What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-11 compared with 2022-05-13 · 343 added, 185 removed, 371 unchanged (59% of the section changed)

44 unchanged sentences

include, by way of example and without limitation:

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;

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;

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);

and potential material weaknesses in our internal control over financial reporting;

ability to continue as a going concern;

need to raise additional funds in the future;

ability to successfully recruit and retain qualified personnel;

ability to successfully implement our business plan;

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

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.

our ability to respond to new technological developments quickly and effectively;

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

business interruptions

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

current and potential material

weaknesses in our internal control over financial reporting;

our ability to continue

as a going concern;

our need to raise additional

funds in the future;

our ability to successfully

recruit and retain qualified personnel;

our ability to successfully

implement our business plan;

our ability to successfully

acquire, develop or commercialize new products and equipment;

being able to scale our

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

intellectual property claims

brought by third parties;

the impact of any industry

we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels

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differ materially from our assumptions.

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

and “our” 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”),

our recent acquisition, Cleared Technologies PBC, a Delaware public benefit corporation (“Cleared”) and our majority-owned

subsidiary WorkSimpli Software, LLC (formerly known as LegalSimpli Software, LLC), a Puerto Rico limited liability company (“WorkSimpli”).

The affiliated network of medical Professional Corporations and medical Professional Associations administratively led by LifeMD Southern

Patient Medical Care, P.C., is the Company’s variable interest entity in which we hold a controlling financial interest (“LifeMD

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

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

“us,” and “our” 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”), our recent acquisition, Cleared Technologies PBC, a Delaware public benefit corporation

(“Cleared”) and our majority-owned subsidiary WorkSimpli Software, LLC (formerly known as LegalSimpli Software, LLC), a

Puerto Rico limited liability company (“WorkSimpli”).

The affiliated network of medical Professional Corporations and

medical Professional Associations administratively led by LifeMD Southern Patient Medical Care, P.C., is the Company’s

affiliated, variable interest entity in which we hold a controlling financial interest (“LifeMD PC”).

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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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).

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 600,000 customers and patients, providing them greater access to high-quality, convenient, and affordable

care in all 50 states.

Our telehealth revenue increased 70% for the three months ended March 31, 2022 as compared to the three months

ended March 31, 2021.

Our telehealth revenue increased 54% for the six months ended June 30, 2022 as compared to the six months ended

June 30, 2021.

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

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 seen 28% year over year revenue growth, with recurring revenue of 98%.

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No revenue was recorded

related to the LifeMD PC during the three months ended March 31, 2022.

related to the LifeMD PC during the three and six months ended June 30, 2022.

in the first quarter of 2021, NavaMD is a female-oriented, tele-dermatology brand that offers access to virtual medical treatment from

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its ownership of WorkSimpli to 85.6%.

Developments During the Three Months Ended March 31, 2022

January 18, 2022, the Company acquired Cleared, a rapidly growing nationwide allergy telehealth platform that provides personalized treatments

for allergy, asthma, and immunology.

The preliminary purchase price was approximately $9.1

million, including cash paid upfront of approximately $1.0 million and payable in the future of approximately $3.0 million, and

contingent consideration of $5.1 million.

Asset Purchase Agreement

February 2022, WorkSimpli closed on an Asset Purchase Agreement (the “ResumeBuild APA”) with East Fusion FZCO, a Dubai, UAE

corporation (the “Seller”), whereby WorkSimpli acquired substantially all of the assets associated with the Seller’s

business offering subscription-based resume building software through SaaS online platforms (the “Acquisition”).

paid to the Seller a purchase price $4,000,000.

The Seller is also entitled to a minimum of $500 thousand to be paid out in quarterly

payments equal to the greater of 15% of net profits (as defined in the ResumeBuild APA) or $62,500, for a two-year period ending on the

two-year anniversary of the closing of the Acquisition.

WorkSimpli borrowed the purchase price from the Company pursuant to a promissory

note with the obligation secured by an equity purchase guarantee agreement and a stock option pledge agreement from Fitzpatrick Consulting,

LLC and its sole member Sean Fitzpatrick, who is Co-Founder and President of WorkSimpli.

Developments During the Three Months Ended June 30, 2022

Equity Incentive Plan (the “2020 Plan”)

June 16, 2022, 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

As of June 30, 2022, the Plan provided for the issuance of up to 4,800,000 shares of Common Stock.

For additional information

see Note 7 - Stockholders’ Equity to our unaudited condensed consolidated financial statements included in this report.

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

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other events beyond our control, such as raw material, component, and labor shortages;

global and regional shipping and logistics constraints;

increased fuel and freight costs;

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.

and the physical effects of climate change, including changes in weather

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.

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

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of Operations

financial results for the three months ended March 31, 2022 are summarized as follows in comparison to the three months ended March 31,

March 31, 2022

March 31, 2021

of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021

financial results for the three months ended June 30, 2022 are summarized as follows in comparison to the three months ended June 30,

June 30, 2022

June 30, 2021

Telehealth revenue, net

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General and administrative expenses

Goodwill impairment charge

Other operating expenses

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(16,126,763 )

Other (expenses) income, net

Other income (expenses), net

(12,972,961 )

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$ (16,830,700 )

for the three months ended March 31, 2022 were approximately $29.0 million, an increase of 60% compared to approximately $18.2 million

for the three months ended March 31, 2021.

for the three months ended June 30, 2022 were approximately $30.5 million, an increase of 37% compared to approximately $22.3 million

for the three months ended June 30, 2021.

The increase in revenues was attributable to both the increase in telehealth revenue of 41%

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Telehealth revenue accounts for 73% of total revenue and has increased during the three

months ended March 31, 2022 due to an increase in online sales demand, with the majority of the growth of our telehealth brands, RexMD

months ended June 30, 2022 due to an increase in online sales demand, with the majority of the growth of our telehealth brands, RexMD

and ShapiroMD.

WorkSimpli revenue accounts for 27% of total revenue and has steadily increased year over year 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.

higher demand, increased market awareness, enhanced digital capabilities, continued marketing campaign expansion and the addition of

the ResumeBuild brand in the first quarter of 2022.

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

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Total cost of revenue

increased by approximately 63% to approximately $5.2 million for the three months ended March 31, 2022 compared to approximately $3.2

million for the three months ended March 31, 2021.

increased by approximately 13% to approximately $4.6 million for the three months ended June 30, 2022 compared to approximately $4.1

million for the three months ended June 30, 2021.

The combined cost of revenue increase was due to increased sales volume during the

three months ended March 31, 2022 when compared to the three months ended March 31, 2021.

three months ended June 30, 2022 when compared to the three months ended June 30, 2021.

Telehealth costs decreased to 20% of associated

telehealth revenues experienced during the three months ended March 31, 2022, from 24% of associated telehealth revenues during the three

months ended March 31, 2021.

WorkSimpli costs increased to 3% of associated WorkSimpli revenues for the three months ended March 31,

2022 as compared to 2% of associated WorkSimpli revenues for the three months ended March 31, 2021.

profit increased by approximately 59% to approximately $23.8 million for the three months ended March 31, 2022 compared to approximately

$15 million for the three months ended March 31, 2021, as a result of increased combined sales.

telehealth revenues experienced during the three months ended June 30, 2022, from 26% of associated telehealth revenues during the three

months ended June 30, 2021.

WorkSimpli costs remained consistent at 2% of associated WorkSimpli revenues for the both the three months

ended June 30, 2022 and 2021.

profit increased by approximately 42% to approximately $25.8 million for the three months ended June 30, 2022 compared to approximately

$18.2 million for the three months ended June 30, 2021, as a result of increased combined sales.

Gross profit as a percentage of revenues

was 82% for both the three months ended March 31, 2022 and March 31, 2021.

Gross profit as a percentage of revenues for telehealth was

78% for the three months ended March 31, 2022 compared to 77% for the three months ended March 31, 2021, and for WorkSimpli was 98% for

both the three months ended March 31, 2022 and March 31, 2021.

More stringent inventory management procedures implemented in 2021 have

contributed to the stabilization in gross profit.

expenses for the three months ended March 31, 2022 were approximately $36.9 million, as compared to approximately $26.9 million for the

three months ended March 31, 2021.

increased to 85% during the three months ended June 30, 2022, from 82% for the three months ended June 30, 2021.

Gross profit as a percentage

of revenues for telehealth was 80% for the three months ended June 30, 2022 compared to 75% for the three months ended June 30, 2021,

and for WorkSimpli was 98% for the three months ended June 30, 2022 compared to 99% for the three months ended June 30, 2021.

pricing and favorable product mix in 2022 have contributed to the increase in gross profit.

expenses for the three months ended June 30, 2022 were approximately $41.5 million, as compared to approximately $34.3 million for the

three months ended June 30, 2021.

This represents an increase of 21%, or $7.1 million.

The increase is primarily attributable to:

and marketing expenses:

General and administrative

During the three months ended June 30, 2022, stock-based compensation was $4.0 million, with the majority related to stock

compensation expense attributable to the service-based options.

This category also consists of merchant processing fees, payroll

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

During the three months

ended June 30, 2022, the Company has had an increase of approximately $2.7 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, partially offset by a Company-wide strategic reduction in costs.

Goodwill impairment charge:

During the three months ended June 30, 2022, the Company recorded a $2.7 million goodwill impairment

charge related to a decline in the estimated fair value of Cleared as a result of a decline in the Cleared financial projections.

Other operating expenses:

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

During the three months ended June 30, 2022, the Company had

an increase of approximately $1.1 million, or 141%, primarily related to increases in the general cost environment necessary to support

the Company’s sales growth.

Customer service expenses:

This consists of payroll and benefit expenses related to the Company’s customer service department located in South Carolina

and Puerto Rico.

During the three months ended June 30, 2022, the Company had an increase of approximately $533 thousand, primarily

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

Development costs:

mainly relates to third-party technology services for developing and maintaining our online platforms and information technology

services for our online products.

During the three months ended June 30, 2022, the Company had an increase of approximately $578

thousand, primarily resulting from technology platform improvements and amortization expense.

increases in operating expenses were partially offset by a decrease in selling and marketing expenses which consist of online marketing

and advertising expenses.

During the three months ended June 30, 2022, the Company had a decrease of approximately $574 thousand, or

3% in selling and marketing costs resulting from a Company-wide strategic reduction in costs and alignment of sales and marketing initiatives

to drive the Company’s recurring revenue subscription-based sales model.

Income (Expenses), net

Three Months Ended June 30,

Interest expense, net

Change in fair value of contingent consideration

Gain on debt forgiveness

income, net for the three months ended June 30, 2022, consists of a $2.7 million reduction to the

Cleared contingent consideration as a result of the remeasurement of the fair value, gain on debt forgiveness of PPP loans and

interest accrued on the Series B Convertible Preferred Stock.

Other expenses for the three months ended June 30, 2021, consist

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

Interest expense decreased

by approximately $770 thousand during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021

financial results for the six months ended June 30, 2022 are summarized as follows in comparison to the six months ended June 30, 2021:

June 30, 2022

June 30, 2021

Telehealth revenue, net

WorkSimpli revenue, net

Total revenue, net

Cost of telehealth revenue

Cost of WorkSimpli revenue

Total cost of revenue

Selling and marketing expenses

General and administrative expenses

Other operating expenses

Goodwill impairment charge

Customer service expenses

Development costs

Total expenses

Operating loss

(28,746,140 )

(28,045,100 )

Other income (expenses), net

(26,247,910 )

(28,901,559 )

Net income (loss) attributable to non-controlling interest

Net loss attributable to LifeMD, Inc.

(26,318,637 )

(28,433,083 )

Preferred stock dividends

Net loss attributable to common shareholders

$ (27,871,762 )

$ (28,433,083 )

for the six months ended June 30, 2022 were approximately $59.5 million, an increase of 47% compared to approximately $40.5 million for

the six months ended June 30, 2021.

The increase in revenues was attributable to both the increase in telehealth revenue of 54% and an

increase in WorkSimpli revenue of 28%.

Telehealth revenue accounts for 75% of total revenue and has increased during the six months ended

June 30, 2022 due to an increase in online sales demand, with the majority of the growth of our telehealth brands, RexMD and ShapiroMD.

WorkSimpli revenue accounts for 25% of total revenue and has steadily increased year over year due to a combination of higher demand,

increased market awareness, enhanced digital capabilities, continued marketing campaign expansion and the addition of the ResumeBuild

brand in the first quarter of 2022.

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

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.

Total cost of revenue

increased by approximately 35% to approximately $9.9 million for the six months ended June 30, 2022 compared to approximately $7.3 million

for the six months ended June 30, 2021.

The combined cost of revenue increase was due to increased sales volume during the six months

ended June 30, 2022 when compared to the six months ended June 30, 2021.

Telehealth costs decreased to 21% of associated telehealth revenues

experienced during the six months ended June 30, 2022, as compared to 25% of associated telehealth revenues during the six months ended

June 30, 2021.

WorkSimpli costs were 2% of associated WorkSimpli revenues for both the six months ended June 30, 2022 and 2021.

profit increased by approximately 50% to approximately $49.6 million for the six months ended June 30, 2022 compared to approximately

$33.2 million for the six months ended June 30, 2021, as a result of increased combined sales.

Gross profit as a percentage of revenues

was 83% for the six months ended June 30, 2022 compared to 82% for the six months ended June 30, 2021.

Gross profit as a percentage of

revenues for telehealth was 79% for the six months ended June 30, 2022 compared to 75% for the six months ended June 30, 2021, and for

WorkSimpli was 98% for both the six months ended June 30, 2022 and June 30, 2021.

Improved pricing and favorable product mix in 2022

have contributed to the increase in gross profit.

expenses for the six months ended June 30, 2022 were approximately $78.4 million, as compared to approximately $61.2 million for the

six months ended June 30, 2021.

This represents an increase of 28%, or $17.1 million.

The increase is primarily attributable to:

Selling and marketing expenses:

This mainly consists of online marketing and advertising expenses.

During the three months ended March 31,

2022, the Company had an increase of approximately $3.3 million, or 18% 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 period ended March 31, 2022, stock-based compensation was $4.5 million, with the majority

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

This category also consists of merchant processing

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

During the three months ended

March 31, 2022, 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 information technology services for our online

During the three months ended March 31, 2022, the Company had an increase of approximately $691 thousand, or 109%, 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 South Carolina and Puerto Rico.

During the three months ended March 31, 2022, the Company had an increase of approximately $638

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 three

months ended March 31, 2022, the Company had an increase of approximately $117 thousand, primarily resulting from technology platform

improvements and amortization expense.

Income (Expense)

Three Months Ended March 31,

During the six months ended June 30, 2022, the Company had an

increase of approximately $2.6 million, or 7% 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 maintain sustained revenue growth in future

years, based on the Company’s recurring revenue subscription-based sales model.

General and administrative

During the six months ended June 30, 2022, stock-based compensation was $8.5 million, with the majority related to stock

compensation expense attributable to the service-based options.

This category also consists of merchant processing fees, payroll

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

During the six months

ended June 30, 2022, the Company has had an increase of approximately $8.1 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, partially offset by a Company-wide strategic reduction in costs.

Other operating expenses:

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

During the six months ended June 30, 2022, the Company had an

increase of approximately $1.8 million or 127%, primarily related to increases in the general cost environment necessary to support

the Company’s sales growth.

Goodwill impairment charge:

During the six months ended June 30, 2022, the Company recorded a $2.7 million goodwill impairment

charge related to a decline in the estimated fair value of Cleared as a result of a decline in the Cleared financial projections.

Customer service expenses:

This consists of payroll and benefit expenses related to the Company’s customer service department located in South Carolina

and Puerto Rico.

During the six months ended June 30, 2022, the Company had an increase of approximately $1.2 million, primarily

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

Development costs:

mainly relates to third-party technology services for developing and maintaining our online platforms and information technology

services for our online products.

During the six months ended June 30, 2022, the Company had an increase of approximately $696 thousand,

primarily resulting from technology platform improvements and amortization expense.

Income (Expenses), net

Six Months Ended June 30,

Interest expense, net

$ (1,041,373 )

Change in fair value of contingent consideration

Gain on debt forgiveness

income (expense) consists of interest expense for the three months ended March 31, 2022 primarily related to interest accrued on the

Series B Convertible Preferred Stock and interest expense and gain on debt forgiveness of Paycheck Protection Program loans for the three

months ended March 31, 2021.

Interest expense increased by approximately $28 thousand during the three months ended March 31, 2022 as

compared to the three months ended March 31, 2021.

March 31, 2022

income, net for the six months ended June 30, 2022, consists of a $2.7 million reduction to the

Cleared contingent consideration as a result of the remeasurement of the fair value, gain on debt forgiveness of PPP loans and

interest accrued on the Series B Convertible Preferred Stock.

Other expenses, net consist of interest expense and amortization

of debt discount recorded related to the June 1, 2021 Purchase Agreement and gain on debt forgiveness of PPP loans for the six months

ended June 30, 2021.

Interest expense decreased by approximately $741 thousand during the six months ended June 30, 2022 as compared

to the six months ended June 30, 2021.

June 30, 2022

December 31, 2021

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Working capital

Working capital decreased by

approximately $18.1 million during the three months ended March 31, 2022.

The decrease in current assets is primarily attributable

to a decrease in cash of approximately $16.2 million, a decrease in inventory of $0.4 million partially offset by an increase in accounts

receivable of approximately $0.8 million.

Current liabilities increased by $2.8 million, which was primarily attributable to an

increase in accounts payable and accrued expenses of $2.6 million as a result of the Company extending payables and credit

terms with vendors and accrual of the first noncontingent milestone payment related to the Cleared acquisition of $1.5 million

due on the first anniversary of the acquisition.

$ (7,358,814 )

capital decreased by approximately $29.5 million during the six months ended June 30, 2022.

The decrease in current assets is primarily

attributable to a decrease in cash of approximately $29.6 million, partially offset by an increase in accounts receivable of approximately

$1.5 million and an increase in inventory of $1.3 million.

Current liabilities increased by $3 million, which was primarily attributable

to an increase in accounts payable and accrued expenses of $2.5 million as a result of the Company extending payables and credit terms

with vendors and accrual of the first noncontingent milestone payment related to the Cleared acquisition of $1.6 million due on the first

anniversary of the acquisition.

and Capital Resources

Three Months Ended March 31,

Six Months Ended June 30,

$ (26,247,910 )

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Net cash used in investing activities

$ (7,378,189 )

Net cash (used in) provided by financing activities

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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 $8.1 million for the three months ended March 31, 2022, as compared with approximately

$9.1 million three months ended March 31, 2021.

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

months ended March 31, 2022, include the net loss of approximately $13.3 million (inclusive of $4.5 million in non-cash, stock-based

compensation charges), principally offset by the Company’s increase in accounts payable of approximately $0.7 million, excluding

the $1.5 million accrual for the first noncontingent milestone payment related to the Cleared acquisition due on the first anniversary

of the acquisition.

cash used in investing activities for the three months ended March 31, 2022 was approximately $7.4 million, as compared with approximately

$49 thousand for the three months ended March 31, 2021.

Rising interest rates and inflation may increase the cost of capital and make it more difficult for us to access capital markets.

cash used in operating activities was approximately $18.2 million for the six months ended June 30, 2022, as compared with approximately

$19.8 million six months ended June 30, 2021.

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

ended June 30, 2022, include the net loss of approximately $26.3 million (inclusive of $8.5 million in non-cash, stock-based compensation

charges), an increase in accounts receivable of $1.5 million and purchase of inventory of $1.3 million, partially offset by the Company’s

increase in accounts payable and accrued expenses of approximately $0.7 million, excluding the $1.6 million accrual for the first noncontingent

milestone payment related to the Cleared acquisition due on the first anniversary of the acquisition.

cash used in investing activities for the six months ended June 30, 2022 was approximately $9.9 million, as compared with approximately

$970 thousand for the six months ended June 30, 2021.

Net cash used in investing activities was due to cash paid for capitalized software

costs of approximately $2.1 million, cash paid for the purchase of the ResumeBuild brand of approximately $4.0 million and cash paid

for the Cleared acquisition of approximately $1.0 million.

cash used in financing activities for the three months ended March 31, 2022 was approximately $774 thousand as compared with net cash

provided by financing activities of approximately $13.4 million for the three months ended March 31, 2021.

During the three months ended

March 31, 2022, financing activities consisted of preferred stock dividends of $777 thousand, distributions to non-controlling interest

of $36 thousand and proceeds from the exercise of warrants of $38 thousand.

costs of approximately $4.5 million, cash paid for the purchase of the ResumeBuild brand of approximately $4.0 million, cash paid for

the Cleared acquisition of approximately $1.0 million and cash paid for the purchase of equipment of $357 thousand.

cash used in financing activities for the six months ended June 30, 2022 was approximately $1.5 million as compared with net cash provided

by financing activities of approximately $29.1 million for the six months ended June 30, 2021.

During the six months ended June 30, 2022,

net cash used in financing activities consisted of preferred stock dividends of $1.6 million, distributions to non-controlling interest

of $72 thousand and a contingent consideration payment related to the ResumeBuild acquisition of $31 thousand, partially offset by proceeds

from the exercise of options and warrants of $129 thousand.

and Capital Resources Outlook

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acquisition, fund business acquisitions and investments we may make from time to time, working capital including our noncancelable operating

lease obligations, capital expenditures and general corporate purposes.

lease obligations, noncontingent consideration, capital expenditures and general corporate purposes.

Company’s continued operations are dependent upon obtaining an increase in its sales volumes which the Company has been successful

in achieving to date.

The 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, and market

and industry factors.

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 over the next 12 months, (3) the Company’s

ability to raise up to $150 million under the 2021 Shelf, with approximately $59.5 million available under the ATM Sales Agreement and

$32 million available under the 2021 Shelf as of March 31 2022, (4) management’s ability to curtail expenses if necessary, and

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

However, there can be no assurances that we will continue to 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 reviewed its forecasted operating results and sources and uses of cash used in management’s assessment, which included

the available financing and consideration of positive and negative evidence impacting management’s forecasts, market, and industry

The Company’s continuance as a going concern is highly dependent on its future profitability and on the on-going support

of its shareholders, affiliates, and creditors.

Based on these circumstances, management has determined that these conditions raise substantial

doubt about the Company’s ability to continue as a going concern.

order to mitigate the going concern issues, the Company has begun to implement strategies to strengthen revenues and improve operational

efficiencies across the business and is significantly curtailing expenses.

Additionally, the Company has $59.5 million available under

the ATM Sales Agreement and $32 million available under the 2021 Shelf.

Management believes that the overall market value of the telehealth

industry is positive and that it will continue to drive interest in the Company.

Accounting Policies and Estimates

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Customers , by analyzing exchanges with its customers using a five-step analysis:

performance obligations

the transaction price

Identify the contract

Identify performance obligations

Determine the transaction

Allocate the transaction

Recognize revenue

the Company’s product-based contracts with customers, the Company has determined that there is one performance obligation, which

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

As of March 31, 2022 and December 31, 2021, the Company

As of June 30, 2022 and December 31, 2021, the Company

has accrued contract liabilities, as deferred revenue, of approximately $2.0 million and $1.5 million, respectively, which represent

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trial period collections.

discounts, returns and rebates on telehealth revenues approximated $1.5 million and $1.2 million, respectively, during the three months

ended March 31, 2022 and 2021.

Customer discounts and allowances on WorkSimpli revenues approximated $448 thousand and $554 thousand,

respectively, during the three months ended March 31, 2022 and 2021.

discounts, returns, and rebates on telehealth revenues approximated $1.6 million and $1.4 million for the three months ended June 30,

2022 and 2021, respectively.

Customer discounts, returns, and rebates on telehealth revenues approximated $3.1 million and $2.6 million

for the six months ended June 30, 2022 and 2021, respectively.

discounts and allowances on WorkSimpli revenues approximated $580 thousand and $668 thousand for the three months ended June 30, 2022

and 2021, respectively.

Customer discounts and allowances on WorkSimpli revenues approximated $1.0 million and $1.2 million for the six

months ended June 30, 2022 and 2021, respectively.

Software Costs

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for capitalization, in accordance with ASC 350-40, Internal-Use Software , are expensed as incurred.

As of March 31, 2022 and December

As of June 30, 2022 and December

31, 2021, the Company capitalized $8.1 million and $3.6 million, respectively, related to internally developed software costs which is

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and Intangible Assets

and intangible assets include those acquired in conjunction with the Cleared acquisition for which the purchase accounting is preliminary

(see Note 3).

Other amortizable intangible assets include:

(1) intangible assets acquired related to the ResumeBuild brand (with original

cost of approximately $4.5 million) with an estimated useful life of five years, (2) a customer relationship asset (with original cost

of approximately $1,007,000) with an estimated useful life of three years, (3) a purchased license (with original cost of $200,000) with

an estimated useful life of ten years and (4) purchased domain names (with original costs of $22,731) with estimated useful lives of

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.

represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination.

Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that

the asset may be impaired.

Goodwill in the amount of $9.5 million was acquired in conjunction with the Cleared acquisition during

the three months ended March 31, 2022 for which the purchase accounting is preliminary (see Note 3).

The Company recorded a $2.7

million goodwill impairment charge during the three months ended June 30, 2022 related to

a decline in the estimated fair value of Cleared as a result of a decline in the Cleared financial projections .

amortizable intangible assets include:

(1) intangible assets acquired related to the ResumeBuild brand (with original cost of approximately

$4.5 million) with an estimated useful life of five years, (2) a customer relationship asset (with original cost of approximately $1,007,000)

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

of ten years and (4) purchased domain names (with original costs of $22,731) with estimated useful lives 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.

of Long-Lived Assets

assets include equipment, capitalized software, and intangible assets subject to amortization.

Long-lived assets are reviewed for impairment

whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If such assets are

considered to be impaired, an impairment is recognized as the amount by which the carrying amount of the assets exceeds the estimated

fair values of the assets.

As of June 30, 2022 and December 31, 2021, the Company determined that no events or changes in circumstances

existed that would indicate any impairment of its long-lived assets.

Company files corporate federal and state tax returns.

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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