What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-12 compared with 2022-11-10 · 486 added, 524 removed, 188 unchanged (84% of the section changed)

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of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,

These statements are based upon beliefs of, and information currently available to, the Company’s management as well

as estimates and assumptions made by the Company’s management.

Readers are cautioned not to place undue reliance on these forward-looking

statements, which are only predictions and speak only as of the date hereof.

When used herein, the words “anticipate,” “believe,”

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

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

“could,” “should,” “continue” or the negative of these terms and similar expressions as they relate

to the Company or the Company’s management identify forward-looking statements.

Such statements reflect the current view of the

Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating

to the Company’s business, industry, and the Company’s operations and results of operations.

Should one or more of these

risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from

those anticipated, believed, estimated, expected, intended, or planned.

as amended (the “Exchange Act”).

These statements are based upon beliefs of, and information currently available to, the

Company’s management as well as estimates and assumptions made by the Company’s management.

Readers are cautioned not to

place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof.

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

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

“will,” “would,” “could,” “should,” “continue” or the negative of these terms

and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements.

Such statements

reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other

factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations.

Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results

may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future

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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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notes thereto appearing elsewhere in this report.

forward-looking statements made in this report are based only on events or information as of the date on which the statements are made

in this report.

Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether

as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence

of unanticipated events.

You should read this report and the documents we refer to in this report and have filed as exhibits to this

report completely and with the understanding that our actual future results may be materially different from what we expect.

include, by way of example and without limitation:

factors include, by way of example and without limitation:

changes in the market acceptance

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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;

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

infringing on our proprietary rights;

our ability to successfully

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differ materially from our assumptions.

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

These accounting principles require us to make certain estimates, judgments and assumptions.

We believe that

the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these

estimates, judgments and assumptions are made.

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

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

during the periods presented.

Our condensed consolidated financial statements would be affected to the extent there are material differences

between these estimates and actual results.

The following discussion should be read in conjunction with our financial statements and

notes thereto appearing elsewhere in this report.

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

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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.

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

financial interest.

Unless otherwise specified, all dollar amounts are expressed in United States (“U.S.”) 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 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.

that provides a software as a service 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

our ownership stake in WorkSimpli to 85.58%.

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 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

delivered on a recurring basis.

In addition to our telehealth offerings, we sell complementary nutritional supplements and over-the-counter

(“OTC”) products.

Many of our products are available on a subscription basis, where patients can subscribe to receive regular

shipments of prescribed medications or products.

This creates convenience and discounted pricing opportunities for patients and recurring

revenue streams for us.

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

and direct response advertising methods across highly scalable marketing channels ( i.e ., national TV, streaming TV, streaming

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

inception, we have helped more than 650,000 customers and patients, providing them greater access to high-quality, convenient, and affordable

care in all 50 states.

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

ended September 30, 2021.

Effective March 31,

2023, the Company redeemed 500 membership interest units in WorkSimpli and, as a result, the Company’s ownership interest in WorkSimpli

increased to 74.06%.

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

treatments for allergy, asthma, and immunology.

are a direct-to-patient telehealth company providing patients a high-quality, cost-effective, and convenient way of accessing comprehensive,

virtual healthcare.

We believe the traditional model of visiting a doctor’s office, traveling to a local pharmacy, and returning

for follow up care or prescription refills is complex, inefficient, and costly, and discourages many individuals from seeking much needed

medical care.

LifeMD is positioned to elevate the healthcare experience through telehealth with our proprietary technology platform,

affiliated provider network, broad treatment capabilities, and unique ability to nurture patient relationships.

LifeMD telehealth platform seamlessly integrates a clinician-centric electronic medical record (“EMR”) system, proprietary

algorithms for case-load balancing and scheduling, customer relationship management (“CRM”) functionality, remote and in-home

lab testing, and digital prescription capabilities, patient-provider audio/video interfacing, cloud pharmacy fulfillment, and more.

proprietary technology platform, combined with our 50-state affiliated provider network, enables the management of virtual treatment

offerings and complex patient journeys for hundreds of conditions spanning men’s and women’s health, dermatology, urgent,

and primary care, chronic care management and more.

Our telehealth offerings in general seek to connect patients to licensed providers

for diagnoses, virtual care, and prescription medications when appropriate.

We also offer over-the-counter (“OTC”) products

that are complementary to the conditions we treat.

Our virtual primary care services are primarily offered on a subscription basis.

mission is to empower people to live healthier lives by increasing access to high quality and affordable virtual and in-home healthcare.

We believe our success has and will continue to be attributable to an amazing patient experience, retaining the highest-quality providers

in the industry, and our end-to-end technology platform.

We plan to build a diverse portfolio of differentiated telehealth service offerings

that meet the needs of a growing and diversified patient base.

inception, we have helped approximately 715,000 customers and patients, providing them greater access to high-quality, convenient, and

affordable care in all 50 states.

Total revenue from recurring subscriptions is approximately 91%.

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

In addition to our telehealth business,

we own 74.06% of WorkSimpli, which operates PDFSimpli, a rapidly growing software as a service platform for converting, signing, editing,

and sharing PDF documents.

This business has seen 101% year-over-year revenue growth, with recurring revenue of 98%.

believe that telehealth platforms like ours will fundamentally shift how individuals perceive and access healthcare in the United States,

by necessity and by preference.

With the average wait time to see a physician in the United States now greater than 29 days, according

to a 2018 Merritt Hawkins Survey, and the United States’ projected significant shortfall of licensed physicians by 2030, we believe

healthcare infrastructure must change to accommodate patients.

Timely and convenient access to healthcare and prescription medications

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

Our mission is to radically change healthcare with our portfolio

of direct-to-patient telehealth brands that encompass on-demand medical treatment, online pharmacy, and OTC products.

We want our brands

to be top-of-mind for consumers considering telehealth.

the United States, healthcare spending is currently $4.0 trillion and is expected to grow to $6.2 trillion by 2028, according to the

Centers for Medicare and Medicaid Services.

Physician services and prescription medications account for approximately 30% of healthcare

spending, or over $1 trillion annually, and we believe that we have the infrastructure, medical expertise, and technical know-how necessary

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

We believe that we are well positioned to capitalize

on this large-scale shift in healthcare.

believe that an amazing customer experience, incredible healthcare, and new customer acquisition form the heart of our business.

exemplified with our first brand, ShapiroMD, we have built a full line of proprietary and patented OTC products for male and female hair

Food and Drug Administration (“FDA”) approved OTC minoxidil, and now a telehealth platform offering that gives

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

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

such as sexual health and hair loss.

RexMD continues to expand its treatment offerings to address additional chronic indications present

in men’s health.

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

a market need.

Our platform is supported by a driven team of digital marketing and branding experts, data analysts, designers, and engineers

focused on building enduring brands.

Brand Portfolio

have built a strategic portfolio of wholly-owned telehealth platform brands supported by an affiliated, 50-state physician network and

an integrated national network of third party pharmacies that address large unmet needs in men’s health, hair loss, virtual primary

care, and dermatology.

We continue to experience aggressive growth across our brands.

process across each brand is to guide consumers through a medical intake process and product selection, after which a licensed U.S.

conducts a virtual consultation and, if appropriate, prescribes prescription medications and/or recommends OTC products.

medications and OTC products are filled by pharmacy fulfillment partners and shipped directly to the patient.

Platform and Business Strategy

are a patient-centric telehealth company dedicated to delivering seamless end-to-end virtual healthcare to consumers.

Our mission is

facilitated by our robust technology platform that is purpose-built to seamlessly connect the touchpoints involved in delivering complex

care, including scheduling for a national provider network, EMR capabilities, secure synchronous and asynchronous communication, digital

prescriptions, cloud pharmacy, and more.

Our platform enables us to deliver modern personalized health experiences and offerings through

our websites and mobile applications, spanning customer discovery, purchase, and connection with licensed providers, to pharmacy and

OTC order fulfillment, through ongoing care.

We believe that our seamless approach significantly reduces the complication, cost and time

burden of healthcare, incentivizing consumers to stick with our brands.

proprietary platform also facilitates and accelerates the development and launch of novel offerings throughout clinical protocol establishment,

marketing, and fulfillment.

Our offerings are sold to consumers on a subscription basis thus creating convenience and discounted pricing

opportunities for patients and recurring revenue streams for the Company.

Our offerings range from prescription medication fulfilled

on a recurring basis, to complementary OTC products, to ongoing care from a team of medical providers.

In general, our offerings seek

to serve a patient from beginning to end, starting from brand or offering discovery to the medical intake and product selection process,

after which a licensed U.S.

physician conducts a virtual consultation and determines a treatment plan.

As appropriate, prescription medications

and OTC products are filled by pharmacy fulfillment partners, and if preferred, shipped directly to the patient.

The number of patients

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our products and services to date.

in 2017, ShapiroMD is a telehealth platform brand that offers access to virtual medical treatment, prescription medications, patented-doctor

formulated OTC products, an FDA approved medical device for male and female hair loss, and female specific topical compounded medications

for hair loss through our telehealth platform.

ShapiroMD has emerged as a leading destination for hair loss treatment across the United

States and has served more than 260,000 customers and patients since inception with a 4.9-star Trustpilot rating.

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

health needs.

After treatment from a licensed physician, if appropriate, one of our partner pharmacies will dispense and ship prescription

medications and OTC products directly to the customer.

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

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

for RexMD is to become a leading telehealth destination for men.

RexMD has emerged as a leading men’s telehealth platform across

the United States and has served more than 360,000 customers and patients since inception with a 4.3-star Trustpilot rating.

Interest Entity:

LifeMD Primary Care

launched in the fourth quarter of 2021, LifeMD PC is a personalized, subscription-based virtual primary care platform.

The LifeMD PC

clinic provides patients in all 50 states with 24/7 access to a high-quality provider for their primary care, urgent care, and chronic

LifeMD PC offers a mobile first platform that incorporates virtual consultations and treatment, prescription medications,

diagnostics, and imaging.

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

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

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

conditions such as aging and acne.

In addition to the brand’s telehealth offerings, NavaMD’s proprietary products leverage

intellectual property and proprietary formulations licensed from Restorsea, a leading medical grade skincare technology platform.

clinically proven skincare technology platform is the result of more than $50 million invested in R&D and intellectual property development,

and Restorsea has received at least 35 patents along with broad industry and academic acclaim, with its breakthrough clinical results

having been published in the peer-reviewed Journal of Drugs in Dermatology and Journal of Clinical and Aesthetic Dermatology.

is one of the first direct-to-patient brands to offer this advanced skincare technology.

Asthma & Immunology:

January 2022, the Company acquired Cleared, a telehealth brand that provides personalized treatments for allergy, asthma, and immunology.

Its offerings include in-home tests for both environmental and food allergies, prescriptions for allergies and asthma, and FDA-approved

immunotherapies for treating chronic allergies.

Cleared leverages a network of medical professionals and providers in all 50 states,

a growing pipeline of pharmaceutical partners, and treatments and tests that cost up to 50 percent less than the brand-name competition.

The offerings include free consultations and ongoing care from U.S.-licensed allergists and nurses.

as a robust CRM system, and with built in analytics and integrations with best-in-class performance marketing platforms, our platform

also enhances our ability to effectively and efficiently acquire new patients and customers and drive brand visibility through strategic

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).

leverage our telehealth technology platform and services across the three core areas described below:

Direct-to-Consumer

Virtual Primary Care

the first quarter of 2022, we launched our flagship virtual primary care offering under the LifeMD brand, LifeMD PC.

This offering provides

patients in all 50 states with 24/7 access to an affiliated high-quality provider for their primary care, urgent care, and chronic care

LifeMD’s virtual primary care offering is a mobile-first full-service destination that provides seamless access to high-quality

clinical care including virtual consultations and treatment, prescription medications, diagnostics, and imaging, wellness coaching and

This offering is also supported by robust partnerships that provide our patients benefits such as substantial discounts on lab

work and a prescription discount card that can be presented at over 60,000 pharmacies to save up to 92% on their prescription medication.

Direct-to-Patient

also leverage our telehealth platform’s provider network, cloud pharmacy, and EMR capabilities across our direct-to-patient telehealth

Our telehealth brands RexMD, ShapiroMD, NavaMD, and Cleared address largely unaddressed or underserved needs and are leading

destinations in their respective treatment verticals of men’s health, hair loss, dermatology, and immunology.

RexMD is a men’s

telehealth platform brand that offers access to virtual medical treatment for a variety of men’s health needs.

After treatment

from an affiliated licensed physician, if appropriate, one of our partner pharmacies will dispense and ship prescription medications

and OTC products directly to the customer.

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

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

a leading men’s telehealth platform across the U.S.

and has served more than 410,000 customers and patients since inception

with a 4.7-star Trustpilot rating.

ShapiroMD offers

access to virtual medical treatment, prescription medications, patented doctor formulated OTC products, topical compounded medications,

and Food and Drug Administration (“FDA”) approved medical devices treating male and female hair loss through our telehealth

ShapiroMD has emerged as a leading destination for hair loss treatment across the U.S.

and has served more than 260,000

customers and patients since inception with a 4.9-star Trustpilot rating.

NavaMD is a female-oriented,

tele-dermatology brand that offers access to virtual medical treatment from dermatologists and other providers, and, if appropriate,

prescription oral and compounded topical medications to treat dermatological conditions such as aging and acne.

In addition to the

brand’s telehealth offerings, NavaMD’s proprietary products leverage intellectual property and proprietary formulations

licensed from Restorsea, a leading medical grade skincare technology platform.

Cleared is a telehealth

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

Offerings include in-home tests for both environmental

and food allergies, prescriptions for allergies and asthma, and FDA-approved immunotherapies for treating chronic allergies.

leverages a network of affiliated medical professionals and providers in all 50 states, various pharmaceutical partners, and treatments

and tests that cost up to 50 percent less than the brand-name competition.

The offerings include free consultations, prescription

medication, complementary OTC products, and ongoing care from U.S.-licensed allergists and nurses.

Telehealth Offerings

Organizations

commercializing healthcare products face a challenging commercial landscape.

Increased competition, shrinking market sizes and challenges

reaching patients via the traditional brick and mortar doctor are forcing pharmaceutical, medical device and diagnostic companies to

rethink their commercial strategies and focus more on digital patient awareness and engagement initiatives.

Spending on digital solutions

to facilitate greater access to their end markets accounts for one-third of their collective $30 billion commercial spend in the U.S.

We believe LifeMD’s unique telehealth technology platform and virtual clinical expertise is well-positioned to address the unmet

needs of healthcare product companies as they relate to digital patient awareness, access to care, adherence and compliance.

Owned Subsidiary:

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

WorkSimpli was

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

which operates a marketing-driven software solutions business.

In addition to WorkSimpli’s growth business model, this acquisition

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

On January 22, 2021, the Company consummated

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

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

affects the Company.

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

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

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

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.

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

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

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

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

In addition to WorkSimpli’s growth business model, this

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

On January 22, 2021, the Company

consummated a transaction and increased its ownership of WorkSimpli to 85.58%.

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

Effective March 31, 2023, the Company redeemed 500 membership interest units in WorkSimpli and, as a result, the Company’s

ownership interest in WorkSimpli increased to 74.06%.

Developments During the Three Months Ended March 31, 2023

to Cleared Stock Purchase Agreement

February 4, 2023, the Company entered into the First Amendment to the Stock Purchase Agreement (the “First Amendment”) between

the Company and the sellers of Cleared.

The First Amendment was amended to, among other things:

(i) reduce the total purchase price by

$250 thousand to a total of $3.67 million;

(ii) change the timing of the payment of the purchase price to $460 thousand paid at closing

(which has already been paid by the Company), with the remaining amount to be paid in five quarterly installments beginning on or before

February 6, 2023 and ending January 15, 2024;

(iii) remove all “earn-out” payments payable by the Company to the sellers;

and (iv) removing certain representations and warranties of the Company and sellers in connection with the transaction.

On February 6,

2023, the Company issued 337,895 shares of common stock related to the first of five quarterly installment payments due to the sellers

of Cleared under the First Amendment.

Capital Credit Facility

March 21, 2023, the Company entered into and closed on a loan and security agreement (the “Credit Agreement”), and a supplement

to the Credit Agreement (the “Supplement”), with Avenue Venture Opportunities Fund II, L.P.

and Avenue Venture Opportunities

(collectively, “Avenue”).

The Credit Agreement provides for a convertible senior secured credit facility of up

to an aggregate amount of $40 million, comprised of the following:

(1) $15 million in term loans funded at closing, (2) $5 million of

additional committed term loans available in the fourth quarter of 2023 and (3) $20 million of additional uncommitted term loans, collectively

referred to as the “Avenue Facility”.

The Avenue Facility matures on October 1, 2026.

The Company issued Avenue warrants

to purchase $1.2 million of the Company’s common stock at an exercise price of $1.24, subject to adjustments (the “Warrants”).

In addition, Avenue may convert up to $2 million of the $15 million in term loans funded at closing into shares of the Company’s

common stock at any time while the loans are outstanding, at a price per share equal to $1.49.

Proceeds from the Avenue Facility

were used to repay the Company’s outstanding notes payable balances with CRG Financial and are expected to be used for general

corporate purposes and at the Company’s election, re-financing up to $5 million liquidation value plus accrued interest of the

Series B Preferred Stock.

of Operations

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

financial results for the three months ended March 31, 2023 are summarized as follows in comparison to the three months ended March 31,

March 31, 2023

March 31, 2022

Telehealth revenue, net

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(13,107,015 )

Other expenses

(14,416,081 )

Net income (loss) attributable to non-controlling interest

Net loss attributable to LifeMD, Inc.

(14,353,375 )

Preferred stock dividends

Net loss attributable to common shareholders

$ (8,058,236 )

$ (14,353,375 )

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

15% and an increase in WorkSimpli revenue of 57%.

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

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

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

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 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

General and administrative

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 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 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:

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 September 30, 2022, the Company had an increase of approximately

$694 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 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

$ (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

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

Customer service expenses

Goodwill impairment charge

Development costs

Total expenses

Operating loss

(35,563,840 )

(40,636,404 )

Other income (expenses), net

(33,445,845 )

Loss on debt extinguishment

(13,274,949 )

Net income (loss) attributable to non-controlling interest

Net income attributable to non-controlling interest

Net loss attributable to LifeMD, Inc.

(13,299,675 )

(42,786,458 )

Preferred stock dividends

2 unchanged sentences

$ (14,076,238 )

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

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 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 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

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 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.

Customer service expenses:

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:

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

services for our online products.

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

Nine Months Ended September 30,

Interest expense, net

$ (2,866,150 )

Change in fair value of contingent consideration

Gain on debt forgiveness

$ (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

revenue, net.

Revenues for the three months ended March 31, 2023 were approximately $33.1 million, an increase of 14% compared to approximately

$29.0 million for the three months ended March 31, 2022.

The increase in revenues was attributable to an increase in WorkSimpli revenue

of 101%, partially offset by a decrease in telehealth revenue of 11%.

Telehealth revenue accounts for 61% of total revenue and has decreased

during the three months ended March 31, 2023 due to a reduction in online sales demand.

WorkSimpli revenue accounts for 39% 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.

cost of revenue.

Total 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 decreased by approximately 20% to approximately $4.2 million for the three months ended March

31, 2023 compared to approximately $5.2 million for the three months ended March 31, 2022.

The combined cost of revenue decrease was

due to decreased Telehealth sales volume during the three months ended March 31, 2023 when compared to the three months ended March 31,

Telehealth costs decreased to 19% of associated telehealth revenues experienced during the three months ended March 31, 2023, from

23% of associated telehealth revenues during the three months ended March 31, 2022 primarily due to lower sales volume and improved pricing.

WorkSimpli costs were 2% of associated WorkSimpli revenues for the both the three months ended March 31, 2023 and 2022.

Gross profit increased by approximately 22% to approximately $28.9 million for the three months ended March 31, 2023 compared

to approximately $23.8 million for the three months ended March 31, 2022, as a result of increased combined sales.

Gross profit as a

percentage of revenues was 87% for the three months ended March 31, 2023 as compared to 82% for the three months ended March 31, 2022.

Gross profit as a percentage of revenues for telehealth was 81% for the three months ended March 31, 2023 compared to 77% for the three

months ended March 31, 2022, and for WorkSimpli was 98% for both the three months ended March 31, 2023 and March 31, 2022.

in sales volume for WorkSimpli and improved pricing for Telehealth have contributed to the increase in gross profit.

Operating expenses for the three months ended March 31, 2023 were approximately $31.8 million, as compared to approximately

$36.9 million for the three months ended March 31, 2022.

This represents a decrease of 14%, or $5.1 million.

The decrease is primarily

attributable to:

Selling and marketing expenses:

This mainly consists of online marketing and advertising expenses.

During the three months ended March 31, 2023, the Company had

a decrease of approximately $5.2 million, or 24% in selling and marketing costs as a result of a Company-wide strategic reduction

in costs and alignment of sales and marketing initiatives to drive the Company’s recurring revenue subscription-based sales

General and administrative

During the three months ended March 31, 2023, stock-based compensation was $2.7 million, with the majority related to stock

compensation expense attributable to service-based stock options and restricted stock units, as compared to stock-based compensation

expense of $4.5 million for the three months ended March 31, 2022.

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 March 31, 2023, the Company had a decrease of approximately $1.6 million in general and administrative expenses, primarily

related to the decrease in stock-based compensation costs referenced above and a Company-wide strategic reduction in costs.

decreases in operating expenses were partially offset by increases in the following:

operating expenses:

This consists of rent and lease expense, insurance, office supplies and software subscriptions, royalty expense

and bank charges.

During the three months ended March 31, 2023, the Company had an increase of approximately $287 thousand, or 20%,

primarily related to increases in office supplies and software subscriptions and insurance.

service expenses:

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 March 31, 2023, the Company had an increase of

approximately $622 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, 2023, the Company had an increase of approximately $755 thousand, primarily resulting from technology platform

improvements and amortization expense.

expense, net.

Interest expense, net consists of interest expense related to the Avenue Facility, notes payable and the Series B Convertible

Preferred Stock for the three months ended March 31, 2023 and interest accrued on the Series B Convertible Preferred Stock for the three

months ended March 31, 2022.

Interest expense increased by approximately $97 thousand during the three months ended March 31, 2023 as

compared to the three months ended March 31, 2022.

on debt extinguishment.

The Company recorded a $325 thousand loss on debt extinguishment related to the repayment of the CRG Financial

loan during the three months ended March 31, 2023 due to a prepayment penalty and various fees associated with the CRG Financial loan.

March 31, 2023

December 31, 2022

3 unchanged sentences

$ (7,853,837 )

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 $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.

$ (20,062,794 )

capital increased by approximately $12.2 million during the three months ended March 31, 2023.

The increase in current assets is primarily

attributable to an increase in cash of approximately $7.6 million as a result of the Avenue Facility, an increase in other current assets

of $387 thousand, an increase in product deposits of $119 thousand and an increase in accounts receivable of $102 thousand.

These increases

were partially offset by a decrease in inventory of approximately $321 thousand.

Current liabilities decreased by $4.4 million, which

was primarily attributable to a decrease in accounts payable and accrued expenses of $3.8 million and a decrease in notes payable of

$975 thousand, partially offset by an increase in deferred revenue of $348 thousand.

and Capital Resources

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash used in operating activities

2 unchanged sentences

Net cash used in investing activities

(12,134,718 )

Net cash (used in) provided by financing activities

Net (decrease) increase in cash

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

(16,243,395 )

2 unchanged sentences

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 $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.

cash used in operating activities was approximately $2.6 million for the three months ended March 31, 2023, as compared with

approximately $8.1 million three months ended March 31, 2022.

The significant factors contributing to the cash used in operations

during the three months ended March 31, 2023, include the net loss of approximately $3.4 million inclusive of the following:

$2.7 million in non-cash stock-based compensation charges, (2) $1.5 million in non-cash depreciation and amortization and (3) a $325

thousand loss on debt extinguishment.

Additionally, a decrease in accounts payable and other operating activities

of $3.8 million contributed to net cash used in operations for the three months ended March 31, 2023.

These factors contributing to

net cash used in operations were partially offset by an increase in deferred revenue of $348 thousand and an increase in inventory

of $321 thousand due to the timing of purchases.

Net cash used in operating activities for the three months ended March 31, 2022,

was driven primarily by the net loss of approximately $13.3 million inclusive of $4.5 million in non-cash stock-based compensation

charges and $530 thousand in non-cash depreciation and amortization, principally offset by the net increase in accounts payable and

accrued expenses of approximately $0.7 million.

cash used in investing activities for the three months ended March 31, 2023 was approximately $1.8 million, as compared with approximately

$7.4 million for the three months ended March 31, 2022.

Net cash used in investing activities for the three months ended March 31, 2023,

was due to cash paid for capitalized software costs of approximately $1.8 million and cash paid for the purchase of equipment of approximately

$32 thousand.

Net cash used in investing activities for the three months ended March 31, 2022, 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 provided by financing activities for the three months ended March 31, 2023 was approximately $12.0 million as compared with net

cash used in financing activities of approximately $774 thousand for the three months ended March 31, 2022.

During the three months

ended March 31, 2023, net cash provided by financing activities consisted of:

(1) $14.5 million in net proceeds received from the

Avenue Facility and (2) $2.0 million in proceeds received from the CRG Financial loan.

These factors contributing to net cash

provided by financing activities were partially offset by repayments of notes payable of approximately $3.3 million net of a $325

thousand loss on debt extinguishment on the CRG Financial loan, preferred stock dividends of approximately $777 thousand, payments

made to redeem 500 WorkSimpli membership interest units of approximately $307 thousand, contingent consideration payments made

related to the ResumeBuild brand acquisition of approximately $63 thousand and distributions to non-controlling interest of $36

Net cash used in financing activities for the three months ended March 31, 2022, consisted of preferred stock dividends of

$777 thousand and distributions to non-controlling interest of $36 thousand, partially offset by proceeds from the exercise of

warrants of $38 thousand.

and Capital Resources Outlook

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

and advances from officers and directors.

Our primary short-term and long-term requirements for liquidity and capital are for customer

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

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

of March 31, 2023, the Company has an accumulated deficit approximating $195.3 million and has experienced significant losses from its

To date, the Company has been funding operations primarily through the sales of its products, issuance of common and preferred

stock and through loans and advances from officers and directors.

Our primary short-term and long-term requirements for liquidity and

capital are for customer acquisitions, funding business acquisitions and investments we may make from time to time, working capital including

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

Company has a current cash balance of approximately $12.8 million as of the filing date.

March 21, 2023, the Company entered into and closed on a Credit Agreement, and a supplement to the Credit Agreement with Avenue.

Credit Agreement provides for a convertible senior secured credit facility of up to an aggregate amount of $40 million, comprised of

the following:

(1) $15 million in term loans funded at closing, (2) $5 million of additional committed term loans available in the fourth

quarter of 2023 and (3) $20 million of additional uncommitted term loans, collectively referred to as the “Avenue Facility”.

The Avenue Facility matures on October 1, 2026.

The Company issued Avenue Warrants to purchase

$1.2 million of the Company’s common stock at an exercise price of $1.24, subject to adjustments.

In addition, Avenue may convert

up to $2 million of the $15 million in term loans funded at closing into shares of the Company’s common stock at any time while

the loans are outstanding, at a price per share equal to $1.49.

Proceeds from the Avenue Facility were used to repay the Company’s

outstanding notes payable balances with CRG Financial and are expected to be used for general corporate purposes and at the Company’s

election, re-financing up to $5 million liquidation value plus accrued interest of the Series B Preferred Stock.

the three months ended March 31, 2023, the Company received proceeds of $2 million under a $2.5 million loan facility with CRG Financial,

maturing on December 15, 2023.

The loan facility includes interest of 12%.

The Company repaid the $2 million outstanding loan balance

on March 21, 2023 with the proceeds received from the Avenue Facility and recorded a $325 thousand loss on debt extinguishment due to

a prepayment penalty and various fees associated with the CRG Financial loan.

As of both March 31, 2023 and December 31, 2022, the outstanding

balance was $0 related to the CRG Financial loan.

October 2022, the Company received proceeds of $976 thousand under a 12-month working capital loan with Amazon.

The terms of the loan

include interest in the amount of $62 thousand.

As of March 31, 2023 and December 31, 2022, the outstanding balance was $765 thousand

and $976 thousand, respectively, and is included in notes payable, net, on the accompanying unaudited condensed consolidated balance

November 2022, the Company received proceeds of $1.9 million under two 10-month working capital loans with Balanced Management.

of the loans include loan origination fees in the amount of $60 thousand and total interest of $840 thousand.

As of March 31, 2023 and

December 31, 2022, the outstanding balance was $1.058 million and $1.821 million, respectively, and is included in notes payable, net, on

the accompanying unaudited condensed consolidated balance sheet.

June 8, 2021, the Company filed a shelf registration statement on Form S-3 under the Securities Act, which was declared effective on

June 22, 2021 (the “2021 Shelf”).

Under the 2021 Shelf at the time of effectiveness, the Company originally had the ability

to raise up to $150 million by selling common stock, preferred stock, debt securities, warrants, and units.

In conjunction with the 2021

Shelf, the Company also entered into an At Market Issuance Sales Agreement (the “ATM Sales Agreement”) with B.

Riley Securities,

and Cantor Fitzgerald & Co.

relating to the sale of its common stock.

In accordance with the terms of the ATM Sales Agreement,

the Company may, but is not obligated to, offer and sell, from time to time, shares of common stock, through or to the Agents, acting

as agent or principal.

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

as defined in Rule 415 under the Securities Act.

On March 22, 2023, the date the Company filed its Annual Report on Form 10-K for the

fiscal year ended December 31, 2022, the Company became subject to the offering limits in General Instruction I.B.6 of Form S-3 (i.e.,

the “baby shelf limitations”).

As a result of the baby shelf limitations, the Company may only offer and sell shares of common

stock having an aggregate offering price of up to $18.435 million pursuant to the ATM Sales Agreement, and it filed a prospectus supplement

with the SEC to that effect on March 27, 2023.

In the event that the Company’s public float increases above $75.0 million, the

Company will no longer be subject to the baby shelf limitations, in which case the Company will file another prospectus supplement with

the SEC prior to making sales pursuant to the ATM Sales Agreement in excess of $18.435 million.

As of March 31, 2023, the Company has

$18.435 million available under the ATM Sales Agreement.

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

8 unchanged sentences

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.

Company has begun to implement strategies to strengthen revenues and improve operational efficiencies across the business and is significantly

curtailing expenses, however, these strategies do not mitigate the substantial doubt about the Company’s ability to continue as

a going concern.

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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of operations.

Company records revenue under the adoption of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with

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

Company records revenue under the adoption of ASC 606, Revenue from Contracts with Customers , by analyzing exchanges with its

customers using a five-step analysis:

Identify the contract

9 unchanged sentences

fulfillment service provider.

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

record the recognition of revenue if orders are not immediately shipped, and deems the impact to be immaterial.

In all cases, delivery

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

of the product.

In the case of its product-based contracts, the Company provides a subscription sensitive service based on the recurring

shipment of products and records the related revenue under the subscription agreements subsequent to receiving the monthly product order,

recording the revenue at the time it fulfills the shipment obligation to the customer.

In some cases, the customer does not obtain control until the product reaches the customer’s delivery

in these cases, recognition of revenue is deferred until that time.

In all cases, delivery is considered to have occurred when

the customer obtains control, which is usually commensurate upon shipment of the product.

In the case where delivery is not commensurate

upon shipment of the product, recognition of revenue is deferred until that time.

In the case of its product-based contracts, the Company

provides a subscription sensitive service based on the recurring shipment of products.

The Company records the related revenue under

the subscription agreements subsequent to receiving the monthly product order, recording the revenue at the time it fulfills the shipment

obligation to the customer.

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

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

Company’s discounts and customer rebates are known at the time of sale, correspondingly, the Company reduces gross product sales

Company’s discounts and customer rebates are known at the time of sale;

correspondingly, the Company reduces gross product sales

for such discounts and customer rebates.

3 unchanged sentences

record estimates for returns and allowances to be applied to the entire product-based portfolio population.

Customer discounts, returns

and rebates on telehealth revenues approximated $331 thousand and $1.5 million, respectively, during the three months ended March 31,

2023 and 2022, respectively.

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

14 unchanged sentences

offers a discount for the monthly or yearly subscriptions being purchased, which is deducted at the time of payment at the initiation

of the contract term, therefore the Contract price is fixed and determinable at the contract initiation.

of the contract term;

therefore the Contract price is fixed and determinable at the contract initiation.

Monthly and annual subscriptions

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

As of 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

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

trial period collections.

discounts, returns, and rebates on 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 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 $1.7 million and $1.6 million for

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

Customer discounts and allowances on WorkSimpli revenues

approximated $912 thousand and $448 thousand, respectively, during the three months ended March 31, 2023 and 2022, respectively.

of March 31, 2023 and December 31, 2022, the Company has accrued contract liabilities, as deferred revenue, of approximately $5.9 million

and $5.5 million, respectively, which represent the following:

(1) obligations for products which the customer has not yet obtained control

due to delivery not commensurate upon shipment of the product, (2) obligations on WorkSimpli in-process monthly or yearly contracts with

customers and (3) a portion attributable to the yet to be recognized WorkSimpli initial 14-day trial period collections.

Software Costs

Company capitalizes certain internal payroll costs and third-party costs related to internally developed software and amortizes these

costs using the straight-line method over the estimated useful life of the software, generally three years.

The Company does not sell

internally developed software other than through the use of subscription service.

Certain development costs not meeting the criteria

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

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.

Company capitalizes certain internal payroll costs and third-party costs related to internally developed software and amortizes

these costs using the straight-line method over the estimated useful life of the software, generally three years.

The Company does

not sell internally developed software other than through the use of subscription service.

Certain development costs not meeting the

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

As of March 31,

2023 and December 31, 2022, the Company capitalized a net amount of $9.5 million and $8.8 million, respectively, related to

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

The increase in capitalized software costs of $700 thousand or 8%, 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 $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.

Goodwill in the amount of $8.0 million was recognized in conjunction with the Cleared acquisition.

recorded an $8.0 million goodwill impairment charge and an $827 thousand intangible asset impairment charge during the year ended December

31, 2022 related to a decline in the estimated fair value of Cleared as a result of a decline in the Cleared financial projections (see

intangible assets are comprised of:

(1) a customer relationship asset, (2) the Cleared trade name, (3) Cleared developed technology,

(4) a purchased license and (5) a purchased domain name.

During the year ended December 31, 2022, the Company recorded an $827 thousand

impairment loss related to a decline in the estimated fair value of the Cleared customer relationship intangible asset with an original

cost of $919 thousand and accumulated amortization of $92 thousand.

Other 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 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.

Company files corporate federal and state tax returns.

Conversion Labs PR and WorkSimpli file tax returns in Puerto Rico.

Both are limited

liability companies and file separate tax returns with any tax liabilities or benefits passing through to its members.

Company records current and deferred taxes in accordance with ASC 740, Accounting for Income Taxes .

This ASC requires recognition

of deferred tax assets and liabilities for temporary differences between tax basis of assets and liabilities and the amounts at which

they are carried in the consolidated financial statements, based upon the enacted rates in effect for the year in which the differences

are expected to reverse.

The Company establishes a valuation allowance, when necessary, to reduce deferred tax assets to the amount expected

to be realized.

The Company periodically assesses the value of its deferred tax asset, a majority of which has been generated by a history

of net operating losses and management determines the necessity for a valuation allowance.

ASC 740 also provides a recognition threshold

and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken in a tax return.

this guidance, a company may recognize the tax benefit from an uncertain tax position in its financial statements only if it is more

likely-than-not ( i.e ., a likelihood of more than 50%) that the tax position will be sustained on examination by the taxing authorities,

based on the technical merits of the position.

The Company’s tax returns for all years since December 31, 2018, remain open to

audit by all related taxing authorities.

Company follows the provisions of ASC 718, Share-Based Payment .

Under this guidance compensation cost generally is recognized

at fair value on the date of the grant and amortized over the respective vesting or service period.

The fair value of options at the

date of grant is estimated using the Black-Scholes option pricing model.

The expected option life is derived from assumed exercise rates

based upon historical exercise patterns and represents the period of time that options granted are expected to be outstanding.

volatility is based upon historical volatility of the Company’s common stock shares using weekly price observations over an observation

period that approximates the expected life of the options.

The risk-free rate approximates the U.S.

Treasury yield curve rate in effect

at the time of grant for periods similar to the expected option life.

Due to limited history of forfeitures, the Company has elected

to account for forfeitures as they occur.

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

Issued Accounting Standards

October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

assets include equipment and capitalized software.

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 March 31,

2023 and December 31, 2022, the Company determined that no events or changes in circumstances existed that would indicate any impairment

of its long-lived assets.

Adopted Accounting Standards

June 2016, the Financial Accounting Standards Board

(“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial

Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments , which requires an entity to utilize

the current expected credit loss (“CECL”) impairment model to estimate its lifetime “expected credit loss” and

record an allowance that is deducted from the amortized cost basis of the financial assets and certain other instruments, including but

not limited to available-for-sale debt securities.

Credit losses relating to available-for-sale debt securities are recorded through

an allowance for credit losses.

ASU 2016-13 requires a cumulative effect adjustment to the balance sheet as of the beginning of the first

reporting period in which the guidance is effective.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit

Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842):

Effective Dates , which defers the effective date

of ASU 2016-13 to fiscal years beginning after December 15, 2022 for all entities except SEC reporting companies that are not smaller

reporting companies.

The Company adopted ASU 2016-13 as of January 1, 2023.

The adoption did not have a material impact on the

Company’s financial statements.

October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805);

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

This new guidance affects all entities that enter into a business combination within the scope of ASC 805-10.

Under this new guidance,

the acquirer should determine what contract assets and/or liabilities it would have recorded under ASC 606, Revenue from Contracts

with Customers , as of the acquisition date, as if the acquirer had entered into the original contract at the same date and on the

same terms as the acquirer.

Accounting for Contract Assets and Contract Liabilities

from Contracts with Customers .

This new guidance affects all entities that enter into a business combination within the scope of

Under this new guidance, the acquirer should determine what contract assets and/or liabilities it would have recorded under

ASC 606, Revenue from Contracts with Customers , as of the acquisition date, as if the acquirer had entered into the original contract

at the same date and on the same terms as the acquirer.

Under current U.S.

GAAP, contract assets and contract liabilities acquired in a business combination are

recorded by the acquirer at fair value.

This update is effective for fiscal years beginning after December 15, 2022.

Early adoption is

The Company is currently evaluating the effects that the adoption of this guidance will have on our consolidated financial

statements and related disclosures.

of New or Revised Accounting Standards—Not Yet Adopted

other accounting standards updates that have been issued or proposed by the FASB that do not require adoption until a future date are

not expected to have a material impact on the consolidated financial statements upon adoption.

GAAP, contract assets and contract liabilities acquired in

a business combination are recorded by the acquirer at fair value.

The Company adopted ASU 2021-08 as of January 1, 2023.

did not have a material impact on the Company’s financial statements.

Quantitative and Qualitative Disclosures about Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis