What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-12 · 339 added, 264 removed, 410 unchanged (60% of the section changed)

36 unchanged sentences

factors include, by way of example and without limitation:

changes in the market acceptance

of our products;

increased levels of competition;

changes in political, economic,

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

our ability to successfully

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

in the market acceptance of our products;

levels of competition;

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

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

ability to maintain and develop relationships with customers and suppliers;

our ability to respond

to new technological developments quickly and effectively;

our ability to protect

our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others

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

infringing on our proprietary rights;

our ability to successfully

integrate acquired businesses or new brands;

the impact of competitive

products and pricing;

supply constraints or difficulties;

general economic and business

conditions, including inflation, slower growth or recession;

business interruptions

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

current and potential material

weaknesses in our internal control over financial reporting;

our ability to continue

as a going concern;

our need to raise additional

funds in the future;

our ability to successfully

recruit and retain qualified personnel;

our ability to successfully

implement our business plan;

our ability to successfully

acquire, develop or commercialize new products and equipment;

being able to scale our

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

intellectual property claims

brought by third parties;

the impact of any industry

ability to respond to new technological developments quickly and effectively;

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

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

prevent others from infringing on our proprietary rights;

ability to successfully integrate acquired businesses or new brands;

impact of competitive products and pricing;

constraints or difficulties;

economic and business conditions, including inflation, slower growth or recession;

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

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

ability to continue as a going concern;

need to raise additional funds in the future;

ability to successfully recruit and retain qualified personnel;

ability to successfully implement our business plan;

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

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

property claims brought by third parties;

impact of any industry regulation.

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

21 unchanged sentences

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,”

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 variable interest entity in which we hold a controlling

financial interest.

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.), 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., (“LifeMD PC”) is the Company’s variable interest entity in which we hold a controlling financial

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

15 unchanged sentences

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.

Effective June 30, 2023, an option agreement was exercised which further restructured the ownership of WorkSimpli.

As a result, the Company’s ownership interest in WorkSimpli decreased to 73.32%.

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,

72 unchanged sentences

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

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

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.

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

and has served more than 443,000 customers and

patients since inception with a 4.6-star Trustpilot rating.

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 platform.

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.

and has served more

than 265,000 customers and patients since inception with a 4.9-star Trustpilot rating.

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.

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.

Cleared 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

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ownership interest in WorkSimpli increased to 74.06%.

Developments During the Three Months Ended March 31, 2023

Effective June 30, 2023, an option agreement was exercised which further restructured

the ownership of WorkSimpli.

As a result, the Company’s ownership interest in WorkSimpli decreased to 73.32%.

Developments During the Three Months Ended June 30, 2023

to Cleared Stock Purchase Agreement

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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.

On April 17, 2023, the Company issued 455,319 shares of common stock related to the second of five

quarterly installment payments due to the sellers of Cleared under the First Amendment.

of Operations

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

WorkSimpli revenue, net

Total revenue, net

of the Three Months Ended June 30, 2023 to the Three Months Ended June 30, 2022

financial results for the three months ended June 30, 2023 are summarized as follows in comparison to the three months ended June 30,

Telehealth revenue,

Cost of telehealth revenue

Cost of WorkSimpli revenue

Total cost of revenue

of WorkSimpli revenue

cost of revenue

Selling and marketing expenses

General and administrative expenses

General and administrative

Other operating expenses

1 unchanged sentence

Development costs

Total expenses

Goodwill impairment charge

in fair value of contingent consideration

Operating loss

1 unchanged sentence

Interest expense, net

Loss on debt extinguishment

on debt forgiveness

(12,972,961 )

Net income attributable to non-controlling interest

Net loss attributable to LifeMD, Inc.

income attributable to non-controlling interest

Net loss attributable to LifeMD,

(13,018,962 )

Preferred stock dividends

Net loss attributable to common shareholders

stock dividends

loss attributable to common shareholders

$ (7,509,562 )

1 unchanged sentence

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.

Revenues for the three months ended June 30, 2023 were approximately $35.9 million, an increase of 18% compared to approximately

$30.5 million for the three months ended June 30, 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.

of 66% and an increase in telehealth revenue of 0.4%.

Telehealth revenue accounts for 62% of total revenue and has increased during the

three months ended June 30, 2023 due to a decrease product refunds and rebates, partially offset by a reduction in online sales demand.

WorkSimpli revenue accounts for 38% 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.

3 unchanged sentences

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.

Total cost of revenue decreased by approximately 2% to approximately $4.5 million for the three months ended June 30,

2023 compared to approximately $4.6 million for the three months ended June 30, 2022.

The combined cost of revenue decrease was due to

decreased telehealth costs during the three months ended June 30, 2023 when compared to the three months ended June 30, 2022.

costs decreased to 18% of associated telehealth revenues experienced during the three months ended June 30, 2023, from 20% of associated

telehealth revenues during the three months ended June 30, 2022 primarily due to improved pricing.

WorkSimpli costs were 3% of associated

WorkSimpli revenues for the three months ended June 30, 2023 and were 2% of associated WorkSimpli revenues for the three months ended

June 30, 2022.

Gross profit increased by approximately 22% to approximately $31.4 million for the three months ended June 30, 2023 compared

to approximately $25.8 million for the three months ended June 30, 2022, as a result of increased combined sales.

Gross profit as a percentage

of revenues was 87% for the three months ended June 30, 2023 as compared to 85% for the three months ended June 30, 2022.

as a percentage of revenues for telehealth was 82% for the three months ended June 30, 2023 compared to 80% for the three months ended

June 30, 2022, and for WorkSimpli was 97% for the three months ended June 30, 2023 and 98% for the three months ended June 30, 2022.

The increase 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 June 30, 2023 were approximately $36.3 million, as compared to approximately

$38.7 million for the three months ended June 30, 2022.

This represents a decrease of 6%, or $2.4 million.

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attributable to:

Selling and marketing expenses:

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

During the three months ended June 30,

2023, the Company had a decrease of approximately $2.3 million, or 10% 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

and administrative expenses:

During the three months ended June 30, 2023, stock-based compensation was $2.9 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 $4.0 million for the three months ended June 30, 2022.

This category also consists of merchant processing

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

the three months ended June 30, 2023, the Company had a decrease of approximately $1.0 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.

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 June 30, 2023, the Company had a decrease of approximately $728 thousand, or 36%,

primarily related to decreases in office supplies and software subscriptions.

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.

in fair value of contingent consideration:

During the three months ended June 30, 2022, the

Company recorded a $2.7 million reduction to the Cleared contingent consideration as a result of the remeasurement of the fair value.

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

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 June 30, 2023, the Company had an increase of

approximately $906 thousand, or 90%, 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 June 30, 2023, the Company had an increase of approximately $680 thousand, or 97%, 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 June 30, 2023 and interest accrued on the Series B Convertible Preferred Stock for the three

months ended June 30, 2022.

Interest expense increased by approximately $863 thousand during the three months ended June 30, 2023 as

compared to the three months ended June 30, 2022.

on debt forgiveness.

The Company recorded a $63 thousand gain on debt forgiveness of Paycheck Protection Program (“PPP”)

loans during the three months ended June 30, 2022.

of the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

financial results for the six months ended June 30, 2023 are summarized as follows in comparison to the six months ended June 30, 2022:

Telehealth revenue,

Cost of telehealth revenue

of WorkSimpli revenue

cost of revenue

Selling and marketing expenses

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

Other operating expenses

Customer service expenses

Development costs

Goodwill impairment charge

in fair value of contingent consideration

Operating loss

(26,011,140 )

Interest expense, net

gain on debt extinguishment

(26,247,910 )

income attributable to non-controlling interest

Net loss attributable to LifeMD,

(10,741,456 )

(26,318,637 )

stock dividends

loss attributable to common shareholders

$ (12,294,581 )

$ (27,871,762 )

revenue, net.

Revenues for the six months ended June 30, 2023 were approximately $69.1 million, an increase of 16% compared to approximately

$59.5 million for the six months ended June 30, 2022.

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

of 81%, partially offset by a decrease in telehealth revenue of 5%.

Telehealth revenue accounts for 62% of total revenue and has decreased

during the six months ended June 30, 2023 due to a reduction in online sales demand.

WorkSimpli revenue accounts for 38% 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 11% to approximately $8.8 million for the six months ended June 30,

2023 compared to approximately $9.9 million for the six months ended June 30, 2022.

The combined cost of revenue decrease was due to

decreased telehealth sales volume during the six months ended June 30, 2023 when compared to the six months ended June 30, 2022.

costs decreased to 19% of associated telehealth revenues experienced during the six months ended June 30, 2023, from 21% of associated

telehealth revenues during the six months ended June 30, 2022 primarily due to lower sales volume and improved pricing.

WorkSimpli costs

were 3% of associated WorkSimpli revenues for the six months ended June 30, 2023 and were 2% of associated WorkSimpli revenues for the

six months ended June 30, 2022.

Gross profit increased by approximately 22% to approximately $60.3 million for the six months ended June 30, 2023 compared to

approximately $49.6 million for the six months ended June 30, 2022, as a result of increased combined sales.

Gross profit as a percentage

of revenues was 87% for the six months ended June 30, 2023 as compared to 83% for the six months ended June 30, 2022.

Gross profit as

a percentage of revenues for telehealth was 81% for the six months ended June 30, 2023 compared to 79% for the six months ended June

30, 2022, and for WorkSimpli was 97% for the six months ended June 30, 2023 and 98% for the six months ended June 30, 2022.

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

Operating expenses for the six months ended June 30, 2023 were approximately $68.1 million, as compared to approximately $75.6

million for the six months ended June 30, 2022.

This represents a decrease of 10%, or $7.6 million.

The decrease is primarily attributable

and marketing expenses:

This mainly consists of online marketing and advertising expenses.

During the six months ended June 30, 2023,

the Company had a decrease of approximately $7.4 million, or 17% 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

and administrative expenses:

During the six months ended June 30, 2023, stock-based compensation was $5.5 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 $8.5 million for the six months ended June 30, 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 six

months ended June 30, 2023, the Company had a decrease of approximately $2.7 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:

1 unchanged sentence

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.

During the six months ended June 30, 2023, the Company had a decrease of approximately $441 thousand, or 13%, primarily

related to decreases in office supplies and software subscriptions.

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

in fair value of contingent consideration:

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

recorded a $2.7 million reduction to the Cleared contingent consideration as a result of the remeasurement of the fair value.

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

service expenses:

1 unchanged sentence

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.

During the six months ended June 30, 2023, the Company had an increase of approximately

$1.5 million, or 79%, 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.

During the six

months ended June 30, 2023, the Company had an increase of approximately $1.4 million, or 127%, 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.

Preferred Stock for the six months ended June 30, 2023 and interest accrued on the Series B Convertible Preferred Stock for the six months

ended June 30, 2022.

Interest expense increased by approximately $960 thousand during the six months ended June 30, 2023 as compared

to the six months ended June 30, 2022.

gain 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

loan during the six months ended June 30, 2023 due to a prepayment penalty and various fees associated with the CRG Financial loan.

Company recorded a $63 thousand gain on debt forgiveness of PPP loans during the six months ended June 30, 2022.

Current assets

Current liabilities

Working capital

$ (11,336,910 )

$ (20,062,794 )

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

capital increased by approximately $8.7 million during the six months ended June 30, 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.

attributable to an increase in cash of approximately $7.9 million as a result of the Avenue Facility, an increase in accounts receivable

of $834 thousand and an increase in product deposits of $108 thousand.

Current liabilities increased by $144 thousand, which was primarily

attributable to an increase in accounts payable and accrued expenses of $2.1 million and an increase in deferred revenue of $120 thousand,

partially offset by a decrease in notes payable of $2.1 million.

and Capital Resources

Three Months Ended March 31,

Net cash used in operating activities

$ (2,613,938 )

Months Ended June 30,

Net cash provided

by (used in) operating activities

$ (18,190,108 )

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

Net cash used in investing

Net cash provided by (used

in) financing activities

Net increase (decrease) in

(29,610,737 )

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 $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.

cash provided by operating activities increased by $20.2 million to $2.0 million for the six months ended June 30, 2023, as compared

with net cash used in operating activities of approximately $18.2 million for the six months ended June 30, 2022 primarily related to

the decrease in the Company’s net loss of $16.9 million to $9.3 million for the six months ended June 30, 2023, as compared with

$26.2 million for the six months ended June 30, 2022.

Other significant factors contributing to net cash provided by operating activities

during the six months ended June 30, 2023, include $5.5 million in non-cash stock-based compensation charges, $3.2 million in non-cash

depreciation and amortization, a net increase in accounts payable, accrued expenses and other operating activities of $3.1 million, a

$325 thousand loss on debt extinguishment and an increase in deferred revenue of $120 thousand.

Net cash used in operating activities

for the six months ended June 30, 2022, was driven primarily by the net loss of approximately $26.2 million (inclusive of $8.5 million

in non-cash, stock-based compensation charges), an increase in accounts receivable of $1.5 million and the 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.

cash used in investing activities for the six months ended June 30, 2023 was approximately $4.1 million, as compared with approximately

$9.9 million for the six months ended June 30, 2022.

Net cash used in investing activities for the six months ended June 30, 2023, was

due to cash paid for capitalized software costs of approximately $3.9 million, cash paid for the purchase of intangible assets of approximately

$149 thousand and cash paid for the purchase of equipment of approximately $64 thousand.

Net cash used in investing activities for the

six months ended June 30, 2022, 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 provided by financing activities for the six months ended June 30, 2023 was approximately $10.0 million as compared with net cash

used in financing activities of approximately $1.5 million for the six months ended June 30, 2022.

During the six months ended June 30,

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 $4.4 million net of a $325 thousand loss on debt extinguishment

on the CRG Financial loan, preferred stock dividends of approximately $1.6 million, net payments made related to adjustments in the membership

interest units of WorkSimpli of approximately $306 thousand, contingent consideration payments made related to the ResumeBuild brand

acquisition of approximately $125 thousand and distributions to non-controlling interest of $72 thousand.

Net cash used in financing

activities for the six months ended June 30, 2022, consisted of preferred stock dividends of $1.6 million, distributions to non-controlling

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

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

and Capital Resources Outlook

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

of June 30, 2023, the Company has an accumulated deficit approximating $202.9 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

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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,

the six months ended June 30, 2023, the Company received proceeds of $2 million under a $2.5 million loan facility with CRG Financial,

maturing on December 15, 2023.

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

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

As of both June 30, 2023 and December 31, 2022, the outstanding

balance was $0 related to the CRG Financial loan.

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include interest in the amount of $62 thousand.

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

As of June 30, 2023 and December 31, 2022, the outstanding balance was $442 thousand

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

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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.

As of June 30, 2023 and

December 31, 2022, the outstanding balance was $294 thousand 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

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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.

As a result of the baby shelf limitations, the Company was only able to 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 June 2023, the Company’s public float increased above $75.0 million.

As a result, the Company is no longer subject to the baby shelf limitations.

The Company filed another prospectus supplement with the

SEC to that effect on June 29, 2023.

As of June 30, 2023, the Company has $59.5 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

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customers using a five-step analysis:

Identify the contract

Identify performance obligations

Determine the transaction

Allocate the transaction

Recognize revenue

performance obligations

the transaction price

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

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Customer discounts, returns

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

and rebates on telehealth revenues approximated $497 thousand and $1.6 million, respectively, during the three months ended June 30,

2023 and 2022, respectively.

Customer discounts, returns and rebates on telehealth revenues approximated $828 thousand and $3.1 million,

respectively, during the six months ended June 30, 2023 and 2022, respectively.

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

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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

approximated $788 thousand and $580 thousand, respectively, during the three months ended June 30, 2023 and 2022, respectively.

discounts and allowances on WorkSimpli revenues approximated $1.7 million and $1.0 million, respectively, during the six months ended

June 30, 2023 and 2022, respectively.

of June 30, 2023 and December 31, 2022, the Company has accrued contract liabilities, as deferred revenue, of approximately $5.7 million

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

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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 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.

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 June 30, 2023 and December

31, 2022, the Company capitalized a net amount of $10.4 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 operations.

The increase in capitalized

software costs of $1.6 million or 18%, is primarily attributable to costs incurred related to development efforts of our LifeMD PC platform.

and Intangible Assets

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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.

(1) the ResumeBuild brand, (2) a customer relationship asset, (3) the Cleared trade name, (4) Cleared

developed technology, (5) a purchased license and (6) two purchased domain names.

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

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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.

As of June 30, 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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis