What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-10 compared with 2021-08-13 · 427 added, 476 removed, 267 unchanged (77% of the section changed)

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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,” “believe,”

“estimate,” “expect,” “forecast,” “future,” “intend,” “plan,”

“predict,” “project,” “target,” “potential,” “will,” “would,”

“could,” “should,” “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

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.

as amended (the “Exchange Act”).

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.

herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,”

“future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,”

“will,” “would,” “could,” “should,” “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 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

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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.

United States, the Company does not have a duty to update any of the forward-looking statements to conform these statements to actual

condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States

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include, by way of example and without limitation:

changes in the market acceptance of our products;

increased levels of competition;

changes in political, economic or regulatory conditions generally

and in the markets in which we operate;

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

our ability to maintain and develop relationships

with customers and suppliers;

our ability to quickly and effectively respond to new technological

developments;

our ability to protect our trade secrets or other proprietary rights,

operate without infringing upon the proprietary rights of others and prevent others from infringing on our proprietary rights;

our ability to successfully integrate acquired businesses or new brands;

the impact of competitive products and pricing;

supply constraints or difficulties;

general economic and business conditions;

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

our ability to continue as a going concern;

our need to raise additional funds in the future;

in the market acceptance of our products;

levels of competition;

in political, economic or regulatory conditions generally and in the markets in which we operate;

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;

ability to quickly and effectively respond to new technological developments;

ability to protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others

and prevent others from infringing on our proprietary rights;

ability to successfully integrate acquired businesses or new brands;

impact of competitive products and pricing;

constraints or difficulties;

economic and business conditions;

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

ability to continue as a going concern;

need to raise additional funds in the future;

ability to successfully recruit and retain qualified personnel;

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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”).

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

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

On July 15, 2021, LegalSimpli Software,

LLC, changed its name to WorkSimpli Software, LLC (“WorkSimpli”).

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.

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change, we changed our trading symbol to LFMD.

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

LLC (“LegalSimpli”), a company that provides a software as a service (SaaS) for converting, editing, signing and sharing

PDF documents called PDFSimpli.

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

through a series of agreements as further described below.

In June 2018, the Company closed the strategic acquisition of 51% of WorkSimpli, a company

that provides a software as a service (SaaS) for converting, editing, signing and sharing PDF documents called PDFSimpli.

Effective January

22, 2021, we consummated a transaction to restructure the ownership of WorkSimpli through a series of agreements as further described

Overview and Strategy

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patients to access healthcare.

We believe the traditional model of visiting a doctor’s office, 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 telehealth.

Direct-to-patient telehealth companies, like LifeMD, Inc., connect consumers digitally

to licensed healthcare professionals for care across various needs, such as virtual primary care, men’s sexual health, dermatology,

telemedicine platform provides patients access to licensed providers for diagnoses, virtual care, and prescription medications,

often delivered on a recurring basis.

In addition to our telemedicine technology offerings, we sell nutritional supplements and

other over-the-counter products.

Many of our products are available on a subscription basis, where patients 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 customer acquisition strategy combines strategic brand-building media placements, influencer

partnerships, and direct response advertising methods across highly scalable marketing channels (i.e.

national TV, streaming TV, streaming

audio, YouTube, podcasts, Out of Home, print, magazines, online search, social media, and digital).

inception, we have helped more than 360,000 customers and patients, providing them greater access to high-quality, convenient, and

affordable care in all 50 states.

Our telemedicine technology revenue increased 208% in 2020 vs.

the prior year.

Total revenue

from recurring subscriptions is approximately 80%.

In addition to our telehealth technology business, we own 85.6% of LegalSimpli,

which operates PDFSimpli, a rapidly growing SaaS platform for converting, signing, editing and sharing PDF documents.

This business

has also seen 165% year over year growth, with recurring revenue of 100%.

We believe the traditional model of visiting a doctor’s office, 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 telehealth.

Direct-to-patient telehealth companies, like LifeMD, Inc., connect consumers digitally to licensed healthcare

professionals for care across various needs, such as virtual primary care, men’s sexual health, dermatology, and others.

telemedicine platform provides patients access to licensed providers for diagnoses, virtual care, and prescription medications, often

delivered on a recurring basis.

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

Many of our products are available on a subscription basis, where patients 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

Our customer acquisition strategy combines strategic brand-building media placements, influencer partnerships, and direct response

advertising methods across highly scalable marketing channels (i.e.

national TV, streaming TV, streaming audio, YouTube, podcasts, Out

of Home, print, magazines, online search, social media, and digital).

inception, we have helped more than 420,000 customers and patients, providing them greater access to high-quality, convenient, and affordable

care in all 50 states.

Our telehealth revenue increased 135% for the nine months ended September 30, 2021 as compared to the nine months

ended September 30, 2020.

Total revenue from recurring subscriptions is approximately 90%.

In addition to our telehealth business, we

own 85.6% of WorkSimpli, which operates PDFSimpli, a rapidly growing SaaS platform for converting, signing, editing and sharing PDF documents.

This business has also seen 331% year over year revenue growth, with recurring revenue of 98%.

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

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shift how a provider’s patients perceive and access healthcare in the United States, by necessity and by preference.

the average wait time to see a physician in the United States now greater than 29 days and the United States projected significant shortfall

of licensed physicians by 2030, we believe the U.S.

With the average

wait time to see a physician in the United States now greater than 29 days and the United States projected 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 outcomes.

is to radically change healthcare with our portfolio of direct-to-patient telehealth technology brands that encompass on-demand

medical treatment, online pharmacy and over-the-counter products.

Timely and convenient access to

healthcare and prescription medications is a critical factor in improving quality of care and patient outcomes.

Our mission is to radically

change healthcare with our portfolio of direct-to-patient telehealth technology 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.

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shift a substantial portion of this market to an online, virtual format.

Our telemedicine 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 a

provider’s 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.

Our telemedicine 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 a provider’s

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.

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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 telehealth platform offering that gives consumers access

to virtual medical treatment from their providers and, when appropriate, a full line of oral and topical prescription medications

for hair loss.

Our men’s brand, RexMD, currently offers access to provider-based treatment through telehealth for men’s

health conditions, currently providing prescription medications and OTC products for chronic conditions such as sexual health and hair

Rex MD has recently expanded its services to provide access to primary care and will soon offer treatments for additional chronic

indications present in men’s health.

We have built a platform that allows us to efficiently launch telehealth brands and offerings

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 LegalSimpli, which operates PDFSimpli, a rapidly growing SaaS platform for

converting, signing, editing and sharing PDF documents.

loss, FDA approved OTC minoxidil, an FDA-cleared medical device, and now a telehealth platform offering that gives consumers access to

virtual medical treatment from their providers and, when appropriate, a full line of oral and topical prescription medications for hair

Our men’s brand, RexMD, currently offers access to provider-based treatment through telehealth for men’s health conditions,

currently providing prescription medications and OTC products for chronic conditions such as sexual health and hair loss.

recently expanded its services to provide access to primary care and will soon offer treatments for additional chronic indications present

in men’s health.

We have built a platform that allows us to efficiently launch telehealth brands and offerings 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 WorkSimpli, which operates PDFSimpli, a rapidly growing SaaS platform for converting,

signing, editing and sharing PDF documents.

Brand Portfolio

have built a strategic portfolio of wholly-owned telemedicine platform brands that address large unmet needs in men’s health,

hair loss and dermatology.

LifeMD is also preparing to offer administrative support to various professional entities that

will provide a direct concierge medicine offering to patients 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 we treat is to guide the provider’s patient through a medical intake process

and product selection, after which a licensed U.S.

physician within our contracted network conducts a virtual consultation and,

if appropriate, prescribes necessary prescription medications and/or recommends over-the-counter products.

Prescription medications 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 360,000 individuals having purchased our

products and services to date.

in 2017, ShapiroMD offers access to virtual medical treatment, prescription medications, patented over-the-counter products, and

an FDA approved medical device for male and female hair loss through our telemedicine platform.

ShapiroMD has emerged as a leading

destination for hair loss treatment across the United States and has served more than 200,000 customers and patients since inception.

In Q1 2021, ShapiroMD greatly enhanced its offerings for female hair loss treatment 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 platform brand offering access to virtual medical treatment for a variety of

men’s health needs.

After treatment from a licensed physician, if appropriate, we dispense and ship prescription medications and

over-the-counter products directly to a provider’s patients.

Since RexMD’s initial launch in the erectile dysfunction

treatment market, it has expanded into additional indications, including but not limited to, premature ejaculation and hair loss.

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 brand that offers access to virtual medical treatment

from dermatologists and other providers, and, if appropriate, prescription oral and compounded topical medications to treat dermatological

have built a strategic portfolio of wholly-owned telemedicine platform brands that address large unmet needs in men’s health, hair

loss and dermatology.

LifeMD is also preparing to offer administrative support to various professional entities that will provide a direct

concierge medicine offering to patients 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 we treat is to guide the provider’s patient through a medical intake process and product

selection, after which a licensed U.S.

physician within our contracted network conducts a virtual consultation and, if appropriate, prescribes

necessary prescription medications and/or recommends over-the-counter products.

Prescription medications 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 420,000 individuals having purchased our products and services to date.

in 2017, ShapiroMD offers access to virtual medical treatment, prescription medications, patented doctor formulated over-the-counter

products, and an FDA approved medical device for male and female hair loss through our telemedicine platform.

ShapiroMD has emerged as

a leading destination for hair loss treatment across the United States and has served more than 200,000 customers and patients since

inception with a 4.9 star Trustpilot rating.

In Q1 2021, ShapiroMD greatly enhanced its offerings for female hair loss treatment with

the addition of topical compounded medications to its product portfolio.

in 2019, RexMD is a men’s telehealth platform brand offering access to virtual medical treatment for a variety of men’s health

After treatment from a licensed physician, if appropriate, we dispense and ship prescription medications and over-the-counter

products directly to a provider’s patients.

Since RexMD’s initial launch in the erectile dysfunction treatment market, it

has expanded into additional indications, including but not limited to, premature ejaculation and hair loss.

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 brand that offers access to virtual medical treatment from

dermatologists and other providers, and, if appropriate, prescription oral and compounded topical medications to treat dermatological

conditions such as anti-aging and acne.

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first direct-to-patient brands to offer this advanced skincare technology.

Nava MD offers access to tele-dermatology services

to a provider’s patients in 47 states.

Nava MD offers access to tele-dermatology services to a provider’s

patients in all 50 states.

iNR Wellness MD

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operates PDFSimpli, an online software-as-a-service (SAAS) platform that allows users to create, edit, convert, sign and share PDF documents.

LegalSimpli 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.

In addition to LegalSimpli’s growth business

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

On January 22, 2021,

the Company consummated a transaction and increased its ownership of LegalSimpli to 85.6%.

of the end of 2020, LegalSimpli was ranked in the top 4,339 websites globally, in which it was also ranked in the top 1,200 for specific

WorkSimpli was acquired through the purchase of 51% of the membership interests of WorkSimpli Software, LLC, a Puerto Rico limited liability

company, which operates a marketing-driven software solutions business.

In addition to WorkSimpli’s growth business model, this

acquisition added deep search engine optimization and search engine marketing expertise to the Company.

On January 22, 2021, the Company

consummated a transaction and increased its ownership of WorkSimpli to 85.6%.

of September 30, 2021, WorkSimpli was ranked in the top 4,232 websites globally, in which it was also ranked in the top 563 for specific

countries with more than 14 million registrants globally.

Since its launch, LegalSimpli has converted or edited over 9 terabytes of

documents for customers from the legal, financial, real-estate and academic sectors.

LegalSimpli had over 62,600 active subscriptions

as of the end of 2020.

Developments During the Three Months Ended June 30, 2021

June 1, 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional

investor (the “Purchaser”), pursuant to which the Company sold and issued:

(i) a senior secured redeemable debenture

(the “Debenture”) in the aggregate principal amount of $15.0 million (the “Aggregate Principal

Amount”), and (ii) warrants to purchase up to an aggregate of 1,500,000 shares of the Company’s common stock at an

exercise price of $12.00 per share (the “Warrant”) of which 500,000 warrants were issued to the Purchaser upon closing

with the remaining 1,000,000 warrants only issued to the Purchaser in increments of 500,000 if the Debenture remains outstanding for

twelve and twenty four months, respectively, following the closing date of the Purchase Agreement.

The Warrant has a term of

three years, and the Debenture has a maturity date of three years.

The Debenture may be paid fully or in part by the Company at any

time prior to maturity with penalty to the Company.

The Company received gross proceeds of $15.0 million and intends to use such

proceeds for working capital, growth investment and general corporate purposes.

June 8, 2021, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B.

Riley Securities,

Riley”) and Cantor Fitzgerald & Co.

(“Cantor”, and collectively the “Agents”) relating

to the sale of its common stock.

In accordance with the terms of the Sales Agreement, the Company may, but is not obligated to, offer

and sell, from time to time, shares of common stock having an aggregate offering price of up to $60 million, through or to the Agents,

acting as agent or principal.

Sales of common stock, if any, will be made by any method permitted that is deemed an “at the market

offering” as defined in Rule 415 under the Securities Act.

The Company intends to use any

net proceeds from the sale of securities for our operations and for other general corporate purposes, including, but not limited to,

capital expenditures, general working capital and possible future acquisitions.

There were no sales of shares of common stock under the

Sales Agreement as of June 30, 2021.

and Resignations of Officers

Financial Officer

On April 2, 2021 (the “Effective

Juan Manuel Piñeiro Dagnery resigned from his position as Chief Revenue Officer (the “Resignation”),

a position he had assumed on February 4, 2021.

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.

On the Effective Date and in connection with the Resignation, the

Company and Mr.

Dagnery entered into a resignation and release agreement (the “Agreement”), whereby Mr.

Dagnery received,

within sixty (60) of the Effective Date and subject to the completion of a successful transition of his duties, equity severance in a

single lump sum of 10,000 shares of common stock of the Company.

The Agreement also contains confidentiality, non-disparagement and non-solicitation

covenants and a general release of claims by Mr.

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 six 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

June 10, 2021, the Board appointed Mr.

Alex Mironov as the Company’s President.

In connection with the Appointment, Mr.

Mironov entered into an Employment Agreement with the Company.

To induce Mr.

Mironov to enter

into the Employment Agreement, Mr.

Mironov was granted an equity award with a grant date of June 10, 2021 outside of the Company’s

2020 Equity and Incentive Plan.

Mironov received options to purchase an aggregate of 200,000 shares of LifeMD, Inc.

common stock.

options have an exercise price of $14.04, which is equal to the closing price of LifeMD.

common stock on June 10, 2021.

will vest ratably, with 1/36th of the shares fully vested on June 10, 2021, and the remainder of the shares vesting ratably each month

over a 35-month period that commences on the date of grant, subject to, the employee’s continued employment with LifeMD, Inc.

such vesting dates.

The options have a five-year term.

Additionally, Mr.

Mironov received a performance-based grant of up to 300,000 restricted

shares of LifeMD, Inc.

common stock, subject to, the employee’s sourcing, and material contribution to the consummation of pharmaceutical

deals, as set forth in more detail in the employment agreement.

Operating Officer

June 15, 2021, the Company and Brad Roberts, our COO, restructured Mr.

Roberts’s compensation arrangements.

The Company and JDM

mutually terminated Mr.

Roberts’s Consulting Agreement and Mr.

Roberts waived all consulting fees due for the remainder of the

term of the Consulting Agreement.

In place of the Consulting Agreement, Mr.

Roberts and the Company amended his Amended and Restated

Employment Agreement dated December 21, 2020 (the “Amendment”) to increase his base salary to $475,000 per calendar year

and to update the terms of his annual bonus, providing for a target amount of $200,000, with any actual bonus to be awarded in the sole

discretion of the Board of Directors.

On June 29, 2021, the Company and Mr.

Roberts entered into a Second Amendment (the “Second

Amendment”) to the Amended and Restated Employment Agreement dated December 21, 2020 to provide that Mr.

Roberts is eligible to

receive up to 300,000 restricted stock units of the Company’s common stock, par value $0.01 (the “RSUs”), which will

vest subject to the Company’s Telemedicine Brands (as defined in the Second Amendment) achieving certain revenue milestones.

RSUs will also vest upon a Change of Control (as defined in the Second Amendment).

2020 Equity Incentive

Plan (the “2020 Plan”)

June 24, 2021, at the Annual Meeting of Stockholders, the stockholders of the Company approved an amendment to the Company’s 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

For additional information see Note 7—Stockholders’ Equity to our unaudited condensed consolidated financial statements

included in this report.

The continuing impact

on business activity brought about by COVID-19 continues to evolve, globally in macro terms, and in micro terms, as such affects the

Among other things, our supply chain is subject to the effects of COVID-19, as well as to natural disasters and other events

beyond our control, such as raw material, component and labor shortages, global and regional shipping and logistics constraints, work

stoppages, power outages and the physical effects of climate change, including changes in weather patterns.

In addition, human rights

concerns, including forced labor and human trafficking, in foreign countries and associated governmental responses have the potential

to disrupt our supply chain and our operations could be adversely impacted.

Although we do not believe that raw materials used in the

products we sell are sourced from regions with forced labor concerns, any delays or other supply chain disruption resulting from these

concerns, associated governmental responses, or a desire to source products, components or materials from other manufacturers or regions

could result in shipping delays, cancellations, penalty payments, or loss of revenue and market share, any of which could have a material

adverse effect on our business, results of operations, cash flows, and financial condition.

In connection with

these potential impacts on our supply chain, we are, as a general matter, seeing a trend of increases in (i) pricing on air and ocean

freight, as well as for component and product parts, and (ii) the overall time to receive shipments.

If these trends continue, many of

our estimates and assumptions for the period ended June 30, 2021 may be subject to a material change in future periods.

Since its launch, WorkSimpli has converted or edited over 11 terabytes of documents

for customers from the legal, financial, real-estate and academic sectors.

WorkSimpli had over 139,200 active subscriptions as of September

Developments During the Three Months Ended September 30, 2021

July 13, 2021, the Company, on behalf of its customers, entered into an agreement to engage Quest Diagnostics Incorporated (“Quest

Diagnostics”) as the Company’s laboratory services provider to perform certain clinical laboratory diagnostic services based

on orders submitted to Quest Diagnostics by licensed health care providers who are under contract with the Company and are authorized

federal or state law to order laboratory tests.

Patients of LifeMD Inc.’s affiliated providers gain access to laboratory

tests which can be completed in their home or office or at any one of Quest Diagnostics’ 2,000 facilities.

July 14, 2021, the Company entered into an agreement to engage Axle Health Inc.

(“Axle Health”) to assist the Company in

establishing a platform to enable patients of the Company’s medical practice clients (“MP Clients”) to schedule certain

nursing services, including blood draws, injections, and other basic healthcare services, and to furnish operational support services

to medical practices using the platform.

In connection therewith, Axle Health granted the Company a revocable, nontransferable, non-exclusive

right and license, with the right to grant sublicenses, to install and use the software and other technology relating to the platform

developed, owned, or with the right to grant sublicenses to install and use the software and/or other technology developed, owned, or

licensed by Axle Health, including the platform, to facilitate the scheduling and provision of certain nursing services to patients of

August 4, 2021, the Company entered into a partnership agreement with Particle Health, a digital health company with a HIPAA-compliant

technology platform that converts electronic medical records data into a user-friendly Fast Healthcare Interoperability Resource (“FHIR”)

Particle Health offers healthcare companies secure access to vital medical data.

With Particle Health’s platform, and patient

consent, licensed medical providers on the upcoming LifeMD primary care platform gain access to comprehensive patient health records,

therefore enabling personalized care through a deeper understanding of their patients’ medical histories.

August 30, 2021, the Company entered into a strategic partnership with Prescryptive Health (“Prescryptive”), a healthcare

technology company empowering consumers by improving the way healthcare is delivered.

The partnership is expected to accelerate growth

for both companies by combining LifeMD’s expanding direct-to-patient telehealth brands and upcoming primary care platform with

Prescryptive’s best-in-class digital pharmacy fulfillment and e-prescribing technology platform.

continuing impact on business activity brought about by COVID-19 continues to evolve, globally in macro terms, and in micro terms, as

such affects the Company.

Among other things, our supply chain is subject to the effects of COVID-19, as well as to natural disasters

and other events beyond our control, such as raw material, component and labor shortages, global and regional shipping and logistics

constraints, work stoppages, power outages and the physical effects of climate change, including changes in weather patterns.

human rights concerns, including forced labor and human trafficking, in foreign countries and associated governmental responses have

the potential to disrupt our supply chain and our operations could be adversely impacted.

Although we do not believe that raw materials

used in the products we sell are sourced from regions with forced labor concerns, any delays or other supply chain disruption resulting

from these concerns, associated governmental responses, or a desire to source products, components or materials from other manufacturers

or regions could result in shipping delays, cancellations, penalty payments, or loss of revenue and market share, any of which could

have a material adverse effect on our business, results of operations, cash flows, and financial condition.

connection with these potential impacts on our supply chain, we are, as a general matter, seeing a trend of increases in (i) pricing

on air and ocean freight, as well as for component and product parts, and (ii) the overall time to receive shipments.

If these trends

continue, many of our estimates and assumptions for the period ended September 30, 2021 may be subject to a material change in future

Vaccine Mandate

are making preparations to comply with a rule issued by the Occupational Safety and Health Administration (“OSHA”) to ensure

that our employees are fully vaccinated against COVID-19 by January 4th or that they test negative for COVID-19 at least once per week.

Employees must receive time off to get vaccinated and sick leave to recover from any side effects.

Any unvaccinated employees must wear

face coverings while at work.

We are in the process of assessing the financial and staffing impact of these requirements.

of Operations

of the Three Months Ended June 30, 2021 to the Three Months Ended June 30, 2020

financial results for the three months ended June 30, 2021 are summarized as follows in comparison to the three months ended June 30,

revenues, net

of product revenue

of software revenue

cost of revenue

and marketing expenses

and administrative expenses

operating expenses

service expenses

income (expense), net

loss before provision for income taxes

for income taxes

loss attributable to noncontrolling interests

loss attributable to LifeMD, Inc.

for the three months ended June 30, 2021 were approximately $22.3 million, an increase of 145% compared to approximately $9.1 million

for the three months ended June 30, 2020.

The increase in revenues was attributable to both the increase in product revenue of 101% and

an increase in software revenue of 434%.

Product revenue accounts for 71% of total revenue and has increased in the three months ended

June 30, 2021 due to an increase in online sales demand, with the majority of the growth of our telehealth brands, RexMD and ShapiroMD.

Software revenue accounts for 29% 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.

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

148% to approximately $4.2 million for the three months ended June 30, 2021 compared to approximately $1.7 million for the three months

ended June 30, 2020.

The combined cost of revenue increase was due to increased costs related to our increased sale volumes, increases

in air and ocean freight and increased pricing on component and product parts when compared to the prior period ended June 30, 2020.

profit increased by approximately 145% to approximately $18.1 million for the three months ended June 30, 2021 compared to approximately

$7.4 million for the three months ended June 30, 2020, as a result of increased combined sales.

Product costs increased to 26% of associated

product revenues during the three months ended June 30, 2021, from 21% of associated product revenues during the three months ended June

Software costs decreased to 2% of associated software revenues during the three months ended June 30, 2021, from 6% of associated

software revenues during the three months ended June 30, 2020.

Software revenues as a percentage of total revenues increased to 29% during

the three months ended June 30, 2021, from 13% during the three months ended June 30, 2020.

Gross profit as a percentage of revenues

was 81% for both the three months ended June 30, 2021 and June 30, 2020 primarily due to higher software revenues as a percentage of

total revenues, partially offset by lower product revenues as a percentage of total revenues.

Months Ended June 30,

and marketing expenses

and administrative expenses

operating expenses

service expenses

expenses for the three months ended June 30, 2021 were approximately $34.2 million, as compared to approximately $10.6 million

for the three months ended June 30, 2020.

of the Three Months Ended September 30, 2021 to the Three Months Ended September 30, 2020

financial results for the three months ended September 30, 2021 are summarized as follows in comparison to the three months ended September

September 30, 2021

September 30, 2020

Telehealth revenue, net

WorkSimpli revenue, net

Total revenues, net

Cost of telehealth revenue

Cost of WorkSimpli revenue

Total cost of revenue

Selling and marketing expenses

General and administrative expenses

Other operating expenses

Customer service expenses

Development costs

Total expenses

Operating loss

(12,591,304 )

(20,532,507 )

Other income (expense), net

Net loss before provision for income taxes

(14,416,081 )

(20,823,603 )

Provision for income taxes

Net loss attributable to noncontrolling interests

Net loss attributable to LifeMD, Inc.

$ (14,353,375 )

$ (20,622,370 )

for the three months ended September 30, 2021 were approximately $24.9 million, an increase of 127% compared to approximately $11.0 million

for the three months ended September 30, 2020.

The increase in revenues was attributable to both the increase in telehealth revenue of

97% and an increase in revenue for WorkSimpli of 309%.

Telehealth revenue accounts for 74% of total revenue and has increased in the

three months ended September 30, 2021 due to an increase in online sales demand, with the majority of the growth of our telehealth brands,

RexMD and ShapiroMD.

Revenue for WorkSimpli accounts for 26% of total revenue and has steadily increased due to a combination of higher

demand, increased market awareness, enhanced digital capabilities and continued marketing campaign expansion.

cost of revenues consists of the cost of (1) telehealth revenues, which primarily include product costs, pharmacy fulfillment costs,

MD consult fees and shipping costs directly attributable to our prescription and OTC products and (2) the cost of WorkSimpli revenue

consisting primarily of information technology fees related to providing the services made available on our online platform.

of revenue increased by approximately 204% to approximately $5.1 million for the three months ended September 30, 2021 compared to approximately

$1.7 million for the three months ended September 30, 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 September 30, 2020.

profit increased by approximately 113% to approximately $19.9 million for the three months ended September 30, 2021 compared to approximately

$9.3 million for the three months ended September 30, 2020, as a result of increased combined sales.

Telehealth costs increased to 27%

of associated telehealth revenues during the three months ended September 30, 2021, from 17% of associated telehealth revenues during

the three months ended September 30, 2020.

WorkSimpli costs decreased to 2% of associated WorkSimpli revenues during the three months

ended September 30, 2021, from 5% of associated WorkSimpli revenues during the three months ended September 30, 2020.

WorkSimpli revenues

as a percentage of total revenues increased to 26% during the three months ended September 30, 2021, from 14% during the three months

ended September 30, 2020.

Gross profit as a percentage of revenues was 80% for the three months ended September 30, 2021 as compared

to 85% for the three months ended September 30, 2020 primarily due to product sales mix and one-time costs associated with the

non-cash write-off of legacy product deposits.

Three Months Ended September 30,

Selling and marketing expenses

General and administrative expenses

Other operating expenses

Customer service expenses

Development costs

Total expenses

expenses for the three months ended September 30, 2021 were approximately $32.4 million, as compared to approximately $29.9 million for

the three months ended September 30, 2020.

This represents an increase of 9%, or $2.6 million.

The increase is primarily

attributable to:

The increase is primarily attributable

and marketing expenses:

This mainly consists of online marketing and advertising expenses.

During the three months ended June 30,

During the three months ended September

30, 2021, the Company had an increase of approximately $9.8 million, or 93% in selling and marketing costs resulting from additional

2 unchanged sentences

and maintain sustained revenue growth in future years, based on the Company’s recurring revenue subscription-based sales model.

Selling and marketing expenses as a percentage of revenue was 81.4% for the three months ended September 30, 2021, as compared to

95.7% for the three months ended September 30, 2020.

This represents a decrease of 14.3%.

and administrative expenses:

During the three months ended June 30, 2021, stock-based compensation was $2.5 million, with the

majority related to stock compensation expense attributable to service-based stock options.

This category also consists of merchant

processing fees, payroll expenses for executive management, amortization expense and legal and professional fees.

During the three

months ended June 30, 2021, the Company has had an increase of approximately $8.6 million in general and administrative expenses,

primarily related to the increase in stock-based compensation costs referenced above, increase in legal and professional fees and

other increases in infrastructure expenses incurred to support the sales volume increases.

During the three months ended September 30, 2021, stock-based compensation expense was $3.1 million,

with the majority related to stock compensation expense attributable to service-based stock options, as compared to stock-based compensation

expense of $16.4 million for the three months ended September 30, 2020.

This category also consists of merchant processing fees,

payroll expenses for executive management, amortization expense and legal and professional fees.

During the three months ended September

30, 2021, the Company had a decrease of approximately $7.8 million in general and administrative expenses, primarily related to the

decrease in stock-based compensation costs referenced above partially offset by an increase in legal and professional fees 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.

the three months ended June 30, 2021, the Company had an increase of approximately $715 thousand, or 352%, primarily related to increases

in the general cost environment necessary to support the Company’s sales growth.

This consists of rent, insurance, royalty expense, bank charges and IT services.

During the three months ended

September 30, 2021, the Company had an increase of approximately $272 thousand, or 50%, 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 and South Carolina.

During the three months ended June 30, 2021, the Company had an increase of approximately $384

in South Carolina and Puerto Rico.

During the three months ended September 30, 2021, the Company had an increase of approximately

$275 thousand, primarily related to increases in headcount in the Company’s customer service department.

1 unchanged sentence

During the three

months ended June 30, 2021, the Company had a decrease of approximately $47 thousand, primarily resulting from lower technology platform

improvements expense.

months ended September 30, 2021, the Company had an increase of approximately $13 thousand, primarily resulting from technology platform

improvements and amortization expense.

(Expenses) / Income

Three Months Ended June 30,

Three Months Ended September 30,

Interest (expense), net

$ (1,824,777 )

Gain on debt forgiveness

expense, which consists of interest expense increased by approximately $673 thousand due to interest expense and amortization of debt

discount recorded related to the June 1, 2021 Purchase Agreement for the three months ended June 30, 2021.

For the three months

ended June 30, 2020 the balance consisted of interest expense and amortization of debt discount.

of the Six Months Ended June 30, 2021 to the Six Months Ended June 30, 2020

financial results for the six months ended June 30, 2021 are summarized as follows in comparison to the six months ended June 30, 2020.

June 30, 2021

June 30, 2020

Product revenues, net

Software revenues, net

Service revenues, net

$ (1,824,777 )

expense, which consists of interest expense increased by approximately $1.5 million due to interest expense and amortization of debt

discount recorded related to the June 1, 2021 Purchase Agreement for the three months ended September 30, 2021.

of the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020

financial results for the nine months ended September 30, 2021 are summarized as follows in comparison to the nine months ended September

September 30, 2021

September 30, 2020

Telehealth revenues, net

WorkSimpli revenues, net

Total revenues, net

Cost of product revenue

Cost of software revenue

Cost of telehealth revenue

Cost of WorkSimpli revenue

Total cost of revenue

6 unchanged sentences

Operating loss

(40,636,404 )

(25,491,384 )

Other income (expense), net

Net loss before provision for income taxes

(43,317,640 )

(26,804,394 )

Provision for income taxes

1 unchanged sentence

Net loss attributable to LifeMD, Inc.

for the six months ended June 30, 2021 were approximately $40.5 million, an increase of 203% compared to approximately $13.4 million

for the six months ended June 30, 2020.

The increase in revenues was attributable to both the increase in product revenue of 169% and

an increase in software revenue of 349%.

Product revenue accounts for 72% of total revenue and has increased in the six months ended

June 30, 2021 due to an increase in online sales demand, with the majority of the growth of our telehealth brands, RexMD and ShapiroMD.

Software revenue accounts for 28% 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

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

146% to approximately $7.5 million for the six months ended June 30, 2021 compared to approximately $3.0 million for the six months ended

June 30, 2020.

The combined cost of revenue increase was due to increased costs related to our increased sale volumes, increases in

air and ocean freight and increased pricing on component and product parts when compared to the prior period ended June 30, 2020.

profit increased by approximately 219% to approximately $33.1 million for the six months ended June 30, 2021 compared to approximately

$10.4 million for the six months ended June 30, 2020, as a result of increased combined sales, and a percentage decrease in costs to

produce product revenues.

Product costs increased to 25% of associated product revenues during the six months ended June 30, 2021, from

24% of associated product revenues during the six months ended June 30, 2020.

Software costs decreased to 3% of associated software

revenues during the six months ended June 30, 2021, from 19% of associated software revenues during the six months ended June 30, 2020.

Software revenues as a percentage of total revenues increased to 28% during the six months ended June 30, 2021, from 19% during the six

months ended June 30, 2020.

Gross profit as a percentage of revenues was 82% for the six months ended June 30, 2021 compared to 77%

for the six months ended June 30, 2020.

The increase of 5% in gross profit was principally attributable to higher software revenues

as a percentage of total revenues, partially offset by lower product revenues as a percentage of total revenues.

During the six months

ended June 30, 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.

Increases in air and ocean freight and increased pricing on component and product parts continued during

the six months ended June 30, 2021.

Six Months Ended June 30,

$ (42,786,458 )

$ (26,396,214 )

for the nine months ended September 30, 2021 were approximately $65.5 million, an increase of 168% compared to approximately $24.4 million

for the nine months ended September 30, 2020.

The increase in revenues was attributable to both the increase in telehealth revenue of

135% and an increase in WorkSimpli revenue of 331%.

Telehealth revenue accounts for 73% of total revenue and has increased in the nine

months ended September 30, 2021 due to an increase in online sales demand, with the majority of the growth from our telehealth brands,

RexMD and ShapiroMD.

WorkSimpli 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) telehealth revenues, which primarily include product costs, pharmacy fulfillment costs,

MD consult fees and shipping costs directly attributable to our prescription and OTC products and (2) the cost of WorkSimpli revenue

consisting primarily of information technology fees related to providing the services made available on our online platform.

of revenue increased by approximately 152% to approximately $12.4 million for the nine months ended September 30, 2021 compared to approximately

$4.9 million for the nine months ended September 30, 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 September 30, 2020.

profit increased by approximately 172% to approximately $53.0 million for the nine months ended September 30, 2021 compared to approximately

$19.5 million for the nine months ended September 30, 2020, as a result of increased combined sales.

Telehealth costs increased to 25%

of associated telehealth revenues during the nine months ended September 30, 2021, from 23% of associated telehealth revenues during

the nine months ended September 30, 2020.

WorkSimpli costs decreased to 2% of associated WorkSimpli revenues during the nine months ended

September 30, 2021, from 5% of associated WorkSimpli revenues during the nine months ended September 30, 2020.

WorkSimpli revenues as

a percentage of total revenues increased to 27% during the nine months ended September 30, 2021, from 17% during the nine months ended

September 30, 2020.

Gross profit as a percentage of revenues was 81% for the nine months ended September 30, 2021 compared to 80% for

the nine months ended September 30, 2020.

The increase of 1% in gross profit was principally attributable to higher WorkSimpli revenues

as a percentage of total revenues, partially offset by lower telehealth revenues as a percentage of total revenues.

Nine Months Ended September 30,

Selling and marketing expenses

4 unchanged sentences

Total expenses

expenses for the six months ended June 30, 2021 were approximately $61.1 million, as compared to approximately $15.3 million for

the six months ended June 30, 2020.

expenses for the nine months ended September 30, 2021 were approximately $93.7 million, as compared to approximately $45.0 million for

the nine months ended September 30, 2020.

This represents an increase of 108%, or $48.7 million.

2 unchanged sentences

This mainly consists of online marketing and advertising expenses.

During the six months ended June 30, 2021,

the Company had an increase of approximately $29.9 million, or 268% 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.

During the nine months ended September

30, 2021, the Company had an increase of approximately $39.7 million, or 183% 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 six months ended June 30, 2021, stock-based compensation was $4.9 million, with the majority

related to stock compensation expense attributable to the attainment of a performance threshold in the period and service-based stock

This category also consists of merchant processing fees, payroll expenses for executive management, amortization expense

and legal and professional fees.

During the six months ended June 30, 2021, the Company has had an increase of approximately $13.9

million in general and administrative expenses, primarily related to the increase in stock-based compensation costs referenced above,

increase in legal and professional fees and other increases in infrastructure expenses incurred to support the sales volume increases.

During the nine months ended September 30, 2021, stock-based compensation was approximately $8.0 million,

with the majority related to stock compensation expense attributable to service-based stock options, as compared to stock-based compensation

expense of $16.9 million for the nine months ended September 30, 2020.

This category also consists of merchant processing fees, payroll

expenses for corporate employees, amortization expense and legal and professional fees.

During the nine months ended September 30,

2021, the Company has had an increase of approximately $6.3 million in general and administrative expenses, primarily related to

increases in legal and professional fees and other increases in infrastructure expenses incurred to support the sales volume increases

partially offset by a decrease in stock-based compensation costs referenced above.

operating expenses:

This consists of rent, insurance, royalty expense, bank charges and IT services for our online products.

the six months ended June 30, 2021, the Company had an increase of approximately $1.5 million or 443%, primarily related to increases

in the general cost environment necessary to support the Company’s sales growth.

the nine months ended September 30, 2021, the Company had an increase of approximately $1.7 million or 265%, primarily related to

increases in the general costs 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 and South Carolina.

During the six months ended June 30, 2021, the Company had an increase of approximately $511 thousand,

primarily related to increases in headcount in the Company’s customer service department.

in South Carolina and Puerto Rico.

During the nine months ended September 30, 2021, the Company had an increase of approximately

$786 thousand, 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.

During the six

months ended June 30, 2021, the Company had an increase of approximately $67 thousand, primarily resulting from technology platform

improvements and amortization expense.

During the nine

months ended September 30, 2021, the Company had an increase of approximately $147 thousand, primarily resulting from technology

platform improvements and amortization expense.

(Expenses) / Income

Six Months Ended June 30,

Nine Months Ended September 30,

Interest (expense), net

3 unchanged sentences

$ (2,681,236 )

expense, which consists of interest expense, amortization of debt discount recorded related to the June 1, 2021 Purchase Agreement

and gain on debt forgiveness of PPP loans decreased by approximately $165 thousand and is included in other expense for the

six months ended June 30, 2021.

For the six months ended June 30, 2020, the balance consisted of interest expense and amortization

of debt discount.

capital increased by approximately $5.4 million during the period ended June 30, 2021.

The increase in current assets is

primarily attributable to an increase in cash of approximately $8.2 million, an increase in accounts receivable of approximately $1.0

million, and inventory and product deposits (combined increase of approximately $1.0 million).

Current liabilities increased by $5.1

million, which was primarily attributable an increase in accounts payable and accrued liabilities of $4.9 million as a result of

the Company extending payables and credit terms with vendors and an increase in deferred revenue of $0.5 million during the period ended

June 30, 2021.

$ (1,313,010 )

expense, which consists of interest expense, amortization of debt discount recorded related to the June 1, 2021 Purchase Agreement and

gain on debt forgiveness of PPP loans increased by approximately $1.4 million and is included in other expense for the nine months ended

September 30, 2021.

For the nine months ended September 30, 2020, the balance consisted of interest expense.

September 30, 2021

December 31, 2020

Current assets

Current liabilities

Working capital

$ (5,744,701 )

$ (1,426,701 )

capital decreased by approximately $4.3 million during the period ended September 30, 2021.

The increase in current assets is primarily

attributable to an increase in accounts receivable of approximately $0.9 million, other current assets of $0.5 million, inventory and

product deposits (combined increase of approximately $0.4 million) and an increase in cash of approximately $0.3 million.

Current liabilities

increased by $6.4 million, which was primarily attributable an increase in accounts payable and accrued liabilities of $6.6 million as

a result of the Company extending payables and credit terms with vendors and an increase in deferred revenue of $0.5 million during the

period ended September 30, 2021.

These increases were partially offset by a decrease in notes payable, net of $0.7 million due to repayments

exceeding proceeds received during the six months ended June 30, 2021.

exceeding proceeds received during the nine months ended September 30, 2021.

and Capital Resources

Six Months Ended June 30,

Nine Months Ended September 30,

$ (43,317,640 )

4 unchanged sentences

Net cash used in investing activities

$ (1,823,843 )

Net cash provided by financing activities

2 unchanged sentences

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 $19.8 million for the six months ended June 30, 2021, as compared with approximately

$1.1 million for the six months ended June 30, 2020.

The significant factors contributing to the cash used in operations during the six

months ended June 30, 2021, include the net loss of approximately $28.9 million (inclusive of $4.9 million in non-cash,

stock-based compensation charges), partially offset by the Company’s increase in accounts payable and accrued expenses of approximately $4.9 million.

cash used in investing activities for the six months ended June 30, 2021 was approximately $970 thousand, as compared with net cash used

in investing activities of $677 thousand for the six months ended June 30, 2020.

Net cash used in investing activities was due to cash

paid for capitalized software costs of approximately $952 thousand and the purchase of equipment of $18 thousand.

cash provided by financing activities for the six months ended June 30, 2021 was approximately $29.0 million as compared with approximately

$1.0 million for the six months ended June 30, 2020.

During the six months ended June 30, 2021, financing activities consisted of gross

proceeds from the $15 million June 1, 2021 Purchase Agreement, net proceeds from private placement of $13.5 million whereby investors purchased

608,696, at a purchase price of $23.00 per share for aggregate gross proceeds of $14.0 million and cash proceeds from the exercise of

options and warrants during the period of approximately $1.0 million partially offset by the purchase of the additional membership interest

of LegalSimpli.

cash used in operating activities was approximately $27.3 million for the nine months ended September 30, 2021, as compared with approximately

$5.6 million for the nine months ended September 30, 2020.

The significant factors contributing to the cash used in operations during

the nine months ended September 30, 2021, include the net loss of approximately $43.3 million (inclusive of approximately $8.0 million

in non-cash, stock-based compensation charges) further described above, partially offset by the Company’s increase in accounts

payable and accrued expenses of approximately $6.9 million and amortization of debt discount of $2.1 million.

cash used in investing activities for the nine months ended September 30, 2021 was approximately $1.8 million, as compared with net cash

used in investing activities of $731 thousand for the nine months ended September 30, 2020.

Net cash used in investing activities was

due to cash paid for capitalized software costs of approximately $1.7 million, the purchase of equipment of $70 thousand and the purchase

of an intangible asset of $22 thousand.

cash provided by financing activities for the nine months ended September 30, 2021 was approximately $29.4 million as compared with approximately

$6.1 million for the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, financing activities consisted

(1) net proceeds of $14.9 million from the private placement whereby investors purchased (a) a senior secured redeemable debenture

in the aggregate principal amount of $15.0 million and (b) warrants to purchase up to an additional 1,500,000 shares of the Company’s

common stock at an exercise price of $12.00 per share, pursuant to the June 1, 2021 Purchase Agreement, (2) net proceeds of $13.5 million

from the private placement of 608,696 common shares, at a purchase price of $23.00 per share for aggregate gross proceeds of $14.0 million

pursuant to the February 2021 Purchase Agreement, (3) net proceeds from the exercise of options and warrants during the period of approximately

$1.3 million, (4) net proceeds from the sale of common stock under the ATM Sales Agreement of approximately $0.5 million, in connection

with our filed shelf registration and launch of an at-the-market program on June 8, 2021, and (5) our entry into a merchant funding agreement

pursuant to which we may obtain cash advances.

Subsequent to the quarter ended September 30, 2021, we closed on the October 4, 2021 Common

Stock and Preferred Stock Offerings whereby the Company received total net proceeds of $55.3 million.

These increases in net cash from

financing activities were partially offset by the repayment of notes payable and the purchase of the additional membership interest of

Notes 1, 5 and 6 to our unaudited condensed consolidated financial statements included in this report for further discussion of certain

of these financing activities.

and Capital Resources Outlook

1 unchanged sentence

from officers and directors.

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 1 to our unaudited condensed consolidated financial statements

included in this report 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.

Additionally, see Notes 1, 5 and 6 to our unaudited condensed consolidated financial statements included in this

report for further discussion of (i) the Purchase Agreement entered into on June 1, 2021, yielding $15.0 million in gross proceeds

to the Company before deduction of transaction fees, resulting in $14.9 million in net proceeds, (ii) our filed shelf registration

and launch of an at-the-market program on June 8, 2021 and (iii) our entry into a merchant funding agreement pursuant to which we

may obtain cash advances.

The Company intends to use the net proceeds for customer acquisition, as well as for working capital and

general corporate purposes.

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.

The Company intends to use the net proceeds of the financing activities described

above for customer acquisition, as well as for working capital, general corporate purposes and to repay existing indebtedness.

1 to our unaudited condensed consolidated financial statements included in this report for further liquidity evaluation.

Accounting Policies and Estimates

14 unchanged sentences

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.

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

6 unchanged sentences

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

Company, through its majority-owned subsidiary WorkSimpli, offers a subscription-based service providing a suite of software applications

to its subscribers, principally on a monthly subscription basis.

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for the service are recorded net of the Company’s known discount rates.

As of June 30, 2021 and December 31, 2020, the Company

As of September 30, 2021 and December 31, 2020, the Company

has accrued contract liabilities, as deferred revenue, of approximately $1,436,000 and $917,000, respectively, which represent obligations

on in-process monthly or yearly contracts with customers.

discounts and allowances on software revenues approximated $668,000 and $107,000 for the three months ended June 30, 2021 and 2020, respectively.

Customer discounts and allowances on software revenues approximated $1,222,000 and $270,000 for the six months ended June 30, 2021 and

2020, respectively.

discounts and allowances on WorkSimpli revenues approximated $377,000 and $275,000 for the three months ended September 30, 2021 and

2020, respectively, and approximated $1,599,000 and $545,000 for the nine months ended September 30, 2021 and 2020, respectively.

Software Costs

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are expensed as incurred.

As of June 30, 2021 and December 31, 2020, the Company capitalized $1,390,483 and $438,136, respectively, related

to internally developed software costs which is amortized over the useful life and included in development costs on our statement of

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

As of September 30, 2021 and December 31, 2020, the Company capitalized $2,169,644 and $438,136, respectively,

related to internally developed software costs which is amortized over the useful life and included in development costs on our statement

of operations.

assets are comprised of:

(1) a customer relationship asset (with original cost of approximately $1,007,000) with an estimated useful

life of three years, (2) a purchased license (with original cost of $200,000) with an estimated useful life of ten years and (3) a purchased

domain name (with an original cost of $22,231) with an estimated useful life of three years.

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 files corporate federal and state tax returns.

Conversion Labs PR and LegalSimpli file tax returns in Puerto Rico, both are limited

Conversion Labs PR and WorkSimpli 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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis