Business Context and Reporting Period
This Form 8-K was filed by Conversion Labs, Inc. (not Lifemd, Inc.) on May 27, 2019, reporting events occurring on May 31, 2019. The filing details the formation of a new subsidiary, Conversion Labs RX, LLC ("CLRX"), and the execution of strategic agreements to launch an online prescription drug business.
Key Financial Metrics and Agreements
The filing does not provide specific revenue, profit, cash flow, or debt figures for the reporting period. Instead, it outlines the financial structure of new agreements:
- Ownership Structure: Conversion Labs, Inc. owns 51% of CLRX through its subsidiary, Conversion Labs PR, LLC.
- Revenue Model: CLRX will pay GoGoMeds a dispensing fee per prescription. For business referred to GoGoMeds outside the primary agreement, GoGoMeds will share 50% of net profits with CLRX in perpetuity.
- Equity Compensation: Consulting agreements with Harborside Advisors, LLC and Happy Walters allow each to earn up to 5,000,000 restricted shares of common stock upon CLRX reaching specific revenue milestones.
Material Changes
The primary material change is the entry into a Material Definitive Agreement to establish CLRX and a Strategic Partnership with Specialty Drugstore Inc. (d/b/a GoGoMeds). This partnership enables CLRX to offer online physician consultations and sell prescription drugs directly to consumers in all 50 states using GoGoMeds' existing infrastructure.
Outlook, Risks, and Contingencies
- Management Commentary: The company is pivoting to a direct-to-consumer telehealth and pharmacy model via the new subsidiary.
- Consulting Roles: Happy Walters will advise on capital markets, marketing, branding, and influencer management. Harborside will assist with general operations and partner liaison.
- Term and Termination: Consulting agreements are for a three-year term. The Strategic Partnership may be terminated upon a material breach if not cured within 30 days of written notice.
- Unregistered Securities: The issuance of potential equity to consultants relies on Section 4(a)(2) of the Securities Act as a private transaction involving accredited investors.
Investor Verification Checklist
- Verify the exact revenue milestones required to trigger the issuance of up to 10 million total restricted shares to consultants.
- Confirm the specific dispensing fee rates payable to GoGoMeds per prescription.
- Review the full text of the Operating Agreement (Exhibit 10.1) for restrictions on the disposition of membership interests.
- Assess the financial stability and operational capacity of GoGoMeds to support the proposed nationwide rollout.