What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-08 · 588 added, 1019 removed, 689 unchanged (70% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

September 30, 2023

March 31, 2024

December 31, 2023

7 unchanged sentences

Equipment, net

Right of use asset

Right of use assets

Capitalized software, net

1 unchanged sentence

Total Non-current Assets

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities

3 unchanged sentences

Current operating lease liabilities

Current portion of long-term debt

Deferred revenue

4 unchanged sentences

Contingent consideration

Purchase price payable

Total Liabilities

3 unchanged sentences

5,000,000 shares authorized

Series B Preferred Stock, $ 0.0001 par value;

5,000 shares authorized, zero and 3,500 shares issued and outstanding, liquidation value approximately, $ 0 and $ 1,305 per share as of September 30, 2023 and December 31, 2022, respectively

Stockholders’ Deficit

Series B Convertible Preferred Stock, $ 0.0001 par value;

authorized, zero shares issued and outstanding, liquidation value, $ 0 per share as of March 31, 2024 and December 31, 2023

Stockholders’ Equity (Deficit)

Series A Preferred Stock, $ 0.0001 par value;

1,610,000 shares authorized, 1,400,000 shares issued and outstanding, liquidation value approximately, $ 29.44 and $ 27.84 per share as of September 30, 2023 and December 31, 2022, respectively

1,610,000 shares authorized, 1,400,000 shares issued and outstanding, liquidation value approximately, $ 25.55 per share as of March 31, 2024 and December 31, 2023

Common Stock, $ 0.01 par value;

100,000,000 shares authorized, 34,759,250 and 31,552,775 shares issued, 34,656,210 and 31,449,735 outstanding as of September 30, 2023 and December 31, 2022, respectively

100,000,000 shares authorized, 40,731,676 and 38,358,641 shares issued, 40,628,636 and 38,255,601 outstanding as of March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

2 unchanged sentences

( 214,265,236 )

Treasury stock, 103,040 and 103,040 shares, at cost, as of September 30, 2023 and December 31, 2022, respectively

Treasury stock, 103,040 , at cost, as of March 31, 2024 and December 31, 2023

Total LifeMD, Inc.

Stockholders’ Deficit

( 12,671,164 )

( 11,395,777 )

Stockholders’ (Deficit) Equity

Non-controlling interest

Total Stockholders’ Deficit

( 11,084,257 )

( 11,871,325 )

Total Liabilities, Mezzanine Equity and Stockholders’ Deficit

Total Stockholders’ Equity

Total Liabilities, Mezzanine Equity and Stockholders’ Equity (Deficit)

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Consolidated STATEMENTS OF OPERATIONS

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Telehealth revenue, net

8 unchanged sentences

Other operating expenses

Customer service expenses

Development costs

Goodwill impairment charge

Change in fair value of contingent consideration

( 2,487,000 )

Customer service expenses

Total expenses

2 unchanged sentences

( 2,852,810 )

( 12,317,737 )

( 33,076,840 )

Interest expense, net

( 1,973,901 )

(Loss) gain on debt extinguishment

( 5,283,147 )

( 7,197,936 )

Loss on debt extinguishment

( 6,648,923 )

4 unchanged sentences

( 4,008,456 )

( 16,863,891 )

( 33,600,309 )

Preferred stock dividends

( 2,329,688 )

Net loss attributable to LifeMD, Inc.

2 unchanged sentences

$ ( 4,785,019 )

$ ( 19,193,579 )

$ ( 35,929,997 )

Basic loss per share attributable to LifeMD, Inc.

7 unchanged sentences

Additional Paid-in

Non- controlling

Balance, January 1, 2023

3 unchanged sentences

$ ( 11,395,777 )

Stock compensation expense

Cashless exercise of stock options

Exercise of warrants

Series A Preferred Stock dividend

Distribution to non-controlling interest

Net (loss) income

$ ( 475,548 )

$ ( 11,871,325 )

( 13,274,949 )

Balance, March 31, 2022

$ 169,026,965

$ ( 155,997,323 )

$ ( 163,701 )

$ ( 1,043,019 )

Stock compensation expense

Exercise of stock options

Stock issued for noncontingent consideration payment

Warrants issued with convertible debt instrument

Series A Preferred Stock Dividend

Distribution to non-controlling interest

Net (loss) income

( 13,018,962 )

( 12,972,961 )

Balance, June 30, 2022

$ 173,157,467

$ ( 169,792,847 )

$ ( 163,701 )

$ ( 1,033,018 )

Stock compensation expense

Stock issued for legal settlement

Cashless exercise of stock options

Series A Preferred Stock dividend

Adjustment of membership interest in WorkSimpli

Distribution to non-controlling interest

Net (loss) income

2 unchanged sentences

( 3,442,473 )

Balance, September 30, 2022

$ 177,131,586

Balance, March 31, 2023

$ 183,183,652

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Stock issued for noncontingent consideration payment

Warrants issued with debt instrument

Exercise of stock options

Cashless exercise of warrants

Cashless exercise of options

Series A Preferred Stock Dividend

Distribution to non-controlling interest

Adjustment of membership interest in WorkSimpli

Net (loss) income

8 unchanged sentences

$ 220,721,095

Stock compensation expense

Stock issued for noncontingent consideration payment

Cashless exercise of stock options

Series A Preferred Stock dividend

Distribution to non-controlling interest

Adjustment of membership interest in WorkSimpli

Net (loss) income

$ ( 221,810,154 )

1 unchanged sentence

$ ( 845,303 )

Balance, June 30, 2023

$ 186,673,930

$ ( 202,857,575 )

$ ( 163,701 )

$ ( 16,021,557 )

$ ( 15,237,938 )

$ 186,673,930

$ ( 202,857,575 )

$ ( 163,701 )

$ ( 16,021,557 )

$ ( 15,237,938 )

Stock compensation expense

Stock issued for noncontingent consideration payment

Stock issued for legal settlement

Cashless exercise of stock options

Sale of common stock under ATM, net

Series B Preferred Stock conversion

Warrants issued for debt instruments fair value adjustment

Series A Preferred Stock dividend

Distribution to non-controlling interest

Net (loss) income

( 6,122,435 )

( 5,283,147 )

Balance, September 30, 2023

$ 196,901,377

$ ( 209,756,573 )

$ ( 163,701 )

$ ( 12,671,164 )

$ ( 11,084,257 )

$ 196,901,377

$ ( 209,756,573 )

$ ( 163,701 )

$ ( 12,671,164 )

$ ( 11,084,257 )

accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Consolidated STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

7 unchanged sentences

Depreciation of fixed assets

Loss (gain) on debt extinguishment

Change in fair value of contingent consideration

( 2,487,000 )

Goodwill impairment charge

Loss on debt extinguishment

Operating lease payments

Stock issued for legal settlement

Stock compensation expense

1 unchanged sentence

Accounts receivable

( 1,583,832 )

( 1,558,063 )

Product deposit

( 2,052,363 )

Other current assets

Change in operating lease liability

Operating lease liabilities

Deferred revenue

Accounts payable

Accrued expenses

( 3,203,759 )

Accrued expenses

Other operating activity

6 unchanged sentences

Purchase of equipment

Purchase of intangible assets

( 4,000,500 )

Acquisition of business, net of cash acquired

( 1,012,395 )

Net cash used in investing activities

7 unchanged sentences

Cash proceeds from exercise of options

Cash proceeds from exercise of warrants

Sale of common stock under ATM, net

Preferred stock dividends

( 2,329,688 )

Contingent consideration payment for ResumeBuild acquisition

Contingent consideration payments for ResumeBuild acquisition

Net payments for membership interest in WorkSimpli

Distributions to non-controlling interest

Net cash provided by (used in) financing activities

( 2,390,388 )

Net increase (decrease) in cash

Net cash (used in) provided by financing activities

( 1,047,690 )

Net increase in cash

Cash at beginning of period

3 unchanged sentences

Non-cash investing and financing activities

Warrants issued for debt instruments

Cashless exercise of options

Consideration payable for Cleared acquisition

Consideration payable for ResumeBuild acquisition

Cashless exercise of warrants

Stock issued for noncontingent consideration payment

Series B Preferred Stock conversion

Principal of Paycheck Protection Program loans forgiven

Warrants issued for debt instruments

Right of use asset

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Effective January 22, 2021,

the Company consummated a transaction to restructure the ownership of WorkSimpli (the “WSS Restructuring”) concurrently increased

its ownership interest in WorkSimpli to 85.58 %.

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

the ownership of WorkSimpli.

the Company consummated a transaction to restructure the ownership of WorkSimpli and concurrently increased its ownership interest in

WorkSimpli to 85.6 %.

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

As a result, the Company’s ownership interest in WorkSimpli decreased to 73.6 %.

Effective December

15, 2022, LifeMD PR, LLC merged into WorkSimpli, with WorkSimpli being the surviving entity.

Effective December 15, 2022, LifeMD PR, LLC merged

into WorkSimpli, with WorkSimpli being the surviving entity.

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

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allergy telehealth platform that provides personalized treatments for allergy, asthma, and immunology (See Note 3).

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

comprehensive, virtual healthcare.

The Company believes the traditional model of visiting a doctor’s office, traveling to a local

Company is a direct-to-patient telehealth company providing a high-quality, cost-effective, and convenient way to access comprehensive,

virtual and in-home healthcare.

The Company believes the traditional model of visiting a doctor’s office, traveling to a retail

pharmacy, and returning for follow up care or prescription refills is complex, inefficient, and costly, and discourages many individuals

from seeking much needed medical care.

The Company is positioned to elevate the healthcare experience through telehealth with our proprietary

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

from seeking medical care.

The Company is improving the delivery of healthcare through telehealth with our proprietary technology platform,

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

Direct-to-patient telehealth technology companies, like the Company, connect consumers to affiliated, licensed, healthcare professionals

for care across numerous indications, including urgent and primary care, men’s and women’s health, and dermatology, chronic

care management and more.

for care across numerous indications, including urgent and primary care, weight management, sleep, hair loss, men’s and women’s

health, hormonal therapy and dermatology, chronic care management and more.

Company’s telehealth platform helps patients access their licensed providers for diagnoses, virtual care, and prescription medications,

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is a market need.

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

This offering provides

patients with 24/7 access to an affiliated high-quality provider for their primary care, urgent care, and chronic care needs.

April 2023, we launched our GLP-1 Weight Management program providing primary care, weight loss, holistic healthcare, lab work and prescription

services, as appropriate, to patients seeking to access a medically supported weight loss solution.

and Subsidiary History

early 2019, the Company launched a service-based business under the name Conversion Labs Media LLC (“CVLB Media”), a Puerto

Rico limited liability company.

However, this business initiative was terminated in early 2019.

In May 2019, Conversion Labs Rx, LLC

(“CVLB Rx”), a Puerto Rico limited liability company, signed a strategic partnership agreement with Specialty Medical Drugstore,

(doing business as “GoGoMeds”).

However, since its inception, CVLB Rx did not conduct any business and CVLB Rx was dissolved

on August 7, 2020.

Additionally, Conversion Labs Asia Limited (“Conversion Labs Asia”), a Hong Kong company, had no activity

during the three and nine months ended September 30, 2023 and 2022.

June 2018, the Company closed the strategic acquisition of 51 % of WorkSimpli.

As a result of various ownership restructurings, the Company’s

ownership interest in WorkSimpli is 73.3 % as of December 31, 2023.

See Note 8 for additional information.

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

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On February 4, 2023,

the Company entered into the First Amendment to the Stock Purchase Agreement (the “First Amendment”) between the Company

and the sellers of Cleared.

The First Amendment was amended to, among other things:

(i) reduce the total purchase price by $ 250 thousand

to a total of $ 3.67 million;

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

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

6, 2023 and ending January 15, 2024;

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

remove certain representations and warranties of the Company and sellers in connection with the transaction (See Note 3).

6, 2023, the Company issued 337,895 shares of common stock related to the first of five quarterly installment payments due to the sellers

of Cleared under the First Amendment.

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.

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.

the Company entered into the First Amendment (the “Cleared First Amendment”) to the Stock Purchase Agreement, dated January

11, 2022, between the Company and the sellers of Cleared (the “Cleared Stock Purchase Agreement”).

The Cleared Stock Purchase

Agreement was amended to, among other things:

(i) reduce the total purchase price by $ 250 thousand to a total of $ 3.67 million;

change the timing of the payment of the purchase price to $ 460 thousand paid at closing (which has already been paid by the Company),

with the remaining amount to be paid in five quarterly installments beginning on or before February 6, 2023 and ending January 15, 2024;

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

and (iv) remove certain representations and warranties

of the Company and sellers in connection with the transaction (See Note 3).

The Company issued the following shares of common stock to

the sellers of Cleared under the Cleared First Amendment:

(1) 337,895 shares on February 6, 2023, (2) 455,319 shares on April 17, 2023,

(3) 158,129 shares on July 17, 2023, (4) 117,583 shares on October 17, 2023 and (5) 95,821 shares on January 16, 2024.

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

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a two-year period ending on the two-year anniversary of the closing of the Acquisition.

As of September 30, 2023, WorkSimpli has paid

the Seller approximately $ 344 thousand in accordance with the ResumeBuild APA.

WorkSimpli borrowed the purchase price from the Company

pursuant to a promissory note with the obligation secured by an equity purchase guarantee agreement and a stock option pledge agreement

from Fitzpatrick Consulting, LLC and its sole member Sean Fitzpatrick, who is Co-Founder and President of WorkSimpli (See Note 3).

As of March 31, 2024, WorkSimpli has paid the

Seller $ 500 thousand in accordance with the ResumeBuild APA.

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

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

LLC and its sole member Sean Fitzpatrick, who is Co-Founder and President of WorkSimpli (See Note 3).

As of March 31, 2024, there is

no remaining balance outstanding related to the promissory note.

otherwise indicated, the terms “LifeMD,” “Company,” “we,” “us,” and “our”

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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 affiliated, variable interest entity

led by LifeMD Southern Patient Medical Care, P.C.

(“LifeMD PC”) is the Company’s affiliated, variable interest entity

in which we hold a controlling financial interest.

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

& Going Concern Evaluation

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

and advances.

The Company’s continued operations are dependent upon obtaining an increase in its sale volumes and obtaining funding

from third-party sources or the issuance of additional shares of common stock.

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

of March 31, 2024, the Company has an accumulated deficit approximating $ 221.8 million and has experienced significant losses from its

Although the Company is showing significant positive revenue trends, the Company expects to incur further losses through

Additionally, the Company expects its burn rate of cash to continue to improve and to maintain positive operating cash flows for

the next 12 months following the date of this report.

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.

The Company’s continued operations are dependent

upon obtaining an increase in its sale volumes or the issuance of additional shares of common stock.

There can be no assurances that

we will be successful in increasing revenues and improving operational efficiencies.

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

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

Venture Opportunities Fund, L.P.

(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 which the Company received on September 26, 2023 under the First Amendment to the Credit Agreement (the

“Avenue First Amendment”) and (3) $ 20 million of additional uncommitted term loans, collectively referred to as the “Avenue

The Avenue Credit Agreement provides for a convertible senior

secured credit facility of up to an aggregate amount of $ 40 million, comprised of the following:

(1) $ 15 million in term loans funded

at closing, (2) $ 5 million of additional committed term loans which the Company received on September 26, 2023 under the First Amendment

to the Avenue Credit Agreement (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.

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, sale of equity in private

placements and securities purchased by a financial institution.

There can be no assurances that we will be successful in increasing revenues,

improving operational efficiencies or that financing will be available or, if available, that such financing will be available under

favorable terms.

Company has a current cash balance of approximately $ 12.9

million as of the filing date.

The Company reviewed its forecasted operating results and sources and uses of cash used in

management’s assessment, which included the available financing and consideration of positive and negative evidence impacting

management’s forecasts, market, and industry factors.

The Company’s continuance as a going concern is highly dependent

on its future profitability and on the on-going support of its stockholders, affiliates, and creditors.

Based on these

circumstances, management has determined that these conditions raise substantial doubt about the Company’s ability to continue

as a going concern.

The accompanying financial statements do not include any adjustments that might result from the outcome of this

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

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

a going concern.

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

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 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 Avenue Credit Agreement, of at least $2 million.

As of March 31, 2024, there was $ 19

million outstanding under the Avenue Facility, and the Company was in compliance with the Avenue Facility covenants.

Loans under the

Avenue Facility accrue interest at a variable rate per annum equal to the greater of (i) the sum of 4.75% plus the Prime Rate (as defined

in the Avenue Supplement) and (ii) 12.50%.

Payments are interest only for up to 24 months and then fully amortized thereafter.

Facility matures on October 1, 2026 .

The Company may prepay the loans, subject to a prepayment penalty of 1.00 % to 3.00 % of the principal

amount prepaid, depending on the timing of the prepayment.

December 11, 2023, the Company entered into a collaboration with Medifast, Inc.

through and with certain of its wholly-owned subsidiaries

(“Medifast”).

Pursuant to certain agreements between the parties, Medifast has agreed to pay to the Company the amount of

$ 10 million to support the collaboration, funding enhancements to the Company platform, operations and supporting infrastructure, of

which $ 5 million was paid at the closing on December 12, 2023, $ 2.5 million was paid during the three months ended March 31, 2024, and

the remainder $ 2.5 million is to be paid by June 30, 2024 (or earlier upon the Company’s achievement of certain program milestones)

(the “Medifast Collaboration”).

addition, in connection with the Medifast Collaboration, the Company entered into a stock purchase agreement and registration rights

agreement with Medifast’s wholly-owned subsidiary, Jason Pharmaceuticals, Inc., whereby the Company issued 1,224,425 shares of

its common stock in a private placement (the “Medifast Private Placement”) at a purchase price of $ 8.1671 per share, for

aggregate proceeds of approximately $ 10 million.

Additionally,

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on June 22, 2021 (the “2021 Shelf”).

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

ability to raise up to $ 150

million by selling common stock, preferred stock, debt securities, warrants, and units.

In conjunction with the 2021 Shelf, the

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

Riley Securities,

and Cantor Fitzgerald & Co.

The Company expects to file a new shelf registration statement in 2024 (the “2024

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, Inc.

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.

June 2023, the Company’s public float increased above $ 75.0

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

believes that the overall market value of the telehealth industry is positive and that it will continue to drive interest in the Company.

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.

As of March 31, 2024, the Company had $ 53.3 million available under the ATM Sales Agreement and

$ 32.0 million available under the 2021 Shelf.

Company has a current cash balance of approximately $ 29.3

million as of the filing date.

The Company reviewed its forecasted

operating results and sources and uses of cash used in management’s assessment, which included the available financing and consideration

of positive and negative evidence impacting management’s forecasts, market, and industry factors.

Positive indicators that lead

to the Company’s expectation that it will have sufficient cash over the next 12 months following the date of this report include:

(1) the Company’s continued strengthening of its revenues and improvement of operational efficiencies across the business, (2)

the expected improvement in its cash burn rate over the next 12 months and positive operating cash flows during the quarter ended March

31, 2024, (3) cash on hand of $ 35.1 million

as of March 31, 2024, (4) $ 53.3

million available under the ATM Sales Agreement

million available under the 2021 Shelf, with

an expectation of continued availability under the 2024 Shelf, (5) management’s ability to curtail expenses, if necessary, and

(6) the overall market value of the telehealth industry, which it believes that will continue to drive interest in the Company as already

evidenced by the Medifast Collaboration and Medifast Private Placement noted above.

2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Presentation

accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted

in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 8

accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally

accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article

8 of Regulation S-X.

9 unchanged sentences

The results of operations

for the three and nine months ended September 30, 2023 are not necessarily indicative of the results for the year ending December 31,

2023 or for any future period.

for the three months ended March 31, 2024 are not necessarily indicative of the results for the year ending December 31, 2024 or for

any future period.

of Consolidation

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During the year ended

December 31, 2021, the Company purchased an additional 34.6 % of WorkSimpli for a total equity interest of approximately 85.58 % as of

December 31, 2021.

December 31, 2021, the Company purchased an additional 34.6 % of WorkSimpli for a total equity interest of approximately 85.6 % as of December

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

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liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

As of September 30,

As of March 31, 2024

and December 31, 2023, there were no cash equivalents.

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There is no non-controlling interest upon consolidation of LifeMD PC.

revenue for LifeMD PC was approximately $ 1.9 million and $ 124 thousand for the three months ended September 30, 2023 and 2022, respectively,

and $ 2.7 million and $ 124 thousand for the nine months ended September 30, 2023 and 2022, respectively.

Total net income for LifeMD PC

was approximately $ 440 thousand for the three months ended September 30, 2023 and net loss for LifeMD PC was approximately $ 1.0 million

for the three months ended September 30, 2022.

Total net loss for LifeMD PC was approximately $ 1.1 million and $ 3.9 million for the nine

months ended September 30, 2023 and 2022, respectively.

revenue for LifeMD PC was approximately $ 7.6 million and $ 358 thousand for the three months ended March 31, 2024 and 2023, respectively.

Total net income for LifeMD PC was approximately $ 5.2 million for the three months ended March 31, 2024 and net loss for LifeMD PC was

approximately $ 1.0 million for the three months ended March 31, 2023.

Company prepares its unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted

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and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Some of the more significant estimates required to be made by management include the determination of reserves for accounts receivable,

returns and allowances, the valuation of inventory and stockholders’ equity-based transactions and the capitalization and impairment

of capitalized software and impairment of other long-lived assets.

Some of the more significant estimates required to be made by management include returns and allowances, stockholders’ equity-based

transactions, the capitalization and impairment of capitalized software and impairment of other long-lived assets, estimates to cash

flow projections, and liquidity assessment.

Actual results could differ from those estimates.

Reclassifications

reclassifications have been made to conform the prior year’s data to the current presentation.

These reclassifications have no

effect on previously reported operating loss, stockholders’ deficit or cash flows.

The Company has changed their categories for

reporting operations and, as a result, the Company has made reclassifications to the prior year presentation in order to conform it to

the current periods’ presentation.

The reclassifications include $ 92 thousand and $ 272 thousand of lease expenses reclassified

from general and administrative expenses to other operating expenses for the three and nine months ended September 30, 2022, respectively.

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

customers using a five-step analysis:

Identify the contract

Identify performance obligations

Determine the transaction price

Allocate the transaction price

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 $ 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.

and rebates on telehealth product revenues approximated $ 991 thousand and $ 331 thousand, respectively, during the three months ended

March 31, 2024 and 2023, respectively.

its LifeMD PC contracts with customers, the Company offers one-time and subscription-based access to the Company’s telehealth platform.

The Company offers monthly and yearly subscriptions dependent upon the subscriber’s enrollment selection.

The Company has estimated

that there is one performance obligation that is delivered over time, as the Company allows the subscriber to access the telehealth platform

for the time period of the subscription purchased.

The Company records the revenue over the customer’s subscription period for

monthly and yearly subscribers.

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

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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;

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

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 $ 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.

the three and nine months ended September 30, 2023 and 2022, the Company had the following disaggregated revenue:

OF DISAGGREGATED REVENUE

Three Months Ended September 30,

Nine Months Ended September 30,

Telehealth revenue

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 $ 766

thousand and $ 912 thousand, respectively, during the three months ended March 31, 2024 and 2023, respectively.

noted above, on December 11, 2023, the Company entered into the Medifast Collaboration.

Pursuant to certain agreements between the parties,

Medifast agreed to pay to the Company the amount of $ 10 million to support the collaboration, funding enhancements to the Company platform,

operations and supporting infrastructure, of which $ 5 million was paid at the closing on December 12, 2023, $ 2.5 million was paid during

the three months ended March 31, 2024, and the remainder of $ 2.5 million is to be paid by June 30, 2024.

Company determined the transaction price totaled $ 10 million, of which $ 5 million was collected in December 2023 and $ 2.5 million was

collected during the three months ended March 31, 2024.

The Company has allocated the total $ 10 million initial transaction price to

three distinct performance obligations.

As the Company completed its first performance obligation related to this agreement, the $ 5 million

payment was fully recognized during the year ended December 31, 2023.

The Company recognized approximately $ 2 million related to the

second performance obligation during the three months ended March 31, 2024.

the three months ended March 31, 2024 and 2023, the Company had the following disaggregated revenue:

SCHEDULE OF DISAGGREGATED REVENUE

Three Months Ended March 31,

Telehealth product revenue

WorkSimpli revenue

Total net revenue

$ 107,687,158

LifeMD PC subscription revenue

Medifast collaboration revenue

Total revenues, net

Company records deferred revenues when cash payments are received or due in advance of its performance.

The Company’s deferred

revenues relate to 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.

As of March 31, 2024 and December

31, 2023, the Company has accrued contract liabilities, as deferred revenue, of approximately $ 13.2 million and $ 8.8 million, respectively,

which represent the following:

(1) $ 8.4 million and $ 4.2 million as of March 31, 2024 and December 31, 2023, respectively, related to

obligations on telehealth in-process monthly or yearly contracts with customers, (2) $ 2.3 million and $ 2.1 million as of March 31, 2024

and December 31, 2023, respectively, related to obligations for telehealth products which the customer has not yet obtained control due

to non-shipment of the product and (3) $ 2.5 million and $ 2.5 million as of March 31, 2024 and December 31, 2023, respectively, related

to obligations on WorkSimpli in-process monthly or yearly contracts with customers.

revenue increased by $ 4.4 million to $ 13.2 million as of March 31, 2024 compared to $ 8.8 million as of December 31, 2023.

is primarily due to the increase in monthly and yearly subscription revenue related to LifeMD PC of approximately $ 7.6 million during

the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

The amount of revenue recognized during the

three months ended March 31, 2024, that was included in the deferred revenue balance as of December 31, 2023, was $ 3.4 million.

Company expects to recognize all of the deferred revenue related to future performance obligations that are unsatisfied or partially

unsatisfied as of March 31, 2024 as revenue by March 31, 2025.

following table summarizes deferred revenue activities for the periods presented:

SCHEDULE OF CONTRACT WITH CUSTOMER LIABILITY

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Beginning of period

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( 12,890,552 )

( 41,633,221 )

( 22,714,468 )

End of period

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Operating lease right-of-use (“ROU”) assets are included in

right-of-use assets, net on the unaudited condensed consolidated balance sheets.

The current and long-term components of operating lease

liabilities are included in the current operating lease liabilities and noncurrent operating lease liabilities, respectively, on the

unaudited condensed consolidated balance sheets.

right-of-use assets on the unaudited condensed consolidated balance sheets.

The current and long-term components of operating lease liabilities

are included in the current operating lease liabilities and noncurrent operating lease liabilities, respectively, on the unaudited condensed

consolidated balance sheets.

lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over

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and current economic conditions in its evaluation of an allowance for future refunds and chargebacks.

As of September 30, 2023 and December

As of March 31, 2024 and December

31, 2023, the reserve for sales returns and allowances was approximately $ 530 thousand and $ 528 thousand, respectively.

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balance sheets.

of September 30, 2023 and December 31, 2022, inventory primarily consisted of finished goods, raw materials and packaging related to

the Company’s OTC products included in the telehealth revenue section of the table above.

of March 31, 2024 and December 31, 2023, inventory primarily consisted of finished goods, raw materials and packaging related to the

Company’s OTC products included in the telehealth revenue section of the table above.

Inventory is maintained at the Company’s

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inventory with the net realizable value and an allowance is made for writing down inventory to net realizable, if lower.

As of September

31, 2024 and December 31, 2023, the Company recorded an inventory reserve of approximately $ 59 thousand and $ 356 thousand, respectively.

of September 30, 2023 and December 31, 2022, the Company’s inventory consisted of the following:

of March 31, 2024 and December 31, 2023, the Company’s inventory consisted of the following:

SUMMARY OF INVENTORY

September 30,

Finished goods - products

Raw materials and packaging components

Finished goods

Inventory reserve

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previously paid.

As of September 30, 2023 and December 31, 2022, the Company has approximately $ 85 thousand and $ 127 thousand, respectively,

As of March 31, 2024 and December 31, 2023, the Company has approximately $ 289 thousand and $ 486 thousand, respectively,

of product deposits with multiple vendors for the purchase of raw materials or finished goods.

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of the product deposit.

As of September 30, 2023, the Company approximates its implicit purchase commitments to be $ 596 thousand, of

which the vast majority are with two vendors that manufacture the Company’s finished goods inventory for its RexMD product line.

As of March 31, 2024, the Company approximates its implicit purchase commitments to be $ 186 thousand, of which

the vast majority are with two vendors that manufacture the Company’s finished goods inventory for its RexMD product line.

Software Costs

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

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.

and Intangible Assets

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

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

the asset may be impaired.

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

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

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

intangible assets are comprised of:

(1) 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.

As of March 31, 2024 and December

31, 2023, the Company capitalized a net amount of $ 12.0 million and $ 11.8 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.

assets are comprised of:

(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.

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 September

As of March 31,

2024 and December 31, 2023, the Company determined that no events or changes in circumstances existed that would indicate any impairment

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WorkSimpli files a tax return in Puerto Rico.

WorkSimpli is a limited liability

company and files tax returns with any tax liabilities or benefits passing through to its members.

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

This ASC requires recognition

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

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

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

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

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

ASC 740 also provides a recognition threshold

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

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

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

based on the technical merits of the position.

The Company’s tax returns for all years since December 31, 2019, remain open to

audit by all related taxing authorities.

The Company records current

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

This ASC requires recognition of deferred tax assets

and liabilities for temporary differences between tax basis of assets and liabilities and the amounts at which they are carried in the

financial statements, based upon the enacted rates in effect for the year in which the differences are expected to reverse.

establishes a valuation allowance, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company periodically

assesses the value of its deferred tax asset, a majority of which has been generated by a history of net operating losses and management

determines the necessity for a valuation allowance.

ASC 740 also provides a recognition threshold and measurement attribute for the financial

statement recognition of a tax position taken or expected to be taken in a tax return.

Using this guidance, a company may recognize the

tax benefit from an uncertain tax position in its financial statements only if it is more likely-than-not (i.e., a likelihood of more

than 50%) that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The Company’s tax returns for all years since December 31, 2020, remain open to audit by all related taxing authorities.

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

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SCHEDULE OF POTENTIALLY DILUTIVE SECURITIES

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Series B Preferred Stock

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within our segments complement one another and position us well for future growth.

Segment operating results are reviewed by the chief

operating decision maker to make determinations about resources to be allocated and to assess performance.

Other factors, including type

of business, revenue recognition and operating results are reviewed in determining the Company’s operating segments.

The Company’s Chief Executive Officer is the

chief operating decision maker and is responsible for reviewing segment operating results to make determinations about resources to be

allocated and to assess performance.

Other factors, including type of business, revenue recognition and operating results are reviewed

in determining the Company’s operating segments.

Value of Financial Instruments

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or liabilities, are as follows:

Inputs that are

unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Inputs (other

than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability through correlation

with market data at the measurement date and for the duration of the instrument’s anticipated life.

Unobservable inputs

that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and that

reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement

Inputs that are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability

through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets

or liabilities and that reflect management’s best estimate of what market participants would use in pricing the asset or liability

at the measurement date.

some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy.

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carrying value of the Company’s financial instruments, including cash, accounts receivable, accounts payable, accrued expenses,

the face amount of notes payable and convertible long-term debt approximate fair value for all periods presented.

and the face amount of notes payable and convertible long term debt approximate fair value for all periods presented.

Concentrations

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current manufacturers or pharmacies cease to perform adequately.

As of September 30, 2023, we utilized three suppliers for fulfillment

services, six suppliers for manufacturing finished goods, six suppliers for packaging, bottling, and labeling, and four suppliers for

prescription medications.

As of December 31, 2022, we utilized four suppliers for fulfillment services, six suppliers for manufacturing

finished goods, five suppliers for packaging, bottling, and labeling, and three suppliers for prescription medications.

Adopted Accounting Pronouncements

June 2016, the Financial Accounting Standards Board

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

2016-13, Financial

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

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

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

not limited to available-for-sale debt securities.

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

an allowance for credit losses.

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

reporting period in which the guidance is effective.

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

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

Effective Dates , which defers the effective date

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

reporting companies.

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

The adoption did not have a material impact on the

Company’s financial statements.

October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805);

Accounting for Contract Assets and Contract Liabilities

from Contracts with Customers .

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

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

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

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

Under current U.S.

GAAP, contract assets and contract liabilities acquired in

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

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

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

Recent Accounting Pronouncements

As of March 31, 2024, we utilized four (4) suppliers for fulfillment

services, nine (9) suppliers for manufacturing finished goods, seven (7) suppliers for packaging, bottling, and labeling, and six (6)

suppliers for prescription medications.

As of December 31, 2023, we utilized three (3) suppliers for fulfillment services, nine (9) suppliers

for manufacturing finished goods, seven (7) suppliers for packaging, bottling, and labeling, and five (5) suppliers for prescription

Accounting Pronouncements

November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) .

The amendments in this update improve reportable segment

disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 will become effective

for the Company’s annual period beginning on January 1, 2024 and interim periods within beginning after January 1, 2025.

does not expect the application of ASU 2023-07 to have a material impact to its consolidated financial statements and related disclosures.

December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , to improve its income

tax disclosure requirements.

Under ASU 2023-09, entities must annually:

(1) disclose specific categories in the rate reconciliation and

(2) provide additional information for reconciling items that meet a quantitative threshold.

ASU 2023-09 will become effective for the

Company beginning on January 1, 2025.

The Company does not expect the application of ASU 2023-09 to have a material impact to its consolidated

financial statements and related disclosures.

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

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

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

3 – ACQUISITIONS

January 18, 2022, the Company completed the acquisition of Cleared.

The acquisition adds to the Company’s growing portfolio of

telehealth capabilities.

The Company accounted for the transaction using the acquisition method in accordance with ASC 805, Business

Combinations , with the purchase price being allocated to tangible and identifiable intangible assets acquired and liabilities assumed

based on their respective estimated fair values on the acquisition date.

Fair values were determined using income approaches.

of Cleared are included within the consolidated financial statements commencing on the acquisition date.

purchase price was approximately $ 9.1 million, including cash paid upfront of approximately $ 1.0 million and payable in the future of

approximately $ 3.0 million, and contingent consideration of $ 5.1 million.

The purchase agreement included up to $ 72.8 million of potential

earn-out payable in cash or stock upon achievement of revenue targets, which was originally recognized as contingent consideration.

Company, with the assistance of a third-party valuation expert, estimated the fair value of the acquired tangible and identifiable intangible

assets using significant estimates such as revenue projections.

The fair value of the identified intangible assets was based primarily

on significant unobservable inputs and thus represent a Level 3 measurement as defined in ASC 820, Fair Value Measurement .

fair value of the trade name and developed technology were determined using the relief-from-royalty method under the income approach.

The royalty rates used to determine the fair value of the trade name and developed technology were 0.10 % and 1.0 % , respectively.

fair value of the customer relationships was determined using the multi-period excess earnings method which involves forecasting the

net earnings expected to be generated.

The customer attrition rate used to determine the fair value of the customer relationships was

The discount rate used to determine the fair value of the trade name, developed technology and customer relationships was 70.5 % .

following table summarizes the acquisition date fair values of assets acquired and liabilities assumed:

SCHEDULE OF FAIR VALUE

OF ASSETS AND LIABILITIES

Purchase price, net of cash acquired

Customer relationship intangible asset

Trade name intangible asset

Developed technology intangible asset

Deferred taxes

Accounts payable and other current liabilities

purchase price and purchase price allocation for Cleared was finalized as of September 30, 2022 with no significant changes to preliminary

Based on the final purchase price allocation, the aggregate goodwill recognized was $ 8.0 million, which is not expected to be

deductible for income tax purposes.

The amount allocated to goodwill and intangible assets reflected the benefits the Company expected

to realize from the growth of the acquisition’s operations.

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

the Company and the sellers of Cleared.

The First Amendment was amended to, among other things:

(i) reduce the total purchase price by

$ 250 thousand to a total of $ 3.67 million;

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

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

February 6, 2023 and ending January 15, 2024;

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

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

On February 6,

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

of Cleared under the First Amendment.

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.

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.

the year ended December 31, 2022, the Company recorded a decrease of $ 5.1 million to the Cleared contingent consideration as a result

of the remeasurement of the fair value.

The decline in the estimated fair value of the Cleared contingent consideration is a result of

a decline in the Cleared financial projections and the removal of all earn-out payments payable by the Company from the terms of the

The Company accounted for the transaction using the acquisition method

in accordance with ASC 805, Business Combinations , with the purchase price being allocated to tangible and identifiable intangible

assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date.

Fair values were determined

using income approaches.

The results of Cleared are included within the consolidated financial statements commencing on the acquisition

February 4, 2023, the Company entered into the Cleared First Amendment.

The Cleared Stock Purchase Agreement was amended to, among other

(i) reduce the total purchase price by $ 250 thousand to a total of $ 3.67 million;

(ii) change the timing of the payment of the

purchase price to $ 460 thousand paid at closing (which has already been paid by the Company), with the remaining amount to be paid in

five quarterly installments beginning on or before February 6, 2023 and ending January 15, 2024;

(iii) remove all “earn-out”

payments payable by the Company to the sellers;

and (iv) remove certain representations and warranties of the Company and sellers in

connection with the transaction.

The Company issued the following shares of common stock to the sellers of Cleared under the Cleared

First Amendment:

During the year ended December 31, 2022, the Company also recorded an $ 8.0 million goodwill impairment charge and an

$ 827 thousand intangible asset impairment charge based on the decline in the Cleared financial projections (See Note 4).

pro forma financial information, assuming the acquisition had taken place on January 1, 2022, as well as the revenue and earnings generated

during the period after the acquisition date, were not material for separate disclosure and, accordingly, have not been presented.

(1) 337,895 shares on February 6, 2023, (2) 455,319 shares on April 17, 2023, (3) 158,129 shares on July 17, 2023, (4)

117,583 shares on October 17, 2023 and (5) 95,821 shares on January 16, 2024.

February 2022, WorkSimpli closed on the ResumeBuild APA to purchase the related intangible assets associated with the ResumeBuild brand,

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period ending on the two-year anniversary of the closing of the Acquisition.

As of September 30, 2023, WorkSimpli has paid the Seller

approximately $ 344 thousand in accordance with the ResumeBuild APA.

The Company estimated the fair value of the contingent consideration

using the income approach and will remeasure the fair value quarterly with changes accounted for through earnings.

4 – GOODWILL AND INTANGIBLE ASSETS

Company’s goodwill balance related to the Cleared acquisition was $ 0 as of both September 30, 2023 and December 31, 2022.

the year ended December 31, 2022, the Company recorded an $ 8.0 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.

of September 30, 2023 and December 31, 2022, the Company has the following amounts related to amortizable intangible assets:

OF GOODWILL AND INTANGIBLE ASSETS

September 30,

As of March 31, 2024, WorkSimpli has paid the Seller $ 500

thousand in accordance with the ResumeBuild APA.

The Company estimated the fair value of the contingent consideration using the income

4 – INTANGIBLE ASSETS

of March 31, 2024 and December 31, 2023, the Company has the following amounts related to amortizable intangible assets:

OF INTANGIBLE ASSETS

Amortizable Intangible Assets:

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( 3,015,435 )

Total net amortizable intangible assets

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

The aggregate amortization expense of the Company’s intangible assets for the three months ended September 30, 2023 and

2022 was $ 246 thousand and $ 326 thousand, respectively.

The aggregate amortization expense of the Company’s intangible assets for

the nine months ended September 30, 2023 and 2022 was $ 726 thousand and $ 667 thousand, respectively.

Total amortization expense for the

remainder of 2023 is approximately $ 246 thousand, 2024 through 2025 is approximately $ 980 thousand per year, 2026 is approximately $ 940

thousand and 2027 is approximately $ 113 thousand.

Total intangible assets, net

aggregate amortization expense of the Company’s intangible assets for the three months ended March 31, 2024 and 2023 was $ 246 thousand

and $ 234 thousand, respectively.

Total amortization expense for the remainder of 2024 is approximately $ 735 thousand, 2025 is approximately

$ 976 thousand, 2026 is approximately $ 939 thousand and for 2027 is approximately $ 113 thousand.

5 – ACCRUED EXPENSES

of September 30, 2023 and December 31, 2022, the Company has the following amounts related to accrued expenses:

of March 31, 2024 and December 31, 2023, the Company has the following amounts related to accrued expenses:

OF ACCRUED EXPENSES

September 30,

Accrued selling and marketing expenses

Accrued compensation

Sales tax payable

Purchase price payable

Accrued dividends payable

Accrued compensation

Accrued interest

Purchase price payable

Other accrued expenses

5 unchanged sentences

include interest in the amount of $ 62 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

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

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

As of 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.

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 .

As of March 31, 2024 and December 31, 2023, the outstanding balance was $ 0 and $ 111 thousand,

respectively, and is included in notes payable, net, on the accompanying unaudited condensed consolidated balance sheet.

January and February 2023, the Company received proceeds of $ 2 million under a $ 2.5 million loan facility with CRG Financial, maturing

on December 15, 2023 .

The loan facility includes interest of 12 %.

The Company repaid the $ 2 million outstanding loan balance

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

to the repayment of the CRG Financial loan due to a prepayment penalty and various fees.

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 financed a $ 348 thousand prepaid insurance policy under a 10-month financing agreement

The Company repaid the $ 2 million outstanding loan balance on March

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

repayment of the CRG Financial loan due to a prepayment penalty and various fees.

As of both March 31, 2024 and December 31, 2023, the

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

the year ended December 31, 2023, the Company financed a $ 348 thousand prepaid insurance policy under a 10-month financing agreement

with Arthur J.

1 unchanged sentence

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.

interest expense on notes payable amounted to $ 216 thousand and $ 0 for the three months ended September 30, 2023 and 2022, respectively.

Total interest expense on notes payable amounted to $ 250 thousand and $ 0 for the nine months ended September 30, 2023 and 2022, respectively.

As of March 31, 2024 and December 31, 2023, the outstanding balance was $ 116 thousand and $ 217 thousand, respectively, and is included

in notes payable, net, on the accompanying consolidated balance sheet.

interest expense on notes payable amounted to $ 5 thousand and $ 21 thousand for the three months ended March 31, 2024 and 2023, respectively.

7 – LONG-TERM DEBT

Capital Credit Facility

noted in Note 1 above, on March 21, 2023, the Company entered into and closed on a Credit Agreement, and a Supplement to the Credit Agreement

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 received

on September 26, 2023 in conjunction with the Avenue First Amendment and (3) $ 20 million of additional uncommitted term loans, collectively

referred to as the “Avenue Facility”.

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 have a term of five years.

The relative fair value of

the Warrants issued to Avenue upon closing was $ 873 thousand.

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 .

The relative fair value was recorded to debt discount and is included

as a reduction to long-term debt on the unaudited condensed consolidated balance sheet as of September 30, 2023.

The Company incurred

other fees associated with the Avenue Facility including:

(1) a $300 thousand financing fee, (2) a $200 thousand upfront commitment fee

of 1% of the total $20 million in committed capital and (3) $27 thousand in legal fees.

The total debt discount recorded of $1.4 million

will be amortized over a forty-two-month period.

Total amortization of debt discount was $ 80 thousand and $ 234 thousand for the three

and nine months ended September 30, 2023, respectively.

The Company received gross proceeds of $ 15.0 million at closing (net proceeds

of $ 12.3 million after repayment of the $ 2 million outstanding CRG loan balance and various fees).

noted in Note 1 above, the Company entered into the Avenue First Amendment to the Credit Agreement whereby the Company received an additional

$ 5 million in committed term loans on September 26, 2023.

The Company received gross and net proceeds of $ 5.0 million.

noted in Note 1 above, on March 21, 2023, the Company entered into the Avenue Credit Agreement and the Avenue Supplement.

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 received on September

26, 2023 in conjunction with the Avenue First Amendment and (3) $ 20 million of additional uncommitted term loans, collectively referred

to as the “Avenue Facility”.

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 Avenue Warrants have a term of five years.

The relative fair value of the

Avenue Warrants upon closing was $ 873 thousand.

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

The relative fair value of the Avenue Warrants was recorded to debt discount and is included as a reduction to long-term debt

on the unaudited condensed consolidated balance sheet as of March 31, 2024.

The Company incurred other fees associated with the Avenue

Facility including:

(1) a $300 thousand financing fee, (2) a $200 thousand upfront commitment fee of 1% of the total $20 million in committed

capital and (3) $27 thousand in legal fees.

The total debt discount recorded of $1.4 million will be amortized over a forty-two-month

Total amortization of debt discount was $ 100 thousand for the three months ended March 31, 2024.

The Company received gross proceeds

of $ 15.0 million at closing (net proceeds of $ 12.3 million after repayment of the $ 2 million outstanding CRG loan balance and various

Avenue Facility matures on October 1, 2026 and interest is based on the greater of:

1 unchanged sentence

plus 4.75% and (2) 12.5%.

At September 30, 2023, the interest rate was 13.25%.

As of March 31, 2024, the interest rate was 13.25%.

Payments are interest only until November 2024.

from the Avenue Facility were used to repay the Company’s outstanding notes payable balances with CRG Financial and are expected

to be utilized for general corporate purposes.

may prepay the loans, subject to a prepayment penalty of 1.00 % to 3.00 % of the principal amount prepaid, depending on the timing of the

Proceeds from the Avenue Facility were used to repay the Company’s outstanding notes payable balances with CRG Financial

and are expected to be utilized for general corporate purposes.

of March 31, 2024, the Company expects to pay $ 1.6 million in 2024, $ 9.5 million in 2025 and $ 7.9 million in 2026 in principal payments

under the Avenue Facility.

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

1 unchanged sentence

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.

of the date of filing, there is $ 20 million outstanding under the Avenue Facility and the Company is in compliance with the Avenue Facility

interest expense on long-term debt, inclusive of amortization of debt discounts, amounted to $ 594 thousand and $ 0 for the three months

ended September 30, 2023 and 2022, respectively.

Total interest expense on long-term debt, inclusive of amortization of debt discounts,

amounted to $ 1.3 million and $ 0 for the nine months ended September 30, 2023 and 2022, respectively.

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

of March 31, 2024, there was $ 19 million outstanding under the Avenue Facility and the Company was in compliance with the Avenue Facility

interest expense on long-term debt, inclusive of amortization of debt discounts, amounted to $ 679 and $ 96 thousand for the three months

ended March 31, 2024 and 2023, respectively.

8 – STOCKHOLDERS’ EQUITY

Company has authorized the issuance of up to 100,000,000 shares of common stock, $ 0.01 par value, and 5,000,000 shares of preferred stock,

$ 0.0001 par value, of which 5,000 shares are designated as Series B Preferred Stock, 1,610,000 are designated as Series A Preferred Stock

and 3,385,000 shares of preferred stock remain undesignated.

$ 0.0001 par value, of which 5,000 shares are designated as Series B Convertible Preferred Stock, 1,610,000 are designated as Series A

Preferred Stock and 3,385,000 shares of preferred stock remain undesignated.

June 8, 2021, the Company filed the 2021 Shelf.

3 unchanged sentences

Shelf, the Company also entered into the ATM Sales Agreement whereby the Company may offer and sell, from time to time, shares of common

On March 22, 2023, the date the Company filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2022, the

Company became subject to the offering limits in General Instruction I.B.6 of Form S-3 (i.e., the “baby shelf limitations”).

As a result of the baby shelf limitations, the Company may only offer and sell shares of common stock having an aggregate offering price

of up to $ 18.435 million pursuant to the ATM Sales Agreement, and it filed a prospectus supplement with the SEC to that effect on March

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 September

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

the nine months ended September 30, 2023, the Company issued an aggregate of 74,372 shares of common stock related to the cashless exercise

Stock Transactions During the Nine Months Ended September 30, 2023

the nine months ended September 30, 2023, the Company issued an aggregate of 339,875 shares of common stock for service, including vested

restricted stock units.

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

the Company and the sellers of Cleared.

The First Amendment was amended to, among other things change the timing of the payment of the

purchase price to $ 460 thousand paid at closing (which has already been paid by the Company), with the remaining amount to be paid in

five quarterly installments beginning on or before February 6, 2023 and ending January 15, 2024.

On February 6, 2023, the Company issued

337,895 shares of common stock related to the first of five quarterly installment payments due to the sellers of Cleared under the First

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.

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.

the nine months ended September 30, 2023, the Company sold 180,021 shares of common stock under the ATM Sales Agreement and net proceeds

received were $ 900 thousand.

the nine months ended September 30, 2023, the Company issued 100,000 shares of common stock related to the settlement of the Harborside

Advisors LLC v.

21-cv-10593, and the Specialty Medical Drugstore, LLC D/B/A GoGoMeds v.

21-cv-10599, matters.

The shares issued were valued based on the closing price of the Company’s stock, or $ 5.32 , on the

date of settlement, July 10, 2023.

July 10, 2023, and August 14, 2023, PA001 Holdings, LLC, 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.

March 21, 2023, in connection with the Company’s closing of a Credit Agreement with Avenue, 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 .

As of March 31, 2024, the Company had $ 53.3 million available under the ATM Sales Agreement and $ 32.0 million available under

the 2021 Shelf.

The Company expects to file a new shelf registration statement in 2024 (the “2024 Shelf”).

the three months ended March 31, 2024, the Company issued an aggregate of 64,113 shares of common stock related to the cashless exercise

the three months ended March 31, 2024, the Company issued an aggregate of 1,268,476 shares of common stock related to the cashless exercise

the three months ended March 31, 2024, the Company issued an aggregate of 1,250 shares of common stock related to the exercise of options

for total proceeds of approximately $ 8 thousand.

Stock Transactions During the Three Months Ended March 31, 2024

the three months ended March 31, 2024, the Company issued an aggregate of 943,375 shares of common stock for service, including vested

restricted stock.

February 4, 2023, the Company entered into the Cleared First Amendment between the Company and the sellers of Cleared.

The Cleared Stock

Purchase Agreement was amended to, among other things change the timing of the payment of the purchase price to $ 460 thousand paid at

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

or before February 6, 2023 and ending January 15, 2024.

The Company issued the following shares of common stock to the sellers of Cleared

under the Cleared First Amendment:

(1) 337,895 shares on February 6, 2023, (2) 455,319 shares on April 17, 2023, (3) 158,129 shares on

July 17, 2023, (4) 117,583 shares on October 17, 2023 and (5) 95,821 shares on January 16, 2024.

The fair value of the stock issuances

under the Cleared First Amendment was $ 3.2 million.

Noncontrolling

income attributed to the non-controlling interest amounted to $ 839 thousand and $ 84 thousand for the three months ended September 30,

2023 and 2022, respectively.

During both the three months ended September 30, 2023 and 2022, the Company paid distributions to non-controlling

shareholders of $ 36 thousand.

Net income attributed to the non-controlling interest amounted to $ 2.2 million and $ 155 thousand for the

nine months ended September 30, 2023 and 2022, respectively.

During both the nine months ended September 30, 2023 and 2022, the Company

paid distributions to non-controlling shareholders of $ 108 thousand.

Software Restructuring Transaction

January 22, 2021 (the “WSS Effective Date”), the Company consummated the WSS Restructuring, which is described in Note 1.

To effect the WSS Restructuring the Company’s wholly-owned subsidiary Conversion Labs PR, entered into a series of membership interest

exchange agreements, pursuant to which, Conversion Labs PR exchanged that certain promissory note, dated May 8, 2019 with an outstanding

balance of $ 376 thousand (the “CVLBPR Note”), issued by WSS in favor of Conversion Labs PR, for 37,531 newly issued membership

interests of WSS (the “Exchange”).

Upon consummation of the Exchange the CVLBPR Note was extinguished.

Concurrently,

in furtherance of the WSS Restructuring, Conversion Labs PR entered into two Membership Interest Purchase Agreements (the “Founding

Members MIPAs”) with two founding members of WSS (the “Founding Members”) whereby Conversion Labs PR purchased from

the Founding Members an aggregate of 2,183 membership interests of WSS for an aggregate purchase price of $ 225,000 , paid in December

furtherance of the WSS Restructuring, Conversion Labs PR entered into a Membership Interest Purchase Agreement with WSS, (the “CVLB

PR MIPA”), pursuant to which Conversion Labs PR purchased 12,000 membership interests of WSS for an aggregate purchase price of

$ 300 thousand.

The CVLB PR MIPA provides that the transaction may be completed in three (3) tranches with a purchase price of $ 100 thousand

per tranche to be made at the sole discretion of Conversion Labs PR .

Payment for the first tranche of $ 100 thousand was made upon execution

of the CVLB PR MIPA in January 2021.

Payments for the second and third tranches were made on the 60-day anniversary and the 120-day anniversary

of the WSS Effective Date.

the consummation of the WSS Restructuring, Conversion Labs PR increased its ownership of WSS from 51 % to approximately 85.58 % on a fully

diluted basis.

WSS entered into an amendment to its operating agreement (the “WSS Operating Agreement Amendment”) to reflect

the change in ownership.

with the WSS Restructuring, Conversion Labs PR entered into option agreements with Sean Fitzpatrick (the “Fitzpatrick Option Agreement”)

and Varun Pathak (the “Pathak Option Agreement” together with Fitzpatrick Option Agreement the “Option Agreements”),

pursuant to which Conversion Labs PR granted options to purchase membership interest units of WSS.

Upon vesting, the Fitzpatrick Options

and the Pathak Options provide for the potential re-purchase of up to an additional 13.25 % of WSS by Fitzpatrick and Pathak in the aggregate

with Conversion Labs PR ownership ratably reduced to approximately 72.98 % .

Fitzpatrick Option Agreement grants Sean Fitzpatrick the option to purchase 10,300 membership interest units of WSS for an exercise price

of $ 1.00 per membership interest unit.

The Fitzpatrick Options vest in accordance with the following milestones (i) 3,434 membership

interests upon WSS achieving $ 2.5 million of gross sales in any fiscal quarter (ii) 3,434 membership interests upon WSS achieving $ 4.0

million of gross sales in any fiscal quarter, and (iii) 3,434 membership interests upon WSS achieving $ 8.0 million of gross sales with

a ten percent (10%) net profit margin in any fiscal quarter.

Pathak Option Agreement grants Varun Pathak the option to purchase 2,100 membership interest units of WSS for an exercise price of $ 1.00

per membership interest unit.

The Pathak Options vest in accordance with the following milestones (i) 700 membership interests upon WSS

achieving $ 2.5 million of gross sales in any fiscal quarter (ii) 700 membership interests upon WSS achieving $ 4.0 million of gross sales

in any fiscal quarter, and (iii) 700 membership interests upon WSS achieving $ 8.0 million of gross sales with a ten percent (10%) net

profit margin in any fiscal quarter.

income attributed to the non-controlling interest amounted to approximately $ 119 thousand and $ 566 thousand for the three months ended

March 31, 2024 and 2023, respectively.

During both the three months ended March 31, 2024 and 2023, the Company paid distributions to

non-controlling shareholders of $ 36 thousand.

Software Capitalization Update

September 30, 2022, Sean Fitzpatrick and Varun Pathak exercised their options to purchase 10,300 and 2,100 membership interest units,

6 unchanged sentences

interest in WorkSimpli increased to 74.1 %.

On June 30, 2023, Lisa Bowlin, WorkSimpli’s Chief Operating Officer, exercised her

option agreement (the “Bowlin Option Agreement”) to purchase 889 membership interest units of WorkSimpli for an exercise

price of $ 1.00 per membership interest unit.

Following the exercise of the Bowlin Option Agreement, Conversion Labs PR decreased its

ownership interest in WorkSimpli from 74.06 % to 73.32 %.

On June 30, 2023, WorkSimpli declared

a cash dividend in the amount of $ 22.40 per membership interest unit to all unit holders of record as of June 30, 2023 and was paid on

July 3, 2023 .

On July 31, 2023, WorkSimpli declared a cash dividend in the amount of $ 11.20 per membership interest unit to all unit holders

of record as of July 28, 2023 and was paid on August 1, 2023 .

On August 31, 2023, WorkSimpli declared a cash dividend in the amount of

$ 16.80 per membership interest unit to all unit holders of record as of August 30, 2023 and was paid on September 1, 2023 .

30, 2023, WorkSimpli declared a cash dividend in the amount of $ 14.00 per membership interest unit to all unit holders of record as of

September 30, 2023 and was paid on October 5, 2023 .

The total dividends declared to noncontrolling interest holders was $ 1.0 million and

$ 1.5 million for the three and nine months ended September 30, 2023, respectively, and is included in the Company’s results of operations

for the three and nine months ended September 30, 2023.

On June 30, 2023, WorkSimpli’s Chief Operating Officer, exercised her option agreement

(the “WorkSimpli COO Option Agreement”) to purchase 889 membership interest units of WorkSimpli for an exercise price of

$ 1.00 per membership interest unit.

Following the exercise of the WorkSimpli COO Option Agreement, Conversion Labs PR decreased its ownership

interest in WorkSimpli from 74.1 % to 73.3 %.

March 31, 2024, WorkSimpli declared a cash dividend in the amount of $ 11.20 per membership interest unit to all unit holders of record

as of March 31, 2024 and was paid on April 10, 2024 .

The total dividends declared to noncontrolling interest holders was $ 267 thousand

for the three months ended March 31, 2024, and is included in the Company’s results of operations for the three months ended March

Company pays cumulative dividends on its Series A Preferred Stock, in the amount of $ 2.21875 per share each year, which is equivalent

2 unchanged sentences

on or about the 15th day of January, April, July, and October of each year.

Dividends declared and paid on the Series A Preferred Stock

during the nine months ended September 30, 2023 are as follows:

(1) quarterly dividend declared on March 28, 2023 to holders of record

as of April 7, 2023 and was paid on April 17, 2023, (2) quarterly dividend declared on June 27, 2023 to holders of record as of July

7, 2023 and was paid on July 17, 2023 and (3) quarterly dividend declared on September 26, 2023 to holders of record as of October 6,

2023 and was paid on October 16, 2023.

The dividends are included in the Company’s results of operations for the three and nine

months ended September 30, 2023.

During the three months ended March 31, 2024, the Company

declared the dividend on March 26, 2024 to holders of record as of April 5, 2024 which was paid on April 15, 2024.

During the three months

ended March 31, 2023, the Company declared the dividend on March 28, 2023 to holders of record as of April 7, 2023 which was paid on

April 17, 2023.

The dividends are included in the Company’s results of operations for the three months ended March 31, 2024 and

January 8, 2021, the Company approved the Company’s 2020 Equity and Incentive Plan (the “2020 Plan”).

Approval of the

2020 Plan was included as Proposal 1 in the Company’s definitive proxy statement for its Special Meeting of Shareholders filed

2020 Plan was included as Proposal 1 in the Company’s definitive proxy statement for its Special Meeting of Stockholders filed

with the Securities and Exchange Commission on December 7, 2020.

5 unchanged sentences

restricted stock, and restricted stock units.

June 24, 2021, at the Annual Meeting of Stockholders, the stockholders of the Company approved an amendment to the 2020 Plan to increase

the maximum number of shares of the Company’s common stock available for issuance under the 2020 Plan by 1,500,000 shares.

June 16, 2022, at the Annual Meeting of Stockholders, the stockholders of the Company approved an amendment to the 2020 Plan to increase

the maximum number of shares of the Company’s common stock available for issuance under the 2020 Plan by 1,500,000 shares.

September 30, 2023, the 2020 Plan, as amended, provided for the issuance of up to 4,950,000 shares of Common Stock.

Remaining authorization

under the 2020 Plan, as amended, was 441,611 shares as of September 30, 2023.

June 24, 2021, at the Annual Meeting of Stockholders, the stockholders of the Company approved the amendment and restatement to the 2020

Plan, which amended the 2020 Plan to increase the maximum number of shares of the Company’s common stock available for issuance

under the 2020 Plan by 1,500,000 shares.

June 16, 2022, at the Annual Meeting of Stockholders, the stockholders of the Company approved the second amendment and restatement of

the 2020 Plan (the “Amended 2020 Plan”), which amended the 2020 Plan to increase the maximum number of shares of the Company’s

common stock available for issuance under the 2020 Plan by 1,500,000 shares.

As of March 31, 2024, the Amended 2020 Plan provided for

the issuance of up to 5,100,000 shares of Common Stock.

Remaining authorization under the Amended 2020 Plan, as amended, was 661,611

shares as of March 31, 2024.

forms of award agreements to be used in connection with awards made under the 2020 Plan to the Company’s executive officers and

non-employee directors are:

Form of Non-Qualified Option Agreement (Non-Employee

Director Awards)

Form of Non-Qualified Option Agreement (Employee Awards);

Form of Restricted Stock Award Agreement.

of Non-Qualified Option Agreement (Non-Employee Director Awards)

of Non-Qualified Option Agreement (Employee Awards);

of Restricted Stock Award Agreement.

the Company had granted service-based stock options and performance-based stock options separate from the 2020 Plan.

the nine months ended September 30, 2023, the Company issued an aggregate of 234,500 stock options to employees under the 2020 Plan and

the prior plan.

These stock options have a contractual term of 4 to 6.5 years and vest in increments which fully vest the options over

a two to three-year period, dependent on the specific agreements’ terms.

following is a summary of outstanding options activity under our 2020 Plan for the nine months ended September 30, 2023:

The following is

a summary of outstanding options activity under our Amended 2020 Plan for the three months ended March 31, 2024:

OF OPTION ACTIVITY

Exercise Price

Options Outstanding Number of Shares

Exercise Price

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price

Balance, December 31, 2023

$ 1.84 – 13.74

Cancelled/Forfeited/Expired

Balance at March 31, 2024

$ 1.84 – 13.74

Balance at September 30, 2023

Exercisable at December 31, 2023

$ 1.84 – 13.74

Exercisable at September 30, 2023

total fair value of the options granted was $ 265 thousand, which was determined by the Black-Scholes Pricing Model with the following

dividend yield of 0 %, expected term of 4 years, volatility of 119.16 % – 133.67 % and risk-free rate of 0.82 % –

Total compensation expense under the 2020 Plan options above was $ 1.2 million and $ 1.4 million for the three months ended September

30, 2023 and 2022, respectively, with unamortized expense remaining of $ 2.1 million as of September 30, 2023.

Total compensation expense

under the 2020 Plan options above was $ 3.5 million and $ 4.9 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, aggregate intrinsic value of vested service-based options outstanding was $ 550 thousand.

following is a summary of outstanding service-based options activity (prior to the establishment of our 2020 Plan above) for the nine

months ended September 30, 2023:

Exercisable at March 31, 2024

compensation expense under the Amended 2020 Plan options above was approximately $ 669 thousand and $ 1.2 million for the three months

ended March 31, 2024 and 2023, respectively, with unamortized expense remaining of $ 565 thousand as of March 31, 2024.

During the three

months ended March 31, 2024, 172,222 options were exercised on a cashless basis, which resulted in 62,781 shares issued.

31, 2024, aggregate intrinsic value of vested service-based options outstanding was $ 1.5 million.

following is a summary of outstanding service-based options activity (prior to the establishment of our 2020 Plan above) for the three

months ended March 31, 2024:

OF OPTION ACTIVITY

Exercise Price

Options Outstanding Number of Shares

Exercise Price

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price

Balance, December 31, 2023

$ 1.00 – 11.98

Cancelled/Forfeited/Expired

Balance at September 30, 2023

Balance at March 31, 2024

$ 1.00 – 11.98

Exercisable December 31, 2023

Exercisable at March 31, 2024

$ 1.00 – 11.98

Exercisable at September 30, 2023

total fair value of the options granted was $ 142

thousand, which was determined by the Black-Scholes

Pricing Model with the following assumptions:

dividend yield of 0 %,

expected term of 6.5

years, volatility of 187.76 %

and risk-free rate of 1.21 %

Total compensation expense under the above service-based option plan was $ 367

thousand and $ 493

thousand for the three months ended September

30, 2023 and 2022, respectively, with unamortized expense remaining of $ 525

thousand as of September 30, 2023.

Total compensation

expense under the above service-based option plan was $ 1.5

million and $ 1.6

million for the nine months ended September 30,

2023 and 2022, respectively.

Of the total service-based options exercised during the nine months ended September 30, 2023, 120,000

options were exercised on a cashless basis, which

resulted in 74,372

compensation expense under the above service-based option plan was approximately $ 192 thousand and $ 643 thousand for the three months

ended March 31, 2024 and 2023, respectively, with unamortized expense remaining of $ 99 thousand as of March 31, 2024.

Of the total service-based

options exercised during the three months ended March 31, 2024, 3,000 options were exercised on a cashless basis, which resulted in 1,332

shares issued.

As of September 30, 2023, aggregate

intrinsic value of vested service-based options outstanding was $ 3.3

following is a summary of outstanding performance-based options activity (separate from the 2020 Plan) for the nine months ended September

As of March 31, 2024, aggregate intrinsic value of vested service-based options outstanding was $ 7.4 million.

following is a summary of outstanding performance-based options activity for the three months ended March 31, 2024:

OF OPTION ACTIVITY

Exercise Price

Options Outstanding Number of Shares

Exercise Price

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price

Balance at December 31, 2023

$ 1.25 – 2.50

Cancelled/Forfeited/Expired

Balance at September 30, 2023

$ 1.25 – 2.50

Balance at March 31, 2024

Exercisable December 31, 2023

$ 1.50 – 2.50

Exercisable at September 30, 2023

compensation expense was recognized on the performance-based options above for the three and nine months ended September 30, 2023, as

the performance terms have not been met or are not probable.

Total compensation expense under the above performance-based options was

$ 106 thousand and $ 317 thousand for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2023, aggregate

intrinsic value of vested performance options outstanding was $ 2.0 million.

following is a summary of outstanding RSUs and RSAs activity under our 2020 Plan for the nine months ended September 30, 2023:

Exercisable at March 31, 2024

compensation expense was recognized on the performance-based options above for the three months ended March 31, 2024 and 2023, as the

performance terms have not been met or are not probable.

As of March 31, 2024, aggregate intrinsic value of vested performance options

outstanding was $ 3.7 million.

and RSAs (under our Amended 2020 Plan)

following is a summary of outstanding RSUs and RSAs activity under our Amended 2020 Plan for the three months ended March 31, 2024:

OF RESTRICTED STOCK UNIT ACTIVITY

2 unchanged sentences

Balance at December 31, 2023

RSU Outstanding Number of Shares, Beginning

RSU Outstanding Number of Shares, Granted

RSU Outstanding Number of Shares, Vested

Cancelled/Forfeited

Balance at September 30, 2023

total fair value of the 3,082,750 RSUs and RSAs granted was $ 10.5 million which was determined using the fair value of the quoted market

price on the date of grant.

Total compensation expense under the 2020 Plan RSUs and RSAs above was $ 1.6 million and $ 703 thousand for

the three months ended September 30, 2023 and 2022, respectively, with unamortized expense remaining of $ 5.7 million as of September

Total compensation expense under the 2020 Plan RSUs and RSAs above was $ 3.1 million and $ 2.3 million for the nine months ended

September 30, 2023 and 2022, respectively.

During the nine months ended September 30, 2023, 474,625 RSUs and RSAs vested, of which 139,875

RSUs and RSAs were issued.

During the nine months ended September 30, 2023, 655,000 RSUs and 809,000 service-based stock options were

cancelled and replaced with 1,830,750 RSAs for four executives and two employees.

Incremental compensation cost resulting from the modifications

was immaterial to the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2023.

following is a summary of outstanding RSUs and RSAs activity (outside of our 2020 Plan) for the nine months ended September 30, 2023:

OF RESTRICTED STOCK UNIT ACTIVITY

RSU Outstanding Number of Shares, Forfeited

Balance at March 31, 2024

RSU Outstanding Number of Shares, Ending

compensation expense under the Amended 2020 Plan RSUs and RSAs above was approximately $ 1.4 million and $ 543 thousand for the three months

ended March 31, 2024 and 2023, respectively, with unamortized expense remaining of approximately $ 3.1 million as of March 31, 2024.

the three months ended March 31 2024, 880,875 RSUs and RSAs were issued, which included 834,125 RSUs and RSAs that vested during the

three months ended March 31, 2024 and 46,750 RSUs and RSAs that vested previously.

and RSAs (outside of our Amended 2020 Plan)

following is a summary of outstanding RSUs and RSAs activity (outside of our Amended 2020 Plan) for the three months ended March 31,

OF WARRANT AND RESTRICTED STOCK OUTSTANDING AND EXERCISABLE

RSU Outstanding

1 unchanged sentence

Balance at December 31, 2023

Cancelled/Forfeited

Balance at September 30, 2023

total fair value of the 725,000 RSUs and RSAs granted was $ 2.0 million which was determined using the fair value of the quoted market

price on the date of grant.

Total compensation expense for RSUs and RSAs outside of the 2020 Plan was $ 139 thousand and $ 225 thousand

for the three months ended September 30, 2023 and 2022, respectively, with unamortized expense remaining of $ 1.3 million as of September

Total compensation expense for RSUs and RSAs outside of the 2020 Plan was $ 728 thousand and $ 1.2 million for the nine months

ended September 30, 2023 and 2022, respectively.

During the nine months ended September 30, 2023, 327,500 RSUs and RSAs vested, of which

200,000 RSUs and RSAs were issued.

During the nine months ended September 30, 2023, 300,000 RSUs were cancelled and replaced with 300,000

RSAs for one executive.

Incremental compensation cost resulting from the modification was immaterial to the unaudited condensed consolidated

financial statements for the three and nine months ended September 30, 2023.

following is a summary of outstanding and exercisable warrants activity during the nine months ended September 30, 2023:

RSU Outstanding Number of Shares, Beginning

RSU Outstanding Number of Shares, Granted

RSU Outstanding Number of Shares, Vested

Balance at March 31, 2024

RSU Outstanding Number of Shares, Ending

compensation expense for RSUs and RSAs outside of the Amended 2020 Plan was approximately $ 255 thousand and $ 305 thousand for the three

months ended March 31, 2024 and 2023, respectively, with unamortized expense remaining of approximately $ 554 thousand as of March 31,

During the three months ended March 31, 2024, 62,500 RSUs and RSAs vested and were issued.

following is a summary of outstanding and exercisable warrants activity during the three months ended March 31, 2024:

OF WARRANT OUTSTANDING AND EXERCISABLE

Exercise Price

Warrants Outstanding Number of Shares

Exercise Price

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price

Balance at December 31, 2023

$ 1.24 – 12.00

Balance at September 30, 2023

( 2,337,500 )

Cancelled/Forfeited/Expired

Balance at March 31, 2024

Exercisable December 31, 2023

$ 1.40 – 12.00

Exercisable September 30, 2023

$ 1.24 – 12.00

total fair value of the warrants granted during the nine months ended September 30, 2023, was $ 895 thousand, which was determined by

the Black-Scholes Pricing Model with the following assumptions:

dividend yield of 0 %, expected term of 4 years, volatility of 122.6 %

and risk-free rate of 3.73 %.

No stock-based compensation expense on the warrants granted during the nine months ended September 30, 2023

was recorded as the warrants are amortized through debt discount (see Note 7).

compensation expense for warrants granted prior to the nine months ended September 30, 2023 was $ 0 and $ 407 thousand for the three months

ended September 30, 2023 and 2022, respectively, with no unamortized expense remaining as of September 30, 2023.

Total compensation expense

for warrants granted prior to the nine months ended September 30, 2023 was $ 18 thousand and $ 1.6 million for the nine months ended September

30, 2023 and 2022, respectively.

As of September 30, 2023, aggregate intrinsic value of vested warrants outstanding was $ 10.2 million.

total stock-based compensation expense related to common stock issued for services, service-based stock options, performance-based

stock options, warrants, RSUs and RSAs amounted to $ 3.3 million

for both the three months ended September 30, 2023 and 2022.

The total stock-based compensation expense related to

common stock issued for services, service-based stock options, performance-based stock options, warrants RSUs and RSAs amounted to

$ 8.8 million

and $ 11.9 million

for the nine months ended September 30, 2023 and 2022, respectively.

Such amounts are included in general and administrative

expenses in the unaudited condensed consolidated statement of operations.

Unamortized expense remaining related to service-based

stock options, performance-based stock options, warrants, RSUs and RSAs was $ 9.6 million

as of September 30, 2023, which is expected to be recognized through 2026.

Company leases office space domestically under operating leases.

The Company’s headquarters are located in New York, New York for

which the lease expires in 2025.

We operate a marketing and sales center in Huntington Beach, California for which the lease expires

in 2024, a patient care center in Greenville, South Carolina for which the lease expires in 2024 and a warehouse and fulfillment center

in Columbia, Pennsylvania for which the lease expires in 2024.

WorkSimpli leases two office spaces in Puerto Rico for which the leases

expire in 2024.

following is a summary of the Company’s operating right-of-use assets and operating lease liabilities as of September 30, 2023:

Exercisable March 31, 2024

compensation expense on the above warrants for services was approximately $ 0 and $ 12 thousand for the three months ended March 31, 2024

and 2023, respectively, with no unamortized expense remaining as of March 31, 2024.

total stock-based compensation expense related to common stock issued for services, service-based stock options, performance-based stock

options, warrants, RSUs and RSAs amounted to approximately $ 2.5 million and $ 2.7 million for the three months ended March 31, 2024 and

2023, respectively.

Such amounts are included in general and administrative expenses in the unaudited condensed consolidated statement

of operations.

Unamortized expense remaining related to service-based stock options, performance-based stock options, warrants, RSUs

and RSAs was approximately $ 4.3 million as of March 31, 2024, which is expected to be recognized through 2026.

Company leases office space domestically under operating leases including:

(1) the Company’s headquarters in New York, New York

for which the lease expires in 2025, (2) a marketing and sales center in Huntington Beach, California for which the lease expires in

2024, (3) a patient care center in Greenville, South Carolina for which the lease expires in 2024, (4) warehouse and fulfillment centers

in Columbia, Pennsylvania and Lancaster, Pennsylvania for which the leases expire in 2024 and (5) a warehouse and pharmacy operations

center in Lancaster, Pennsylvania for which the lease expires in 2029, with an additional five year option to extend, for which the Company

expects to utilize.

WorkSimpli leases two office spaces in Puerto Rico for which the leases expire in 2024.

following is a summary of the Company’s operating right-of-use assets and operating lease liabilities as of March 31, 2024:

OF OPERATING RIGHT OF USE OF ASSETS

2 unchanged sentences

Operating lease liabilities - noncurrent

accumulated amortization of the Company’s operating right-of-use assets was $ 1.9 million as of September 30, 2023.

accumulated amortization of the Company’s operating right-of-use assets was $ 2.3 million and $ 1.5 million as of the three months

ended March 31, 2024 and 2023, respectively.

table below reconciles the undiscounted future minimum lease payments under the above noted operating leases to the total operating lease

liabilities recognized on the unaudited condensed consolidated balance sheet as of September 30, 2023:

liabilities recognized on the unaudited condensed consolidated balance sheet as of March 31, 2024:

OF MATURITY OF OPERATING LEASE LIABILITIES

2 unchanged sentences

Fiscal year 2026

Fiscal year 2027

Fiscal year 2028

imputed interest

( 1,020,171 )

Present value of operating lease liabilities

lease expenses were $ 214 thousand and $ 200 thousand for the three months ended September 30, 2023 and 2022, respectively, and $ 643 thousand

and $ 603 thousand for the nine months ended September 30, 2023 and 2022, respectively, and were included in other operating expenses

in our unaudited condensed consolidated statement of operations.

lease expenses were approximately $ 226 thousand and $ 223 thousand for the three months ended March 31, 2024 and 2023, respectively, and

were included in other operating expenses in our unaudited condensed consolidated statement of operations.

cash flow information related to operating lease liabilities consisted of the following:

OF OTHER INFORMATION RELATED TO OPERATING LEASE LIABILITIES

September 30,

OF CASH FLOW INFORMATION RELATED TO OPERATING LEASE LIABILITIES

Cash paid for operating lease liabilities

balance sheet information related to operating lease liabilities consisted of the following:

September 30, 2023

March 31, 2024

December 31, 2023

1 unchanged sentence

Weighted average discount rate

have elected to apply the short-term lease exception to the warehouse space we lease in Lancaster, Pennsylvania.

This lease has a term

of 12 months and is not recognized on the balance sheet, but rather expensed on a straight-line basis over the lease term.

Straight-line

lease payments are $ 3 thousand per month.

Additionally, Conversion Labs PR utilizes office space in Puerto Rico on a month-to-month basis

incurring rental expense of approximately $ 3 thousand per month.

have elected to apply the short-term lease exception to the warehouse and fulfillment center spaces we lease in Columbia, Pennsylvania

and Lancaster, Pennsylvania.

These leases have a term of less than 12 months and are not recognized on the balance sheet, but rather

expensed on a straight-line basis over the lease term.

Straight-line lease payments are approximately $ 2 thousand and $ 3 thousand per

month, for Columbia, Pennsylvania and Lancaster, Pennsylvania, respectively.

Additionally, Conversion Labs PR utilizes office space in

Puerto Rico on a month-to-month basis incurring rental expense of approximately $ 3 thousand per month.

10 - COMMITMENTS AND CONTINGENCIES

7 unchanged sentences

sold – advertising and operating expenses directly related to the marketing of the licensed products.

As of September 30, 2023

and December 31, 2022, $ 0 and approximately $ 138 thousand, respectively, were included in accrued expenses in regard to this agreement.

As of March 31, 2024 and

December 31, 2023, $ 0 and $ 5 thousand, respectively, was included in accrued expenses in regard to this agreement.

The Company paid Pilaris

approximately $ 5 thousand and $ 0 during the three months ended March 31, 2024 and 2023, respectively, in regard to this agreement.

2018, the Company entered into a license agreement (the “Alphabet Agreement”) with M.ALPHABET, LLC (“Alphabet”),

10 unchanged sentences

Alphabet a royalty equal to 13% of Gross Receipts (as defined in the Agreement) realized from the sales of Licensed Products.

were earned or owed as of September 30, 2023.

were earned or owed as of March 31, 2024.

execution of the Alphabet Agreement, Alphabet was granted a 10 -year stock option to purchase 20,000 shares of the Company’s common

13 unchanged sentences

equaling the total expected product acceptance cost in excess of the product deposit.

As of September 30, 2023, the Company approximates

As of March 31, 2024, the Company approximates

its implicit purchase commitments to be $ 186 thousand.

the normal course of business operations, the Company may become involved in various legal matters.

As of September 30, 2023, other than

as set forth below, the Company’s management does not believe that there are any potential legal matters that could have a material

As of March 31, 2024, other than

as set forth below, the Company’s management does not believe that there are any potential legal matters that could have an adverse

effect on the Company’s consolidated financial position.

December 10, 2021, a purported breach of contract, breach of duty of good faith and fair dealing, unjust enrichment, quantum meruit,

and fraud lawsuit, captioned Harborside Advisors LLC v.

21-cv-10593, was filed in the United States District

Court for the Southern District of New York against the Company.

The Harborside Complaint alleges, among other things, that the Company

breached a Consulting Services Agreement dated as of June 5, 2019, and Harborside was entitled to 1 million shares ( i.e ., 200,000

shares post 5-for-1 reverse stock split) in the Company if the Conversion Labs Rx business achieved a topline revenue of $ 10 million

and an additional 1 million shares ( i.e ., 200,000 shares post 5-for-1 reverse stock split) for each additional $ 5 million in topline

revenue up to a maximum of 5 million shares ( i.e.

, 1,000,000 shares post 5-for-1 reverse stock split).

The Complaint further alleges

that the Company fraudulently induced Harborside to give up its ownership interest in Conversion Labs Rx and that it was a breach of

the duty of good faith and fair dealing and fraudulent for the Company to have dissolved Conversion Labs Rx.

Consequently, alleges Harborside,

the Company was unjustly enriched, and Harborside is entitled to recover from the Company for quantum meruit.

The Harborside Complaint

implies between $ 5.0 million and $ 33.0 million in alleged damages related to failure to award the aforementioned stock but only specifically

states that “Harborside has incurred damages in excess of $ 75 thousand, with the exact amount to be determined with specificity

at trial” for each of the 5 counts.

On February 11, 2022, the Company filed a Motion to Dismiss the Harborside Complaint, which

Harborside opposed.

The Company replied on April 4, 2022 and was awaiting a decision from the Court on whether the case will be fully

or partially dismissed.

In the meantime, the parties agreed to mediate both cases ( Harborside Advisors LLC v.

21-cv-10593, and Specialty Medical Drugstore, LLC D/B/A GoGoMeds v.

21-cv-10599, noted below) together.

On September 22, 2022, as a result of mediation, the parties reached a settlement to resolve the matters in these cases.

issued 400,000 shares of common stock during the year ended December 31, 2022 and 100,000 additional shares of common stock on July 10,

2023 related to this settlement.

The costs of this settlement are reflected in the Company’s financial results.

December 10, 2021, a purported breach of contract, unjust enrichment, quantum meruit, and account stated lawsuit, captioned Specialty

Medical Drugstore, LLC D/B/A GoGoMeds v.

21-cv-10599, was filed in the United States District Court for the

Southern District of New York against the Company.

The GoGoMeds Complaint alleges, among other things, that Conversion Labs Rx breached

a Strategic Partnership Agreement (dated May 27, 2019) (the “SPA”) by the Company not paying two invoices (#3269 and 3270)

totaling $ 274 thousand, and, therefore, “LifeMD has been unjustly enriched in an amount in excess of $ 274 thousand, with the exact

amount to be determined with specificity at trial.” Further, GoGoMeds alleges that “to the extent that the SPA is inapplicable,

GoGoMeds is entitled to recover from LifeMD from quantum meruit” because “GoGoMeds conferred a benefit on LifeMD by fulfilling

over 17,000 prescriptions and over the counter drug orders for LifeMD’s clients.” On February 11, 2022, the Company filed

its Answer and Counterclaim to the GoGoMeds Complaint, pleading the affirmative defenses that the claims are barred, in whole or in part:

(i) because they fail to state claims upon which relief can be granted;

(ii) by breach of contract by plaintiff;

(iii) by offset, recoupment,

and/or unjust enrichment to plaintiff;

(iv) by accord and satisfaction;

(v) for failure of condition precedent;

(vi) because adequate

remedies at law exist;

(vii) by failure to mitigate;

(viii) by the doctrine of unclean hands;

and (ix) by consent ratification, waiver,

excuse, and/or estoppel, (x) as well as that attorney fees and costs, as well as special, indirect, incidental, and/or consequential

damages are not recoverable.

Further, the Company counterclaimed against GoGoMeds for:

(a) breach of contract for failing to:

adequate customer service and related pharmacy services;

(ii) charge LifeMD actual costs for prescription and over the counter drugs

(including shipping), as was contractually required;

and (iii) provide regular reports and allow audits for review to establish adequate

service and accurate costs;

(b) trade secret misappropriation of the LifeMD Information, Data, and Materials, as defined therein;

unjust enrichment of GoGoMeds through its retention of such LifeMD Information, Data, and Materials, and for the benefit of the creation

of the GoGoCare telehealth company;

(d) conversion by GoGoMeds by exercising unauthorized dominion and control over the LifeMD Information,

Data, and Materials;

and (f) an accounting.

GoGoMeds’ responded to the counterclaims on March 4, 2022 and the parties

had commenced fact discovery.

In the meantime, the parties agreed to mediate both cases ( Harborside Advisors LLC v.

21-cv-10593, and Specialty Medical Drugstore, LLC D/B/A GoGoMeds v.

21-cv-10599) together.

court granted a 60-day stay in the Specialty Medical Drugstore, LLC D/B/A GoGoMeds v.

LifeMD, Inc., Case No.

21-cv-10599, and

the parties were amenable in the Harborside Advisors LLC v.

21-cv-10593, to the court foregoing any decision

on our motion to dismiss until after mediation.

On September 22, 2022, as a result of mediation, the parties reached a settlement to

resolve the matters in these cases.

As noted above, the Company issued 400,000 shares of common stock during the year ended December

31, 2022 and 100,000 additional shares of common stock on July 10, 2023 related to this settlement.

The shares issued were valued based

on the closing price of the Company’s stock, or $5.32, on the date of settlement, July 10, 2023.

The costs of this settlement are

reflected in the Company’s financial results.

February 28, 2022, a purported breach of contract lawsuit (with six counts of alleged breach, and indemnity reliance concerning reasonable

costs and expenses), captioned William Blair LLC v.

2022L001978, was filed in the Circuit Court of Cook

County, Illinois County Department, Law Division against the Company (the “Blair Complaint”).

The Blair Complaint alleges,

among other things, that LifeMD breached an engagement letter agreement entered into on January 7, 2021 with Blair that concerned potential

debt financing.

In particular, Blair alleges that the Company breached its obligations by, inter alia :

(i) failing to advise Blair

of, and ultimately completing, a debt financing transaction with a different investment banking firm on or about June 3, 2021;

(ii) reproducing

several pages from a Confidential Information Brochure used in the Company’s debt financing transaction with a different investment

banking firm;

(iii) failing to provide Blair with a right of first refusal to be its joint active bookrunning manager for a common stock

sales agreement that it executed on or about June 3, 2021, through a different investment banking firm;

(iv) failing to provide Blair

with a right of first refusal to be its joint active bookrunning manager for a common stock sales agreement that it executed on or about

September 28, 2021, through a different investment banking firm (despite the Company having formally terminated the engagement letter

with Blair on or about July 16, 2021);

(v) failing to provide Blair with a right of first refusal to be its joint active bookrunning

manager for a preferred stock offering that it executed on or about September 28, 2021, through two different investment banking firms

as bookrunning co-managers (despite the Company having formally terminated the engagement letter with Blair on or about July 16, 2021);

and (vi) purchasing a convertible note from a pharmaceutical investor in connection with its acquisition of all outstanding shares of

allergy telehealth platform, Cleared.

The Blair Complaint seeks damages adequate to compensate Blair for the aforementioned alleged breaches

, which implicitly meets or exceeds the purported $ 1.0 million minimum fee in the engagement letter), as well as reasonable

costs and expenses incurred in this action.

On May 22, 2022, the Company filed its answer, affirmative defenses, and counterclaim, denying

the alleged breaches of its obligations under the engagement letter agreement.

Further, the Company asserted the following affirmative

(1) failure to state a claim on which relief can be granted;

(3) breach of the engagement letter agreement;

unclean hands;

(5) failure to mitigate;

(6) the doctrines of waiver, accord, and satisfaction, and res judicata;

(7) estoppel;

repudiation/anticipatory breach.

The Company also counterclaimed for a declaratory judgment that:

(i) Plaintiff breached, repudiated

and/or anticipatorily breached the engagement letter agreement;

(ii) as a result, the Company was not bound by the terms of the engagement

letter agreement from that time forward;

(iii) Plaintiff is not owed any amounts under the engagement letter agreement;

an award to the Company of any further relief that the Court deems just and proper.

Court conducted virtual case management conferences on June 30, 2022 and August 3, 2022, and fact discovery (i.e., written discovery

requests and responses) commenced thereafter.

On August 29, 2022, the plaintiff subpoenaed B.

Riley Financial, Inc.

for documents.

Court subsequently held several case management and status conferences, beginning in October 2022 and continuing through March 2023.

On April 5, 2023, the court granted the plaintiff’s motion to compel certain discovery and ordered the Company to conduct certain

additional searches for documents and to produce responsive documents by April 26, 202 3, which

the Company did in compliance with the order.

A further case management conference was held on May 17, 2023.

In June 2023, the

parties attended a mediation resulting in a settlement that fully resolved the matters in

The costs of this settlement are reflected in the Company’s financial results.

September 5, 2023, the Internal Revenue Service (the “IRS”) issued a notice of deficiency to the Company in which the IRS

asserted an income tax deficiency of approximately $ 1.9 million for the Company’s tax year ending December 31, 2019.

timely filed a petition in the United States Tax Court disputing all of the proposed tax deficiency.

The case remains in its earliest

The Company should be served with the IRS’s answer to the Company’s petition in the near future.

The Company filed

an amended return well before the notice of deficiency was issued that the Company believes will resolve all or substantially all of

the issues in the case.

The Company intends to vigorously defend this case.

11 – RELATED PARTY TRANSACTIONS

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 .

January and February 2023, the Company received proceeds of $ 2 million under a $ 2.5 million loan facility with CRG Financial, maturing

on December 15, 2023 .

The loan facility includes interest of 12 %.

The Company repaid the $ 2 million outstanding loan balance

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

to the repayment of the CRG Financial loan (see Note 6).

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

was $ 0 related to the CRG Financial loan.

Bhatia, a member of the Board of the Company, also serves on the Board of Directors of

CRG Financial.

the nine months ended September 30, 2023 and 2022, WorkSimpli utilized CloudBoson Technologies Pvt.

(“CloudBoson”),

formerly LegalSubmit Pvt.

The Company repaid the $ 2 million outstanding loan balance on March

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

repayment of the CRG Financial loan (see Note 6).

As of both March 31, 2024 and December 31, 2023, the outstanding balance was $ 0 related

to the CRG Financial loan.

Bhatia, a member of the Board of the Company, is a 3% owner and also serves on the Board of Directors

of CRG Financial.

the three months ended March 31, 2024 and 2023, the Company utilized CloudBoson Technologies Pvt.

(“CloudBoson”), formerly

LegalSubmit Pvt.

Ltd., a company owned by WorkSimpli’s Chief Software Engineer, to provide software development services.

WorkSimpli paid CloudBoson a total of $ 611 thousand and $ 403 thousand during the three months ended September 30, 2023 and 2022, respectively,

and $ 1.8 million and $ 1.1 million during the nine months ended September 30, 2023 and 2022, respectively, for these services.

owed CloudBoson $ 208 thousand as of September 30, 2023.

There were no amounts owed to CloudBoson as of December 31, 2022.

paid CloudBoson a total of approximately $ 1.1 million and $ 623 thousand during the three months ended March 31, 2024 and 2023, respectively,

for these services.

The Company owed CloudBoson $ 28 thousand as of March 31, 2024 and $ 226 thousand as of December 31, 2023.

Consulting Agreements

May 30, 2023, Will Febbo, a member of the Board of the Company, entered into a consulting services agreement with the Company, pursuant

to which he provides certain investor relations and strategic business development services, in consideration for 375,000 restricted

shares of the Company’s common stock, which will vest in quarterly installments from August 30, 2023 through November 30, 2024.

The Company issued 62,500 restricted shares of common stock related to this agreement during the three months ended March 31, 2024.

June 14, 2023, Robert Jindal, a member of the Board of the Company, entered into a consulting services agreement with the Company, pursuant

Jindal provides certain investor relations and strategic business development services, in consideration for 225,000 restricted

shares of the Company’s common stock, which will vest in six-month installments from June 14, 2023 through December 31, 2024.

June 14, 2023, Naveen Bhatia, a member of the Board of the Company, entered into a consulting services agreement with the Company, pursuant

Bhatia provides certain investor relations and strategic business development services, in consideration for 225,000 restricted

shares of the Company’s common stock, which will vest in six-month installments from June 14, 2023 through December 31, 2024.

12 – SEGMENT DATA

3 unchanged sentences

within our segments complement one another and position us well for future growth.

Relevant segment data for the three and nine months

ended September 30, 2023 and 2022 is as follows:

OF RELEVANT SEGMENT DATA

Three Months Ended September 30,

Nine Months Ended September 30,

Relevant segment data for the three months ended March

31, 2024 and 2023 is as follows:

SCHEDULE OF RELEVANT SEGMENT DATA

Three Months Ended March 31,

Operating loss

1 unchanged sentence

$ ( 5,001,358 )

$ ( 20,859,582 )

$ ( 34,181,305 )

Operating income

$ 107,687,158

Operating loss

1 unchanged sentence

$ ( 2,852,810 )

$ ( 12,317,737 )

$ ( 33,076,840 )

segment data as of September 30, 2023 and December 31, 2022 is as follows:

September 30, 2023

segment data as of March 31, 2024 and December 31, 2023 is as follows:

March 31, 2024

December 31, 2023

3 unchanged sentences

Issued for Service

October 2023, the Company issued 326,875 shares of common stock related to vested RSUs and RSAs with a total fair value of $ 1.1 million.

Sales Agreement

October and November 2023, the Company sold 829,886 shares of common stock under

the ATM Sales Agreement

and net proceeds received were $ 5.3

Issued for Noncontingent Consideration Payment

October 17, 2023, the Company issued 117,583 shares of common stock related to the fourth of five quarterly installment payments due

to the sellers of Cleared under the First Amendment.

April and May 2024, the Company issued 122,250

shares of common stock related to vested restricted stock with a total fair value of $ 601

Exercise of Options and Warrants

April and May 2024, the Company issued 285,554

shares of common stock related to the cashless exercise of warrants and 22,050

shares of common stock related to the cashless exercise of options.

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 1. Financial Statements