What changed in this filing

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Item 1. Financial Statements

2021-05-14 compared with 2020-11-16 · 1459 added, 1586 removed, 206 unchanged (94% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

receivable, net

current assets

March 31, 2021

December 31, 2020

Current Assets

of use asset, net

Software, net

Accounts receivable, net

Product deposit

Inventory, net

Other current assets

Total Current Assets

Non-current assets

AND STOCKHOLDERS’

payable and accrued expenses

Right of use asset, net

Capitalized software, net

Intangible assets, net

Total non-current assets

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT

Current Liabilities

consideration on purchase of LegalSimpli

to issue common stock

B Preferred Stock - put liability

tax liability

Commitments and contingencies

Accounts payable and accrued expenses

Notes payable, net

Deferred revenue

Total Current Liabilities

Long-term Liabilities

Lease Liability

Contingent consideration on purchase of LegalSimpli

Total Liabilities

Mezzanine Equity

Preferred Stock, $0.0001 per value;

5,000,000 shares authorized

Series B Preferred Stock, $0.0001 per value;

5,000 shares authorized, 3,500 and

3,500 shares issued and outstanding, liquidation value approximately, $1,079 and $1,045 per share as of March 31, 2021 and

December 31, 2020, respectively

Stockholders’

Stock, $0.0001 per value;

4,996,500 and 5,000,000 shares authorized

B Preferred Stock, $0.0001 per value;

5,000 and 0 shares authorized, 3,500 and 0 shares issued and outstanding as of September

30, 2020 and December 31, 2019, respectively

stock, $0.01 par value;

100,000,000 shares authorized, 15,634,962 and 10,680,730 shares issued, 15,531,922 and 10,577,690

outstanding as of September 30, 2020 and December 31, 2019, respectively

paid-in capital

Common stock, $0.01 par value;

100,000,000 shares authorized, 25,885,014 and 23,433,663 shares issued, 25,781,974 and 23,330,623 outstanding as of March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

(91,754,288 )

(80,151,905 )

stock, 103,040 and 103,040 shares, at cost

Conversion Labs, Inc.

Stockholders’

Non-controlling

Treasury stock, 103,040 and 103,040 shares, at cost

Total LifeMD, Inc.

Stockholders’

Liabilities and Stockholders’

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

Non-controlling interest

Total Stockholders’

Total Liabilities, Mezzanine Equity and Stockholders’

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

Consolidated STATEMENTS OF OPERATIONS

Months Ended September 30,

revenues, net

Revenues, net

of product revenue

of software revenue

& marketing expenses

and administrative expenses

service expenses

(20,532,507 )

(25,491,384 )

from operations before provision for income taxes

(20,823,603 )

(26,804,394 )

for income taxes

(20,823,603 )

(26,804,394 )

(loss) attributable to noncontrolling interests

loss attributable to Conversion Labs, Inc.

Three Months Ended March 31,

Product revenues, net

Software revenues, net

Service revenues, net

Total Revenues, net

Cost of product revenue

Cost of software revenue

Cost of revenues

Selling & marketing expenses

General and administrative expenses

Other operating expenses

Customer service expenses

Development Costs

Total expenses

Operating Loss

(11,918,337 )

Other Income (Expenses)

Interest expense, net

Gain on debt forgiveness

Net Loss before provision for income taxes

(11,872,886 )

Provision for income taxes

(11,872,886 )

distribution to holders of common and Series B Preferred stock

loss attributable to Conversion Labs, Inc.

Net (loss) attributable to noncontrolling interests

Net loss attributable to LifeMD, Inc.

common stockholders

1 unchanged sentence

$ (2,394,728 )

$ (2,425,656 )

loss per share attributable to Conversion Labs, Inc.

Basic loss per share attributable to LifeMD, Inc.

common stockholders

loss per share attributable to Conversion Labs, Inc.

Diluted loss per share attributable to LifeMD, Inc.

common stockholders

Weighted Average

number of common shares outstanding:

Weighted Average number of common shares outstanding:

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

1 unchanged sentence

Noncontrolling

at December 31, 2019

$ (16,594,917 )

Balance, January 1, 2020

$ (16,594,919 )

exercise of warrants

to non-controlling interest

dividend from down-round provision in common stock shares yet to be issued

dividend from warrant price adjustments

at March 31, 2020

$ (1,129,243 )

issued for services

exercise of warrants

of common stock

issued for share liability (proceeds received for prior period)

to non-controlling interest

dividend from down-round provision in common stock shares yet to be issued

June 30, 2020

Stock compensation

Cashless exercise of warrants

Deemed dividend from down-round provision in common stock shares yet to be issued

Deemed dividend from warrant price adjustments

Distributions to non-controlling interest

Balance, March 31, 2020

$ (20,238,551 )

of stock options

exercise of stock options

issued for share liability (proceeds received for prior period)

dividend from warrant price adjustments

dividend from warrants issued and BCF with Series B Preferred Stock

$ (3,393,534 )

$ (3,709,406 )

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

Noncontrolling

Balance, Janauary 1, 2021

$ (80,151,905 )

September 30, 2020

$ (2,301,899 )

1 unchanged sentence

$ (4,477,586 )

Noncontrolling

at December 31, 2018

Stock compensation

Cashless exercise of stock options

Exercise of stock options

Sale of stock in private placement, net

Distribution to non-controlling interest

Purchase of addititional

membership interest of LSS

Adjustment of noncontrolling

Interest for additional investment

(11,602,383 )

issued for services

Distributions

to non-controlling interest

at March 31, 2019

(11,602,383 )

to issue shares for non-controlling interest in CVLB PR

June 30, 2019

(11,872,886 )

to issue shares for non-controlling interest in CVLB PR

issued in conjunction with stock

issued in conjunction with debt

of common stock

Distributions

to non-controlling interest

September 30, 2019

Balance, March 31, 2021

$ (91,754,288 )

1 unchanged sentence

Consolidated STATEMENTS OF CASH FLOWS

Months Ended September 30,

Months Ended March 31,

FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

$ (2,533,544 )

to reconcile net loss to net cash (used in) provided by operating activities:

Adjustments to reconcile

net loss to net cash (used in) provided by operating activities:

of debt discount

of capitalized software

of intangibles

Amortization of intangibles

of debt discount

return and allowances

on forgiveness of debt

lease payments

to issue shares for services

issued for services

compensation expense

in Assets and Liabilities

to issue shares for services

Changes in Assets and

current assets

tax liability

payable and accrued expenses

1 unchanged sentence

FLOWS FROM INVESTING ACTIVITIES

paid for capitalized software costs

Cash paid for capitalized

software costs

to seller for contingent consideration

1 unchanged sentence

FLOWS FROM FINANCING ACTIVITIES

proceeds from Series B Preferred Stock

from convertible notes payable

proceeds from sale of common stock

proceeds from exercise of warrants

proceeds from exercise of options

proceed from sale of warrants

of debt issuance costs

Distributions

to non-controlling interest

from note payable

of notes payable

shares and warrants

Cash proceeds from

private placement offering, net

Cash proceeds from

exercise of options

Purchase of membership

interest of LSS

Distributions to non-controlling

Proceeds from note

Repayment of notes

issuance costs

cash provided by financing activities

(decrease) increase in cash

at beginning of the period

at end of the period

Disclosure of Cash Flow Information

cash provided by (used in) financing activities

Net increase (decrease)

at beginning of period

at end of period

paid for interest

paid during the period for interest

of company stock for investment in subsidiary

investing and financing activitites:

exercise of warrants

of Paycheck protection Program loans forgiven

purchase of membership interest in LSS issued in performance options

dividend from warrant price adjustments

distribution from warrants issued with Series B Preferred Stock

yet to be issued for capitalized costs

distribution from down-round provision on unissued shares

to issue common stock

issuance costs for liability to issue shares

of convertible note payable and interest for Series B Preferred Stock

issued for capitalized costs

issued in relation to debt

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

NATURE OF THE ORGANIZATION AND BUSINESS

(the “Company”), was 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.

Further, in connection with changing its name, the Company changed

its trading symbol to CVLB.

On April 1, 2016, our majority-owned subsidiary, Immudyne PR LLC (“Immudyne PR”), which

was initially organized for the purpose of forming a joint venture with the original owners of one of our skincare products, amended

and restated its operating agreement whereby we increased our ownership and voting interest in Immudyne PR to 78.2%.

with the name change of the parent company to Conversion Labs, Inc.

completed in 2018, Immudyne PR was renamed to Conversion Labs

PR LLC (now known as “Conversion Labs PR”, and/or “CLPR”).

On April 25, 2019, the operating agreement

of Conversion Labs PR was amended and restated in its entirety after acquiring the remaining minority interest in the Conversion

Labs PR, which is now a wholly-owned subsidiary of the Company.

Company is a direct-to-consumer response healthcare company that provides a convenient, cost-effective and smarter way for consumers

to access high quality Over The Counter (OTC) products and prescription medications.

the nine months ended September 30, 2020 the Company generated $20.3 million in revenue from sales of its branded products and

$ 4.1 million in revenue from sales generated on its software platform.

The Company has incurred operating losses since inception

and has an accumulated deficit of $47.9 million as of September 30, 2020.

healthcare system is undergoing a paradigm shift largely due to new technologies and the emergence of direct-to-consumer

The COVID-19 Pandemic has accelerated this paradigm shift across all facets of internet commerce activities.

the traditional model of visiting a doctor’s office, receiving a physical prescription, visiting a neighborhood 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, as well as hindering prescription adherence.

Direct-to-consumer telemedicine companies,

like our Company, offer patients immediate and virtual treatment from licensed physicians, and the home delivery of prescription

medications, devices and diagnostics bundled with over-the counter wellness products.

worsening global COVID-19 pandemic occurring during the fall season of 2020, has resulted in significant, and heightened governmental

measures being implemented to control the spread of COVID-19, and while we cannot predict their scope and severity, these developments

and measures could materially and adversely affect our business beyond the initial positive impacts we recognized.

of the worsening pandemic, our results of operations and our financial condition could be negatively impacted.

are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and are taking steps to minimize its

impact on our business.

However, the extent to which COVID-19 impacts our business, results of operations or financial condition

will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of

the outbreak, new information that may emerge concerning the severity of COVID-19 or the effectiveness of actions taken to contain

the pandemic or treat its impact, among others, including the timing and the likelihood of a successful vaccine.

if we or any of our significant supply vendors, with whom we engage were to experience shutdowns or other business disruptions,

our ability to conduct our business in the manner and on the timelines presently planned could be materially or negatively affected,

which could have a material adverse impact on our business, results of operations and financial condition.

have built a platform that allows us to efficiently launch telehealth and wellness product lines 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

and Subsidiary History

June 2018, Conversion Labs closed the strategic acquisition of 51% of LegalSimpli Software, LLC (“LegalSimpli”), a

software as a service (SaaS) application for converting, editing, signing and sharing PDF documents.

In addition to LegalSimpli’s

was formed in the State of Delaware on May 24, 1994, under its prior name, Immudyne, Inc.

The Company changed its name to Conversion

on June 22, 2018 and then subsequently, on February 22, 2021, it changed its name to LifeMD, Inc.

Effective February 22, 2021,

the trading symbol for the Company’s common stock, par value $0.01 per share on The Nasdaq Stock Market LLC changed from “CVLB”

to “LFMD”.

April 1, 2016, the original operating agreement of 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

Concurrent with the name change of the parent company to Conversion Labs, Inc., Immudyne PR was renamed to

Conversion Labs PR LLC.

On April 25, 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.

June 2018, the Company closed the strategic acquisition of 51% of LegalSimpli Software, LLC (“LegalSimpli”), a software as

a service (SaaS) application for converting, editing, signing and sharing PDF documents.

In addition to LegalSimpli Software’s

growth business model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company.

early 2019, the Company had launched a service-based business under the name Conversion Labs Media LLC, 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.

January 22, 2021, the Company consummated a transaction to restructure the ownership of LegalSimpli (the “LSS Restructuring”)

(See Note 5).

Company is a direct-to-patient telehealth company that provides a smarter, cost-effective and convenient way of accessing 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.

healthcare system is undergoing a paradigm shift, thanks to new technologies

and the emergence of direct-to-patient healthcare.

Direct-to-patient telemedicine 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

Company’s telemedicine platform helps patients access licensed providers for diagnoses, virtual care, and prescription medications,

often delivered on a recurring basis.

In addition to its telemedicine offerings, it sells nutritional supplements and other over-the-counter

Many of its 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.

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 telemedicine offering that gives

consumers access to virtual medical treatment and, when appropriate, a full line of oral and topical prescription medications for hair

The Company’s men’s telemedicine brand, Rex MD, currently offers treatment for erectile dysfunction, and will soon

offer treatments for additional indications present in men’s health.

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.

and Subsidiary History

June 2018, Conversion Labs closed the strategic acquisition of 51% of LegalSimpli Software, LLC (“LegalSimpli”), a software

as a service (SaaS) application for converting, editing, signing and sharing PDF documents.

In addition to LegalSimpli’s growth

business model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company.

early 2019, the Company had launched a service-based business under the name Conversion Labs Media LLC, 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.

June 2019, a strategic joint venture with GoGoMeds.com (GoGoMeds) was formed in order to help facilitate the launch of our telemedicine

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

Labs Rx, LLC (“CVLB Rx”), a Puerto Rico limited liability company, had no activity during the nine months ended September

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.

venture with GoGoMeds had not initiated activities, and its termination did not have an impact on the Company’s operations.

Labs Rx, LLC (“CVLB Rx”), a Puerto Rico limited liability company, had no activity during the year ended December 31, 2020

and was dissolved during the period.

otherwise indicated, the “Company”

refers Conversion Labs, Inc.

(formerly known as Immudyne, Inc.), our wholly owned

subsidiary Conversion Labs PR, LLC (“Conversion Labs PR”, formerly known as Immudyne PR LLC), a Puerto Rico limited

liability company and our majority-owned subsidiary LegalSimpli Software, LLC, a Puerto Rico limited liability company (“LegalSimpli”).

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 LLC, and “Conversion Labs PR”), a Puerto Rico limited liability company (“Conversion Labs PR”,

or “CLPR”) and our majority-owned subsidiaries LegalSimpli Software, LLC, a Puerto Rico limited liability company

(“LegalSimpli”).

Unless otherwise specified, all dollar amounts are expressed in United States dollars.

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”

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 approved by

the Financial Industry Regulatory Authority (FINRA) and became effective in the market on October 14, 2020 (the “Effective

Date”).

All references to common shares and common share data in these unaudited financial statements and elsewhere in this

Form 10-Q as of September 30, 2020, and for the three and nine-months then ended, reflect the Reverse Stock Split.

The Reverse Split was approved by the Financial Industry Regulatory

Authority (FINRA) and became effective in the market on October 14, 2020 (the “Effective Date”).

All references to common

shares and common share data in these financial statements and elsewhere in this Form 10-Q as of March 31, 2021 and 2020, and for the

three months then ended, reflect the Reverse Stock Split.

Company has funded operations in the past through the sales of its products, issuance of common stock and through loans and advances

from officers and directors.

The Company’s continued operations are dependent upon obtaining an increase in its sale volumes

and the continued financial support from officers and directors, obtaining funding from third-party sources or the issuance of

additional shares of common stock.

See Subsequent Event Note 9 for a further discussion of a private placement offering, which

closed on November 3, 2020, yielding approximately $13.2 million in net proceeds to the Company after deduction of placement fees

and other offering expenses.

The Company intends to use the net proceeds to expedite growth initiatives, as well as for general

corporate purposes.

The Company’s continued operations are dependent upon obtaining an increase in its sale volumes and

the continued financial support from officers and directors, obtaining funding from third-party sources or the issuance of additional

shares of common stock.

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”).

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.

Company intends to use the net proceeds to fund growth initiatives, as well as for general corporate purposes.

Concern Evaluation

accompanying unaudited financial statements have been prepared on the basis that the Company will continue as a going concern,

which assumes the realization of assets and the satisfaction of liabilities in the normal course of business.

As of September

30, 2020, the Company has an accumulated deficit approximating $47.9 million and has experienced significant losses from

its operations.

on the Company’s cash balance as of September 30, 2020, and projected cash needs, management estimates that it will need

an additional $7.2 million through the next 12 months.

The Company has also closed a private placement offering,

discussed in “Liquidity”

above, and further in Note 9, “Subsequent Events”.

Although management has been

successful to date 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.

these circumstances, management has determined that these conditions raise substantial doubt about the Company’s ability

to continue as a going concern.

The accompanying financial statements do not include any adjustments that might result from the

outcome of this uncertainty.

accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue as

a going concern, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business.

March 31, 2021, the Company has an accumulated deficit approximating $90.2 million and has experienced 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 2021.

Additionally, the Company expects its burn rate of cash to continue through the second quarter of 2021;

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.

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.

Company has a current cash balance of approximately $13.4 million as of the filing date, which includes the $13.5 million of net proceeds

from the February 2021 Offering noted above.

Based on the Company’s projected cash requirements, management estimates that it will

utilize approximately $8.4 million through the next 12 months from the filing date of this report.

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

Positive indicators that lead to its 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 improvement of operational efficiencies

across the business, (2) the expected improvement in its cash burn rate in the second quarter of 2021 and over the next 12 months, (3)

overall investor interest in its equity securities which it believes will enable it to successfully complete future capital raises and

(4) the overall market value of the telemedicine industry and how it believes that will continue to drive interest in the Company.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Presentation

accompanying unaudited condensed consolidated financial statements were prepared by the Company in accordance with accounting

principles generally accepted in the United States of America (“US GAAP”) for interim financial information and are

Certain information and disclosures normally included in consolidated financial statements prepared in accordance with

US GAAP have been condensed or omitted.

The condensed consolidated balance sheet as of December 31, 2019 was derived from our

audited financial statements but does not include all disclosures required by US GAAP.

Accordingly, these condensed consolidated

financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related

notes included in its Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange

Commission on March 30, 2020.

The results of the three and nine months ended September 30, 2020 (unaudited) are not necessarily

indicative of the results to be expected for the pending full year ending December 31, 2020, nor the pending three month results

ending December 31, 2020.

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 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 months

ended March 31, 2021 are not necessarily indicative of the results for the year ending December 31, 2021 or for any future period.

of Consolidation

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

consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, CLPR and its majority owned

subsidiary, LegalSimpli.

The non-controlling interest in LegalSimpli represents the 49% equity interest held by other members

of the subsidiary.

unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, CLPR and its

majority owned subsidiary, LegalSimpli.

The non-controlling interest in LegalSimpli represents the 49% equity interest held by other

members of the subsidiary as of December 31, 2020.

During the three months ended March 31, 2021, the Company purchased an additional

36% of LegalSimpli for a total equity interest of approximately 85% (see Note 5).

significant intercompany transactions and balances have been eliminated in consolidation.

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

(if necessary) for accounts receivable, returns and allowances, useful life of intangible and right of use assets, the valuation

of inventory and inputs into the provision for lease liabilities and stockholders’

Interest Entities

Company follows ASC 810-10-15 guidance with respect to accounting for variable interest entities (each, a “VIE”).

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.

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 it with a controlling financial interest.

A party is deemed 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.

accordance with ASC 810-10-25-37 and as amended by ASU 2009-17, the Company determines whether any legal entity in which the Company

becomes involved is a VIE and subject to consolidation.

The Company conducts an assessment on an ongoing basis for each VIE including

(1) the power to direct activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation

to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE.

As a result, the Company

determined that three (3) entities were VIEs and subject to consolidation.

Labs Media, LLC (“CVLB Media”), a Puerto Rico limited liability company,

Labs Rx, LLC (“CVLB Rx”), a Puerto Rico limited liability company (dissolved in 2020), and

Labs Asia Limited, a Hong Kong company (“Conversion Labs Asia”).

Media, CVLB Rx and Conversion Labs Asia are all considered immaterial as of March 31, 2021 and December 31, 2020.

CVLB Rx had no activity

and was dissolved during the year ended December 31, 2020.

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 valuation of inventory and stockholders’

equity-based transactions.

Actual results

could differ from those estimates.

continuing impact on business activity brought about by the Coronavirus pandemic (“COVID-19”) continues to evolve,

globally in macro terms, and in micro terms, as such affects the Company.

As a result, many of our estimates and assumptions for

the three and nine months ended September 30, 2020 were subject to an increased level of judgment and may carry a higher degree

of variability and volatility.

In future periods, subsequent to September 30, 2020, when additional information becomes available,

which may differ from our current assumptions, may subject our estimates to material change in future periods.

Actual results could differ from

those estimates.

continuing impact on business activity brought about by the Coronavirus pandemic (“COVID-19”) continues to evolve, globally

in macro terms, and in micro terms, as such affects the Company.

As a result, many of our estimates and assumptions for the period ended

March 31, 2021 were subject to an increased level of judgment and may carry a higher degree of variability and volatility.

periods, subsequent to March 31, 2021, when additional information becomes available, which may differ from our current assumptions,

may subject our estimates to material change in future periods.

Reclassifications

reclassifications have been made to conform the prior year’s data to the current presentation.

These reclassifications have

no effect on previously reported operations, stockholders’

equity (deficit) or cash flows.

Given the increase in the Company’s

software business and to conform the Company’s presentation of operating results to industry standards, the Company has

changed their categories for reporting operations, as result the Company has made reclassifications to the prior year presentation

in order to conform it to the current periods’

These reclassifications have no

effect on previously reported operating loss, stockholders’

deficit or cash flows.

Given the increase in the Company’s software

business and to conform the Company’s presentation of operating results to industry standards, the Company has changed their categories

for reporting operations, as result the Company has made reclassifications to the prior year presentation in order to conform it to the

current periods’

presentation.

The reclassification includes $421,998 of merchant processing fees reclassified from cost of revenues

to general and administrative expenses for the three months ended March 31, 2020.

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

2 unchanged sentences

the transaction price

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;

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

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 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.

its product-based contracts with customers, the Company records an estimate for provisions of discounts, returns, allowances,

customer rebates and other adjustments for its product shipments, and are reflected as contra revenues in arriving 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.

Customer discounts, returns and rebates on product revenues during the three months ended September 30,

2020 and 2019 approximated $823,000 and $219,000, respectively, and approximated $2,157,000 and $1,004,000, respectively, during

the nine months ended September 30, 2020 and 2019.

Company, through its majority-owned subsidiary LegalSimpli, 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.

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 time period of the subscription purchased.

The Company allows the customer

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 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

As of September 30, 2020 and December 31, 2019, the Company has accrued contract liabilities, as deferred revenue, of approximately

$413,000 and $110,000, respectively, which represent obligations on in-process monthly or yearly contracts with customers and

a portion attributable to the yet to be recognized initial 14-day trial period collections.

the three and nine months ended September 30, 2020 and 2019, the Company had the following disaggregated revenue:

Months September 30,

revenues- CLPR:

product revenue for CLPR

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 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.

its product-based contracts with customers, the Company records an estimate for provisions of discounts, returns, allowances, customer

rebates and other adjustments for its product shipments, and are reflected as contra revenues in arriving at reported net revenues.

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.

Customer discounts, returns

and rebates on product revenues approximated $1,222,000 and $314,000, respectively, during the three months ended March 31, 2021 and

Company, through its majority-owned subsidiary LegalSimpli, 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 time period of the subscription purchased.

The Company allows the customer 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.

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 March 31, 2021 and December 31, 2020, the Company

has accrued contract liabilities, as deferred revenue, of approximately $1.339.000 and $917,000, respectively, which represent obligations

on in-process monthly or yearly contracts with customers and a portion attributable to the yet to be recognized initial 14-day trial

period collections.

Customer discounts and allowances on software revenues approximated $554,000 and $163,000, respectively, during the

three months ended March 31, 2021 and 2020.

the three months ended March 31, 2021 and 2020, the Company had the following disaggregated revenue:

Three Months Ended March 31,

Product revenues by Brand for Conversion Labs PR:

Total product revenue for Conversion Labs PR

Software revenue for LegalSimpli

Total net revenue

receivable principally consist of amounts due from third-party merchant processors, who process our subscription revenues;

merchant accounts balance receivable represents the charges processed by the merchants that have not yet been deposited with the

The unsettled merchant receivable amount normally represents processed sale transactions from the final one to three

days of the 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, 2020 and 2019, the Company had an allowance for bad debt, attributable to single agent relationship

amounting to $58,470 and $0, respectively.

As of September 30, 2020 and December 31, 2019, the reserve for sales returns and allowances

was approximately $294,000 and $83,000, respectively.

As of September 30, 2019 and December 31, 2018, the reserve for sales returns

and allowances was approximately $83,000 and $43,000, respectively.

For all periods presented, as noted above, the sales returns

and allowances were recorded as contra assets in arriving at presented accounts receivable, net.

The Company has reevaluated the

nature of the accounts and determined them to be liabilities.

of September 30, 2020 and December 31, 2019, inventory primarily consisted of finished goods related to the Company’s brands

included in the product revenue section of the table above.

Inventory is maintained at the Company’s third-party warehouse

location, which is owned by a related party, in Pennsylvania and at Amazon fulfillment centers.

accounts balance receivable represents the charges processed by the merchants that have not yet been deposited with the Company.

unsettled merchant receivable amount normally represents processed sale transactions from the final one to three days of the 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 March 31, 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 March 31, 2021 and December 31, 2020, the reserve for sales returns and allowances was approximately

$356,000 and $349,000, respectively.

For all periods presented, as noted above, the sales returns and allowances were recorded

as contra assets in arriving at presented accounts receivable, net.

of March 31, 2021 and December 31, 2020, inventory primarily consisted of finished goods related to the Company’s brands included

in the product revenue section of the table above.

Inventory is maintained at the Company’s third-party warehouse location in Wyoming

and at the Amazon fulfillment center.

The Company also maintains inventory at a related-party warehouse in Pennsylvania.

is valued at the lower of cost or net 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

net realizable, if lower.

As of September 30, 2020 and December 31, 2019, the Company recorded an inventory reserve in the amount

of $57,481 and $12,500, respectively.

The increase in our inventory reserve mainly is attributable to the lack of marketability

for our INR Wellness product line.

of September 30, 2020 and December 31, 2019, the Company’s inventory consisted of the following:

Goods - Products

materials and packaging components

Inventory - net

compares the cost of inventory with the net realizable value and an allowance is made for writing down inventory to net realizable, if

As of March 31, 2021 and December 31, 2020, the Company recorded an inventory reserve in the amount of $57,481 and $57,481, respectively.

of March 31, 2021 and December 31, 2020, the Company’s inventory consisted of the following:

Finished Goods - Products

Raw materials and packaging components

Inventory reserve

Total Inventory - net

of our vendors require deposits when a purchase order is placed for goods or fulfillment services.

These deposits typically range

from 10% to 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, 2020, and December 31, 2019, the Company has approximately $1,093,000 and $150,000,

respectively, of product deposits with multiple vendors for the purchase of raw materials or finished goods.

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, 2020 and December 31, 2019, the Company approximates it’s

implicit purchase commitments to be $2.2 million and $300,000, respectively.

As of September 30, 2020, and December 31, 2019,

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.

These deposits typically range from

10% to 33% of the total purchased amount.

Our vendors include a credit memo within their final invoice, recognizing the deposit amount

previously paid.

As of March 31, 2021 and December 31, 2020, the Company has approximately $1,300,243 and $816,765, respectively, of

product deposits with multiple vendors for the purchase of raw materials or finished goods.

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 March 31, 2021 and December 31, 2020, the Company approximates its implicit purchase commitments to be $2.6

million and $1.6 million, respectively.

As of March 31, 2021 and 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.

Software Costs

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 three years.

does not sell internally developed software other than through the use of subscription 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, 2020 and 2019, the Company capitalized $334,585 and $0

related to internally developed software costs which is included in development costs on our statement of operations.

As of September

30, 2020, these costs include $40,000 in capitalized stock based compensation for a third-party service provider.

During the nine

months ending September 30, 2020 and 2019, the Company amortized $36,001 and $0 of capitalized software costs, respectively.

assets are comprised of a customer relationship asset and purchased license with an estimated useful life of three years and indefinite

life, respectively.

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.

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 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 capitalization, in accordance with Accounting Standards Codification (“ASC”) ASC 350-40 Internal-Use Software ,

are expensed as incurred.

As of March 31, 2021 and December 31, 2020, the Company capitalized $491,385 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

assets are comprised of a customer relationship asset (with original cost of approximately $1,007,000) and a purchased license (with

a cost of $200,000) with an estimated useful life of three and ten years, respectively.

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.

of Long-Lived Assets

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 lowest level for which identifiable cash flows are largely independent of the cash flows

of other groups of assets and liabilities (asset group).

If the sum of the projected undiscounted cash flows (excluding interest

charges) of an asset group is less than its carrying value and the fair value of an asset group is also 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.

the carrying amount of a finite-lived intangible asset can never be written down below its fair value.

Any loss would be recognized

in income from continuing operations in the period in which the determination is made.

to Issue Common Stock

to issue common stock represents liabilities of the Company for failing to issue shares of common stock timely to various consultants

and or third-party investors in conjunction with various consulting, service, warrant or stock purchase agreements.

As of September

30, 2020, the Company has a liability to issue 326,983 shares of common stock for $218,848 in fair value.

During the nine months

ended September 30, 3020, the Company received $2,338,349 in cash from investors which was recorded as a liability to issue

shares until such time as the shares were issued.

The number of shares of common stock pending issuance are fixed, with the corresponding

liability subject to change pursuant to the share price at the time of issuance.

The initial liability is established using the

fair market value of the common stock price on the date of the agreement’s trigger resulting in the need to issue, or the

purchase price specified in the stock purchase agreement, dependent on the circumstance.

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 lowest level for which identifiable cash flows are largely independent of the cash flows of other

groups of assets and liabilities (asset group).

If the sum of the projected undiscounted cash flows (excluding interest charges) of an

asset group is less than its carrying value and the fair value of an asset group is also 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 income from continuing

operations in the period in which the determination is made.

Protection Program

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

The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible

purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.

The amount of loan forgiveness will be reduced

if the borrower terminates employees or reduces salaries during the eight-week period.

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

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.

the three months ended March 31, 2021, the Company had a total of $184,914 of its PPP loans forgiven by the SBA (see Note 4).

As of March 31, 2021 and December 31, 2020, the PPP loan balance was $74,269 and $259,183, respectively, and is reflected on the

Company’s consolidated balance sheet as current liabilities, within notes payable, net.

Company files corporate federal, state and local tax returns.

Conversion Labs PR and LegalSimpli 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 its

Conversion Labs PR and LegalSimpli 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 its members.

Company records current and deferred taxes in accordance with Accounting Standards Codification (“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, 2016, remain open to audit by all related taxing

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.

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, 2017, remain open to audit by all related taxing authorities.

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 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

Due to limited history of forfeitures, the estimated forfeiture rate included in the option valuation was zero.

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

compensation expense.

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.

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 Company has

elected to account for forfeitures as they occur.

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

(Loss) Per Share

earnings (loss) per common share is based on the weighted average number of shares outstanding during each period presented.

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 when the effects would be antidilutive.

stock equivalents comprising shares underlying 5,931,158 options and warrants for the three and nine months ended September 30,

2020 have not been included in the loss per share calculations as the effects are anti-dilutive.

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 when the effects would be antidilutive.

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

these instruments are used to purchase common shares at the average market price for 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, and the resulting common shares are included in the denominator of the diluted EPS calculation

for the entire period being presented.

following table summarizes the number of shares of common stock issuable pursuant to our convertible securities that were excluded from

the diluted per share calculation because the effect of including these potential shares was antidilutive even though the exercise price

could be less than the average market price of the common shares:

Series B Preferred Stock

Restricted Stock Units (RSUs)

Stock options

Potentially dilutive securities

Value of Financial Instruments

carrying value of the Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued

expenses and the face amount of notes payable approximate fair value for all periods presented.

carrying value of the Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued expenses

and the face amount of notes payable approximate fair value for all periods presented.

Concentrations

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 periodically performs credit analysis and monitors

the financial condition of its customers to reduce credit risk.

Company monitors its positions with, and the credit quality of, the financial institutions with which it invests.

at times, maintains balances in various operating accounts in excess of federally insured limits.

are dependent on certain third-party manufacturers, although we believe that other contract manufacturers could be quickly secured

if any of our current manufacturers cease to perform adequately.

As of September 30, 2020 and December 31, 2019, 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 three and nine months ended September 30, 2020 and the year ended December

31, 2019, we purchased 100% of our finished goods from two (2) manufacturers.

The Company, at times,

maintains balances in various operating accounts in excess of federally insured limits.

are dependent on certain third-party manufacturers, although we believe that other contract manufacturers could be quickly secured if

any of our current manufacturers cease to perform adequately.

As of March 31, 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 three months ended March 31, 2021 and 2020, we purchased 100% of our finished goods from two (2) manufacturers.

Adopted Accounting Pronouncements

June 2018, the FASB issued ASU 2018-07, “Compensation –

Stock Compensation (Topic 718):

Improvements to Nonemployee

Share-Based Payment Accounting”

that expands the scope of ASC Topic 718 to include share-based payment transactions for

acquiring goods and services from nonemployees.

An entity should apply the requirements of ASC Topic 718 to nonemployee awards

except for certain exemptions specified in the amendment.

The guidance is effective for fiscal years beginning after December

15, 2018, including interim reporting periods within that fiscal year.

This standard was adopted on January 1, 2019 and did not

have a material impact on the Company’s financial position, results of operations or cash flows.

July 2017, the FASB issued ASU No.

2017-11, “Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815)- Accounting

for Certain Financial Instruments with Down Round Features”

(“ASU 2017-11”).

Equity-linked instruments, such

as warrants and convertible instruments, may contain down round features that result in the strike price being reduced on the

basis of the pricing of future equity offerings.

Under ASU 2017-11, a down round feature will no longer require a freestanding

equity-linked instrument (or embedded conversion option) to be classified as a liability that is remeasured at fair value through

the income statement (i.e.

marked-to-market).

However, other features of the equity-linked instrument (or embedded conversion

option) must still be evaluated to determine whether liability or equity classification is appropriate.

Equity classified instruments

are not marked-to-market.

For earnings per share (“EPS”) reporting, the ASU requires companies to recognize the effect

of the down round feature only when it is triggered by treating it as a dividend and as a reduction of income available to common

shareholders in basic EPS.

The amendments in this ASU are effective for all entities for fiscal years, and interim periods within

those fiscal years, beginning after December 15, 2019.

This standard was adopted on January 1, 2020 and did not have a material

impact on the Company’s financial position, results of operations or cash flows.

of New or Revised Accounting Standards—Not Yet Adopted

August 2020, the FASB issued ASU 2020-06, “

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

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 earnings-per-share (“EPS”)

guidance and amendments to the guidance for the derivatives 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 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 the beginning of its annual fiscal year, or January 1, 2021, should the Company elect to early adopt.

The Company is currently

evaluating the impact the adoption of ASU 2020-06 could have on the Company’s financial statements and disclosures.

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

GAAP for certain financial instruments with characteristics of liabilities 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 earnings-per-share ("EPS") guidance and amendments to the guidance for the derivatives 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 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 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.

Recent Accounting Pronouncements

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.

INTANGIBLE ASSETS

of September 30, 2020, the Company has the following amounts related to intangible assets:

Assets as at:

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.

INTANGIBLE ASSETS

Relationship Asset

of March 31, 2021 and December 31, 2020, the Company has the following amounts related to intangible assets:

Intangible Assets as at:

Amortizable Intangible Assets

Customer Relationship Asset

Purchased Licenses

Accumulated amortization

Net Amortizable Intangible Assets

aggregate amortization expense of the Company’s intangible assets for the three months ended September 30, 2020 and 2019

was approximately $83,903, respectively.

The aggregate amortization expense of the Company’s intangible assets for the nine

months ended September 30, 2020 and 2019 was approximately $251,709, respectively.

Amortization expense for the remainder of 2020

and 2021 is $275,570 and $148,173, respectively.

Total Net Amortizable Intangible Assets

aggregate amortization expense of the Company’s intangible assets for the three months ended March 31, 2021 and 2020 was approximately

$83,903 and $123,903, respectively.

Total amortization expense for the remainder of 2021 is $70,936.

Total amortization expense for 2022

through 2025 is $20,000 per year and $105,001, thereafter.

NOTES PAYABLE

May 29, 2018, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Alpha Capital

Anstalt (“Alpha”) and Brio Capital Master Fund Ltd.

(“Brio”), (collectively, the “2018 SPAs”)

Pursuant to the terms of the Purchase Agreement, the Company issued and sold the 2018 SPAs senior secured convertible notes

in the aggregate original principal amount of $550,000 (collectively, the “Alpha and Brio Notes”), and warrants to

purchase up to 478,261 shares of the Company’s common stock (collectively the “Alpha and Brio Warrants”).

Alpha and Brio Notes matured on May 2019.

Interest on the outstanding principal amount of the Alpha and Brio Notes had compounded

annually at the annual rate of twelve percent (12%), subject to adjustments through to their maturity date.

The Alpha and Brio

Notes were convertible into the Company’s common stock, at the option of the holder, at any time following issuance, unless

the conversion or share issuance under the conversion would cause the holder to beneficially own in excess of 4.99% of the Company’s

common stock.

The conversion price for the principal and interest, if any, in connection with voluntary conversion by the Holder

shall be $1.15 per share of Common Stock, subject to adjustment as defined in the Alpha and Brio Notes.

Alpha and Brio have converted

$344,642 of these notes including $9,922 of interest as of December 31, 2019, leaving a balance of $187,308 .

As of September

30, 2020, these notes have been paid off.

August 15, 2019, the Company entered into securities purchase agreements (the “August 2019 Purchase Agreements”) with

two accredited investors, including Alpha and Brio.

Pursuant to the terms of the August 2019 Purchase Agreements, the Company

issued and sold to the investors convertible promissory notes for the aggregate original principal amount of $1,291,000 (collectively

the “August 2019 Notes”), and warrants to purchase up to 935,870 shares of the Company’s common stock (the “August

2019 Warrants”).

The August 2019 Notes matured on August 15, 2020 and accrued interest at a rate of twelve percent (12%)

per annum, subject to adjustments, prior to maturity, as defined therein.

The August 2019 Notes may be converted into shares of

the Company’s common stock, at the discretion of the holder, at any time following issuance, unless the conversion or share

issuance under the conversion would cause the holder to beneficially own shares in excess of 4.99% of the Company’s common

The conversion price for the principal and interest, if any, in connection with voluntary conversion by the investors shall

be $1.15 per share of common stock, subject to adjustment as defined therein.

In conjunction with the August 2019 Notes, the Company

issued the August 2019 Warrants with an exercise price of $1.40 per share.

The fair value of August 2019 Warrants was determined

to be $569,147 based on the use of Black-Scholes pricing model.

The August 2019 Warrants were evaluated by management and deemed

to be equity-linked awards subject to ASC 810, Derivatives and Hedging.

The August 2019 Notes contained an original issue

discount of 20% or $215,250 which is the difference between the note’s face amount of $1,21,000 and the cash proceeds

received from the investors.

As part of this financing, the Company paid debt issuance costs $284,070 which are placed as a contra-debt

account and were amortized over the life of the loan.

February 25, 2020, the Company entered into a Note Repayment and Warrant Amendment Agreement with Alpha and Brio, whereby the

Company agreed to repay the outstanding balance of Alpha and Brio’s August 2019 Notes in the amount of $1,291,000.

result of this transaction, the Company accelerated debt discounts for warrants, issuance costs and original issue discount of

$500,145, which was recognized through interest expense on the accompanying unaudited consolidated statement of operations.

of September 30, 2020 and December 31, 2019, the gross balance payable for these notes was $0 and $1,291,000, respectively.

of September 30, 2020 and December 31, 2019, the Company has cumulatively amortized $568,322 and $404,393 of the debt discounts

costs including debt issuance costs, original issue discount, and discount for warrants issued in connection with the debt transaction,

all of which is included in interest expense on the accompanying unaudited consolidated statement of operations.

As of September

30, 2020 and December 31, 2019, the net balance payable for these notes was $0 and $627,426, respectively.

February 18, 2020, the Company entered into two purchase agreements (the “C6 Purchase Agreements”) for the purchase

and sale of future revenue with C6 Capital, LLC (“C6”).

Pursuant to the terms of the C6 Purchase Agreements, the Company

issued and sold to C6 two loan agreements in the aggregate original principal amount of $1,020,000.

These loans contain an original

purchase discount of 18%, or $270,000, in total, or $135,000 per each of the two agreements.

C6 paid $375,000 per loan agreement

for a total of $750,000.

The Company paid debt issuance costs to C6 of $7,500 per agreement, or $15,000 in total, which was placed

as a contra-debt account and will be amortized over the life of the loan.

The loan agreements require the Company to pay all future

receipts of the Company without recourse until such time as the purchased amount has been repaid.

The loan agreements require

the Company to make a daily average payment of $8,094 during the term of such agreements.

As of September 30, 2020, the Company

has made $1,020,000 in principal payments under these loan agreements.

As of September 30, 2020, the gross balance payable for

these loan agreements was $0, and the balance of the loan net of discounts was $0.

For the nine months ended September 30, 2020,

the Company has amortized $285,000 of debt discount through interest expense on the accompanying unaudited statement of operations.

May 21, 2020 through May 27, 2020 the Company, issued convertible promissory notes (the “May 2020 Notes”) to five

(5) accredited investors (each a “May 2020 Investor”, and collectively, the “May 2020 Investors”).

aggregate principal amount of the May 2020 Notes is $1,000,000 for which the Company received gross proceeds of $1,000,000.

May 2020 Notes were due and payable six months from the date of issuance.

The May 2020 Notes entitle each holder to 12% interest

upon Maturity, or $120,000.

The May 2020 Notes may be converted into shares of the Company’s common stock at any time following

the date of issuance at a conversion price of $2.50 per share, subject to adjustment.

During the week ended November 6, 2020,

all accredited investors exercised their conversion rights under the May 2020 Notes.

The Company is preparing to issue the underlying

shares effective November 12, 2020.

an inducement to enter into the transaction, the Company issued an aggregate of 133,000 shares of the Company’s restricted

common stock to the May 2020 Investors.

In the event of a default, the outstanding balance of the May 2020 Notes shall increase

to 130% and shall become immediately due and payable upon notice to the Company.

June 2020, the Company and its subsidiaries received loans in the aggregate amount of approximately $242,000 (the “PPP Loan”)

under the new Paycheck Protection Program legislation administered by the U.S.

Loan and Forgiveness

June 2020, the Company and its subsidiaries received three loans in the aggregate amount of approximately $259,183 (the “PPP

Loan”) under the Paycheck Protection Program legislation administered by the U.S.

Small Business Administration.

1 unchanged sentence

interest at one percent per annum (1.0%) and mature five years from the date of the first 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 categories 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.

As at September 30, 2020, the $242,000 PPP loan proceeds are reflected on the Company’s

balance sheet as current liabilities, within loans payable.

July 27, 2020, the Company issued a secured convertible promissory note in the principal amount of up to $1,500,000 to an accredited

The Company received $600,000 in aggregate gross proceeds.

Any additional advances under this note would require the

approval of the lender in its sole discretion.

This note accrues interest at a rate of one and one-quarter percent (1.25%) per

month and carried a maturity date of January 24, 2021.

The note balance of $607,500, including accrued interest of $7,500, was

repaid in full on August 28, 2020 with the issuance of Series B Convertible Preferred Stock (see Note 5).

interest expense on notes payable, inclusive of amortization of debt discounts, amounted to $1,313,010 and $430,956 for the nine

months ended September 30, 2020 and 2019, respectively.

Total interest expense on notes payable, inclusive of amortization of

debt discounts, amounted to $291,096 and $130,936 for the three months ended September 30, 2020 and 2019, respectively.

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 categories 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 three months ended March

31, 2021, the Company had a total of $184,914 of its PPP loans forgiven by the SBA which is included in gain on debt forgiveness on the

accompanying unaudited condensed consolidated statement of operations.

As of March 31, 2021 and December 31, 2020, the PPP loan balance

was $74,269 and $259,183, respectively, and is reflected on the Company’s unaudited condensed consolidated balance sheet

as current liabilities, within notes payable, net.

December 2020, the Company received proceeds of $500,000 under a short-term working capital 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.

Funding Agreement

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 $600,000

as of March 31, 2021.

interest expense on notes payable, inclusive of amortization of debt discounts, amounted to $17,271 and $793,039 for the three months

ended March 31, 2021 and 2020, respectively.

STOCKHOLDERS’

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 and 4,995,000 shares of

preferred stock remain undesignated.

B Convertible Preferred Stock

August 27, 2020, the Secretary of State of the State of Delaware delivered confirmation of the effective filing of the Company’s

Certificate of Designations of the Series B Convertible Preferred Stock, which established 5,000 shares of the Company’s

Series B Preferred Stock, having such designations, rights and preferences as set forth therein (the “Series B Designations”).

shares of Series B Preferred Stock have a stated value of $1,000 per share (the “Series B Stated Value”) and are convertible

into Common Stock at the election of the holder of the Series B Preferred Stock, at a price of $3.25 per share ($0.65 pre-split),

subject to adjustment (the “Conversion Price”).

Each holder of Series B Preferred Stock shall be entitled to receive,

with respect to each share of Series B Preferred Stock then outstanding and held by such holder, dividends at the rate of thirteen

percent (13%) per annum (the “

Preferred Dividends ”).

Preferred Dividends shall accrue and be cumulative from and after the date of issuance of any share of Series B Preferred Stock

on a daily basis computed on the basis of a 365-day year and compounded quarterly.

The Preferred Dividends are payable only when,

as, and if declared by the Board of Directors of the Company (the “Board”) and the Company has no obligation to pay

such Preferred Dividends;

provided , however , if the Board determines to pay any Preferred Dividends, the Company

shall pay such dividends in kind in a number of additional shares of Series B Preferred Stock (the “PIK Shares”) equal

to the quotient of (i) the aggregate amount of the Preferred Dividends being paid by the Company in respect of the shares of Series

B Preferred Stock held by such holder, divided by (ii) the Series B Issue Price (as defined in the Series B Designations);

provided , further , that, at the election of the purchasers holding a majority of the shares of Series B Preferred

Stock then outstanding, in their sole discretion, such Preferred Dividends shall be paid in cash or a combination of cash and

Notwithstanding the foregoing, the Preferred Dividends may be paid in cash at the election of the Company if, and

only if, (A) the purchasers holding a majority of the shares of Series B Preferred Stock then outstanding consent in writing to

the payment of any specific dividend in cash, or (B) at any time following the twenty-four (24) month anniversary of the Closing,

(i) the prevailing VWAP of the Common Stock over the trailing ninety (90)-day period is equal to or greater than $3.00 per share

(subject to adjustments for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations,

reverse stock splits or other similar events), and (ii) the average trading volume of the Common Stock over the trailing ninety

(90)-day period is equal to or greater than 40,000 shares (200,000 pre-split) of Common Stock per day, or (C) at any time following

the thirty-six (36) month anniversary of the Closing.

holders of Series B Preferred Stock rank senior to the Common Stock with respect to payment of dividends and rights upon liquidation

and will vote together with the holders of the Common Stock on an as-converted basis, subject to beneficial ownership limitations,

on each matter submitted to a vote of holders of Common Stock (whether at a meeting of shareholders or by written consent).

addition, as further described in the Series B Designations, if at least 30% of the number of shares of Series B Preferred Stock

sold at the Closing are outstanding, the Company will not take certain corporate actions without the affirmative vote at a meeting

(or the written consent with or without a meeting) of the purchasers holding a majority of the shares of Series B Preferred Stock

then outstanding.

at any time following the twelve (12)-month anniversary of the Closing (A) the prevailing VWAP (as defined in the Series B Designations)

of the Common Stock over the trailing ninety (90)-day period is equal to or greater than $15.00 per share ($3.00 pre-split)(subject

to adjustments for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, reverse

stock splits or other similar events), and (B) the average trading volume of the Common Stock over the trailing ninety (90)-day

period is equal to or greater than 40,000 shares (200,000 pre-split) of Common Stock per day, the Company shall have the right,

but not the obligation, in its sole discretion, to elect to convert all, but not less than all, of the then-outstanding shares

of Series B Preferred Stock into Common Stock by delivering written notice of such election (the “Forced Conversion Notice”)

to the holders of the Series B Preferred Stock within ten (10) Business Days following the satisfaction of the criteria of clauses

(A) and (B) above (a “Forced Conversion”).

On the Forced Conversion Date (as defined in the Series B Designations),

each share of Series B Preferred Stock shall be converted into the number of fully paid and non-assessable shares of Common Stock

equal to the quotient of:

(x) the sum of (1) the Series B Issue Price, plus (2) any accrued but unpaid dividends on such

share of Series B Preferred Stock as of immediately prior to the conversion thereof, including the Preferred Dividends, divided

by (y) the Conversion Price of such share of Series B Preferred Stock in effect at the time of conversion.

The Forced Conversion

Notice shall state (i) the number of shares of Series B Preferred Stock held by such Holder that are proposed to be converted,

and (ii) the date on which such Forced Conversion shall occur, which date shall be the thirtieth (30 th ) day following

the date such Forced Conversion Notice is deemed given (a “Forced Conversion Date”).

the event of a Forced Conversion, a holder may elect, in its sole discretion and in lieu of the Forced Conversion, to have each

then-outstanding share of Series B Preferred Stock held by such holder be redeemed by the Company (a “

Forced Conversion

Redemption ”) by delivering written notice to the Company (a “

Forced Conversion Redemption Notice ”

and the date such Holder delivers such notice to the Corporation, a “

Forced Conversion Redemption Notice Date ”)

prior to the Forced Conversion Date, which notice shall state (A) the number of shares of Series B Preferred Stock that are to

be redeemed, (B) the date on which such Forced Conversion Redemption shall occur, which date shall be the tenth (10th) Business

Day following the applicable Forced Conversion Redemption Notice Date (the “

Forced Conversion Redemption Date ”)

and (C) the wire instructions for the payment of the applicable amount owed to such holder.

Each share of Series B Preferred Stock

that is the subject of a Forced Conversion Redemption shall be redeemed by the Company in cash at a price per share equal to the

sum of (1) the Series B Issue Price, plus (2) any accrued but unpaid dividends on such share of Series B Preferred Stock,

including the Preferred Dividends (the “

Per Share Forced Conversion Redemption Price ”).

any time (A) after December 31, 2020, if a sufficient number of shares of Common Stock are not available to effect the conversion

of the Series B Preferred Stock outstanding into Common Stock and the exercise of the Warrants, or (B) after the three (3) year

anniversary of the closing, each holder shall have the right, in its sole and absolute discretion (in addition to and not to the

exclusion of any remedy such holder may have at law or in equity), to require that the Company redeem (an “Optional Redemption”),

to the fullest extent permitted by law and out of funds lawfully available therefor, all or any portion of such holder’s

Series B Preferred Stock then outstanding by delivering written notice thereof;

provided , however , that right of

the holders to cause an Optional Redemption under clause (B) above shall expire at such time as (i) the Company’s Common

Stock is listed for trading on a National Securities Exchange (as defined in the Series B Designations) and (ii) the VWAP of the

Common Stock over any ninety (90)-day period is equal to or greater than $10.00 per share ($2.00 pre-split), subject to adjustment.

Purchase Agreement

August 28, 2020, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an investor

(the “Investor”), to purchase from the Company an aggregate of 3,500 units (the “Units”), at a purchase

price of $1,000 per Unit, each consisting of (i) one share of Series B Convertible Preferred Stock, and (ii) a warrant to purchase

400 shares of common stock of the Company.

The aggregate purchase price for the Units is $3,500,000, of which (i) $2,892,500 is

being paid in cash at the closing of the transaction and (ii) $607,500, is being paid by the conversion of the outstanding principal

and interest due on the Secured Convertible Promissory Note (the “Note”) issued by the Company to the Investor on

July 27, 2020.

The Purchase Agreement provides that the Investor may not sell, transfer or otherwise dispose of the Series B Preferred

Stock or warrants (or the shares of Common Stock issuable thereunder) for a period of one year following the closing.

a result of the Purchase Agreement, the Company recorded a deemed dividend to the holders of the Series B Preferred Stock

of $3,500,000 for the value of the warrants and beneficial conversion feature in excess of the purchase price.

Additionally, the

company recorded a put liability of $3,500,000 for the value of the Series B Preferred Stock redemption feature.

This liability

was increased by $41,137 for the 13% dividend accrued for the Series B Preferred stockholders for a balance of $3,541,137 as of

September 30, 2020.

August 31, 2020, the Company entered into a consulting agreement (the “CL1 Consulting Agreement”) with a consultant

(“CL1”

or “Consultant”), to which Consultant will assist the Company with, among other things, general

operations of the business, marketing and branding, and recruiting talent in connection with the Company’s men’s sexual

health, hair loss and PDF businesses (the “Services”).

As compensation for the Services, Consultant shall receive from

the Company two warrants (“Consulting Warrant 1”

and “Consulting Warrant 2”

collectively, the “Consulting

Warrants”), that entitle Consultant to purchase up to an aggregate of 750,000 of Common Stock of the Company according to

the terms and conditions outlined therein, including any restrictions on exercisability.

During the five-year term of Consulting

Warrant 1, Consultant may purchase up to an aggregate of 500,000 shares of Common Stock, at an exercise price equal to the closing

price of the Common Stock immediately prior to the Closing of $5.20 per share, and Consulting Warrant 1 becomes exercisable as

to such shares of Common Stock in 18 equal monthly installments beginning on the date that is six months following the issue date

or immediately prior to the consummation of a change of control of the Company.

During the five-year term of Consulting Warrant

2, Consultant may purchase up to an aggregate of 250,000 shares of Common Stock, at an exercise price of $5.75 per share, and Consulting

Warrant 2 becomes exercisable as to such shares of Common Stock on the date that is 24 months following the issue date or immediately

prior to the consummation of a change of control of the Company.

Purchase Agreement

Concurrently,

the Company entered into a warrant purchase agreement (the “Warrant Purchase Agreement”) with CL1 to purchase from

the Company (i) a warrant to purchase 500,000 shares of Common Stock, at an exercise price equal to the closing price of the Common

Stock immediately prior of $5.20 per share ($1.04 per share on a pre-split basis) (the “Class A Warrant”), for

a purchase price of $15,000, and (ii) a warrant to purchase 250,000 shares of Common Stock, at an exercise price of $5.75 per

share (the “Class B Warrant”

and, together with the Class A Warrant, the “Purchased Warrants”),

for a purchase price of $10,000.

Each of the Purchased Warrants have a five-year term.

Each of the Purchase Warrants is immediately

exercisable as to fifty percent (50%) of the shares issuable thereunder and the remaining fifty percent (50%) shall become exercisable

on the date that is six months following the issue date of each Purchased Warrant, subject to a repurchase right in favor of the

fair value of the warrants above (Consulting Warrants and Purchase Warrants) was approximately $9,467,767, which was determined

by the Black-Scholes Pricing Model with the following assumptions:

dividend yield of 0%, term of 5 years, volatility of 161.4%,

and risk-free rate of 0.28%.

Total amortization for the three- and nine-months ending September 30, 2020 was $394,283 and is reflected

in stock-based compensation, with unamortized costs of $9,068,504 remaining at September 30, 2020.

March 2020, Alpha and Brio exercised their warrants in a cashless exercise for an aggregate of 367,231 shares of common stock

warrants to obtain 147,858 shares of common stock.

May 2020, the Company issued a total of 843,242 shares of common stock for the cashless exercise of warrants.

May 2020, the Company issued 294,120 shares of common stock to an investor for $250,000 in cash consideration.

the nine months ended September 30, 2020 (specifically three months ended June 30, 2020), the Company issued 50,000 shares for

services valued at approximately $35,200.

the nine months ended September 30, 2020 (specifically the three months ended June 30, 2020), the Company issued 2,196,740 shares

of common stock for share liability of $1,726,000.

September 2020, the company received aggregate proceeds of $25,000 for the sale of warrants from the Warrant Purchase Agreement.

the three months ended September 30, 2020, the Company issued a total of 379,957 shares of common stock from the exercise of warrants

and cash proceeds of $622,763.

the three months ended September 30, 2020, the Company issued a total of 335,600 shares of common stock from the exercise of stock

options with cash proceeds of $300,400.

the three months ended September 30, 2020, the Company issued a total of 331,270 shares of common stock from the cashless exercise

of stock options.

the three months ended September 30, 2020, the Company issued a total of 375,447 shares of common stock for share liability totaling

of September 30, 2020, the Company has $218,848 in cash from investors which is recorded as a liability to issue shares until

such time as the shares are issued.

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 and 4,996,500 shares of preferred stock

remain undesignated.

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.

the three months ended March 31, 2021, the Company issued an aggregate of 608,905 shares

of common stock related to cashless exercise of options.

the three months ended March 31, 2021, the Company issued an aggregate of 30,000 shares of common stock related to the

exercise of warrants for gross proceeds of $24,000.

interest purchase agreement

July 31, 2019 the Company entered into a certain membership interest purchase agreement (the “MIPA”) by and between the Company,

Conversion Labs PR, LLC (“CVLB 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 CVLB PR from the Related Parties, bringing the Company’s

ownership of CVLB PR to 100%.

consideration for the Company’s purchase of the Remaining Interests from the Related Parties, Mr.

Schreiber and Mr.

Galluppi agreed

to cancel all potential issuances of restricted stock and or options related to 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).

Schreiber and Mr.

Galluppi were also entitled to additional issuances

pursuant to certain milestones as follows:

(i) 500,000 shares of the Company’s Common Stock to each of Mr.

Schreiber and Mr.

(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”).

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.

Company recorded an aggregate expense of $18,060,000 reflected in general and administrative expenses during the three months

ended September 30, 2020 for the issuance of these 2,000,000 shares, of which 1,200,000 shares were issued during the three months ended

March 31, 2021.

Stock Transactions During the Three Months Ended March 31, 2021:

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”).

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.

the three months ended March 31, 2021, the Company issued an aggregate of 1,203,750 shares

of common stock for services expensed in prior periods.

Noncontrolling

the three months ended September 30, 2020 and 2019, the net loss attributed to the non-controlling interest amounted to $201,233

and $160,838, respectively.

For the nine months ended September 30, 2020 and 2019, the net loss attributed to the non-controlling

interest amounted to $408,180 and $375,540, respectively.

During the nine months ended September 30, 2020 and 2019, the Company

paid distributions to non-controlling shareholders of $121,223 and $61,625, respectively.

April 25, 2019, the Company entered into an LLC Membership Unit purchase agreement with entities owned by the Company’s

Chief Executive Officer and Chief Technology Officer, and Conversion Labs PR, and simultaneously purchased the remaining 21.8%

interest of Conversion Labs PR from the Company’s Chief Executive officer and Chief Technology Officer.

Subsequent to the

agreement’s closing, the Company now wholly-owns 100% of Conversion Labs PR.

In order to consummate this transaction, the

Company agreed to issue 1,000,000 shares of common stock based on the issuance price of $0.90 per share, equal to $900,000 to

the Company’s Chief Executive Officer and Chief Technology Officer.

The shares were issued on August 6, 2019.

The difference

between the value of the stock issued and net book value of the transfer to accumulated deficit was recognized in non-controlling

interest in 2019 for a charge of $412,377.

Stock Options

January 20, 2020, the Company approved the transition of its Chief Acquisition Officer, to the role of President of LegalSimpli

(“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.

the nine months ended September 30, 2020, the Company issued 480,000 stock options to three employees, two advisory board members,

and one vendor of the Company.

These stock options have a contractual term of 10 years and vest in in increments which fully vest

the options over a two to three year period, dependent on the specific agreements’

following is a summary of outstanding service-based options activity for the nine months ended September 30, 2020:

Outstanding Number of Shares

Price per Share

Average Remaining Contractual Life

Average Exercise Price per Share

December 31, 2019

the three months ended March 31, 2021 and 2020, the net loss attributed to the non-controlling interest amounted to $270,503 and

$138,816, respectively.

During the three months ended March 31, 2021 and 2020, the Company paid distributions to non-controlling shareholders

of $36,000 and $36,000, respectively.

Software Restructuring Transaction

January 22, 2021 (the “LSS Effective Date”), the Company consummated a transaction to restructure the ownership of LegalSimpli

Software, LLC, a Puerto Rico limited liability company (“LSS”), a majority-owned subsidiary of the Company (the “LSS

Restructuring”).

To effect the LSS Restructuring the Company’s wholly-owned subsidiary Conversion Labs PR LLC, a Puerto Rico

limited liability company (“CVLB PR”) entered into a series of membership interest exchange agreements, pursuant to which,

CVLB PR exchanged that certain a promissory note, dated May 8, 2019 with an outstanding balance of $375,823 (the “CVLBPR Note”),

issued by LSS in favor of CVLB PR, for 37,531 newly issued membership interests of LSS (the “Exchange”).

Upon consummation

of the Exchange the CVLBPR Note was extinguished.

Concurrently,

in furtherance of the LSS Restructuring, CVLB PR entered into two Membership Interest Purchase Agreements (the “Founding Members

MIPAs”) with two founding members of LSS (the “Founding Members”) whereby CVLB PR purchased from the Founding Members

an aggregate of 2,183 membership interests of LSS for an aggregate purchase price of $225,000, paid in December 2020.

furtherance of the LSS Restructuring, CVLB PR entered into a Membership Interest Purchase Agreement with LSS, (the “CVLB PR MIPA”),

pursuant to which CVLB PR purchased 12,000 membership interests of LSS 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 CVLB 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 are due on the 60-day anniversary and the 120-day anniversary of the LSS Effective Date

and are reflected in accounts payable and accrued expenses as of March 31, 2021.

the consummation of the LSS Restructuring, CVLB PR increased its ownership of LSS from 51% to approximately 85.58% on a fully diluted

LSS entered into an amendment to its operating agreement (the “LSS Operating Agreement Amendment”) to reflect the

change in ownership.

with the LSS Restructuring, CVLB 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 CVLB PR granted options to purchase membership interest units of LSS.

Upon vesting, the Fitzpatrick Options and the

Pathak Options provide for the potential re-purchase of up to an additional 13.25% of LSS by Fitzpatrick and Pathak in the aggregate

with CVLB PR ownership ratably reduced to approximately 72.98%.

Fitzpatrick Option Agreement grants Sean Fitzpatrick the option to purchase 10,300 membership interest units of LSS 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 LSS achieving $2,500,000 of gross sales in any fiscal quarter (ii) 3,434 membership interests upon LSS achieving

$4,000,000 of gross sales in any fiscal quarter and (iii) 3,434 membership interests upon LSS achieving $8,000,000 of gross sales

with a ten percent (10%) net profit margin in any fiscal quarter.

Pathak Options shall vest in accordance with the following (i) 700 membership interests upon LSS achieving $2,500,000 of gross

sales in any fiscal quarter (ii) 700 membership interests upon LSS achieving $4,000,000 of gross sales in any fiscal quarter and

(iii) 700 membership interests upon LSS achieving $8,000,000 of gross sales with a ten percent (10%) net profit margin in any

fiscal quarter.

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.

Equity Incentive Plan (the “2020 Plan”)

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, Plan provided for the issuance of up to 1,650,000 shares of Common Stock.

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.

affirmative vote of the holders of shares of common stock representing a majority of the shares of Common Stock cast at the Annual Meeting

of Stockholders to be held June 24, 2021 is required for the approval of the proposed 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.

forms of award agreements to be used in connection with awards made under the 2020 Plan to the Company’s executive officers and

non-employee directors are:

of Non-Qualified Option Agreement (Non-Employee Director Awards)

of Non-Qualified Option Agreement (Employee Awards);

of Restricted Stock Award Agreement.

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

January 20, 2020, the Company approved the transition of its Chief Acquisition Officer, to the role of President of LegalSimpli (“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.

the three months ended March 31, 2021, the Company issued an aggregate of 905,000 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’

following is a summary of outstanding options activity under our 2020 Plan for the three months ended March 31, 2021:

Number of Shares

Exercise Price

Balance, December 31, 2020

$ 5.80 –

Cancelled/Forfeited/Expired

at September 30, 2020

December 31, 2019

at September 30, 2020

following is a summary of outstanding performance-based options activity for the nine months ended September 30, 2020:

Outstanding Number of Shares

Price per Share

Average Remaining Contractual Life

Average Exercise Price per Share

at December 31, 2019

Balance at March 31, 2021

$ 5.80 –

Exercisable at December 31, 2020

$ 5.80 –

Exercisable at March 31, 2021

$ 5.80 –

total fair value of the options granted was approximately $7,975,592, which was determined by the Black-Scholes Pricing Model with the

following assumptions:

dividend yield of 0%, term of 10 years, volatility of 179.17 –

180.24%, and risk-free rate of 0.66%–1.28%.

Total compensation expense under the 2020 Plan options above was approximately $1,240,117 and $0 for the three months

ended March 31, 2021 and 2020, respectively, with unamortized expense remaining of approximately $12,678,337 as of March 31, 2021.

Stock Units (RSU)

following is a summary of outstanding and exercisable RSU activity under our 2020 Plan during the three months ended March 31, 2021:

RSU Outstanding Number of Shares

Exercise Price per Share

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price per Share

Balance at December 31, 2020

$ 6.03 –

Exercised/Expired

Balance at March 31, 2021

$ 6.03 –

Exercisable December 31, 2020

$ 6.03 –

Exercisable March 31, 2021

$ 6.03 –

total fair value of the RSUs granted was approximately $681,025 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 $132,763 and $0

for the three months ended March 31, 2021 and 2020, respectively, with unamortized expense remaining of approximately $548,262

as of March 31, 2021.

following is a summary of outstanding service-based options activity (prior to the establishment of our 2020 Plan above) for the three

months ended March 31, 2021:

Options Outstanding Number of Shares

Exercise Price per Share

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price per Share

Balance, December 31, 2020

$ 0.80 - 7.50

Cancelled/Forfeited/Expired

Balance at March 31, 2021

$ 0.80 - 7.50

Exercisable December 31, 2020

$ 1.00 –

Exercisable at March 31, 2021

$ 1.00 –

compensation expense under the above service-based option plan was approximately $347,922 and $95,900 for the three months ended March

31, 2021 and 2020, respectively, with unamortized expense remaining of approximately $3,291,992 as of March 31, 2021.

following is a summary of outstanding performance-based options activity for the three months ended March 31, 2021:

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

$ 1.25 –

Cancelled/Expired

at September 30, 2020

December 31, 2019

at September 30, 2020

following is a summary of outstanding and exercisable warrants activity during the nine months ended September 30, 2020:

Outstanding Number of Shares

Price per Share

Average Remaining Contractual Life

Average Exercise Price per Share

at December 31, 2019

Balance at March 31, 2021

$ 1.25 –

Exercisable December 31, 2020

$ 1.25 –

Exercisable at March 31, 2021

$ 1.25 –

compensation expense was recognized on the performance-based options above for the three months ended March 31, 2021 and 2020, as the

performance terms have not been met or are not probable.

All performance options exercised this quarter had been previously expensed.

following is a summary of outstanding and exercisable warrants activity during the three months ended March 31, 2021:

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

$ 1.40 –

Exercised/Expired

at September 30, 2020

December 31, 2019

September 30, 2020

2020 Warrant Inducement

August 2020, the Company offered an inducement to all 26 warrant holders of our $2.00

strike price warrants, which total 526,846 common stock warrants outstanding, by offering a reduced exercise price of $1.75

(a $0.25 discount) for these warrants if they are immediately exercised.

the three and nine months ended September 30, 2020, there were 379,957 of these warrants exercised, and none forfeited or adjusted.

The Company accounted for the warrant inducement as a deemed dividend based on the difference in the Black-Scholes value of the

warrants immediately before and immediately after the inducement.

The significant assumptions used in the Company included common

stock volatility of 148.49%, risk free rate of 0.14%, a weighted average term of 1.6 years and the current stock price of the

Company as of the date of inducement.

Based on the Black-Scholes valuation method the Company recorded a deemed dividend to additional

paid in capital and retained earnings on the inducement of approximately $73,636 and received proceeds from the warrants exercised

of approximately $623,000 during the three

and nine months ended September 30, 2020.

of September 30, 2020, and to the date of this Form 10Q, a vast majority of the respective warrant holders have exercised the

inducement related discount.

Capital Anstalt (“Alpha”) Warrants

February 25, 2020, the Company and Alpha entered into a Note Repayment and Warrant Amendment Agreement (the “2018 Alpha

Amendment”) whereby the Company agreed to (i) repay the outstanding balance of the convertible promissory note issued in

favor of Alpha, effective on May 29, 2018, in the amount of $224,145, including principal and interest (the “2018 Alpha

Note”) and (ii) amend the exercise price of the warrant (the “2018 Alpha Warrant”) issued to Alpha in connection

with the 2018 Alpha Note on May 29, 2018.

The 2018 Alpha Warrant originally provided for the purchase of up to 391,304 shares

of the Company’s common stock at an exercise price of $1.40 per share, none of which have been exercised as of the

date of the 2018 Alpha Amendment.

Pursuant to the terms of the 2018 Alpha Warrant and in connection with the 2018 Alpha Amendment,

the Company revised the exercise price of the Alpha 2018 Warrant from $1.40 per share to $0.68 per share and increased the number

of shares issuable under the Alpha 2018 Warrant from 391,304 to 811,594 shares.

February 25, 2020, the Company and Alpha entered into a Note Repayment and Warrant Amendment Agreement (the “2019 Alpha

Amendment”) whereby the Company agreed to (i) repay the outstanding balance of the convertible promissory note issued in

favor of Alpha on August 15, 2019 in the amount of $520,000, including principal and interest (the “August 2019 Alpha Note”)

and (ii) amend the exercise price of the August 2019 Warrant issued to Alpha in connection with the 2019 Alpha Note on August

The August 2019 Warrant issued to Alpha originally provided for the purchase of up to 365,217 shares of the Company’s

common stock at an exercise price of $1.40 per share, none of which have been exercised as of the date of the 2019 Alpha

Pursuant to the 2019 Alpha Amendment, Alpha has agreed to the reduction of the exercise price from $1.40 to $1.15,

subject to further adjustment.

As a result of the above described reduction of the exercise price and the application of certain

provisions of the 2019 Alpha Warrant, the amount of shares that may be purchased upon exercise of the 2019 Alpha Warrant after

giving effect to the foregoing is increased to 757,488 shares of the Company’s common stock.

May 7, 2020 , the Company agreed to further amend August 2019 Warrant issued to Alpha

on August 15, 2019, as amended on February 25, 2020 (the “Second Alpha Warrant Amendment”).

Specifically, pursuant

to anti-dilution provisions contained therein, the Company agreed to amend the August 2019 Warrant issued to Alpha in order to

increase the amount of shares able to be purchased thereunder by an additional 331,401 shares of the Company’s common stock

or an aggregate of up to 1,088,889 shares (the “Alpha Warrant Shares”).

On the same day, Alpha exercised, on a cashless

basis, all of the August 2019 Warrants issued to Alpha, as amended, resulting in the issuance of 391,466 shares of the Company’s

common stock to Alpha, with no effect on the Company’s statement of operations.

Upon Alpha’s cashless exercise, the

August 2019 Warrants issued to Alpha are no longer in force or effect and no additional issuances will be due or owing.

a result of the above transactions, the Company has recorded a deemed dividend to Alpha for the price adjustments of the August

2019 Warrant issued to Alpha of $915,479 which is recorded in the statement of changes in stockholder’s equity as an increase

in additional paid in capital and a reduction of accumulated deficit.

During the month of March 2020, Alpha exercised a portion

of their warrants in a cashless exercise, whereby Alpha exercised 267,223 common stock warrants to obtain 90,231 shares of common

Master Fund (“Brio”) Warrants

February 25, 2020, the Company, and Brio entered into a Warrant Amendment Agreement to amend the exercise price of the warrant

issued to Brio on May 29, 2018.

The Brio 2018 Warrant originally provided for the purchase of up to 86,957 shares of the

Company’s common stock at an exercise price of $1.40 per share, none of which have been issued as of the date of the 2018

Brio Warrant Amendment.

Pursuant to the 2018 Brio Warrant Amendment, the Company agreed to revise the exercise price of the 2018

Brio Warrant from $1.40 per share to $0.68 per share and increased the number of shares issuable under the 2018 Brio Warrant from

86,957 to 93,398 shares.

February 25, 2020, the Company, and Brio entered into a Note Repayment and Warrant Amendment Agreement whereby the Company agreed

to (i) repay the outstanding balance of the Convertible Promissory Note issued in favor of Brio on August 15 , 2019 in the amount

of $162,500, including principal and interest and (ii) amend the exercise price of the warrant issued to Brio in connection with

the 2019 Brio Note on August 15, 2019.

The Brio 2019 Warrant originally provide for the purchase of up to 114,130 shares of the

Company’s common stock at an exercise price of $1.40 per share, none of which have been exercised as of the date

of the 2019 Brio Amendment.

Pursuant to the 2019 Brio Amendment, Brio has agreed to the reduction of the exercise price of $1.40

to $1.15, subject to further adjustment.

As a result of the above described reduction of the exercise price and the application

of certain provisions of the 2019 Brio Warrant, the amount of shares that may be purchased upon exercise of the 2019 Brio Warrant

after giving effect to the foregoing is increased to 236,715 shares of the Company’s common stock.

May 7, 2020 , the Company agreed to further amend those certain warrants issued to Brio

on August 15, 2019, as amended on February 25, 2020.

Specifically, pursuant to anti-dilution provisions therein, the Company agreed

to amend the 2019 Brio Warrant in order to increase the amount of shares able to be purchased thereunder by an additional 103,562

shares of the Company’s common stock or an aggregate of up to 340,278.

On the same day, Brio exercised on a cashless basis

the Brio Warrants in full resulting in the issuance of 103,562 shares of the Company’s common stock to Brio with no effect

on the Company’s statement of operations.

Upon Brio’s cashless exercise, the 2019 Brio Warrants are no longer in force

or effect and no additional issuances will be due or owing.

a result of the above transactions, the Company has recorded a deemed dividend to Brio for the price adjustments of the Brio warrants

of $226,906 which is recorded in the statement of changes in stockholder’s equity as an increase in additional paid in capital

and a reduction of accumulated deficit.

During the month of March 2020, Brio exercised a portion of their warrants in a cashless

exercise, whereby Alpha exercised 100,000 common stock warrants to obtain 57,547 shares of common stock.

Consulting Agreement

September 29, 2020 (the “Effective Date”), the parties entered into an amendment to the Consulting Agreement (the

“Amended Consulting Agreement”) with Blue Horizon Consulting, LLC (“Blue Horizon”) primarily to change

the compensation for services provided by the Consultant.

Under the Amended Consulting Agreement, Blue Horizon may receive an

aggregate of up to 2,000,000 shares of the Company’s common stock, subject to adjustment, upon the Company reaching certain

revenue milestones.

Happy Walters, a member of the Company’s Board, is the sole owner of Blue Horizon.

The Amended Consulting

Agreement was approved by the Company’s disinterested directors.

a result of the Amended Consulting Agreement, the Company recorded stock compensation expense of $15,900,000 during the three

and nine months ended September 30, 2020, representing the fair value of the 2,000,000 shares of common stock earned under the

Amended Consulting Agreement.

No shares remain unearned under the Amended Consulting Agreement as of September 30, 2020.

of 800,000 common shares of the total 2,000,000 shares earned were issued under the Amended Consulting Agreement on October 16,

total stock-based compensation expense related to common stock issued for services, Service-Based Stock Options, Performance-Based

Stock Options and Warrants issued for service amounted to approximately $16,364,000 and $167,000 for the three months ended September

30, 2020 and 2019, respectively, and approximately $16,899,000 and $540,000 for the nine months ended September 30, 2020 and 2019,

Balance at March 31, 2021

$ 1.40 –

Exercisable December 31, 2020

$ 1.40 –

Exercisable March 31, 2021

$ 1.40 –

compensation expense on the above warrants for services was approximately $604,974 and $0 for

the three months ended March 31, 2021 and 2020.

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 $2,325,775 and $95,900 for the three months ended March 31, 2021 and 2020,

respectively.

Such amounts are included in general and administrative expenses in the unaudited consolidated statement of operations.

Company primarily leases office space and other equipment using month to month terms.

Conversion Labs PR utilizes office space

in Puerto Rico, which is subleased from the Company’s President and CEO, on a month to month basis, incurring rental expense

of approximately $4,000 to $5,000 a month for this office space.

February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes all existing guidance on accounting for leases

in ASC Topic 840.

ASU 2016-02 is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use

assets and corresponding lease liabilities on the balance sheet.

ASU 2016-02 will continue to classify leases as either finance

or operating, with classification affecting the pattern of expense recognition in the statement of income.

ASU 2016-02 is effective

for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

We have reviewed ASC

842 and have determined the following impact on our financial statements:

February 2018, the Company entered into a 3-year agreement to lease office space in Huntington Beach, California beginning on

March 2, 2018.

The rent is payable on a monthly basis in the amount of $2,106 for the first twelve months, $2,149 for the second

twelve months and $2,235 for the third twelve months;

the lease expires on February 28, 2021.

A security deposit of $2,235 was

paid for this lease.

The Company has classified this as an operating lease and have recorded the straight-line lease expense in

the accompanying unaudited statement of operations.

Such amounts are included in general and administrative expenses in the consolidated statement of operations.

6 - COMMITMENTS AND CONTINGENCIES

2016, Conversion Labs PR entered into a sole and exclusive license, royalty and advisory agreement with Pilaris Laboratories,

LLC (“Pilaris”) relating to Pilaris’

2016, Conversion 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.

As consideration for granting Conversion Labs PR this license, Pilaris will

receive on quarterly basis, 10% of the net income collected by the licensed products based on the following formula:

= total income –

cost of goods sold –

advertising and operating expenses directly related to the marketing of the

licensed products.

In addition, Conversion Labs PR shall pay Pilaris a performance fee 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 year ended December

31, 2018, the Company capitalized the license fee in the amount of $100,000, as the purchase of the fee is deemed an asset purchase

under ASC 805.

In April 2017, the Company issued shares 43,478 of common stock and 21,739 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, 2020 and December 31, 2019, $0 and $0, respectively was included in accounts payable and

accrued expenses in regard to this agreement, as no sales occurred.

The term of the agreement will be the life of the US Patent

held by Pilaris, ten years.

As consideration for granting Conversion Labs PR this license, Pilaris will receive on quarterly basis, 10%

of the net income collected by the licensed products based on the following formula:

Net Income = total income –

cost of goods

advertising and operating expenses directly related to the marketing of the licensed products.

As of March 31, 2021 and

December 31, 2020, $0 and $0, respectively was included in accounts payable and accrued expenses in regard to this agreement, as no sales

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”).

to the license granted under the Alphabet Agreement, Conversion Labs PR obtains an exclusive license to incorporate (i) any intellectual

property rights related to 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”).

Company shall pay Alphabet a royalty equal to 13% of Gross Receipts (as defined in the Agreement) realized from the sales of Licensed

Further, so long as the Agreement is not previously terminated, the Company, also agreed to pay Alphabet $50,000 on

the 120-day anniversary of the Agreement and an additional $50,000 on the 360-day anniversary of the Agreement.

execution of the Alphabet Agreement, Alphabet was granted a 10-year option to purchase 20,000 shares of the Company’s common

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 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 March 31, 2021.

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.

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, 2020 and

December 31, 2019, the Company approximates it’s implicit purchase commitments to be $2.2 million and $300,000, respectively.

and Consulting Agreements

Company has entered into various agreements with officers, directors, employees and consultants that expire in terms of one to

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.

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 March 31, 2021 and December 31, 2020, the

Company approximates its implicit purchase commitments to be $2.6 million and $1.6 million, respectively.

the normal course of business operations, the Company may become involved in various legal matters.

As of September 30, 2020,

the Company’s management does not believe that there are any potential legal matters that could have an adverse effect on

the Company’s financial position.

RELATED PARTY TRANSACTONS

As of March 31, 2021, other than

as set forth below, the Company’s management does not believe that there are any potential legal matters that could have an adverse

effect on the Company’s consolidated financial position.

April 16, 2021, a purported securities class action lawsuit, captioned David L.

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 the defendants made false or misleading statements about, and allegedly failed to disclose material adverse facts concerning,

the Company’s 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 5, 2021, a second purported securities class action lawsuit, captioned Cho v.

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, similarly, 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.

RELATED PARTY TRANSACTIONS

Executive Officer

Labs PR utilizes office space in Puerto Rico, which is subleased from the President and CEO, and incurs expense of approximately $7,500

$4,000 to $5,000 a month for this office space for which the Company and the CEO do not have a written lease agreement.

to JLS Ventures, an entity wholly owned by our CEO, for rent on Conversion Labs PR’s Puerto Rico office space amounted to

$45,000 and $37,000 for the nine months ended September 30, 2020 and 2019, respectively.

Labs PR utilizes BV Global Fulfillment, owned by a related person of the Company’s CEO to warehouse a majority of the Company’s

a month for this office 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 $22,500 and $15,000 for the three

months ended March 31, 2021 and 2020, respectively.

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.

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and reimburses BV Global Fulfillment for their direct costs associated with shipping the Company’s products.

As of September

30, 2020 and December 31, 2019, the Company owed BV Global Fulfillment $217,449 and $53,026, respectively, which are included

in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

The Company reimbursed

BV Global Fulfillment a total of $99,082 and $79,192 during the three months ended March 31, 2021 and 2020, respectively.

31, 2021 and December 31, 2020, the Company owed BV Global Fulfillment $0 and $58,943, respectively, which are included in

accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

Agreement with Chief Operating Officer

November 27, 2020 , the Company entered into a consulting

agreement (the “Consulting Agreement”) with 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

As compensation for the services, JDM will receive a monthly fee of $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 $51,000 under this agreement, with no bonus earned or accrued, for the three months

ended March 31, 2021.

of Chief Financial Officer

February 4, 2021, the Board appointed Mr.

Marc Benathen as the Company’s Chief Financial Officer.

In connection with the Appointment,

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 restricted stock units of the Company’s common stock (the “RSUs”).

RSU’s vest in accordance with the following:

(i) 3,750 of the RSUs vesting on the Effective Date (ii) 3,750 RSUs on February

4, 2022 (iii) 3,750 RSU’s on February 4, 2023 and (iv) 3,750 RSU’s on February 4, 2024.

In addition to the RSU’s, 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.

March 18, 2021, we issued 3,750 common shares under this Employment Agreement.

SUBSEQUENT EVENTS

Company has evaluated subsequent events through the date these financial statements were issued and has identified the following:

October 9, 2020, the Company effectuated a 1-for-5 reverse 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).

October 21, 2020, the Board of Directors (the “Board”) of the Company, appointed a new director to the Board (the

“Appointment”).

In connection with

the appointment to the Board, the director shall receive a one-time grant of 20,000 shares of the Company’s common stock.

In addition, the new director will be eligible to participate in any duly authorized stock option plan adopted by the Company.

On November 3, 2020, the

Company consummated an initial closing of a private placement offering (the “Offering”), whereby pursuant to the securities

purchase agreement (the “Purchase Agreement”) entered into by the Company and certain accredited investors on October

30, 2020 (each an “Investor”

and collectively, the “Investors”) the Company sold to such Investors an

aggregate of approximately 3,192,084 shares (the “Shares”) of the Company’s common stock, par value $0.01

per share (the “Common Stock”), for an aggregate purchase price of $14,461,512.75 (the “Purchase Price”).

The Purchase Price was funded on November 3, 2020 (the “Closing Date”) and resulted in net proceeds to the Company

of approximately $13.2 million.

to the Purchase Agreement , the Company agreed, for a period of 90 days from the closing date, not to issue or enter into any

agreement to issue any shares of common stock or common stock equivalents with the exception of certain exempt issuances as provided

LLC (the “Placement Agent”) acted as exclusive placement agent for the Offering and received cash compensation equal

to 6% of the Purchase Price and warrants to purchase 91,336 shares of the Company’s common stock, at an initial exercise

price of $4.75 per share, subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse

stock split or other similar transaction (the “PA Warrants”).

The PA Warrants may be exercised on a “cashless”

basis and will expire on November 3, 2025.

November 10, 2020, the Board of Directors (the “Board”) of the Company, appointed a new director to the Board (the

“Appointment”).

In connection with

the appointment to the Board, the director shall receive a one-time grant of 20,000 of the Company’s common stock.

the new director will be eligible to participate in any duly authorized stock option plan adopted by the Company.

Company has evaluated subsequent events through the date these consolidated financial statements were issued and has identified the following:

Option Exercise

April 2021, the Company issued an aggregate of approximately 264,142 shares of common stock pursuant to the cashless

exercise of an outstanding stock options.

of Chief Revenue Officer

April 2, 2021, Mr.

Juan Manuel Piñeiro Dagnery submitted to the board of directors of the Company his resignation from his position,

effective immediately.

Dagnery did not resign as a result of any disagreement with the Company on any matter relating to the Company’s

operations, policies or practices.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Regarding Forward-Looking Statements

Quarterly Report on Form 10-Q includes a number of 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”) that reflect management’s current views with respect to future events and financial performance.

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

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.

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,

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,”

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“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

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.

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 intend to update any of the forward-looking statements to conform these statements

to actual results.

financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

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.

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 intend to update any of the forward-looking statements to conform these statements to actual results.

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 financial statements as well as the reported amounts of revenues and expenses during the periods presented.

Our 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

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:

ability to successfully commercialize our products on a large enough scale to generate

profitable operations;

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.

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.

include, by way of example and without limitation:

ability to successfully commercialize our products on a large enough scale to generate profitable operations;

ability to maintain and develop relationships with customers and suppliers;

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economic and business conditions;

interruptions resulting from geo-political actions, including war, and terrorism or disease

outbreaks (such as COVID-19);

interruptions resulting from geo-political actions, including war, and terrorism or disease outbreaks (such as COVID-19);

ability to continue as a going concern;

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ability to successfully acquire, develop or commercialize new products and equipment;

● intellectual

able to scale our telehealth platform built to improve the experience and medical care provided to patients across the country;

property claims brought by third parties;

impact of any industry regulation.

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.

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.

used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “Company,”

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and “our”

refer to Conversion Labs, Inc.

(formerly known as Immudyne, Inc.), our wholly subsidiary

Conversion Labs PR, LLC (formerly Immudyne PR LLC, now “Conversion Labs PR”), a Puerto Rico limited liability company

(“Conversion Labs PR”, or “CLPR”) and our majority-owned subsidiaries LegalSimpli Software, LLC, a Puerto

Rico limited liability company (“LegalSimpli”).

Unless otherwise specified, all dollar amounts are expressed in United

States dollars.

Labs, Inc., was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc.

We changed our name to Conversion

on June 22, 2018.

Further, in connection with changing its name, the Company changed its trading symbol to CVLB.

April 1, 2016, our majority-owned subsidiary, Immudyne PR LLC (“Immudyne PR”), which was initially formed for the

purpose of a joint venture with the original owners of one of our skincare products, amended and restated its operating agreement

whereby we increased our ownership and voting interest in Immudyne PR to 78.2%.

Concurrent with the name change of the parent

company to Conversion Labs, Inc.

completed in 2018, Immudyne PR was renamed to Conversion Labs PR LLC (now known as “Conversion

Labs PR”).

On April 25, 2019, the operating agreement of Conversion Labs PR was amended and restated in its entirety after

acquiring the remaining minority interest in the Conversion Labs PR, which is now a wholly-owned subsidiary of the Company.

June 2018, Conversion Labs closed the strategic acquisition of 51% of LegalSimpli Software, LLC (“LegalSimpli”), a

software as a service (SaaS) application for converting, editing, signing and sharing PDF documents.

In addition to LegalSimpli’s

growth business model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company.

early 2019, we also launched a service-based business under the name Conversion Labs Media LLC, which was to be used to run e-commerce

marketing campaigns for other online businesses.

However, this business was discontinued in 2019 in order to focus on our core

business as well the expansion of our telehealth opportunities.

Company is a direct response healthcare company that provides a convenient, cost-effective and smarter way for consumers to access

high quality Over The Counter (OTC) products and prescription medications.

healthcare system is undergoing a paradigm

shift largely due to new technologies and the emergence of direct-to-consumer healthcare.

We believe the traditional model of

visiting a doctor’s office, receiving a physical prescription, visiting a neighborhood 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

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 (“LegalSimpli”).

Unless otherwise specified, all dollar amounts are expressed

in United States dollars.

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 changing

our name, we changed our trading symbol to LFMD.

In June 2018, the Company closed the strategic acquisition of 51% of LegalSimpli Software,

LLC (“LegalSimpli”), a software as a service (SaaS) application for converting, editing, signing and sharing PDF documents.

In addition to LegalSimpli Software’s growth business model, this acquisition added deep search engine optimization and search

engine marketing expertise to the Company.

Effective January 22, 2021, we consummated a transaction to restructure the ownership of LegalSimpli

through a series of agreements as further described below.

Overview and Strategy

are a direct-to-patient telehealth company that provides a smarter, cost-effective and convenient way of accessing healthcare.

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.

Direct-to-consumer telemedicine companies, like our Company, offer patients immediate and virtual treatment

from licensed physicians, and the home delivery of prescription medications, devices and diagnostics bundled with over-the counter

wellness products.

have built a platform that allows us to efficiently launch telehealth and wellness product lines 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 2019, we have made significant investments in our telemedicine technology platform which is the backbone of our physician network,

pharmacy provider, CRM system, and third-party advertising platforms.

This platform facilitates patient consultations, virtual

prescriptions, fulfillment, and follow-up consultations.

telehealth brands have been built with one singular focus in mind:

to become the leading provider of quality healthcare in a virtual

To this end, we work with our physicians, our advisors, and our patients to ensure that we can provide the ultimate quality

We believe the long-term success of our telehealth business will be driven primarily by the outstanding care we provide

in our services and product offerings.

Our current brand portfolio is comprised of telehealth brands respectively targeting three

market segments:

hair loss, men’s health, and emergency medications.

healthcare system is undergoing a paradigm shift, thanks to new technologies and the emergence of

direct-to-patient healthcare.

Direct-to-patient telemedicine companies, like our company, connect consumers to licensed healthcare professionals

for care across numerous indications, including concierge care, men’s sexual health and dermatology, among others.

telemedicine platform helps patients access licensed providers for diagnoses, virtual care, and prescription medications, often delivered

on a recurring basis.

In addition to our telemedicine offerings, we sell nutritional supplements and other over-the-counter products.

Many of our 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 us.

Our patient acquisition strategy combines strategic brand-building media placements and direct response advertising

methods across highly scalable marketing channels (i.e.

national TV, streaming TV, streaming audio, podcast, print, magazines, online

search, social media, and digital).

inception, we have helped more than 300,000 customers and patients, providing them greater access to high-quality, convenient, and affordable

care in all 50 states.

people can relate to the hassle and inconvenience of seeking medical care.

We believe that telemedicine platforms like ours will fundamentally

shift how patients 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 at greater than 29 days, according to a 2018 Merritt Hawkins Survey, and the United States projected to have

a 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

Our mission is to radically change healthcare with our portfolio of direct-to-patient telehealth 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.

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 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 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.

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 personalized telemedicine offering that gives consumers access

to virtual medical treatment and, when appropriate, a full line of oral and topical prescription medications for hair loss.

Our men’s

telemedicine brand, RexMD, currently offers treatment for erectile dysfunction, and will soon offer treatments for additional indications

present in men’s health.

We have built a platform that allows us to efficiently launch telehealth and wellness product lines 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.

addition to our telehealth business, we own 85.6% of PDFSimpli, a rapidly growing SaaS platform for converting, signing, editing and

sharing PDF documents.

Brand Portfolio

have built a strategic portfolio of wholly-owned telehealth brands that address large unmet needs in men’s health, hair loss and

We also are preparing to launch a concierge care offering under the LifeMD brand.

We continue to scale our offerings in

a calculated manner, ensuring that each brand or indication we launch will enhance current and future patients’

experiences with

our platform.

process across each brand and condition that we treat is to guide the patient through a medical intake process and product selection,

after which a licensed U.S.

physician within our network conducts a virtual consultation and, if appropriate, prescribes necessary prescription

medications and/or recommends over-the-counter products.

Prescription and over-the-counter products are filled by pharmacy fulfillment

partners and shipped directly to the patient.

The number of patients and customers we serve across the nation continues to increase at

a robust pace, with more than 300,000 individuals having purchased our products and services to date.

in 2017, ShapiroMD offers virtual medical treatment, prescription medications, patented over-the-counter products, and an FDA approved

medical device for male and female hair loss.

ShapiroMD has emerged as a leading destination for hair loss treatment across the United

States and has had more than 200,000 customers and patients since inception.

In Q1 2021, ShapiroMD greatly enhanced its telemedicine

offering for female hair loss with the addition of topical compounded medications to its product portfolio.

February 21, 2020, ConsumersAdvocate.org ranked ShapiroMD as the third best hair loss treatment provider in the United States, ahead

of other household brands such as Bosley, Keeps and Rogaine.

in 2019, RexMD is a men’s telehealth brand offering virtual medical treatment from licensed providers for a variety of men’s

health needs.

After consulting with a physician, if appropriate, we dispense and ship prescription medications and over-the-counter products

directly to patients.

We initially launched in the erectile dysfunction treatment market.

We intend to expand beyond the sexual health

market and launch additional treatment areas in men’s health in the first half of 2021.

Our vision for RexMD is to become a leading

telehealth destination for men.

in the first quarter of 2021, Nava MD is a female-oriented tele-dermatology and skincare brand that will offer virtual medical treatment

from dermatologists and other providers, and, if appropriate, prescription oral and compounded topical medications to treat many common

dermatological conditions.

In addition to the brand’s telemedicine offerings, NavaMD’s proprietary products leverage intellectual

property and proprietary formulations licensed from Restorsea, a leading medical grade skincare technology platform.

Restorsea’s

clinically proven skincare technology platform is the result of more than $50 million invested in R&D and intellectual 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 Drugs in Dermatology and Journal of Clinical and Aesthetic Dermatology.

Nava MD will be one

the first direct-to-consumer product lines to offer this advanced skincare technology.

Nava MD will be positioned as an online skincare

and telehealth brand that will offer tele-dermatology services to patients in 47 states.

iNR Wellness MD

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.

Owned Subsidiary:

is a PDF conversion software product, which was acquired through the purchase of 51% of the membership interests of LegalSimpli

a Puerto Rico limited liability company, which operates a marketing-driven software solutions business.

PDFSimpli enables users

to convert, edit and sign PDF documents.

Since its launch, PDFSimpli has converted or edited over 5 terabytes of documents for

customers from the legal, financial, real-estate and academic sectors.

of COVID-19 Pandemic

are closely monitoring how the spread of the COVID-19 pandemic caused by the novel coronavirus is affecting our employees, customers

and business operations.

We have developed preparedness plans to help safeguard the safety of our employees and customers, while

safely continuing business operations.

to the global spread of the outbreak, the severity of the pandemic in New York, California, and Puerto Rico where we have corporate

offices, and in line with guidance from public health officials, we have temporarily restricted access to our offices and implemented

a mandatory remote work policy during this period.

Our offices will remain closed until we are able to safely and responsibly

re-open them in accordance with governmental and public health guidance, as well as health and safety policies tailored to our

a result of the early measures we took in response to the COVID-19 pandemic to protect our employees and business operations,

our business has not been materially negatively impacted during these extraordinary times.

We have experienced relatively minor

impacts on our inventory availability and delivery capacity since the outbreak, none of which has materially impacted our ability

to service our customers.

We have taken measures to bolster key aspects of our supply chain to support our continued growth.

continue to work with our existing manufacturing, logistics and other supply chain partners to build key processes to ensure our

ability to service our customers.

are also carefully monitoring shifting consumer behavior from brick and mortar retail and physical healthcare offices to our online

We have observed continued strength in our e-commerce sales since the end of the quarter ended September 30, 2020, due

in part to changing consumer behavior during the COVID-19 pandemic and widespread awareness and acceptance of telemedicine.

businesses, such as ours, have benefitted from increased coverage and visibility due to quarantine measures and policies adopted

widely across the country.

We believe the increased awareness of telehealth is reflected in the rapid growth we are seeing across

our telehealth brands.

is an online software-as-a-service (SAAS) platform that allows users to create, edit, convert, sign and share PDF documents.

was acquired through the purchase of 51% of the membership interests of LegalSimpli Software, LLC, a Puerto Rico limited liability company,

which operates a marketing-driven software solutions business.

As of the end of 2020, PDFSimpli was ranked in the top 4,339 websites

globally, in which it was also ranked in the top 1,200 for specific countries with more than 9.5 million registrants globally.

its launch, PDFSimpli has converted or edited over 9 terabytes of documents for customers from the legal, financial, real-estate and

academic sectors.

PDFSimpli had over 62,600 active subscriptions as of the end of 2020.

Developments During the Quarter

and Resignations of Officers

Digital Officer

January 5, 2021, our board of directors appointed Mr.

Bryant Hussey as the Company’s Chief Digital Officer.

Bryant Hussey, age

45, combines over 20 years senior and executive level management with both direct-to-consumer and traditional e-commerce companies.

2018 to 2020, he was the Chief Digital Officer for AVS Products, LLC., a direct response nutraceutical company acting as Playboy’s

global licensee for sexual wellness supplements.

From 2009 to 2018 he was the Vice President of Marketing for Atlantic Coast Brands,

an omni-channel international beauty company which has serviced more than 10 million customers.

Bryant’s undergraduate studies

were in Economics at St.

Peters University and he also attended New York University completing professional studies programs in Integrated

Medical Officer

January 11, 2021, our board of directors appointed Dr.

Anthony Puopolo as the Company’s Chief Medical Officer (the “Appointment”).

Anthony Puopolo, age 49, combines over 20 years of experience in medicine and wellness.

In 2018 he founded Alpha Medical Group, where

he serves as president to present.

From September 2019 to December 2020, he served as a staff physician at Teledoc.

From July 2017 to

December 2020, he served as a regional medical director at Swift MD.

In January 2014 he founded the Integrative Wellness Medical Group,

where he remained until May 2017.

From August 2010 to May 2017, he served as a partner staff physician at Sharp-Rees Stealy Medical Group

(“Sharp-Rees”).

From September 2008 to July 2010, he served as afloat physician at Sharp-Rees.

From September 2005 to August

2008, he served at the mental health clinic of the 121 st General Hospital in South Korea, first as a chief of outpatient and

medical director of alcohol treatment center, then as chief of inpatient at the psychiatric ward.

From September 2004 to August 2005,

he served as a staff physician and chief of outpatient at the mental health clinic at the U.S.

military base of Camp Casey in South Korea.

He has an undergraduate degree from Tufts University and a Medical Degree from Boston University School of Medicine.

Business Officer

February 3, 2021, our board of directors appointed Corey Deutsch as our Chief Business Officer.

Corey Deutsch, age 27, has over 5 years

of experience in various healthcare finance roles.

In May 2020, Mr.

Deutsch founded a long only hedge fund focused exclusively on the

healthcare end-market.

From June 2019 through June 2020, Mr.

Deutsch served as an investment professional at Amulet Capital Partners,

a healthcare focused private equity firm.

From November 2018 to June 2019, Mr.

Deutsch was an investment professional for Arsenal Capital

Partners, a middle-market healthcare private equity firm.

From June 2016 to November 2018, Mr.

Deutsch was an investment banker at MTS

Health Partners, a boutique investment bank focused on the healthcare sector.

Deutsch is also currently an advisor for Heat Biologics,

an oncology focused pharmaceutical Company.

He received his undergraduate degree from the University of Pennsylvania, graduating Summa

Cum Laude with a B.A.

in economics.

Financial Officer

February 4, 2021, Mr.

Juan Manuel Piñeiro Dagnery submitted to the board of directors his resignation from his position as Chief

Financial Officer of the Company (the “Resignation”).

Dagnery did not resign as a result of any disagreement with the

Company on any matter relating to the Company’s operations, policies or practices.

Dagnery will continue to serve as an executive

of the Company, assuming the role of Chief Revenue Officer, effective on the date of the Resignation.

Dagnery resigned from his

position as Chief Revenue Officer on April 2, 2021.

the date of, and in connection with, the Resignation, the board of directors appointed Mr.

Marc Benathen as the Company’s Chief

Financial Officer.

Marc Benathen combines over 18 years of experience in financial, operational and consumer products/services senior

Previously, he had been involved in 6 companies in the consumer, technology and media industries holding positions including

Chief Financial Officer, Vice President and Director.

From 2017 through January 2021, Mr.

Benathen was the Chief Financial Officer for

Blink Holdings, Inc.

(dba Blink Fitness), a national fitness company.

From 2014 to 2017, he was Vice President of Finance for Blink Fitness.

From December 2010 to January 2014, he was Senior Manager of Corporate Finance of ANN, Inc., a NYSE-listed retail company that focused

on women’s fashion.

Benathen is also currently a director of Baruch College Alumni Association and past Trustee of the Baruch

College Fund, a charitable and alumni arm of Baruch College.

He has an undergraduate degree from Baruch College with Honors.

Software Restructuring Transaction

January 22, 2021, we consummated a transaction to restructure the ownership of LegalSimpli (the “LSS Restructuring”).

the consummation of the LSS Restructuring, CLPR will increase its ownership of LegalSimpli from 51% to approximately 85.58% on a fully

diluted basis.

Concurrently,

in furtherance of the LSS Restructuring, CVLB PR entered into two Membership Interest Purchase Agreements (the “Founding Members

MIPAs”) with two founding members of LSS (the “Founding Members”) whereby CVLB PR purchased from the Founding Members

an aggregate of 2,183 membership interests of LSS for an aggregate purchase price of $225,000, paid in December 2020.

furtherance of the LSS Restructuring, CVLB PR entered into a Membership Interest Purchase Agreement with LSS, (the “CVLB PR MIPA”),

pursuant to which CVLB PR purchased 12,000 membership interests of LSS 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 CVLB PR.

Payment for the first tranche of $100,000 was made upon execution of the CVLB PR MIPA.

Payments for the second

and third tranches are due on the 60-day anniversary and the 120-day anniversary of the LSS Effective Date.

the consummation of the LSS Restructuring, CVLB PR increased its ownership of LSS from 51% to approximately 85.58% on a fully diluted

LSS entered into an amendment to its operating agreement (the “LSS Operating Agreement Amendment”) to reflect the

change in ownership.

with the LSS Restructuring, CVLB 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 CVLB PR granted options to purchase membership interest units of LSS.

Upon vesting, the Fitzpatrick Options and the

Pathak Options provide for the potential re-purchase of up to an additional 13.25%% of LSS by Fitzpatrick and Pathak in the aggregate

with CVLB PR ownership ratably reduced to approximately 72.98%.

Fitzpatrick Option Agreement grants Sean Fitzpatrick the option to purchase 10,300 membership interest units of LSS 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

LSS achieving $2,500,000 of gross sales in any fiscal quarter (ii) 3,434 membership interests upon LSS achieving $4,000,000 of gross

sales in any fiscal quarter and (iii) 3,434 membership interests upon LSS achieving $8,000,000 of gross sales with a ten percent (10%)

net profit margin in any fiscal quarter.

Pathak Options shall vest in accordance with the following (i) 700 membership interests upon LSS achieving $2,500,000 of gross sales

in any fiscal quarter (ii) 700 membership interests upon LSS achieving $,4,000,000 of gross sales in any fiscal quarter and (iii) 700

membership interests upon LSS 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.

of Operations

of the Three Months Ended September 30, 2020 to the Three Months Ended September 30, 2019

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

September 30, 2019:

revenues, net

of product revenue

of software revenue

cost of revenue

& marketing expenses

and administrative expenses

service expenses

from operations

$ (20,532,507 )

income (expenses)

from operations before provision for income taxes

$ (20,823,603 )

$ (1,104,642 )

loss attributable to noncontrolling interests

loss attributable to Conversion Labs, Inc.

$ (20,622,370 )

for the three months ended September 30, 2020 were approximately $11 million, an increase of 252% compared to approximately $3.1

million for the three months ended September 30, 2019.

The increase in revenues was attributable to both the increase in product

revenue of 283% and an increase in software revenue of 136%.

Product revenue accounts for 86% of total revenue and has increased

in the three months ended September 30, 2020 due to an increase in online sales demand, with the majority of this increase attributable

to the nationwide lockdown resulting from COVID-19 driving increased consumer online purchases.

Software revenue accounts for

14% of total revenue and has steadily increased quarter over quarter due to a combination of higher demand, increased market awareness,

continued marketing campaign expansion, as well as the effects of the nationwide lockdown resulting from COVID-19.

cost of revenues consist of the cost of (1) product revenues, which primarily include product material costs and fulfillment costs

directly attributable to the production of our products held for sale and (2) the cost of software revenue consisting primarily

of credit card processing fees and information technology fees related to providing the services made available on our online

Total cost of revenue increased by approximately 302% to approximately $2.7 million for the three months ended September

30, 2020 compared to approximately $0.7 million for the three months ended September 30, 2019.

The combined cost of revenue increase

was due to increased product costs related to our improved product sale volumes, and the related increases in merchant and other

processing fees incurred due to our combined higher sales volumes when compared to the prior year’s three month period September

profit increased by approximately 238% to approximately $8.3 million for the three months ended September 30, 2020 compared to

approximately $2.4 million for the three months ended September 30, 2019, as a result of increased combined sales, partially offset

by a percentage increases in our costs to produce those revenues, principally attributable to increased product costs.

costs increased to 30% of associated product revenues experienced during the three months ended September 30, 2020, from 25% of

associated product revenues during the three month period ended September 30, 2019.

Total gross profit as a percentage of total

revenues was 75% for the three months ended September 30, 2020 compared to 78% for the three months ended September 30, 2019.

The absolute decrease in total gross margin of 3% (relative decrease of 4%) was primarily due to increased product costs set forth

immediately above resulting from the impact of COVID-19 related disruptions to our product supply chain causing increased costs

to procure our production inputs.

Months Ended September 30,

& marketing expenses

and administrative expenses

service expenses

operating expenses

expenses for the three months ended September 30, 2020 were approximately $28.8 million, as compared to approximately $3.4 million

for the three months ended September 30, 2019.

This represents an increase of approximately 742%, or $25.4 million.

is primarily attributable to the following:

and marketing expenses:

This mainly consists of online marketing and advertising expenses.

During the three months ended September

30, 2020, the Company had an increase of approximately $8.5 million in selling and marketing costs resulting from additional

sales and marketing initiatives to drive the current quarter’s sales growth, and is expected to maintain sustained revenue

growth throughout the remaining balance of the year ending December 31, 2020, and beyond, based on the Company’s recurring

revenue subscription based sales model.

and administrative expenses:

During the three month period ended September 30, 2020, stock based compensation was $16,331,558,

(1) with the majority related to a restricted share issuance liability attributable to the attainment of a performance

threshold in the period, (2) coupled with the issuance expense associated with the probability of future performance threshold

This category also consists of payroll expenses for executive management, amortization expense and legal and professional

During the three months ended September 30, 2020, the Company had an increase of approximately $16.7 million in general

and administrative expenses, primarily related to the increase in stock-based compensation costs referenced above, and other

increases in infrastructure expenses incurred to support the sales volume increases.

operating expenses:

This mainly consists of general office supplies, rent, insurance, bank charges and IT service costs for

our online products.

During the three months ended September 30, 2020, the Company had an increase of approximately $120,000,

primarily related to the general cost environment necessary to support the Company’s sales growth, coupled with a bad

debt charge of $58,000 recognized on the settlement of a sales commission receivable write-off which became uncollectible

during the three months ended September 30, 2020.

service expenses:

This consists of payroll and benefit expenses related to the Company’s customer service department

located in Puerto Rico.

During the three months ended September 30, 2020, the Company had an increase of approximately $90,000,

primarily related to increases in headcount in the Company’s customer service department.

This mainly relates to third-party technology services for developing and maintaining our online platforms.

the three months ended September 30, 2020, the Company had an increase of approximately $57,000, primarily resulting from

technology platform improvements for LegalSimpli and amortization expenses at CLPR.

Months Ended September 30,

expense for the three months ended September 30, 2020 increased by approximately $160,000 compared to the three months ended September

The increase in other expense, interest expense, is primarily attributable to increased debt.

of the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

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

September 30, 2019:

revenues, net

of product revenue

of software revenue

cost of revenue

& marketing expenses

and administrative expenses

service expenses

from operations

financial results for the three months ended March 31, 2021 are summarized as follows in comparison to the three months ended March 31,

March 31, 2021

March 31, 2020

Product revenues, net

Software revenues, net

Service revenues, net

Total revenues, net

Cost of product revenue

Cost of software revenue

Total cost of revenue

Selling & marketing expenses

General and administrative expenses

Other operating expenses

Customer service expenses

Development costs

Total expenses

Operating loss

$ (11,918,337 )

$ (1,740,505 )

from operations before provision for income taxes

Other income, net

Net loss before provision for income taxes

$ (11,872,886 )

$ (2,533,544 )

loss attributable to noncontrolling interests

loss attributable to Conversion Labs, Inc.

Provision for Income taxes

Net loss attributable to noncontrolling interests

Net loss attributable to LifeMD, Inc.

$ (11,602,383 )

$ (2,394,728 )

for the nine months ended September 30, 2020 were approximately $24.4 million, an increase of 186% compared to approximately $8.5

million for the nine months ended September 30, 2019.

The increase in revenues was attributable to both the increase in product

revenue of 177% and an increase in software revenue of 241%.

Product revenue accounts for 83% of total revenue and has increased

in the nine months ended September 30, 2020 due to an increase in online sales demand, with the majority of this increase attributable

to the nationwide lockdown resulting from COVID-19 driving increased consumer online purchases.

Software revenue accounts for

17% of total revenue and has steadily increased year over year due to a combination of higher demand, increased market awareness,

continued marketing campaign expansion, as well as the effects of the nationwide lockdown resulting from COVID-19.

cost of revenues consist of the cost of (1) product revenues, which primarily include product material costs and fulfillment costs

directly attributable to the production of our products held for sale and (2) the cost of software revenue consisting primarily

of credit card processing fees and information technology fees related to providing the services made available on our online

Total cost of revenue increased by approximately 232% to approximately $6.7 million for the nine months ended September

30, 2020 compared to approximately $2 million for the nine months ended September 30, 2019.

The combined cost of increase was

due to increased product costs related to our improved product sale volumes, and the related increases in merchant and other processing

fees incurred due to our combined higher sales volumes when compared to the prior year’s nine month period September 30,

profit increased by approximately 172% to approximately $17.7 million for the nine months ended September 30,2020 compared to

approximately $6.5 million for the nine months ended September 30, 2019, as a result of increased combined sales, partially offset

by a percentage increases in our costs to produce those revenues, principally attributable to increased product costs.

costs increased to 31% of associated product revenues experienced during the nine months ended September 30, 2020, from 25% of

associated product revenues during the nine month period ended September 30, 2019.

for the three months ended March 31, 2021 were approximately $18.2 million, an increase of 323% compared to approximately $4.3 million

for the three months ended March 31, 2020.

The increase in revenues was attributable to both the increase in product revenue of 349%

and an increase in software revenue of 264%.

Product revenue accounts for 73% of total revenue and has increased in the three months

ended March 31, 2021 due to an increase in online sales demand, with the majority of the growth of our telemedicine brands, RexMD and

Software 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.

cost of revenues consists of the cost of (1) product revenues, which primarily include product material costs and fulfillment costs directly

attributable to the production of our products held for sale and (2) the cost of software 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

144% to approximately $3.3 million for the three months ended March 31, 2021 compared to approximately $1.3 million for the three months

ended March 31, 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 March 31, 2020.

profit increased by approximately 403% to approximately $14.9 million for the three months ended March 31, 2021 compared to approximately

$3.0 million for the three months ended March 31, 2020, as a result of increased combined sales, and a percentage decrease in costs to

produce product revenues.

Product costs decreased to 17% of associated product revenues during the three months ended March 31, 2021,

from 29% of associated product revenues during the three months ended March 31, 2020.

Gross profit as a percentage of revenues was 82%

73% for the nine months ended September 30, 2020 compared to 76% for the nine months ended September 30, 2019.

The absolute decrease

of 3.8% (relative decrease of 4.9%) in gross profit was principally attributable to higher product costs incurred during the nine

months ended September 30, 2020, resulting from the use of new suppliers, at slightly higher costs, resulting from the impact

of COVID-19 related disruptions to our product supply chain, causing increased costs to procure our production inputs.

suppliers were also required to supplement our increased production needs to meet our increased product demand.

Months Ended September 30,

and marketing expenses

and administrative expenses

service expenses

operating expenses

expenses for the nine months ended September 30, 2020 were approximately $43.2 million, as compared to approximately $8.9 million

for the nine months ended September 30, 2019.

for the three months ended March 31, 2021 compared to 69% for the three months ended March 31, 2020.

The increase of 13% in gross profit

was principally attributable to lower product costs and more stringent inventory management during the three months ended March 31, 2021.

During the three months ended March 31, 2020, product costs from the use of new suppliers, at higher costs, resulted from the impact

of COVID-19 related disruptions to product supply chain.

This increase has been contained and reduced for 2021, thus far.

Three Months Ended March 31,

Selling & marketing expenses

General and administrative expenses

Other operating expenses

Customer service expenses

Development costs

Total expenses

expenses for the three months ended March 31, 2021 were approximately $26.8 million, as compared to approximately $4.7 million for the

three months ended March 31, 2020.

This represents an increase of 470%, or $22.1 million.

The increase is primarily

attributable to:

The increase is primarily attributable to:

and marketing expenses:

This mainly consists of online marketing and advertising expenses.

During the nine months ended September

30,2020, the Company had an increase of approximately $16.1 million, or 288% in selling and marketing costs resulting from

additional sales and marketing initiatives to drive the current nine months ended September 30, 2020 sales growth reported

above, and is expected to maintain sustained revenue growth throughout the remaining balance of the year ending December 31,

2020, and beyond in Fiscal 2021, based on the Company’s recurring revenue subscription based sales model.

During the three months ended March 31,

2021, the Company had an increase of approximately $15.9 million, or 579% 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.

and administrative expenses:

During the nine month period ended September 30, 2020, stock based compensation was $16.9 million,

(1) with the majority related to a restricted share issuance liability attributable to the attainment of a performance threshold

in the period (specifically in the three months ended September 30, 2020), (2) coupled with the issuance expense associated

with the probability of future performance threshold attainment.

This category also consists of payroll expenses for executive

management, amortization expense and legal and professional fees.

During the nine months ended September 30, 2020, the Company

has had an increase of approximately $18.1 million in general and administrative expenses, primarily related to the increase

in stock-based compensation costs referenced above, and other increases in infrastructure expenses incurred to support the

sales volume increases.

During the period ended March 31, 2021, stock-based compensation was $2.3 million, with the majority

related to stock compensation expense attributable to the attainment of a performance threshold in the period.

This category also

consists of merchant processing fees, payroll expenses for executive management, amortization expense and legal and professional

During the three months ended March 31, 2021, the Company has had an increase of approximately $5.3 million in general and

administrative expenses, primarily related to the increase in stock-based compensation costs referenced above, and other increases

in infrastructure expenses incurred to support the sales volume increases.

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, 2020, the Company had a decrease of approximately $36,000, primarily related to

increases in the general cost environment necessary to support the Company’s sales growth, coupled with a bad debt charge

of $58,000 recognized on the settlement of a sales commission receivable write-off which became uncollectible during the nine

months ended September 30, 2020, offset by decreases in royalty payouts and a decrease in an IT service subscription that

was terminated in early 2020.

the three months ended March 31, 2021, the Company had an increase of approximately $737K, or 592%, primarily related to increases

in the general cost environment necessary to support the Company’s sales growth.

service expenses:

This consists of payroll and benefit expenses related to the Company’s customer service department

located in Puerto Rico.

During the nine months ended September 30, 2020, the Company had an increase of approximately $80,000,

This consists of payroll and benefit expenses related to the Company’s customer service department located

in Puerto Rico and South Carolina.

During the three months ended March 31, 2021, the Company had an increase of approximately $127K,

primarily related to increases in headcount in the Company’s customer service department.

This mainly relates to third-party technology services for developing and maintaining our online platforms.

the nine months ended September 30, 2020, the Company had an increase of approximately $131,000, primarily resulting from

technology platform improvements for LegalSimpli and amortization expenses at CLPR.

Months Ended September 30,

expense for the nine months ended September 30, 2020 increased by $882,054 compared to the nine months ended September 30, 2019.

The increase in other expense, interest expense, is primarily attributable to increased debt.

$ (4,782,914 )

During the three

months ended March 31, 2021, the Company had an increase of approximately $114K, primarily resulting from technology platform improvements

and amortization expense.

(Expenses) / Income

Three Months Ended March 31,

Interest (expense), net

Gain on debt forgiveness

expense, which consists of interest expense and gain on debt forgiveness of PPP loans decreased by approximately $838K and is

included in other income for the period ended March 31, 2021.

For the period ended March 31, 2020 the balance consisted of interest expense

primarily and loss on debt settlement attributable to the increased use of debt during 2020 and the acceleration of debt discount.

March 31, 2021

December 31, 2020

Current assets

Current liabilities

Working capital

$ (1,426,701 )

capital (deficit) had a negative turn of approximately $3.6 million during the nine months ended September 30, 2020.

to this decline in working capital included current assets increasing by approximately $1.9 million for the nine months ended

September 30,2020.

This increase in current assets is attributable to a decrease in cash and cash equivalents of approximately

$190,000, being offset by increases in accounts receivable (approximately $317,000), and inventory and product deposits (combined

at approximately $1.9 million).

Current liabilities increased by $5.5 million which was primarily attributable to an increase

in accounts payable and accrued liabilities as a result of the Company extending payables and credit terms with vendors during

the nine months ended September 30, 2020.

capital increased by approximately $3.8 million during the period ended March 31, 2021.

The increase in current assets is primarily

attributable to an increase in cash of approximately $4.2 million, an increase in accounts receivable of approximately $0.7 million,

and inventory and product deposits (combined increase of approximately $0.9 million).

Current liabilities increased by $1.9 million,

which was primarily attributable to an increase in accounts payable and accrued liabilities of $1.6 million as a result of the

Company extending payables and credit terms with vendors and an increased in deferred revenue of $0.4 million during the period ended

March 31, 2021.

and Capital Resources

Three Months Ended March 31,

$ (11,872,886 )

$ (2,533,544 )

cash (used in) provided by operating activities

cash used in investing activities

cash provided by financing activities

(decrease) increase in cash

inception, the Company has funded operations through the collections from revenues provided by the sales of its products, issuances

of common and preferred stock equivalents, receipt of loans and advances from officers and directors and the issuance of convertible

notes to third-party investors.

cash used in operating activities was approximately $5.6 million for the nine months ended September 30, 2020, as compared with

net cash provided by operating activities of approximately $92,000 for the nine months ended September 30, 2019, the significant

factors contributing to the cash used in operations were the nine month, September 30, 2020 loss of approximately $26.8 million

(inclusive of $16.9 million in stock based compensation charges) , principally offset by the Company’s increase in accounts

payable of approximately $4.2 million.

cash used in investing activities for the nine months ended September 30, 2020 was approximately $731,000, as compared with net

cash used in investing activities of $500,000 for the nine months ended September 30, 2019.

Net cash (used in) provided by operating activities

Net cash (used in) investing activities

was primarily due to continued payments on the Company’s purchase of LegalSimpli of $400,000 and the cash paid for capitalized

software costs of approximately $331,000.

cash provided by financing activities for the nine months ended September 30, 2020 was $6,135,981, as compared with net cash provided

by financing activities of $1,008,303 for the nine months ended September 30, 2019.

During the nine months ended September 30,

2020, financing activities consisted of proceeds from notes payable of $2,350,000, proceeds of $2,892,500 from the issuance of

mezzanine equity, and cash receipts for share issuances of $2,088,349, cash proceeds from the sales of warrants of $622,763 and

proceeds from the exercise of stock options of $300,400, which were offset by the repayment of notes payable of approximately

$2,500,000, distributions of noncontrolling interests of $121,223 and payment for debt issuance costs of $15,000.

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

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 loans and advances from officers and directors and the issuance of convertible notes to third-party

cash used in operating activities was approximately $9.1 million for the three months ended March 31, 2021, as compared with net

cash provided by operating activities of approximately $661K three months ended March 31, 2020.

The significant factors contributing

to the cash used in operations during the three months ended March 31, 2021, include the net loss of approximately $11.8 million

(inclusive of $2.3 million in non-cash, stock-based compensation charges), principally offset by the Company’s increase in accounts

payable of approximately $1.6 million.

cash used in investing activities for the three months ended March 31, 2021 was approximately $49K, as compared with net cash used in

investing activities of $468K for the three months ended March 31, 2020.

Net cash used in investing activities was due to cash paid for

capitalized software costs of approximately $49K.

cash provided by financing activities for the three months ended March 31, 2021 was approximately $13.4 million as compared with

net cash used in financing activities of approximately $942K for the three months ended March 31, 2021.

During the three months ended

March 31, 2021, financing activities consisted of net proceeds from private placement of $13.5 million, investors purchased 608,696,

at a purchase price of $23.00 per share for aggregate gross proceeds of $14 million offset by the purchase of additional membership

interest of LegalSimpli.

and Capital Resources Outlook

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from officers and directors.

The Company’s continued operations are dependent upon obtaining an increase in its sale volumes

and the continued financial support from officers and directors, obtaining funding from third-party sources or the issuance of

additional shares of common stock.

See Subsequent Event Note 9 for a further discussion of a private placement offering, which

closed on November 3, 2020, yielding approximately $13.2 million in net proceeds to the Company after deduction of placement fees

and other offering expenses.

The Company intends to use the net proceeds for customer acquisition, as well as for general corporate

Concern Evaluation

accompanying unaudited financial statements have been prepared on the basis that the Company will continue as a going concern,

which assumes the realization of assets and the satisfaction of liabilities in the normal course of business.

As of September

30, 2020, the Company has an accumulated deficit approximating $47.9 million and has experienced significant losses from

its operations.

on the Company’s cash balance as of September 30, 2020, and projected cash needs, management estimates that it will need

an additional $7.2 million through the next 12 months.

The Company has also closed a private placement offering, discussed

in “Liquidity”

above, and further in Note 9, “Subsequent Events”.

Although management has been successful

to date 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.

Based on these circumstances,

management has determined that these conditions raise substantial doubt about the Company’s ability to continue as a going

The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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.

See Note 5 for a further discussion of a private placement offering, which closed

on February 11, 2021, yielding $14 million in gross proceeds to the Company before deduction of placement fees and other offering expenses,

resulting in $13.5 million in net proceeds.

The Company intends to use the net proceeds for customer acquisition, as well as for general

corporate purposes.

Accounting Policies and Estimates

significant accounting policies are more fully described in the notes to our financial statements.

We believe that the accounting

policies below are critical for one to fully understand and evaluate our financial condition and results of operations.

significant accounting policies are more fully described in the notes to our unaudited condensed consolidated financial statements.

believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results

of operations.

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

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the transaction price

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;

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

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 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.

its product-based contracts with customers, the Company records an estimate for provisions of discounts, returns, allowances,

customer rebates and other adjustments for its product shipments, and are reflected as contra revenues in arriving 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.

Company, through its majority-owned subsidiary LegalSimpli, 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.

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 time period of the subscription purchased.

The Company allows the customer

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 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

As of September 30, 2020 and December 31, 2019, the Company has accrued contract liabilities, as deferred revenue, of approximately

$413,000 and $110,000, respectively, which represent obligations on in-process monthly or yearly contracts with customers and

a portion attributable to the yet to be recognized initial 14-day trial period collections.

discounts, returns and rebates on product revenues during the nine months ended September 30, 2020 and 2019 approximated $2.2

million and $1 million, respectively.

Customer discounts and allowances on software revenues during the nine months ended September

30, 2020 and 2019 approximated $545,000 and $241,000, respectively.