What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-10 compared with 2022-08-11 · 239 added, 241 removed, 473 unchanged (50% of the section changed)

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estimates, judgments, and assumptions are made.

These estimates, judgments and assumptions can affect the reported amounts of assets and

liabilities as of the date of the condensed consolidated financial statements as well as the reported amounts of revenues and expenses

These estimates, judgments and assumptions can affect the reported amounts of assets

and liabilities as of the date of the condensed consolidated financial statements as well as the reported amounts of revenues and expenses

during the periods presented.

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ability to maintain and develop relationships with customers and suppliers;

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

our ability to respond

to new technological developments quickly and effectively;

our ability to protect

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general economic and business

conditions, including inflation, slower growth or recession;

business interruptions

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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

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.

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”),

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”).

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

Patient Medical Care, P.C., (“LifeMD PC”) is the Company’s affiliated, variable interest entity in which we hold a

controlling financial interest.

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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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 and

concurrently increased its ownership stake in WorkSimpli to 85.6%.

On January 18, 2022, the Company acquired Cleared, a rapidly growing

nationwide allergy telehealth platform that provides personalized treatments for allergy, asthma, and immunology.

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

January 22, 2021, we consummated a transaction to restructure the ownership of WorkSimpli through a series of agreements and concurrently

increased its ownership interest in WorkSimpli to 85.6%.

Effective September 30, 2022, two option agreements were exercised which further

restructured the ownership of WorkSimpli.

As a result, the Company’s ownership interest in WorkSimpli decreased to 73.64%.

Note 7 for additional information.

On January 18, 2022, the Company acquired Cleared, a rapidly growing nationwide allergy telehealth

platform that provides personalized treatments for allergy, asthma, and immunology.

Overview and Strategy

are a direct-to-patient telehealth technology company that provides a smarter, cost-effective, and convenient way for Americans to access

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, and slow, and discourages many individuals from seeking much needed

medical care.

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

Direct-to-patient telehealth companies, like LifeMD, Inc., are leading the shift by connecting consumers digitally to licensed healthcare

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

are a direct-to-patient telehealth technology company that provides a smarter, cost-effective, and convenient way for Americans 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, and slow, and discourages many individuals from

seeking much needed medical care.

healthcare system is undergoing a paradigm shift, due to new technologies and the

emergence of telehealth.

Direct-to-patient telehealth companies, like LifeMD, Inc., are leading the shift by connecting consumers

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

health and dermatology.

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

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care in all 50 states.

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

June 30, 2021.

Our telehealth revenue increased 39% for the nine months ended September 30, 2022 as compared to the nine months

ended September 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 documents.

In addition to our telehealth business, we

own 73.64% of WorkSimpli, which operates PDFSimpli, a rapidly growing software as a service platform for converting, signing, editing, and sharing PDF

This business has seen 38% year over year revenue growth, with recurring revenue of 98%.

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LifeMD PC capabilities are supported by robust partnerships as further discussed below.

No revenue was recorded

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

Total revenue and net

loss for LifeMD PC was approximately $124 thousand and $1.0 million for the three months ended September 30, 2022, respectively, and

$124 thousand and $3.9 million for the nine months ended September 30, 2022, respectively.

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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Owned Subsidiary:

operates PDFSimpli, an online SaaS platform that allows users to create, edit, convert, sign, and share PDF documents.

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

WorkSimpli was

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

On January 22, 2021, the Company increased

its ownership of WorkSimpli to 85.6%.

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.

On January 22, 2021, the Company consummated

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

Effective September 30, 2022, two option agreements were exercised

which further restructured the ownership of WorkSimpli.

As a result, the Company’s ownership interest in WorkSimpli decreased to

Developments During the Three Months Ended September 30, 2022

noted above, effective September 30, 2022, two option agreements were exercised which further restructured the ownership of WorkSimpli.

As a result, the Company’s ownership interest in WorkSimpli decreased to 73.64%.

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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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

In addition, human rights concerns, including forced labor, in foreign countries and associated governmental

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

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

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

time for shipment and delivery to our customers from third-party shippers.

on air and ocean freight, as well as for raw materials and finished goods, (ii) the overall time to receive shipments, and (iii) the

overall time for shipment and delivery to our customers from third-party shippers.

We are also seeing a trend of shortages for key raw

of Operations

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

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

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

September 30, 2022

September 30, 2021

Telehealth revenue, net

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General and administrative expenses

Goodwill impairment charge

Other operating expenses

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(12,591,304 )

(16,126,763 )

Other income (expenses), net

(12,972,961 )

Other expenses

(14,416,081 )

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(14,353,375 )

(16,830,700 )

Preferred stock dividends

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$ (14,353,375 )

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.

for the three months ended September 30, 2022 were approximately $31.4 million, an increase of 26% compared to approximately $24.9 million

for the three months ended September 30, 2021.

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

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Telehealth revenue accounts for 68% of total revenue and has increased during the three

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, 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.

months ended September 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 32% 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

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Total cost of revenue

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

decreased by approximately 7% to approximately $4.7 million for the three months ended September 30, 2022 compared to approximately $5.1

million for the three months ended September 30, 2021.

The combined cost of revenue decrease was due to improved pricing during the three

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

Telehealth costs decreased to 21% of associated

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

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.

telehealth revenues experienced during the three months ended September 30, 2022, from 27% of associated telehealth revenues during the

three months ended September 30, 2021.

WorkSimpli costs were 2% of associated WorkSimpli revenues for the both the three months ended

September 30, 2022 and 2021.

profit increased by approximately 34% to approximately $26.7 million for the three months ended September 30, 2022 compared to approximately

$19.9 million for the three months ended September 30, 2021, as a result of increased combined sales.

Gross profit as a percentage of

revenues increased to 85% during the three months ended September 30, 2022, from 80% for the three months ended September 30, 2021.

profit as a percentage of revenues for telehealth was 79% for the three months ended September 30, 2022 compared to 73% for the three

months ended September 30, 2021, and for WorkSimpli was 98% for both the three months ended September 30, 2022 and 2021.

The increase in revenues for both telehealth and WorkSimpli, improved pricing

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

expenses for the three months ended September 30, 2022 were approximately $33.5 million, as compared to approximately $32.4 million for

the three months ended September 30, 2021.

This represents an increase of 3%, or $1.1 million.

The increase is primarily attributable to:

The increase is primarily attributable

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.

During the three months ended September 30, 2022, stock-based compensation was $3.3 million, with the majority related

to stock compensation expense attributable to the service-based options and restricted stock units.

This category also consists of

merchant processing fees, payroll expenses for corporate employees, taxes and licenses, amortization expense and legal and professional

During the three months ended September 30, 2022, the Company has had an increase of approximately $1.8 million in general

and administrative expenses, primarily related to increases in legal and professional fees and payroll related costs incurred to

support the sales volume increases and growth of the Company, 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 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

During the three months ended September 30, 2022, the Company

had an increase of approximately $707 thousand, 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.

This consists of rent, insurance, payroll and benefit expenses related to the Company’s customer service department located

in South Carolina and Puerto Rico.

During the three months ended September 30, 2022, the Company had an increase of approximately

$983 thousand, primarily related to increases in headcount in the Company’s customer service department.

Development costs:

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services for our online products.

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

During the three months ended September 30, 2022, the Company had an increase of approximately

$694 thousand, primarily resulting from technology platform improvements and amortization expense.

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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,

During the three months ended September 30, 2022, the Company had a decrease of approximately $3.1 million,

or 15% 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.

Three Months Ended September 30,

Interest expense, net

$ (1,824,777 )

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

$ (1,824,777 )

expenses for the three months ended September 30, 2022, consists of interest accrued on the Series B Convertible Preferred Stock and

an increase to the Cleared contingent consideration as a result of the remeasurement of the fair

Other expenses for the three months ended September 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 $1.7 million during the three months

ended September 30, 2022 as compared to the three months ended September 30, 2021.

of the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021

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

September 30, 2022

September 30, 2021

Telehealth revenue, net

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Other operating expenses

Goodwill impairment charge

Customer service expenses

Goodwill impairment charge

Development costs

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$ (42,786,458 )

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.

for the nine months ended September 30, 2022 were approximately $90.9 million, an increase of 39% compared to approximately $65.5 million

for the nine months ended September 30, 2021.

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

39% and an increase in WorkSimpli revenue of 38%.

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

months ended September 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, 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 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.

increased by approximately 17% to approximately $14.6 million for the nine months ended September 30, 2022 compared to approximately

$12.4 million for the nine months ended September 30, 2021.

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

the nine months ended September 30, 2022 when compared to the nine months ended September 30, 2021.

Telehealth costs decreased to 21%

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

revenues during the nine months ended September 30, 2021.

WorkSimpli costs were 2% of associated WorkSimpli revenues for both the nine

months ended September 30, 2022 and 2021.

profit increased by approximately 44% to approximately $76.3 million for the nine months ended September 30, 2022 compared to approximately

$53.0 million for the nine months ended September 30, 2021, as a result of increased combined sales.

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.

revenues was 84% for the nine months ended September 30, 2022 compared to 81% for the nine months ended September 30, 2021.

as a percentage of revenues for telehealth was 79% for the nine months ended September 30, 2022 compared to 75% for the nine months ended

September 30, 2021, and for WorkSimpli was 98% for both the nine months ended September 30, 2022 and 2021.

The increase in revenues for both telehealth and WorkSimpli, improved pricing and favorable

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

expenses for the nine months ended September 30, 2022 were approximately $111.9 million, as compared to approximately $93.7 million for

the nine months ended September 30, 2021.

This represents an increase of 19%, or $18.2 million.

The increase is primarily attributable to:

Selling and marketing expenses:

This mainly consists of online marketing and advertising expenses.

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.

The increase is primarily attributable

and administrative expenses:

During the nine months ended September 30, 2022, stock-based compensation was $11.9 million, with the

majority related to stock compensation expense attributable to the service-based options and restricted stock units.

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 nine months ended September 30, 2022, the Company has had an increase of approximately $9.8

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

above, and an increase in payroll and other infrastructure expenses incurred to support the sales volume increases and growth of the Company,

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

During the nine months ended September 30, 2022, the Company

had an increase of approximately $2.5 million, 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.

This consists of rent, insurance, payroll and benefit expenses related to the Company’s customer service department located

in South Carolina and Puerto Rico.

During the nine months ended September 30, 2022, the Company had an increase of approximately

$2.2 million, primarily related to increases in headcount in the Company’s customer service department.

Goodwill impairment charge:

During the nine months ended September 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.

Development costs:

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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.

During the nine months ended September 30, 2022, the Company had an increase of approximately $1.4

million, 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 nine months ended September 30, 2022, the Company had a decrease of approximately $444 thousand

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

Six Months Ended June 30,

Nine Months Ended September 30,

Interest expense, net

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Gain on debt forgiveness

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

$ (2,681,236 )

income, net for the nine months ended September 30, 2022, consists of a $2.5 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 nine months ended September 30, 2021.

Interest expense decreased by approximately $2.4 million during the nine months

ended September 30, 2022 as compared to the nine months ended September 30, 2021.

September 30, 2022

December 31, 2021

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$ (11,961,588 )

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

capital decreased by approximately $34.1 million during the nine months ended September 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.

attributable to a decrease in cash of approximately $35.5 million, partially offset by an increase in inventory of $2.1 million due to

timing of purchases and an increase in accounts receivable of approximately $1.6 million.

Current liabilities increased by $2.1 million,

which was primarily attributable to an increase in accounts payable and accrued expenses of $1.2 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 an increase in deferred revenue of approximately $853 thousand.

and Capital Resources

Six Months Ended June 30,

$ (26,247,910 )

$ (28,901,559 )

Nine Months Ended September 30,

Net cash used in operating activities

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Net cash used in investing activities

(12,134,718 )

Net cash (used in) provided by financing activities

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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 $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.

cash used in operating activities was approximately $21.0 million for the nine months ended September 30, 2022, as compared with approximately

$27.3 million for the nine months ended September 30, 2021.

The significant factors contributing to the cash used in operations during

the nine months ended September 30, 2022, include the net loss of approximately $33.4 million (inclusive of $11.9 million in non-cash,

stock-based compensation charges), an increase in inventory of $2.1 million due to timing of purchases, an increase in accounts receivable

of $1.6 million and reduction in accrued expenses of $2.3 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.

These decreases were partially offset by

an increase in accounts payable of $1.8 million as a result of the Company extending payables and credit terms with vendors.

cash used in investing activities for the nine months ended September 30, 2022 was approximately $12.1 million, as compared with approximately

$1.8 million for the nine months ended September 30, 2021.

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

software costs of approximately $6.7 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 $379 thousand.

cash used in financing activities for the nine months ended September 30, 2022 was approximately $2.4 million as compared with net cash

provided by financing activities of approximately $29.4 million for the nine months ended September 30, 2021.

During the nine months

ended September 30, 2022, net cash used in financing activities consisted of preferred stock dividends of $2.3 million, distributions

to non-controlling interest of $108 thousand and contingent consideration payments made related to the ResumeBuild brand acquisition

of $94 thousand, partially offset by proceeds from the exercise of options and warrants of $129 thousand and proceeds received from the

sale of a portion of the Company’s membership interest in WorkSimpli of $12 thousand.

and Capital Resources Outlook

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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.

of its stockholders, affiliates, and creditors.

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

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fulfillment service provider;

in limited cases, title does not pass until the product reaches the customer’s delivery site, in

in limited cases, the customer does not obtain control until the product reaches the customer’s delivery site, in

these limited cases, recognition of revenue should be deferred until that time, however the Company does not have a process to properly

1 unchanged sentence

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

is considered to have occurred when the customer obtains control, which is usually commensurate upon shipment

of the product.

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

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

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

has accrued contract liabilities, as deferred revenue, of approximately $2.4 million and $1.5 million, respectively, which represent

1 unchanged sentence

trial period collections.

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

discounts, returns, and rebates on telehealth revenues approximated $1.1 million and $871 thousand for the three months ended September

30, 2022 and 2021, respectively.

Customer discounts, returns, and rebates on telehealth revenues approximated $4.2 million and $3.5 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

for the nine months ended September 30, 2022 and 2021, respectively.

discounts and allowances on WorkSimpli revenues approximated $710 thousand and $377 thousand for the three months ended September 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.

Customer discounts and allowances on WorkSimpli revenues approximated $1.7 million and $1.6 million for

the nine months ended September 30, 2022 and 2021, respectively.

Software Costs

5 unchanged sentences

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

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

amortized over the useful life and included in development costs on our statement of operations.

As of September 30, 2022 and

December 31, 2021, the Company capitalized $10.3 million and $3.6 million, respectively, related to internally developed software costs

which is amortized over the useful life and included in development costs on our statement of operations.

The increase in capitalized

software costs of $6.7 million or 186%, is primarily attributable to costs incurred related to development efforts of our LifeMD PC platform.

and Intangible Assets

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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.

Goodwill in the amount of $8.4 million was acquired in conjunction with the Cleared acquisition during the

three months ended March 31, 2022 (see Note 3).

The Company recorded a $2.7 million goodwill impairment charge during the nine months

ended September 30, 2022 related to a decline in the estimated fair value of Cleared as a result

of a decline in the Cleared financial projections .

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

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fair values of the assets.

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

As of September 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.

56 unchanged sentences

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