LifeMD, Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; filed March 22, 2023. This is an annual filing, and the supplied text does not provide clear standalone fourth-quarter results.
Business context
LifeMD operates a direct-to-patient telehealth business offering virtual primary and urgent care and condition-specific services, alongside WorkSimpli, a majority-owned software-as-a-service business operating PDFSimpli. LifeMD owns 73.64% of WorkSimpli at year-end. The company reported approximately 680,000 customers and patients served since inception; management said about 90% of total revenue was recurring subscriptions.
Financial performance
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $119.0 million | $92.9 million |
| Telehealth revenue | $82.6 million | $68.2 million |
| WorkSimpli revenue | $36.4 million | $24.7 million |
| Gross profit / margin | $100.4 million / 84.3% | $74.9 million / 80.6% |
| Operating loss | $43.4 million | $54.3 million |
| Net loss | $45.0 million | $61.3 million |
| Net loss attributable to common stockholders | $48.6 million | $61.8 million |
| Net cash used in operating activities | $22.9 million | $33.1 million |
| Net cash used in investing activities | $13.9 million | $3.4 million |
| Cash at year-end | $4.0 million | $41.3 million |
Revenue grew 28% year over year: telehealth revenue rose 21% and WorkSimpli revenue rose 47%. Gross margin improved, while selling and marketing expense fell by about $4.2 million. Operating expenses nevertheless increased 11% to $143.8 million, including $8.9 million of goodwill and intangible-asset impairments, primarily related to Cleared. The company recorded a $5.1 million reduction in Cleared contingent consideration, a noncash benefit associated with lower projections and the subsequent removal of earn-out payments. Stock-based compensation was $13.7 million.
Financial position and liquidity
At December 31, 2022, current assets were $11.3 million and current liabilities were $31.4 million, producing a $20.1 million working-capital deficit. Total liabilities were $33.0 million; notes payable, net, were $2.8 million, and stockholders’ equity was negative $11.9 million. Cash declined by $37.4 million during the year. Investing cash use primarily reflected $8.5 million of capitalized software costs, the $4.0 million ResumeBuild purchase, and about $1.0 million paid for Cleared.
Management and the auditor identified substantial doubt about the company’s ability to continue as a going concern, citing losses, operating cash outflows, limited liquidity, and the need for additional funding. Management said cash was approximately $14.6 million as of the filing date and disclosed available capacity under its ATM and shelf registrations; these are potential financing sources, not cash on hand. Subsequent to year-end, LifeMD borrowed $2 million under a CRG Financial facility and, on March 21, 2023, entered an Avenue Capital facility. As of filing, $15 million was outstanding under the Avenue facility. Its terms include a minimum unrestricted cash covenant of $5 million and interest at the greater of prime plus 4.75% or 12.5%.
Material changes, outlook, and notable items
- WorkSimpli acquired the ResumeBuild assets for $4.0 million upfront, with at least $0.5 million in additional contingent payments. Cleared was acquired in January 2022; its financial projections subsequently declined, leading to impairment charges.
- In February 2023, the Cleared purchase agreement was amended: total purchase price was reduced to $3.67 million, earn-outs were eliminated, and remaining payments were scheduled in installments through January 2024. LifeMD issued 337,895 shares for the first installment.
- Management said it was curtailing expenses and pursuing revenue growth and improved operating efficiency, but did not provide quantified forward guidance. It described continued investment and scaling of telehealth as priorities.
- LifeMD settled two disputes with Harborside Advisors and GoGoMeds in September 2022, issuing 400,000 common shares; up to 100,000 additional shares may be issued. A separate William Blair lawsuit remained pending, and the company said a potential loss could not yet be estimated.
- Management concluded internal control over financial reporting was ineffective due to material weaknesses involving segregation of duties, revenue-recognition controls, accounting documentation, and IT general controls. Disclosure controls were also deemed ineffective. The auditor did not attest to internal-control effectiveness.
- Key risks include continued losses and financing needs, dilution, competition and customer retention, telehealth and healthcare regulation, privacy and cybersecurity, reliance on providers, pharmacies and technology vendors, and execution of acquisitions and growth plans. The company also disclosed substantial state and federal healthcare compliance risks.
Most important facts for investors to verify
- Whether post-year-end financing and operating cash generation provide adequate liquidity, including compliance with the Avenue facility’s covenants and repayment terms.
- Whether recurring revenue growth, retention, and gross-margin gains can offset ongoing operating expenses and reduce cash burn.
- Whether the Cleared business meets revised expectations and whether further impairment or acquisition-related payments arise.
- Progress in remediating material weaknesses, particularly revenue recognition, segregation of duties, and IT controls.
- Developments and financial exposure in the William Blair litigation, the remaining possible settlement shares, and any other contingencies.
- Potential dilution from equity financing, preferred dividends, options, warrants, and shares issued for obligations.