What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-09 · 440 added, 352 removed, 397 unchanged (67% of the section changed)

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factors include, by way of example and without limitation:

in the market acceptance of our products;

levels of competition;

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

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

ability to maintain and develop relationships with customers and suppliers;

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.

changes in the market acceptance

of our products;

increased levels of competition;

changes in political, economic,

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

our ability to successfully

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

our ability to maintain

and develop relationships with customers and suppliers;

our ability to respond

to new technological developments quickly and effectively;

our ability to protect

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

from infringing on our proprietary rights;

our ability to successfully

integrate acquired businesses or new brands;

the impact of competitive

products and pricing;

supply constraints or difficulties;

general economic and business

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

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

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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.), 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.

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 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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and sharing PDF documents.

This business has seen 81% year-over-year revenue growth, with recurring revenue of 98%.

This business has seen 65% year-over-year revenue growth, with recurring revenue of 100%, 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.

Platform and Business Strategy

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The number of patients

and customers we serve across the nation continues to increase at a robust pace, with more than 755,000 individuals having purchased

and customers we serve across the nation continues to increase at a robust pace, with approximately 803,000 individuals having purchased

our products and services to date.

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

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.

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 474,000 customers and patients since inception

with a 4.6-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 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.

and has served more than 265,000

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

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

Developments During the Three Months Ended June 30, 2023

Developments During the Three Months Ended September 30, 2023

to Cleared Stock Purchase Agreement

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

On July 17, 2023, the Company issued 158,129

shares of common stock related to the third of five quarterly installment payments due to the sellers of Cleared under the First Amendment.

Amendment to Avenue Credit Agreement

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”).

On September 26, 2023, the Company entered into the First Amendment to the Credit Agreement

(the “Avenue First Amendment”) whereby the Company received an additional $5 million in committed term loans.

received gross and net proceeds of $5.0 million on September 26, 2023.

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 which the Company received

on September 26, 2023 under the Avenue First Amendment 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

The Company is subject to certain affirmative and negative covenants under the Avenue Facility, including the requirement,

beginning on the closing date, to maintain at least $5 million of unrestricted cash to be tested at the end of each month, and beginning

on the period ended September 30, 2023, and at the end of each quarter thereafter, a trailing six-month cash flow, subject to certain

adjustments as provided by the Credit Agreement, of at least $2 million.

As of the date of filing, there is $20 million outstanding

under the Avenue Facility and the Company is in compliance with the Avenue Facility terms.

B Preferred Stock Conversion

July 10, 2023 and August 14, 2023, PA001 Holdings, LLC (“PA001 Holdings”), the holder of the Company’s Series B Preferred

Stock, elected to convert 2,275 and 1,225 shares, respectively, of the Company’s Series B Preferred Stock, at a price of $3.25

per share of Series B Preferred Stock, pursuant to the terms of the Securities Purchase Agreement dated August 28, 2020.

The conversion

was calculated based on the original issuance price of the Series B Preferred Stock plus all accrued dividends to date.

The conversion

resulted in 1,010,170 and 550,694 shares of the Company’s common stock issued to PA001 Holdings, on July 12, 2023 and August 15,

2023, respectively.

In connection with the Securities Purchase Agreement, the Company and PA001 Holdings entered into a Registration

Rights Agreement pursuant to which the Company agreed to register the shares of the Company’s common stock underlying the Series

B Preferred Stock in the following circumstances:

(i) demand registration rights, providing that PA001 Holdings may demand that the Company

file registration statements, at any time, and (ii) piggyback registration rights, providing that PA001 Holdings be given notice of any

proposed registration of securities by the Company, and requiring that the Company register all or any portion of the registrable securities

that PA001 Holdings requests to be registered, in each case, subject to the terms and conditions of the registration rights agreement.

of Operations

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,

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

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

September 30, 2023

September 30, 2022

Telehealth revenue, net

WorkSimpli revenue, net

Total revenue, net

Cost of telehealth revenue

of WorkSimpli revenue

cost of revenue

Cost of WorkSimpli revenue

Total cost of revenue

Selling and marketing expenses

General and administrative

General and administrative expenses

Other operating expenses

1 unchanged sentence

Development costs

Goodwill impairment charge

in fair value of contingent consideration

Change in fair value of contingent consideration

Total expenses

Operating loss

(12,904,125 )

Interest expense, net

on debt forgiveness

(12,972,961 )

income attributable to non-controlling interest

Net loss attributable to LifeMD,

(13,018,962 )

stock dividends

loss attributable to common shareholders

Net income attributable to non-controlling interest

Net loss attributable to LifeMD, Inc.

Preferred stock dividends

Net loss attributable to common shareholders

$ (6,898,998 )

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revenue, net.

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 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

Revenues for the three months ended September 30, 2023 were approximately $38.6 million, an increase of 23% compared to

approximately $31.4 million for the three months ended September 30, 2022.

The increase in revenues was attributable to an increase in

WorkSimpli revenue of 42% and an increase in telehealth revenue of 14%.

Telehealth revenue accounts for 63% of total revenue and has

increased during the three months ended September 30, 2023 due to an increase in online sales demand and a decrease in product refunds

WorkSimpli revenue accounts for 37% 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.

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online platform.

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.

The decrease is primarily

Total cost of revenue increased by approximately 1% to approximately $4.8 million for the three months ended September

30, 2023 compared to approximately $4.7 million for the three months ended September 30, 2022.

The combined cost of revenue increase

was due to increased WorkSimpli costs during the three months ended September 30, 2023 when compared to the three months ended September

30, 2022, partially offset by decreased telehealth costs during the three months ended September 30, 2023 when compared to the three

months ended September 30, 2022.

Telehealth costs decreased to 18% of associated telehealth revenues experienced during the three months

ended September 30, 2023, from 21% of associated telehealth revenues during the three months ended September 30, 2022 primarily due to

improved pricing.

WorkSimpli costs were 2% of associated WorkSimpli revenues for both the three months ended September 30, 2023 and 2022.

Gross profit increased by approximately 27% to approximately $33.8 million for the three months ended September 30, 2023 compared

to approximately $26.7 million for the three months ended September 30, 2022, as a result of increased combined sales.

Gross profit as

a percentage of revenues was 88% for the three months ended September 30, 2023 as compared to 85% for the three months ended September

Gross profit as a percentage of revenues for telehealth was 82% for the three months ended September 30, 2023 compared to 79%

for the three months ended September 30, 2022, and for WorkSimpli was 98% for both the three months ended September 30, 2023 and 2022.

The increase in sales volume for telehealth and WorkSimpli and improved pricing for telehealth have contributed to the increase in gross

Operating expenses for the three months ended September 30, 2023 were approximately $38.4 million, as compared to approximately

$33.8 million for the three months ended September 30, 2022.

This represents an increase of 14%, or $4.6 million.

The increase is primarily

attributable to:

and marketing expenses:

Selling and marketing expenses:

This mainly consists of online marketing and advertising expenses.

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.

During the three months ended September 30, 2023, the Company

had an increase of approximately $2.6 million, or 15% in selling and marketing costs as a result of additional sales and marketing

initiatives to drive the current period’s sales growth reported.

General and administrative expenses:

This mainly consists of stock-based

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

legal and professional fees.

During the three months ended September 30, 2023, the Company had an increase of approximately $1.0 million

in general and administrative expenses, primarily related to an increase due to WorkSimpli dividends paid during the nine months ended

September 30, 2023.

Stock-based compensation was $3.3 million during both the three months ended September 30, 2023 and 2022, with the

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

Other 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 September 30, 2023, the Company had an increase of approximately $5 thousand, or 0.3%.

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, 2023, the Company had an increase of approximately

$618 thousand, or 42%, 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.

During the three months ended

September 30, 2023, the Company had an increase of approximately $677 thousand, or 82%, primarily resulting from technology platform

improvements and amortization expense.

increases in operating expenses were partially offset by a decrease in the following:

Change in fair value of

contingent consideration:

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

an increase of $248 thousand to the Cleared contingent consideration as a result of the remeasurement of the fair value.

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,

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

Stock for the three months ended September 30, 2023 and interest accrued on the Series B Preferred Stock for the three months ended September

Interest expense increased by approximately $582 thousand during the three months ended September 30, 2023 as compared to the

three months ended September 30, 2022.

of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

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

September 30, 2023

September 30, 2022

Telehealth revenue, net

WorkSimpli revenue, net

Total revenue, net

Cost of telehealth revenue

of WorkSimpli revenue

cost of revenue

Cost of WorkSimpli revenue

Total cost of revenue

Selling and marketing expenses

General and administrative

General and administrative expenses

Other operating expenses

2 unchanged sentences

Goodwill impairment charge

in fair value of contingent consideration

Change in fair value of contingent consideration

Total expenses

Operating loss

(12,317,737 )

(33,076,840 )

Interest expense, net

gain on debt extinguishment

(Loss) gain on debt extinguishment

(14,616,836 )

income attributable to non-controlling interest

Net loss attributable to LifeMD,

(33,445,845 )

Net income attributable to non-controlling interest

Net loss attributable to LifeMD, Inc.

(16,863,891 )

stock dividends

loss attributable to common shareholders

(33,600,309 )

Preferred stock dividends

Net loss attributable to common shareholders

$ (19,193,579 )

$ (35,929,997 )

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.

Revenues for the nine months ended September 30, 2023 were approximately $107.7 million, an increase of 18% compared to

approximately $90.9 million for the nine months ended September 30, 2022.

The increase in revenues was attributable to an increase in

WorkSimpli revenue of 65% and an increase in telehealth revenue of 1%.

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

during the nine months ended September 30, 2023 due to a decrease in product refunds partially offset by a decrease 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 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.

Total cost of revenue decreased by approximately 7% to approximately $13.5 million for the nine months ended September

30, 2023 compared to approximately $14.6 million for the nine months ended September 30, 2022.

The combined cost of revenue decrease

was due to improved pricing and a decrease in telehealth sales volume partially offset by an increase in WorkSimpli sales volume during

the nine months ended September 30, 2023 when compared to the nine months ended September 30, 2022.

Telehealth costs decreased to 19%

of associated telehealth revenues experienced during the nine months ended September 30, 2023, from 21% of associated telehealth revenues

during the nine months ended September 30, 2022 primarily due to lower sales volume and improved pricing.

WorkSimpli costs were 2% of

associated WorkSimpli revenues for the nine months ended September 30, 2023 and 2022.

Gross profit increased by approximately 23% to approximately $94.1 million for the nine months ended September 30, 2023 compared

to approximately $76.3 million for the nine months ended September 30, 2022, as a result of increased combined sales.

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.

a percentage of revenues was 87% for the nine months ended September 30, 2023 as compared to 84% for the nine months ended September

Gross profit as a percentage of revenues for telehealth was 81% for the nine months ended September 30, 2023 compared to 79%

for the nine months ended September 30, 2022, and for WorkSimpli was 98% for both the nine months ended September 30, 2023 and 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 nine months ended September 30, 2023 were approximately $106.4 million, as compared to approximately

$109.4 million for the nine months ended September 30, 2022.

This represents a decrease of 3%, or $3.0 million.

The decrease is primarily attributable

and marketing expenses:

The decrease is primarily

attributable to:

Selling 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.

operating expenses:

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

and bank charges.

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.

During the nine months ended September 30, 2023, the Company had

a decrease of approximately $4.9 million, or 8% 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 nine months ended September 30, 2023, stock-based compensation was $8.8 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 $11.9 million for the nine months ended September 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 nine months

ended September 30, 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 partially

offset by an increase due to WorkSimpli dividends paid during the nine months ended September 30, 2023.

Other operating expenses:

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

During the nine months ended September 30, 2023, the Company had a decrease of approximately $436 thousand, or 9%, primarily related

to decreases in office supplies and software subscriptions.

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.

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

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, 2023, the Company had an increase of approximately

$2.1 million, or 63%, primarily related to increases in headcount in the Company’s customer service department.

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

During the six

months ended June 30, 2023, the Company had an increase of approximately $1.4 million, or 127%, primarily resulting from technology

platform improvements and amortization expense.

Development costs:

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

During the nine months ended

September 30, 2023, the Company had an increase of approximately $2.1 million, or 108%, primarily resulting from technology platform

improvements and amortization expense.

Change in fair value of

contingent consideration:

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

a $2.5 million reduction to the Cleared contingent consideration as a result of the remeasurement of the fair value.

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 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.

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

Stock for the nine months ended September 30, 2023 and interest accrued on the Series B Preferred Stock for the nine months ended September

Interest expense increased by approximately $1.5 million during the nine months ended September 30, 2023 as compared to the

nine months ended September 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 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.

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

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

months ended September 30, 2022.

September 30, 2023

December 31, 2022

Current assets

Current liabilities

Working capital

$ (7,635,641 )

$ (20,062,794 )

capital increased by approximately $8.7 million during the six months ended June 30, 2023.

capital increased by approximately $12.4 million during the nine months ended September 30, 2023.

The increase in current assets is primarily

attributable to an increase in cash of approximately $11.3 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

of $1.6 million and an increase in other current assets of $617 thousand.

Current liabilities increased by $1.1 million, which was primarily

attributable to an increase in accounts payable and accrued expenses of $2.9 million and an increase in deferred revenue of $692 thousand,

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and Capital Resources

Months Ended June 30,

Net cash provided

by (used in) operating activities

Nine Months Ended September 30,

Net cash provided by (used in) operating activities

$ (20,966,110 )

Net cash used in investing

Net cash provided by (used

in) financing activities

Net increase (decrease) in

Net cash used in investing activities

(12,134,718 )

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

(35,491,216 )

inception, the Company has funded operations through the collections from revenues provided by the sales of its products, issuances of

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

cash 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.

cash provided by operating activities increased by $24.1 million to $3.1 million for the nine months ended September 30, 2023, as compared

with net cash used in operating activities of approximately $21.0 million for the nine months ended September 30, 2022.

in net cash provided by operating activities was primarily related to the decrease in the Company’s net loss of $18.8 million to

$14.6 million for the nine months ended September 30, 2023, as compared with $33.4 million for the nine months ended September 30, 2022.

Other significant factors contributing to net cash provided by operating activities during the nine months ended September 30, 2023,

include $8.8 million in non-cash stock-based compensation charges, $5.4 million in non-cash depreciation and amortization, a net increase

in accounts payable, accrued expenses and other operating activities of $4.6 million, a $325 thousand loss on debt extinguishment and

an increase in deferred revenue of $692 thousand.

Net cash used in operating activities for the nine months ended September 30, 2022,

was driven primarily by 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, 2023 was approximately $6.5 million, as compared with approximately

$12.1 million for the nine months ended September 30, 2022.

Net cash used in investing activities for the nine months ended September

30, 2023, was due to cash paid for capitalized software costs of approximately $6.3 million, cash paid for the purchase of intangible

assets of approximately $149 thousand and cash paid for the purchase of equipment of approximately $94 thousand.

Net cash used in investing

activities for the nine months ended September 30, 2022, 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 provided by financing activities for the nine months ended September 30, 2023 was approximately $14.7 million as compared with net

cash used in financing activities of approximately $2.4 million for the nine months ended September 30, 2022.

During the nine months

ended September 30, 2023, net cash provided by financing activities consisted of:

(1) $19.5 million in net proceeds received from the

Avenue Facility, (2) $2.3 million in proceeds received from notes payable and (3) $900 thousand in net proceeds received for the sale

of common stock under the ATM Sales Agreement (as defined below).

These factors contributing to net cash provided by financing activities

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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.

activities for the nine months ended September 30, 2022, 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 acquisition of $94 thousand, partially

offset by proceeds from the exercise of options and warrants of $129 thousand and proceeds received from the sale of a portion of the

Company’s membership interest in WorkSimpli of $12 thousand.

and Capital Resources Outlook

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

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 $6.4 million as of the filing date.

of September 30, 2023, the Company has an accumulated deficit approximating $209.8 million and has experienced significant losses from

its operations.

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.

The Company has a current cash balance of approximately $12.9 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.

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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”.

(1) $15 million in term loans funded at closing, (2) $5 million of additional committed term loans which the Company received

on September 26, 2023 under the Avenue First Amendment 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 six months ended June 30, 2023, the Company received proceeds of $2 million under a $2.5 million loan facility with CRG Financial,

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.

the nine months ended September 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 June 30, 2023 and December 31, 2022, the outstanding

balance was $0 related to the CRG Financial loan.

As of both September 30, 2023 and December 31, 2022, the

outstanding balance was $0 related to the CRG Financial loan.

the nine months ended September 30, 2023, the Company received proceeds of $348 thousand under a 10-month financing agreement with Arthur

Gallagher Risk Management Services, LLC.

The terms of the agreement include finance fees in the amount of $13 thousand.

As of September

30, 2023 and December 31, 2022, the outstanding balance was $315 thousand and $0, respectively, and is included in notes payable, net,

on the accompanying unaudited condensed consolidated balance sheet.

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

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include interest in the amount of $62 thousand.

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

As of September 30, 2023 and December 31, 2022, the outstanding balance was $111 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 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.

As of September 30, 2023

and December 31, 2022, the outstanding balance was $0 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,

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”)

Riley Securities, Inc.

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 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 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 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,

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.

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.

September 30, 2023, the Company has $58.6 million available under the ATM Sales Agreement.

October and November 2023, the Company sold 82 9,8 86 shares of common stock under the

ATM Sales Agreement and net proceeds received were $5.3 million.

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:

performance obligations

the transaction price

Identify the contract

Identify performance obligations

Determine the transaction price

Allocate the transaction price

Recognize revenue

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

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fulfillment service provider.

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.

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

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Customer discounts, returns

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.

and rebates on telehealth revenues approximated $696 thousand and $1.1 million during the three months ended September 30, 2023 and 2022,

respectively.

Customer discounts, returns and rebates on telehealth revenues approximated $1.5 million and $4.2 million during the nine

months ended September 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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The Company allows the customer to cancel at any point during

the billing cycle, in which case the customers subscription will not be renewed for the following month or year depending on the original

subscription.

The Company records the revenue over the customers subscription period for monthly and yearly subscribers or at the end

of the initial 14-day service period for customers who purchased the initial subscription, as the circumstances dictate.

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;

the billing cycle, in which case the customer’s subscription will not be renewed for the following month or year depending on the

original subscription.

The Company records the revenue over the customer’s subscription period for monthly and yearly subscribers

or at the end of the initial 14-day service period for customers who purchased the initial subscription, as the circumstances dictate.

The Company 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.

Monthly and annual subscriptions

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

Customer discounts and allowances on WorkSimpli revenues

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:

(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.

Monthly and annual

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

Customer discounts and allowances on WorkSimpli

revenues approximated $865 thousand and $710 thousand during the three months ended September 30, 2023 and 2022, respectively.

discounts and allowances on WorkSimpli revenues approximated $2.6 million and $1.7 million during the nine months ended September 30,

2023 and 2022, respectively.

of September 30, 2023 and December 31, 2022, the Company has accrued contract liabilities, as deferred revenue, of approximately $6.2

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

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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.

As of September 30, 2023 and

December 31, 2022, the Company capitalized a net amount of $11.3 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.

in capitalized software costs of $2.5 million or 28%, is primarily attributable to costs incurred related to development efforts of our

LifeMD PC platform.

and Intangible 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 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.

As of September

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