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Item 1A. Risk Factors

2024-02-20 compared with 2023-02-21 · 97 added, 139 removed, 223 unchanged (51% of the section changed)

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Risks Related to Our Business

Global economic conditions, including inflation and supply chain disruptions, could continue to adversely affect our operations.

General global economic downturns and macroeconomic trends, including heightened inflation, capital market volatility, interest rate and currency rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect demand for our products and exacerbate some of the other risks that affect our business, financial condition and results of operations.

Both domestic and international markets experienced significant inflationary pressures in fiscal year 2022 and inflation rates in the U.S., as well as in other countries in which we operate, are currently expected to continue at elevated levels for the near-term.

In addition, the Federal Reserve in the U.S.

and other central banks in various countries have raised, and may again raise, interest rates in response to concerns about inflation, which, coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks.

Interest rate increases or other government actions taken to reduce inflation could also result in recessionary pressures in many parts of the world.

Our sales may be adversely impacted by the health and stability of the general economy.

Our results of operation are highly dependent on the number of product sales and program fees generated by our OPTA VIA Coaches.

A downturn in general economic conditions, such as a recession or prolonged economic slowdown, may reduce the demand for our products and otherwise adversely affect our sales.

Deterioration of economic conditions, an economic recession or slow growth, periods of inflation or economic uncertainty, could continue to adversely affect consumer spending as well as demand for our products.

General global economic downturns and macroeconomic trends, including heightened inflation, capital market volatility, interest rate and currency rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect consumer spending and demand for our products, and exacerbate some of the other risks that affect our business, financial condition and results of operations.

For example, economic forces, including changes in disposable consumer income and/or reductions in discretionary spending, unemployment levels, labor shortages, demographic trends, inflation and consumer confidence in the economy, may cause consumers to defer or decrease purchases of our products and programs which could adversely affect our revenue, gross profit, and/or our overall financial condition and operating results.

Our direct selling model may be challenged both domestically and abroad which could harm our business.

In both domestic and foreign markets, we may be subject to challenges by government regulators regarding our direct selling model.

The success of our business is dependent on our ability to maintain and grow our network of OPTA VIA Coaches .

We consider our number of active earning OPTA VIA Coaches and average quarterly revenue per active earning OPTA VIA Coach to be key indicators of our financial performance and condition.

As of December 31, 2023, the Company had 41,100 total active earning OPTA VIA Coaches as compared to 60,900 as of December 31, 2022.

If we are unable to reverse the downtrend of the number of active earning Coaches, which has been declining since Q3 2022, or revenue per active earning Coach, which has been declining since Q2 2023, our future revenue and operating results will continue to be adversely affected, as we believe that the success of the Company depends on the success of our OPTA VIA Coaches.

Additionally, OPTA VIA Coaches are subject to high turnover and we depend on our network of OPTA VIA Coaches to continually grow their businesses by supporting customers and attracting, training and motivating new OPTA VIA Coaches.

Our failure to provide the business essentials and competitive compensation necessary to motivate OPTA VIA Coaches to grow their businesses will adversely affect our future growth and operating results.

The growth and sustainability of our network of OPTA VIA Coaches is also subject to risks which may be outside of our control.

These include:

potential misconduct or improper claims by OPTA VIA Coaches;

negative public perceptions of multi-level marketing;

general economic conditions;

failure to develop innovative products to meet consumer demands;

adverse opinions of our products, services, or industry;

and regulatory actions against our Company, competitors in our industry, or other direct selling companies.

Our direct selling model may be challenged, which could harm our business.

We may be subject to challenges by government regulators regarding our direct selling model.

Legal and regulatory requirements concerning the direct selling industry generally do not include “bright line” rules and are inherently fact-based and subject to interpretation.

As a result, regulators and courts have discretion in their application of

these laws and regulations, and the enforcement or interpretation of these laws and regulations by government agencies or courts can change.

Recent settlements between the FTC and other direct selling companies and guidance from the FTC have addressed inappropriate earnings and lifestyle claims and the importance of focusing on consumer sales.

As a result, regulators and courts have discretion in their application of these laws and regulations, and the enforcement or interpretation of these laws and regulations by government agencies or courts can change.

Settlements between the FTC and other direct selling companies and guidance from the FTC have addressed inappropriate earnings and lifestyle claims and the importance of focusing on consumer sales.

These developments have created a level of ambiguity as to the proper interpretation of the law and related court decisions.

Any adverse rulings or legal actions could impact our business if direct selling laws or anti-pyramid laws are interpreted more narrowly or in a manner that results in additional burdens or restrictions on direct selling companies.

For example, in 2016, the FTC entered into a settlement with another multi-level marketing company, requiring the company to modify its business model, including basing sales compensation and qualification only on sales to retail and preferred customers and on purchases by a distributor for personal consumption within allowable limits.

Although this settlement does not represent judicial precedent or a new FTC rule, the FTC has indicated that the industry should look at this settlement, and the principles underlying its specific measures, for guidance.

Similarly, in 2019, the FTC took aggressive actions against a multi-level marketing company, which ultimately led to the company being permanently prohibited from using a multilevel compensation plan in the United States.

For example, in 2019, the FTC took aggressive actions against a multi-level marketing company, which ultimately led to the company being permanently prohibited from using a multilevel compensation plan in the United States.

If our OPTA VIA Coaches make improper claims regarding our products or business, or if regulators determine we are making any improper claims, this could lead to an FTC investigation and could harm our business.

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If we are required to make changes or if the FTC seeks to enforce similar measures in the industry, either through rulemaking or an enforcement action against us, our business could be harmed.

In addition, the FTC has increased its scrutiny of the use of testimonials, which we also utilize, as well as the role of endorsers.

The FTC has also increased its scrutiny of the use of testimonials, which we also utilize, as well as the role of endorsers.

We cannot be sure that the FTC will not challenge our advertising or other operations in the future, which could have a material adverse effect on our business.

Governmental regulations in countries where we plan to commence or expand operations may prevent or delay entry into those markets.

In addition, our ability to sustain satisfactory levels of sales in our markets is dependent in significant part on our ability to introduce innovative products into such markets.

However, governmental regulations in our markets, both domestic and international, can delay or prevent the introduction, or require the reformulation or withdrawal, of certain of our products.

In addition, our ability to sustain satisfactory levels of sales is dependent in significant part on our ability to introduce innovative products.

However, governmental regulations can delay or prevent the introduction, or require the reformulation or

withdrawal, of certain of our products.

Any such regulatory action, whether or not it results in a final determination adverse to us, could create negative publicity, with detrimental effects on the motivation and recruitment of OPTA VIA Coaches and, consequently, on sales.

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Similarly, the FTC continues to scrutinize multi-level marketers.

In 2020, the FTC sent out letters warning multi-level marketing companies to remove and address claims that they or their participants made about their products' ability to treat or prevent COVID-19 or provide earnings for people who have recently lost income.

All of these actions and any future scrutiny of us or the direct selling industry could generate negative publicity or further regulatory actions that could result in fines, restrict our ability to conduct our business, enter into new markets, and ultimately attract customers.

We have experienced rapid growth and expect our growth to continue, which could place significant strain on our management, systems, resources, and results of operations.

We have experienced rapid growth and development in a relatively short period of time and expect to continue growth in the future.

For example, we generated revenue of $1.599 billion in 2022, $1.526 billion in 2021, $934.8 million in 2020 and $713.7 million in 2019 representing year-over-year increases of 4.8% in 2022, 63.2% in 2021 and 31.0% in 2020.

Our rapid growth places significant demands on our management and our administrative, logistical, operational and financial infrastructure.

We cannot assure you that we will be able to successfully optimize our distribution center network, including our network of third-party manufacturers, or open new distribution centers in new or existing markets if needed to accommodate or facilitate growth or that certain of our distribution centers will not have, or continue to have, operational challenges.

Our ability to compete effectively and to manage future growth, if any, will depend on our ability to maximize operational efficiencies across our distribution center network, to implement and improve on a timely basis operational, financial and management information systems, including our warehouse management systems, and to expand, train, motivate and manage our work force.

We cannot assure you that our existing personnel, systems, procedures, controls, or third-party manufacturer partners will be adequate to support the future growth of our operations.

Our failure to effectively manage our growth could harm our business and reputation and, in particular, our financial condition, results of operations and cash flows, which could negatively affect our ability to make distributions to stockholders and the trading price of our common stock.

Our growth could also increase our capital requirements, which may require us to issue potentially dilutive equity securities and incur debt.

We rely on third parties to provide us with a majority of the products we sell and we manufacture the remaining portion.

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The services we require from these parties may be disrupted due to a number of factors associated with their businesses, including the following:

• public health crises, such as pandemics and epidemics, including the COVID-19 pandemic;

• public health crises, such as pandemics and epidemics;

• labor disruptions;

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The operations at this facility may be disrupted by a number of factors, including the following:

• public health crises, such as pandemics and epidemics, including the COVID-19 pandemic;

• public health crises, such as pandemics and epidemics;

• labor disruptions;

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Some of our suppliers may depend on a variety of other local, regional, national and international suppliers to fulfill the purchase orders we place with them.

The availability of such ingredients and other products at competitive prices

depends on many factors beyond our control, including the number and size of the suppliers that provide the raw materials that meet our quality and production standards.

The availability of such ingredients and other products at competitive prices depends on many factors beyond our control, including the number and size of the suppliers that provide the raw materials that meet our quality and production standards.

We rely on our suppliers, and their supply chains, to meet our quality and production standards and specifications and supply ingredients and other products in a timely and safe manner.

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We may be subject to claims from our customers alleging that our OPTA VIA Coaches lack the qualifications necessary to provide proper advice regarding weight loss and related topics.

We may also be subject to claims that our OPTA VIA Coaches have provided inappropriate advice or have inappropriately referred or failed to refer customers to health care providers for matters other than weight loss.

We may also be subject to claims that our OPTA VIA Coaches have provided inappropriate advice or have failed to recommend customers consult with their health care providers during the course of the customers’ weight loss journey, as recommended in the Company’s Medical Disclaimer.

Such claims could result in lawsuits, damage to our reputation and divert management’s attention from our business, which would adversely affect our business.

We may be subject to health or advertising related claims from our customers.

Our weight loss and weight management programs do not include medical treatment or medical advice, and we do not engage physicians or nurses to monitor the progress of our customers.

While we collaborate with LifeMD healthcare providers, our businesses are separate, and our weight loss and weight management programs do not include medical treatment or medical advice, and we do not engage physicians or nurses, with LifeMD or otherwise, to monitor the progress of our customers.

Many people who are overweight suffer from other physical conditions, and our target consumers could be considered a high-risk population.

A customer who experiences health problems could allege or bring a lawsuit against us on the basis that those problems were caused or worsened by participating in our programs.

A customer who experiences health problems could allege or bring a lawsuit against us on the basis that those problems were caused or worsened by participating in our programs, including outcomes based on interactions with our independent OPTA VIA Coaches or healthcare providers associated with LifeMD.

Further, customers who allege that they were deceived by any statements that we made in advertising or labeling could bring a lawsuit against us under consumer protection laws.

From time-to-time we are subject to such allegations and have

been involved in such litigation.

From time-to-time we are subject to such allegations and have been involved in such litigation.

We may ultimately be unsuccessful in defending ourselves against such claims.

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Competition is intense in the weight management industry and we must remain competitive in the areas of program efficacy, price, taste, customer service and brand recognition.

Our competitors include companies selling pharmaceutical products and weight loss programs, digital tools, app-based health and wellness monitoring solutions and wearable trackers, as well as a wide variety of diet foods and meal replacement bars and shakes, appetite suppressants and nutritional supplements.

Our competitors include companies selling weight loss medications, pharmaceutical products and weight loss programs, digital tools, app-based health and wellness monitoring solutions and wearable trackers, as well as a wide variety of diet foods and meal replacement bars and shakes, appetite suppressants and nutritional supplements.

Some of our competitors are significantly larger than we are and have substantially greater resources.

Any increased competition from new entrants into our industry or any increased success by existing competition could result in reductions in our sales or prices, or both, which could have an adverse effect on our business and results of operations.

New weight loss products or services may put us at a competitive disadvantage and our business may suffer.

Additionally, the entrance into the market and growing acceptance of the favorably perceived and easier to use weight loss medications, such as GLP-1s, has reduced and may further reduce demand for our services and products.

New weight loss medications, products or services may put us at a competitive disadvantage and our business may suffer.

The weight management industry is subject to changing consumer demands based, in large part, on the efficacy and popular appeal of weight management programs.

The popularity of weight management programs is dependent, in part, on their ease of use, cost and channels of distribution as well as consumer trends, which continue to evolve with the introduction of new technologies and innovations, and, on an ongoing basis, many existing and potential providers of weight loss solutions, including many pharmaceutical firms with significantly greater financial and operating resources than we have, are developing new products and services.

The creation of a weight loss solution, such as a drug therapy, that is perceived to be safe, effective and “easier” than a portion-controlled meal plan would put us at a disadvantage in the marketplace and our results of operations could be negatively affected.

The growing popularity of weight loss solutions, such as a drug therapy or GLP-1 medications, which may be perceived to be safe, effective and “easier” than a portion-controlled meal plan has affected the marketplace and could negatively impact our results of operations.

If we do not continue to develop innovative new products or if our products do not continue to appeal to the market, or if we are unable to successfully expand or respond to consumer trends, our business may suffer.

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We may not be successful in developing, introducing on a timely basis or marketing any new or enhanced products, and we cannot assure you that any new or enhanced products will appeal to the market.

Our results of operations are highly dependent on the number of product sales generated by our OPTA VIA Coaches.

Our failure to develop new products and to enhance our existing products, and the failure of our products to continue to appeal to the market could have an adverse impact on our ability to attract and retain customers and thus adversely affect our business, financial condition or results of operations.

Additionally, we commit and invest substantial time and resources into developing innovative new products.

There is no assurance that any new products will be successfully adopted by our customer base, or that we will be able promote such new products without taking steps such as reducing pricing or incurring acquisition costs that would affect our revenues and/or profitability.

We may not be able to successfully implement new strategic initiatives, which could adversely impact our business.

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Our business depends on the effectiveness of our advertising and marketing programs, including the strength of the Company's and our OPTA VIA Coaches’ social media presence, to attract and retain customers.

Use of social media may

materially and adversely affect our reputation or subject us to fines or other penalties, and restrictions on the use of or access to social media may adversely impact sales of our products and services.

Use of social media may materially and adversely affect our reputation or subject us to fines or other penalties, and restrictions on the use of or access to social media may adversely impact sales of our products and services.

Our business success depends on our ability to attract and retain customers.

Our ability to attract and retain customers depends significantly on the effectiveness of our OPTA VIA Coaches’ advertising and marketing practices.

Our OPTA VIA Coaches support our customers and market our products and services primarily through word of mouth, email and via social media channels such as Facebook, Instagram, Twitter and video conferencing platforms.

If their advertising and marketing campaigns do not generate a sufficient number of customers, our business, financial condition and results of operations will be adversely affected.

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An increase in the use of social media for product promotion and marketing may cause an increase in the burden on us to monitor compliance of such materials and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations.

As laws and regulations, including FTC enforcement, rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees, or our Coaches or other third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact our business, financial condition and results of operations or subject us to fines or other penalties.

In addition, as we continue to expand our presence domestically and internationally, we, our OPTA VIA Coaches and customers may face more restrictions and increasingly complex regulations on free use and access to social media platforms.

Restrictions on the use of or access to social media, especially in foreign countries that impose stricter regulations around free speech, access to independent news or citizens’ use of foreign communications tools deemed harmful to political or economic interests, may adversely impact sales of our products and services.

Even where the restrictions on social media or censorship are narrowly tailored or targeted, the ability of our OPTA VIA Coaches to reach new customers or our ability to grow our OPTA VIA Coaches in those markets may be adversely affected and our results of operations and financial condition could suffer.

Human Capital Risks

The success of our business is dependent on our ability to maintain and grow our network of OPTA VIA Coaches .

OPTA VIA Coaches are subject to high turnover and we depend on our network of OPTA VIA Coaches to continually grow their businesses by attracting, training and motivating new OPTA VIA Coaches.

We consider our number of active earning OPTA VIA Coaches and average quarterly revenue per active earning OPTA VIA Coach to be key indicators of our financial performance and condition.

As of December 31, 2022, the Company had 60,900 total active earning OPTA VIA Coaches.

The failure to provide the business essentials and competitive compensation necessary to motivate OPTA VIA Coaches to grow their businesses will adversely affect our future growth and operating results.

The growth and sustainability of our network of OPTA VIA Coaches is also subject to risks which may be outside of our control.

These include:

• potential misconduct or improper claims by OPTA VIA Coaches;

• negative public perceptions of multi-level marketing;

• general economic conditions;

• failure to develop innovative products to meet consumer demands;

• adverse opinions of our products, services, or industry;

• regulatory actions against our Company, competitors in our industry, or other direct selling companies.

As laws and regulations, including FTC enforcement, rapidly evolve to govern the

use of these platforms and devices, the failure by us, our employees, or our Coaches or other third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact our business, financial condition and results of operations or subject us to fines or other penalties.

We are dependent on our key executives for future success.

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The effects of these new and evolving laws, regulations, and other obligations potentially are far-reaching and may require us to further modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

In addition, if we choose to continue expanding our business internationally in the future we may be subject to international privacy, data protection, consumer protection and other laws and regulations, which in some cases are more restrictive than those in the United States.

In addition, if we choose to expand our business internationally in the future, we may be subject to international privacy, data protection, consumer protection and other laws and regulations, which in some cases are more restrictive than those in the United States.

For example, the European Union traditionally has imposed stricter obligations under such laws than the United States.

Consequently, any future expansion of our international operations may require changes to the ways we collect and use consumer information.

In the ordinary course of our business, we collect and utilize proprietary and customer information and data.

In the ordinary course of our business, we collect and utilize proprietary and customer information and

As a result, we have developed systems that are designed to protect consumer information and prevent fraudulent transactions and other security breaches.

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We currently face certain legal obligations regarding the manner in which we treat such information and data.

Businesses have been criticized by privacy groups and governmental bodies for their use and handling of such information

Businesses have been criticized by privacy groups and governmental bodies for their use and handling of such information and data.

We rely on third-party software products to secure our credit card transactions.

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If we fail to successfully enforce our intellectual property rights, the value of our brand, services and products could be diminished and our business may suffer.

Additionally, failure to protect our intellectual property could result in the entry of a competitor to the market.

Additionally, failure to protect our intellectual property could result in the entry of a competitor into the market.

Our precautions may not prevent misappropriation of our intellectual property by state actors, competitors, or individuals or groups that are or are not affiliated with the Company.

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Any of these results could reduce our revenue and our ability to compete effectively, increase our costs or harm our business.

Risks Related to International Operations

The sale of our products in markets outside of the United States may subject us to risks.

In connection with our entry into the Asia Pacific markets of Hong Kong and Singapore, we expanded our sales, marketing and distribution activities in these markets.

The sale, marketing and distribution of our products and programs in these and other international locations is subject to a number of uncertainties, including, but not limited to, the following:

• public health crises, such as pandemics and epidemics, including the COVID-19 pandemic;

• economic and political instability;

• import or export licensing requirements;

• trade restrictions;

• product registration requirements;

• longer payment cycles;

• changes in regulatory requirements, including regulations governing our direct selling business model, and tariffs;

• potentially adverse tax consequences;

• potentially weak protection of intellectual property rights.

These uncertainties could lead to potential risks for our continued expansion and sales success in the Asia Pacific markets and elsewhere, any of which could harm our business, financial condition and results of operations.

Expansion into international markets increases our operational, regulatory and other risks.

In July 2019, we commenced our international operations, entering into the Asia Pacific markets of Hong Kong and Singapore.

As a result, we face increased operational, regulatory, compliance and reputational risks.

The failure of our compliance and internal control systems to properly mitigate such additional risks, or of our operating infrastructure to support such expansion, could result in operational failures and regulatory fines or sanctions.

Our operations in Hong Kong and Singapore and other jurisdictions are subject to significant compliance, disclosure and other obligations.

Activity in international markets also exposes us to fluctuations in currency exchange rates, which may adversely affect the U.S.

dollar value of revenues, expenses and assets associated with our business activities outside the United States.

Actual and anticipated changes in current exchange rates may also adversely affect international demand for our business investment strategies to expand our products and services, most of which represent investments primarily in U.S.

dollar-based assets.

Because certain of our costs to support international business activities will be based in local currencies, the profitability of such activities in U.S.

dollars may be adversely affected by a weakening of the U.S.

dollar versus other currencies in which we derive revenues.

If we expand our operations into additional foreign countries, we may be subject to additional risks, including the ability to successfully adapt to local culture and navigate regulatory, economic, political and social risks.

We cannot be certain that we will be able to enter and successfully compete in additional foreign markets or that we will be able to continue to compete in the foreign markets in which we currently operate.

We are subject to anti-corruption laws in the jurisdictions in which we operate, including the U.S.

Foreign Corrupt Practices Act (“FCPA”).

Our failure to comply with these laws could result in penalties which could harm our reputation and have a material adverse effect on our business, results of operations and financial condition .

We are subject to the FCPA, which generally prohibits companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits, along with various other anticorruption laws.

There is no assurance that the policies, procedures and training for all employees, including management, that were designed to ensure that we, our employees and other intermediaries comply with the FCPA and other anticorruption laws to which we are subject, will work effectively all of the time or protect us against liability under the FCPA or other laws for actions taken by our employees and other intermediaries with respect to our business or any businesses that we may acquire.

Expansion of our operations in international markets, such as Hong Kong, Singapore and other jurisdictions, may pose elevated risks of anti-corruption violations as we are in frequent contact with persons who may be considered “foreign officials” under the FCPA, resulting in an elevated risk of potential FCPA violations.

If we are not in compliance with the FCPA and other laws governing the conduct of business with government entities (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could have an adverse impact on our business, financial condition, results of operations and liquidity.

Any investigation of any potential violations of the FCPA or other anticorruption laws by U.S.

or foreign authorities could harm our reputation and have an adverse impact on our business, financial condition and results of operations.

Our business in Hong Kong and Singapore is subject to sensitive economic, political, regulatory and market conditions.

Entering the Asia Pacific markets of Hong Kong and Singapore is a key component of our global growth strategy.

Our business in these countries is sensitive to economic, political, regulatory and market conditions that drive sales volume.

If we are unable to establish our position in these markets our business and financial results could be adversely affected.

Risks Related to Our Industry

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Our program features pre-packaged food selections, which we believe offer convenience and value to our customers.

Our continued success depends, to a large degree, upon the continued popularity of our program versus various other weight loss, weight management and fitness regimens, such as low carbohydrate diets, appetite suppressants and diets featured in the published media.

Changes in consumer tastes and preferences away from our pre-packaged food and support and counseling services, and any failure to provide innovative responses to these changes, may have a materially adverse impact on our business, financial condition, operating results, cash flows and prospects.

Changes in consumer tastes and preferences away from our pre-packaged food and support and coaching services, and any failure to provide innovative responses to these changes, may have a materially adverse impact on our business, financial condition, operating results, cash flows and prospects.

Our success is also dependent on our food innovation including maintaining a robust array of food items and improving the quality of existing items.

If we do not continually expand our food items or provide customers with items that are desirable in taste and quality, our business could be harmed.

Consumer’s increased attention to recent developments, innovations, and FDA approvals of weight loss medications, and the perception of their safety, effectiveness, and ease of use, may also reduce consumer engagement in our offering.

Consumer’s purchasing decisions are highly subjective and can be influenced by many factors, such as perception of the ease of use and

efficacy of the service and product offerings as well as brand image or reputation, marketing programs, cost, social media presence and sentiment, consumer trends, personalization, the digital platform, and user experience.

Moreover, consumers can, and frequently do, change approaches easily.

We anticipate competition from other companies that provide telehealth services associated with weight management, and certain of these competitors have greater financial and other resources than us and have operations in therapeutic or other areas where we may seek to expand in the future.

The weight loss industry is subject to adverse publicity, which could harm our business.

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Our industry is subject to governmental regulation that could increase in severity and hurt results of operations.

Our industry is subject to federal, state and other governmental regulation.

Our industry is subject to federal, state and other governmental regulations.

Certain federal and state agencies, such as the FTC and the U.S.

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If federal, state, local or foreign regulation of our industry increases for any reason, then we may be required to incur significant expenses, as well as modify our operations to comply with new regulatory requirements, which could harm our operating results.

Additionally, remedies available in any potential administrative or regulatory actions may include product recalls and require us to refund amounts paid by all affected customers or pays other damages, which could be substantial.

Laws and regulations directly applicable to communications, operations or commerce over the Internet such as those governing intellectual property, privacy, libel and taxation, are more prevalent and remain unsettled.

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The successful assertion or settlement of an uninsured claim, a significant number of insured claims or a claim exceeding the limits of our insurance coverage would harm us by adding costs to the business and by diverting the attention of senior management from the operation of the business.

may also be subject to claims that our products contain contaminants, are improperly labeled, include inadequate instructions as to use or inadequate warnings covering interactions with other substances.

We may also be subject to claims that our products contain contaminants, are improperly labeled, include inadequate instructions as to use or inadequate warnings covering interactions with other substances.

Additionally, the manufacture and sale of these products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination.

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Any negative publicity associated with these actions would adversely affect our brand and may result in decreased product sales and, as a result, lower revenue and profits.

Risks Related to Our Common Stock

Risks Related to the Company’s Common Stock

Actions of activist stockholders could cause us to incur substantial costs, divert management's attention and resources, and have an adverse effect on our business.

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In addition, perceived uncertainties as to our future direction, strategy or leadership created as a consequence of activist stockholder initiatives may result in the loss of potential business opportunities, harm our ability to attract new investors, customers, employees, suppliers and other strategic partners, and cause our share price to experience periods of volatility or stagnation.

There can be no assurance that we will continue to declare cash dividends at all or in any particular amounts.

The Company declared a dividend of $1.64 per share on December 8, 2022, to stockholders of record as of December 20, 2022, that was paid on February 7, 2023.

We intend to continue paying a quarterly dividend to our stockholders for the foreseeable future, subject to long term cash flow needs, including capital spend needs and overall macroeconomic conditions.

Our Board of Directors periodically reviews our quarterly dividend to ensure that it is in the best interest of our stockholders and is in compliance with all applicable laws and agreements.

Future dividends may also be affected by, among other factors:

our views on potential future capital requirements for investments in acquisitions;

any stock repurchase programs;

changes in federal and state income tax laws or corporate laws;

changes to our business model;

and interest and principal payments required by indebtedness that we may incur in the future.

Our dividend payments may change from time to time, and we cannot provide any assurance that we will continue to declare dividends at all or in any particular amounts.

A reduction in our dividend payments could have a negative effect on our stock price.

Provisions in our certificate of incorporation may deter or delay an acquisition of us or prevent a change in control, even if an acquisition or a change of control would be beneficial to our stockholders.

Provisions of our certificate of incorporation (as amended) may have the effect of deterring unsolicited takeovers or delaying or preventing a third-party from acquiring control of us, even if our stockholders might otherwise receive a premium for their shares over the then current market prices.

In addition, these provisions may limit the ability of our stockholders to approve transactions that they may deem to be in their best interests.

Our certificate of incorporation (as amended) permits our Board of Directors to issue preferred stock without stockholder approval upon such terms as the Board of Directors may determine.

The rights of the holders of our common stock will be junior to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.

The issuance of preferred stock could have the effect of making it more difficult for a third-party to acquire, or discourage a third-party from acquiring, a majority of our outstanding common stock.

The issuance of a substantial number of preferred shares could adversely affect the price of our common stock.

General Risk Factors

There can be no assurance that we will declare cash dividends in the future or in any particular amounts.

On December 13, 2023, we announced that the Company updated its capital allocation priorities following a thorough review, and decided to discontinue the Company’s quarterly cash dividend.

Our Board of Directors periodically reviews our capital allocation strategy to ensure that it is in the best interest of our stockholders and is in compliance with all applicable laws and agreements.

Our capital allocation strategy may change from time to time, and we cannot provide any assurance that we will declare dividends in the future or in any particular amounts.

The discontinuation of our dividend payments could have a negative effect on our stock price.

Our stock price fluctuates from time to time and may fall below expectations of securities analysts and investors, and could subject us to litigation, which may result in you suffering a loss on your investment.

The market price of our common stock may fluctuate significantly in response to a number of factors, many of which are out of our control.

The market price of the Company’s common stock may fluctuate significantly in response to a number of factors, many of which are out of our control.

These factors include:

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additions or departures of key personnel;

any future sales of our common stock or other securities;

any future sales of the Company’s common stock or other securities;

stock market price and volume fluctuations of publicly-traded companies;

and general political, economic and market conditions.

future quarter our operating results may fall below the expectations of securities analysts and investors, which could result in a decrease in the trading price of our common stock.

In some future quarter our operating results may fall below the expectations of securities analysts and investors, which could result in a decrease in the trading price of the Company’s common stock.

In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities.

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Securities litigation could result in substantial costs and divert management's attention and resources, which could seriously harm our business and operating results.

shares over the then current market prices.

In addition, these provisions may limit the ability of our stockholders to approve transactions that they may deem to be in their best interests.

Our certificate of incorporation (as amended) permits our Board of Directors to issue preferred stock without stockholder approval upon such terms as the Board of Directors may determine.

The rights of the holders of the Company’s common stock will be junior to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.

The issuance of preferred stock could have the effect of making it more difficult for a third-party to acquire, or discourage a third-party from acquiring, a majority of the Company's outstanding common stock.

The issuance of a substantial number of preferred shares could adversely affect the price of the Company’s common stock.

General Risk Factors

If we do not maintain effective internal control over financial reporting, we could fail to report our financial results accurately.

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Any of the foregoing could also cause investors to lose confidence in our reported financial information and in our Company and could result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future.

UNRESOLVED STAFF COMMENTS

Our collaboration with LifeMD may not achieve the anticipated benefits.

On December 13, 2023, we announced a new strategic collaboration (the “Collaboration”) with telehealth company, LifeMD, in furtherance of our expansion into the medically supported weight loss market, and with the expectation that the Collaboration would result in various long-term benefits to both companies, including increase in revenue, customer acquisition increase, and longer tenure in customer retention.

Achieving the anticipated benefits of the Collaboration is subject to a number of uncertainties, including whether our business and LifeMD’s business can become integrated in an effective and efficient manner.

Failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues generated by the Collaboration and diversion of management’s attention and energy away from ongoing business operations, which could have a material adverse effect on our business or financial results.

The Collaboration’s success will depend to a substantial extent on the willingness of customers to use LifeMD’s telehealth platform.

If our customers do not perceive the benefits of LifeMD’s telehealth services, or if the Collaboration does not drive customer acquisition or retention, then our market may not develop, or it may develop more slowly than we expect.

Similarly, individual and healthcare industry concerns could limit acceptance of LifeMD’s healthcare services.

If any of these occur, it could have a material adverse effect on the success of the collaboration.

Finally, if LifeMD terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the marketplace could be adversely affected.

Our Collaboration with LifeMD could open us up to additional risks.

The Collaboration may pose a number of risks, including:

LifeMD has discretion in determining the efforts and resources that they will apply;

LifeMD may not perform their obligations as expected;

and LifeMD may fail to comply with applicable regulatory requirements.

Healthcare professionals providing telehealth services have become subject to a number of lawsuits alleging malpractice and some of these lawsuits may involve large claims and significant defense costs.

Through the Collaboration, it is possible that these claims could also be asserted against us or our independent OPTA VIA Coaches and include us as an additional defendant.

We could incur reputational harm or negative publicity in relation to an adverse event involving a LifeMD healthcare provider.

Additionally, a number of laws and regulations govern anti-kickbacks, physician self-referrals, and the business of advertising, promotion, dispensing, and marketing services, products, and pharmaceuticals.

These regulatory regimes are overseen by state and federal level governmental bodies, including the FDA, the U.S.

Department of Health and Human Services (“HHS”), and the FTC.

Through the Collaboration, failure to comply with the laws and regulations of these governmental agencies may result in legal or other enforcement actions, including orders to cease non-compliant activities.

There can be no assurance that we will not be subject to state, federal or foreign government actions or class action lawsuits, which could harm our business, financial condition and results of operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors