, Inc. current report, Q2 FY2018

Business Context and Reporting Period

This Form 8-K was filed by Immudyne, Inc. (not Lifemd, Inc.) on May 29, 2018. The filing reports the closing of a Membership Interest Purchase Agreement on the same date, wherein Immudyne PR, LLC, a wholly owned subsidiary of the Company, acquired a 51% membership interest in LegalSimpli Software, LLC ("LSS"), a Puerto Rico-based marketing-driven software solutions business.

Key Financial Metrics and Transaction Terms

  • Acquisition Cost: An initial payment of $150,000 was made upon execution.
  • Contingent Consideration: Up to an additional $200,000 is payable based on revenue and profit milestones:
    • $100,000 at 90 days if LSS gross revenue for the preceding 30 days is $\ge$ $75,000.
    • $100,000 at 180 days if LSS gross revenue for the preceding 30 days is $\ge$ $150,000 with a minimum net profit margin of 25%.
  • Debt and Liquidity: A revolving line of credit agreement was established allowing advances up to $1,000,000 for LSS. The Company is not obligated to advance funds and may terminate the privilege unilaterally. Interest rates are determined per advance.
  • Profit Distribution: A bonus pool equal to 5% of LSS net profits is reserved for founding members. Additionally, for every $10 million in revenue (up to $50 million) with a net profit margin $\ge$ 20%, founding members receive 1% of pretax profits.

Material Changes

The primary material change is the expansion of the Company's operations through the acquisition of a controlling 51% interest in LSS. The filing does not provide comparative financial data for the prior period as this is a transactional report rather than a periodic financial statement.

Outlook, Risks, and Contingencies

  • Performance Risk: Future payments of up to $200,000 are contingent on LSS meeting specific revenue and profit thresholds within 90 and 180 days.
  • Discretionary Funding: While a $1,000,000 line of credit is available to LSS, the Company retains full discretion to deny advances or terminate the facility.
  • Ownership Structure: The Company retains full ownership of the membership interests regardless of whether LSS achieves the performance milestones.

Investor Verification Checklist

  • Verify the actual revenue and profit performance of LSS at the 90-day and 180-day marks to determine if the $200,000 in contingent payments will be triggered.
  • Review the attached Exhibits 10.1, 10.2, and 10.3 for specific terms regarding the line of credit interest rates and the exact mechanics of the profit-sharing bonus pool.
  • Confirm the integration strategy for LSS into Immudyne's existing operations and the expected impact on future consolidated financial statements.
  • Note that the filing references "Immudyne, Inc." despite the request metadata mentioning "Lifemd, Inc."; verify the correct registrant identity.