LifeMD, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Note Regarding Forward-Looking Statements The following discussion should be read in conjunction with the financial statements and related notes contained elsewhere in this Quarterly Report on Form 10-Q. Certain statements made in this discussion are “forward-looking statements” within the meaning of 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by the Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ materially from those anticipated, believed, estimated, expected, intended, or planned. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results. Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our unaudited condensed consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report. Risk factors include, by way of example and without limitation: ● changes in the market acceptance of our products; ● the impact of competitive products and pricing; ● our ability to successfully commercialize our products on a large enough scale to generate profitable operations; ● our ability to maintain and develop relationships with customers and suppliers; ● our ability to respond to new technological developments quickly and effectively, including applications and risks of artificial intelligence (“AI”); ● our ability to prevent, detect and remediate cybersecurity incidents; ● our ability to protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on our proprietary rights; ● our ability to successfully acquire, develop or commercialize new products and equipment; ● our ability to collaborate successfully with other businesses and to integrate acquired businesses or new brands; ● supply chain constraints or difficulties; ● current and potential material weaknesses in our internal control over financial reporting; ● our need to raise additional funds in the future; ● our ability to successfully recruit and retain qualified personnel; ● the impact of industry regulation, including regulation of compounded medications, insurance claims, privacy and digital healthcare; ● general economic and business conditions, including inflation, slower growth or recession; ● changes in the political or regulatory conditions in the markets in which we operate; and ● business interruptions resulting from geo-political actions, including war, and terrorism or disease outbreaks. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission (“SEC”). We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. 30 Business Overview We are a direct-to-patient telehealth company providing a high-quality, cost-effective, and convenient way to access comprehensive, virtual and in-home healthcare. We believe 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 which discourages many individuals from seeking much-needed medical care. LifeMD is improving the delivery of the healthcare experience through telehealth with our proprietary technology platform, affiliated and dedicated provider network, broad and expanding treatment capabilities, and the unique ability to nurture patient relationships. The LifeMD telehealth platform integrates best-in-class capabilities including a 50-state medical group, a nationwide pharmacy network, a wholly-owned affiliated commercial pharmacy, nationwide laboratory and diagnostic testing capabilities, a fully integrated electronic medical records (“EMR”) system and a patient care and service call center. These capabilities are integrated by an industry-leading, proprietary telehealth technology that supports a broad range of primary care, chronic disease and lifestyle healthcare needs. Currently, LifeMD treats approximately 311,000 active patient subscribers across a range of their medical needs including primary care, men’s sexual health, weight management, sleep, hair loss and hormonal therapy by providing telehealth clinical services and prescription and over-the-counter (“OTC”) treatments, as medically appropriate. Our virtual primary care services are primarily offered on a subscription basis. Since inception, we have helped approximately 1,293,000 customers and patients by providing them with greater access to high-quality, convenient, and affordable care. Our mission is to empower people to live healthier lives by increasing access to high-quality and affordable virtual and in-home healthcare. We believe our success has been, and will continue to be, attributable to an amazing patient experience, made possible by attracting and retaining the highest-quality providers in the country, and our vertically integrated care platform. As we continue to pursue long-term growth, we plan to continue to introduce new telehealth product and service offerings that complement our already expansive treatment areas. In June 2024, the Company launched the acceptance of private health insurance for its virtual primary care services, including weight management for medically qualified patients. Initially available in select states, the Company plans to continue enrollments with private payors to facilitate access to medically necessary services, ultimately having broad coverage options across all 50 states. In April 2025, the Company expanded acceptance of insurance to Medicare beneficiaries for qualifying care. Initially available to more than 21 million Medicare Part B beneficiaries in 26 states, the Company expects to expand access to medically necessary services for more than 60 million Medicare beneficiaries nationwide, with access to qualifying services across 49 states. Our telehealth revenue increased 34% for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. Total revenue from recurring subscriptions is approximately 95%. In addition to our telehealth business, we owned 73.3% of WorkSimpli, which operates PDFSimpli, a software as a service platform for converting, signing, editing, and sharing PDF documents. WorkSimpli revenue from recurring subscriptions is 100%. Our Platform and Business Strategy We are a patient-centric telehealth company dedicated to delivering seamless end-to-end virtual healthcare directly to consumers and through select enterprise (“B2B”) partnerships. Our mission is facilitated by our robust technology platform that is purpose-built to seamlessly connect the various touchpoints involved in delivering complex care, including scheduling for a national provider network, an EMR system, secure synchronous and asynchronous communication, prescriptions, pharmacy and laboratory integrations, and more. Our platform enables us to deliver modern personalized health experiences and offerings through our websites and mobile applications, spanning customer discovery, purchase and connection with licensed providers, to pharmacy and OTC order fulfilment, through ongoing care. We believe that our seamless approach significantly reduces the complication, cost and time burden of healthcare, therefore incentivizing consumers to stick with our brands. Our offerings are sold to consumers on a primarily subscription basis, thus creating a relationship-driven patient experience to bolster retention rates and recurring revenue. Our offerings range from prescription medication and OTC products fulfilled on a recurring basis, to primary care and weight management clinical services delivered by a team of dedicated medical providers. In general, our offerings seek to serve a patient throughout the lifecycle of their urgent, chronic, and lifestyle healthcare needs. As appropriate, prescription medications and OTC products are filled by our in-house mail order pharmacy or third-party pharmacy fulfilment partners, and are shipped directly to patients. 31 Our platform also includes a robust customer relationship management (“CRM”) system, and performance marketing platform that enables us to acquire and retain new patients and customers at scale by driving brand visibility through strategic media placements, influencer partnerships, and direct response advertising methods across highly visible marketing channels ( i.e ., national TV, streaming TV, streaming audio, YouTube, podcasts, Out of Home, print, magazines, online search, social media, and digital). We leverage our telehealth technology platform and services across the two core areas described below: Direct-to-Patient Telehealth Brands We leverage our telehealth platform’s affiliated provider network, pharmacy, and EMR capabilities across our direct-to-patient telehealth brands. Our core telehealth brands LifeMD and Rex MD target largely unaddressed or underserved healthcare needs and are leading destinations in their respective treatment verticals of virtual primary care and men’s health. ○ LifeMD is a telehealth brand that offers access to virtual primary care and telehealth services, offering comprehensive healthcare solutions across more than 200 conditions. This brand provides patients with access to affiliated high-quality providers for their urgent care and chronic care needs. LifeMD’s offering is a mobile-first full-service destination that provides seamless access to comprehensive virtual medical care including on-demand consultations and treatment, prescription medications, diagnostics and imaging, wellness coaching, integration with in-home tools and more. This offering is also supported by partnerships that provide our patients with benefits such as substantial discounts on lab work and a prescription discount card. LifeMD has served over 596,000 customers and patients to date. In April 2023, we launched our rapidly growing GLP-1 Weight Management Program providing primary care, metabolic coaching, lab work and prescription services (as appropriate) to patients seeking to access a medically supported weight loss solution. Since inception, our Weight Management Program has grown exponentially to approximately 82,000 patient subscribers as of September 30, 2025, remaining at the forefront of the rapidly growing GLP-1 weight loss market, with our highly differentiated and comprehensive offering. In September 2024, we expanded our Weight Management Program with a personalized, non-GLP-1 treatment plan consisting of three oral medications – metformin, bupropion, and topiramate - which is expected to grow the program’s addressable market. As part of its commitment to increasing access to branded prescription GLP-1 medications, we have developed an electronic benefits verification program that allows patients to check pharmacy benefits verification upon enrolling in a LifeMD virtual care program. Secondly, we have partnered with an AI-powered platform that optimizes prior authorization submissions and aims to improve approval rates for patients. Thirdly, we are establishing direct integrations with branded manufacturers who are also committed to lower cost offerings. These enhancements are designed to minimize delays in care, reduce barriers to accessing brand-name medications, and ensure that a broader range of patients can benefit from LifeMD’s offerings. ○ Rex MD is a men’s telehealth platform brand that offers access to virtual medical treatment for a variety of men’s health needs, including erectile dysfunction, premature ejaculation and hair loss. After treatment from an affiliated licensed physician, if appropriate, one of our partner pharmacies will dispense and ship prescription medications and OTC products directly to the customer. Since Rex MD’s initial launch, it has expanded into additional indications including weight management and testosterone replacement therapy. Rex MD has served more than 668,000 customers and patients to date. ○ ShapiroMD is a legacy brand offering access to virtual medical treatment, prescription medications, patented doctor formulated OTC products, topical compounded medications, and Food and Drug Administration (“FDA”) approved medical devices treating male and female hair loss through our telehealth platform. ShapiroMD is a leading destination for hair loss treatment across the United States (“U.S.”) and has served approximately 261,000 customers and patients to date. To support our telehealth brands, in November 2024 we announced the opening of a state-of-the-art wholly-owned affiliated commercial pharmacy, marking an important milestone in creating a fully integrated, end-to-end telehealth platform. This 22,500-square-foot facility, located in Lancaster, PA and designed to fill up to 5,000 daily prescriptions, allows us to offer patients a more cohesive care journey for relevant conditions from initial consultation to prescription fulfillment within a single integrated ecosystem. In September 2025, we expanded our pharmacy to include advanced non-sterile compounding capabilities for oral and topical medications, so that we could deliver tailored therapies designed to meet evolving patient needs while improving efficiency and reducing reliance on third-party providers. B2B Telehealth Partnerships Organizations selling healthcare products face a challenging commercial landscape. Increased competition, shrinking market sizes, and challenges reaching patients via the traditional brick-and-mortar physician offices are forcing pharmaceutical, medical device, and diagnostic companies to rethink their commercial strategies and increase their focus on digital patient awareness and engagement initiatives. It is estimated that spending on digital solutions to facilitate greater access to end markets accounts for one-third of the collective $30 billion commercial spend by these companies in the U.S. We believe LifeMD’s unique telehealth technology platform and virtual care expertise is well-positioned to address the unmet needs of healthcare product companies as they relate to digital patient awareness, access to care, adherence, and compliance. 32 During the nine months ended September 30, 2025, LifeMD executed its integration with LillyDirect’s (“Lilly”) pharmacy provider, Gifthealth, to offer streamlined access of single-dose vials of Lilly’s prescription obesity treatment Zepbound® (tirzepatide) to the Company’s eligible patients. LifeMD also announced plans to offer a simplified pathway for cash-pay patients to access all FDA-approved dose strengths of Wegovy® directly within LifeMD’s virtual care platform and an additional offering through its collaboration with Novo Nordisk that provides access to Ozempic® for patients with type 2 diabetes. Majority Owned Subsidiary: WorkSimpli WorkSimpli is a leading provider of workplace and document services for consumers, gig workers, and small businesses. WorkSimpli operates the following brands: (1) PDFSimpli, an online software as a service platform that allows users to create, edit, convert, sign, and share PDF documents, (2) ResumeBuild, a leading provider of digital resume and cover letter services, (3) SignSimpli, a digital signature platform and (4) LegalSimpli, a provider of legal forms for consumers and small businesses. As a result of a series of restructuring transactions, the Company’s ownership interest in WorkSimpli was 73.3%. WorkSimpli had approximately 141,000 active subscriptions as of September 30, 2025. On November 4, 2025, we sold our majority ownership interest in WorkSimpli to Lion Buyer, LLC. The sale positions the Company as a pure-play telehealth technology company focused on scaling its virtual care and pharmacy operations. For a description of the transaction, see Note 15—Subsequent Events. Results of Operations During the three months ended September 30, 2025, the Company identified and corrected errors related to the recording of net revenue as agent in certain arrangements with the Company’s third-party pharmacy providers as well as various out-of-period amounts included in our previously issued financial statements that were deemed to be quantitatively and qualitatively immaterial, individually and in the aggregate, to the financial statements in the periods recorded or to the relevant prior periods. Information presented in the tables below for the three and nine months ended September 30, 2024 has been revised to reflect these corrections. See Note 3—Revisions to Previously Issued Financial Statements. Comparison of the Three Months Ended September 30, 2025 to the Three Months Ended September 30, 2024 Our financial results for the three months ended September 30, 2025 are summarized as follows in comparison to the three months ended September 30, 2024: September 30, 2025 September 30, 2024 % of % of $ Sales $ Sales Telehealth revenue, net $ 47,279,933 78,57 % $ 40,154,683 75.38 % WorkSimpli revenue, net 12,892,537 21,43 % 13,117,611 24.62 % Total revenue, net 60,172,470 100 % 53,272,294 100 % Cost of telehealth revenue 6,714,235 11.16 % 4,300,877 8.07 % Cost of WorkSimpli revenue 693,678 1.15 % 712,664 1.34 % Total cost of revenue 7,407,913 12.31 % 5,013,541 9.41 % Gross profit 52,764,557 87.69 % 48,258,753 90.59 % Selling and marketing expenses 29,474,490 48.98 % 26,611,672 49.97 % General and administrative expenses 16,589,390 27.57 % 18,115,143 34.00 % Customer service expenses 2,784,320 4.63 % 2,804,210 5.26 % Other operating expenses 3,039,135 5.05 % 2,112,169 3.96 % Development costs 2,846,436 4.73 % 2,611,833 4.90 % Total expenses 54,733,771 90.96 % 52,255,027 98.09 % Operating loss (1,969,214 ) (3.27 )% (3,996,274 ) (7.50 )% Interest expense, net (262,456 ) (0.44 )% (558,597 ) (1.05 )% Loss on debt extinguishment (1,155,851 ) (1.92 )% - - % Net loss before income taxes (3,387,521 ) (5.63 )% (4,554,871 ) (8.55 )% Income tax expense (169,134 ) (0.28 )% (232,523 ) (0.44 )% Net loss (3,556,655 ) (5.91 )% (4,787,394 ) (8.99 )% Net income (loss) attributable to non-controlling interest 249,462 0.42 % (129,472 ) (0.25 )% Net loss attributable to LifeMD, Inc. (3,806,117 ) (6.33 )% (4,657,922 ) (8.74 )% Preferred stock dividends (776,563 ) (1.29 )% (776,563 ) (1.46 )% Net loss attributable to LifeMD, Inc. common stockholders $ (4,582,680 ) (7.62 )% $ (5,434,485 ) (10.20 )% 33 Total revenue, net. Revenues for the three months ended September 30, 2025 were approximately $60.2 million, an increase of 13% compared to approximately $53.3 million for the three months ended September 30, 2024. The increase in revenues was attributable to an increase in telehealth subscription revenue, primarily for LifeMD primary care which experienced an increase of approximately $6.4 million during the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily due to an increase in online sales demand. Telehealth revenue accounts for 79% of total revenue. WorkSimpli revenue accounts for 21% of total revenue and has decreased by approximately $225 thousand, or 2%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily due to a decrease in online sales demand. Total cost of revenue. Total cost of revenue consists of the cost of (1) telehealth revenues, which primarily include product costs, pharmacy fulfilment costs, physician consult fees, and shipping costs directly attributable to our prescription and OTC products and (2) WorkSimpli revenue consisting primarily of information technology fees related to providing the services made available on our online platform. Total cost of revenue increased by approximately 48% to approximately $7.4 million for the three months ended September 30, 2025 compared to approximately $5.0 million for the three months ended September 30, 2024. The combined cost of revenue increase was due to increased sales volume during the three months ended September 30, 2025 when compared to the three months ended September 30, 2024. Telehealth costs increased to 14% of associated telehealth revenues experienced during the three months ended September 30, 2025, from 11% of associated telehealth revenues during the three months ended September 30, 2024 due to increases in physician consult fees and product shipping costs. WorkSimpli costs stayed consistent at 5% of associated WorkSimpli revenues for both the three month periods ended September 30, 2025 and 2024. Gross profit. Gross profit increased by 9% to approximately $52.8 million for the three months ended September 30, 2025 compared to approximately $48.3 million for the three months ended September 30, 2024. Gross profit as a percentage of revenues was approximately 88% for the three months ended September 30, 2025 as compared to approximately 91% for the three months ended September 30, 2024. Gross profit as a percentage of revenues for telehealth was 86% for the three months ended September 30, 2025 compared to 89% for the three months ended September 30, 2024, and for WorkSimpli was 95% for both the three month periods ended September 30, 2025 and 2024. The increase in sales volume and demand for telehealth subscriptions, partially offset by the increase in physician consult fees and product shipping costs contributed to the increase in gross profit. The increase in physician consult fees and product shipping costs also contributed to the decrease in gross profit as a percentage of telehealth revenue. Total expenses. Operating expenses for the three months ended September 30, 2025 were approximately $54.7 million, as compared to approximately $52.3 million for the three months ended September 30, 2024. This represents an increase of 5%, or approximately $2.5 million. The increase is primarily attributable to: (i) Selling and marketing expenses: This mainly consists of online marketing and advertising expenses. During the three months ended September 30, 2025, the Company had an increase of approximately $2.9 million, or 11% in selling and marketing costs resulting from additional sales and marketing initiatives to drive the current period’s sales growth primarily for telehealth subscription revenue. This ramp up is expected to both increase and maintain sustained revenue growth in future years, based on the Company’s recurring revenue subscription-based sales model. (ii) Other operating expenses: This consists of rent and lease expense, insurance, office supplies and software subscriptions, royalty expense and bank charges. During the three months ended September 30, 2025, the Company had an increase of approximately $927 thousand, or 44%, primarily related to increases in software subscriptions to support the Company’s growth and compliance initiatives. (iii) Development costs: This mainly relates to third-party technology services for developing and maintaining our online platforms. During the three months ended September 30, 2025, the Company had an increase of approximately $235 thousand, or 9%, primarily resulting from technology platform improvements and amortization expenses. The above increases in expenses were partially offset by the following decreases in expenses: (i) General and administrative expenses: This category mainly consists of stock-based compensation expense, merchant processing fees, payroll expenses for corporate employees, taxes and licenses, amortization expense and legal and professional fees. During the three months ended September 30, 2025, the Company had a decrease of approximately $1.5 million in general and administrative expenses, primarily related to a decrease in legal and professional fees of $1.2 million, a decrease in sales tax accruals of $793 thousand and a decrease in payroll costs of $446 thousand, partially offset by an increase in stock-based compensation expense of $804 thousand. (ii) Customer service expenses: This consists of rent, insurance, payroll and benefit expenses related to the Company’s patient care center in South Carolina. During the three months ended September 30, 2025, the Company had a decrease of approximately $20 thousand, or 0.7%. 34 Interest expense, net. Interest expense, net consists of interest expense related to the Avenue Facility, partially offset by interest income on the Company’s cash account balances for the three months ended September 30, 2025 and interest expense related to the Avenue Facility and notes payable, partially offset by interest income on the Company’s cash account balances for the three months ended September 30, 2024. Interest expense decreased by approximately $296 thousand during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to the repayment of the Avenue Facility on August 5, 2025. Loss on debt extinguishment. The Company recorded a $1.2 million loss on debt extinguishment related to the repayment of the Avenue Facility during the three months ended September 30, 2025 due to a prepayment penalty and various fees associated with the Avenue Facility. Comparison of the Nine Months Ended September 30, 2025 to the Nine Months Ended September 30, 2024 Our financial results for the nine months ended September 30, 2025 are summarized as follows in comparison to the nine months ended September 30, 2024: September 30, 2025 September 30, 2024 % of % of $ Sales $ Sales Telehealth revenue, net $ 147,186,714 78.72 % $ 109,687,054 73.45 % WorkSimpli revenue, net 39,788,325 21.28 % 39,650,009 26.55 % Total revenue, net 186,975,039 100 % 149,337,063 100 % Cost of telehealth revenue 21,689,400 11.60 % 13,049,315 8.74 % Cost of WorkSimpli revenue 1,793,133 0.96 % 1,589,318 1.06 % Total cost of revenue 23,482,533 12.56 % 14,638,633 9.80 % Gross profit 163,492,506 87.44 % 134,698,430 90.20 % Selling and marketing expenses 87,793,648 46.95 % 77,164,480 51.66 % General and administrative expenses 51,210,246 27.39 % 51,160,883 34.26 % Customer service expenses 9,086,549 4.86 % 7,385,669 4.95 % Other operating expenses 8,582,655 4.59 % 6,318,791 4.23 % Development costs 8,265,842 4.42 % 7,101,655 4.76 % Total expenses 164,938,940 88.21 % 149,131,478 99.86 % Operating loss (1,446,434 ) (0.77 )% (14,433,048 ) (9.66 )% Interest expense, net (1,551,758 ) (0.83 )% (1,567,743 ) (1.05 )% Loss on debt extinguishment (1,155,851 ) (0.62 )% - - % Net loss before income taxes (4,154,043 ) (2.22 )% (16,000,791 ) (10.71 )% Income tax expense (169,134 ) (0.09 )% (232,523 ) (0.16 )% Net loss (4,323,177 ) (2.31 )% (16,233,314 ) (10.87 )% Net income (loss) attributable to non-controlling interest 1,286,382 0.69 % 237,037 0.16 % Net loss attributable to LifeMD, Inc. (5,609,599 ) (3.00 )% (16,470,351 ) (11.03 )% Preferred stock dividends (2,329,688 ) (1.25 )% (2,329,688 ) (1.56 )% Net loss attributable to LifeMD, Inc. common stockholders $ (7,939,247 ) (4.25 )% $ (18,800,039 ) (12.59 )% Total revenue, net. Revenues for the nine months ended September 30, 2025 were approximately $187.0 million, an increase of 25% compared to approximately $149.3 million for the nine months ended September 30, 2024. The increase in revenues was attributable to the increase in telehealth revenue of 34%. Telehealth revenue accounts for 79% of total revenue and has increased during the nine months ended September 30, 2025 due to an increase in telehealth subscription revenue, primarily for LifeMD primary care which experienced an increase of approximately $41.2 million during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 due to increased demand. WorkSimpli revenue accounts for 22% of total revenue and stayed consistent for both the nine month periods ended September 30, 2025 and 2024. 35 Total cost of revenue. Total cost of revenue consists of the cost of (1) telehealth revenues, which primarily include product costs, pharmacy fulfilment costs, physician consult fees, and shipping costs directly attributable to our prescription and OTC products and (2) WorkSimpli revenue consisting primarily of information technology fees related to providing the services made available on our online platform. Total cost of revenue increased by approximately 60% to approximately $23.5 million for the nine months ended September 30, 2025 compared to approximately $14.6 million for the nine months ended September 30, 2024. The combined cost of revenue increase was due to increased sales volume during the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024. Telehealth costs increased to 15% of associated telehealth revenues experienced during the nine months ended September 30, 2025, from 12% of associated telehealth revenues during the nine months ended September 30, 2024 primarily due to increases in physician consult fees and product shipping costs. WorkSimpli costs increased to 5% of associated WorkSimpli revenues for the nine months ended September 30, 2025 as compared to 4% of associated WorkSimpli revenues for the nine months ended September 30, 2024. Gross profit. Gross profit increased by approximately 21% to approximately $163.5 million for the nine months ended September 30, 2025 compared to approximately $134.7 million for the nine months ended September 30, 2024. Gross profit as a percentage of revenues was approximately 87% for the nine months ended September 30, 2025 as compared to approximately 90% for the nine months ended September 30, 2024. Gross profit as a percentage of revenues for telehealth was 85% for the nine months ended September 30, 2025 compared to 88% for the nine months ended September 30, 2024, and for WorkSimpli was 95% for the nine months ended September 30, 2025 compared to 96% for the nine months ended September 30, 2024. The increase in sales volume and demand for telehealth subscriptions partially offset by an increase in physician consult fees and product shipping costs, contributed to the increase in gross profit. The increase in physician consult fees and product shipping costs as well as the Medifast Collaboration revenue recognized during the nine months ended September 30, 2024 also contributed to the decrease in gross profit as a percentage of telehealth revenue for the nine months ended September 30, 2025. Total expenses. Operating expenses for the nine months ended September 30, 2025 were approximately $164.9 million, as compared to approximately $149.1 million for the nine months ended September 30, 2024. This represents an increase of 11%, or approximately $15.8 million. The increase is primarily attributable to: (i) Selling and marketing expenses: This mainly consists of online marketing and advertising expenses. During the nine months ended September 30, 2025, the Company had an increase of approximately $10.6 million, or 14% in selling and marketing costs resulting from additional sales and marketing initiatives to drive the current period’s sales growth primarily for LifeMD virtual primary care. This ramp up is expected to both increase and maintain sustained revenue growth in future years, based on the Company’s recurring revenue subscription-based sales model. (ii) General and administrative expenses: This category mainly consists of stock-based compensation expense, merchant processing fees, payroll expenses for corporate employees, taxes and licenses, amortization expense and legal and professional fees. During the nine months ended September 30, 2025, the Company had an increase of approximately $0.1 million in general and administrative expenses, primarily related to an increase in merchant processing fees of $864 thousand and an increase in payroll costs of $837 thousand partially offset by a decrease in stock-based compensation expense of $1.3 million and a decrease in legal and professional fees of $305 thousand. (iii) Customer service expenses: This consists of rent, insurance, payroll and benefit expenses related to the Company’s patient care center in South Carolina. During the nine months ended September 30, 2025, the Company had an increase of approximately $1.7 million, or 23%, primarily related to increases in infrastructure costs and compensation costs due to increased headcount to support the Company’s growth. (iv) Other operating expenses: This consists of rent and lease expense, insurance, office supplies and software subscriptions, royalty expense and bank charges. During the nine months ended September 30, 2025, the Company had an increase of approximately $2.3 million, or 36%, primarily related to increases in software subscriptions. (v) Development costs: This mainly relates to third-party technology services for developing and maintaining our online platforms. During the nine months ended September 30, 2025, the Company had an increase of approximately $1.2 million, or 16%, primarily resulting from technology platform improvements and amortization expenses. Interest expense, net. Interest expense, net consists of interest expense related to the Avenue Facility, partially offset by interest income on the Company’s cash account balances for the nine months ended September 30, 2025 and interest expense related to the Avenue Facility and notes payable, partially offset by interest income on the Company’s cash account balances for the nine months ended September 30, 2024. Interest expense stayed consistent for both the nine month periods ended September 30, 2025 and 2024. Loss on debt extinguishment. The Company recorded a $1.2 million loss on debt extinguishment related to the repayment of the Avenue Facility during the nine months ended September 30, 2025 due to a prepayment penalty and various fees associated with the Avenue Facility. 36 Working Capital September 30, 2025 December 31, 2024 Current assets $ 41,085,605 $ 52,369,360 Current liabilities 56,663,553 67,400,168 Working capital $ (15,577,948 ) $ (15,030,808 ) Working capital decreased by approximately $0.5 million during the nine months ended September 30, 2025. The decrease in current assets is primarily attributable to a decrease in cash of approximately $11.2 million due to the repayment of the Avenue Facility on August 5, 2025 and a decrease in accounts receivable of approximately $1.6 million, partially offset by an increase in other current assets of approximately $0.6 million. Current liabilities decreased by approximately $10.7 million, which was primarily attributable to a decrease in current portion of long-term debt of approximately $8.4 million due to the repayment of the Avenue Facility on August 5, 2025 and a decrease in deferred revenue of $5.3 million, partially offset by an increase in accounts payable and accrued expenses of approximately $2.8 million. Liquidity and Capital Resources Nine Months Ended September 30, 2025 2024 Net cash provided by operating activities $ 11,560,698 $ 16,439,889 Net cash used in investing activities (10,161,401 ) (8,815,591 ) Net cash used in financing activities (12,618,450 ) (3,183,770 ) Net (decrease) increase in cash (11,219,153 ) 4,440,528 Net cash provided by operating activities was approximately $11.6 million for the nine months ended September 30, 2025, as compared with approximately $16.4 million for the nine months ended September 30, 2024. The significant factors contributing to the net cash provided by operating activities during the nine months ended September 30, 2025, include: (1) $8.7 million in non-cash depreciation and amortization, (2) $7.8 million in non-cash stock-based compensation charges, (3) an increase in accounts payable and accrued expenses of $2.8 million and (4) $1.2 million loss on debt extinguishment recorded related to the repayment of the Avenue Facility on August 5, 2025. These increases were partially offset by a decrease in deferred revenue of $5.3 million and the Company’s net loss of $4.3 million for the nine months ended September 30, 2025. The significant factors contributing to the net cash provided by operating activities during the nine months ended September 30, 2024, include: (1) an increase in accounts payable and accrued expenses of $12.4 million, (2) an increase in deferred revenue of $10.9 million, (3) $9.1 million in non-cash stock-based compensation charges, and (4) $7.3 million in non-cash depreciation and amortization. These increases were partially offset by: (1) the Company’s net loss of $16.2 million for the nine months ended September 30, 2024, (2) an increase in accounts receivable of $5.2 million and (3) an increase in other current assets of $2.3 million. Net cash used in investing activities for the nine months ended September 30, 2025 was approximately $10.2 million, as compared with approximately $8.8 million for the nine months ended September 30, 2024. Net cash used in investing activities for the nine months ended September 30, 2025, was due to cash paid for capitalized software costs of approximately $8.4 million, and cash paid for the purchase of equipment of approximately $1.7 million. Net cash used in investing activities for the nine months ended September 30, 2024, was due to cash paid for capitalized software costs of approximately $7.5 million, and cash paid for the purchase of equipment of approximately $1.3 million. Net cash used in financing activities for the nine months ended September 30, 2025 was approximately $12.6 million as compared with approximately $3.2 million for the nine months ended September 30, 2024. Net cash used in financing activities for the nine months ended September 30, 2025, consisted of: (1) the repayment of the Avenue Facility on August 5, 2025 of approximately $18.7 million, (2) preferred stock dividends of $2.3 million, and (3) distributions to non-controlling interest of $762 thousand partially offset by $8.7 million net proceeds received related to sales of common stock under the ATM Sales Agreement and $471 thousand of cash proceeds received from the exercise of options and warrants. Net cash used in financing activities for the nine months ended September 30, 2024, consisted of: (1) preferred stock dividends of $2.3 million, (2) distributions to non-controlling interest of $603 thousand, (3) repayments of notes payable of approximately $328 thousand, and (4) the final contingent consideration payment made related to the ResumeBuild acquisition of approximately $31 thousand, partially offset by proceeds from the exercise of options of approximately $108 thousand. Liquidity and Capital Resources Outlook 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. Our primary short-term and long-term requirements for liquidity and capital are for customer acquisitions, funding business acquisitions and investments we may make from time to time, working capital including our noncancelable operating lease obligations, long-term debt obligations, capital expenditures and general corporate purposes. For more information on our operating lease obligations, see Note 10—Leases to our unaudited condensed consolidated financial statements included in this report. 37 On 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. and Avenue Venture Opportunities Fund, L.P. (collectively, “Avenue”). The Avenue Credit Agreement provided 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 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, of which $660 thousand have been exercised (the “Avenue Warrants”). In addition, Avenue converted $2 million of the $15 million in term loans funded at closing into shares of the Company’s common stock 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. On August 5, 2025, the Company paid the remaining $14.0 million in outstanding principal payments on the Avenue Facility and the prepayment penalty as noted in the Avenue Credit Agreement. As of September 30, 2025, there are no principal payments remaining on the Avenue Facility. The Company recorded a loss on debt extinguishment of $1.2 million within its unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2025. The Company entered into an At Market Issuance Sales Agreement (the “ATM Sales Agreement”) with B. Riley Securities, Inc. and Cantor Fitzgerald & Co. relating to the sale of its common stock. In accordance with the terms of the ATM Sales Agreement, the Company may, but is not obligated to, offer and sell, from time to time, shares of common stock, through or to the Agents, acting as agent or principal. Sales of common stock, if any, will be made by any method permitted that is deemed an “at the market offering” as defined in Rule 415 under the Securities Act. On June 7, 2024, the Company filed a shelf registration statement on Form S-3 under the Securities Act, which was declared effective on July 18, 2024 (the “2024 Shelf”). Under the 2024 Shelf at the time of effectiveness, the Company had the ability to raise up to $150.0 million by selling common stock, preferred stock, debt securities, warrants, and units including $53.3 million of its common stock under the ATM Sales Agreement. During the three months ended September 30, 2025, the Company sold 762,990 shares of common stock under the ATM Sales Agreement and net proceeds received were $8.7 million. As of September 30, 2025, the Company had $44.6 million available under the ATM Sales Agreement. The Company expects that its existing cash as of September 30, 2025 of $23.8 million will be sufficient to fund our planned operating expenses and capital expenditure requirements for at least the next 12 months from the issuance date of these unaudited condensed consolidated financial statements. Critical Accounting Estimates We prepare our unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking into account our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis. We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above. Our significant accounting policies are more fully described in Note 2—Basis of Presentation and Summary of Significant Accounting Policies to our unaudited condensed consolidated financial statements included in this report. Recent Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“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. The amendments in this update are effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that ASU 2023-09 will have to its financial disclosures. 38 In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) to improve the disclosures about a public business entity’s expenses and provide more detailed information about the types of expenses included in certain expense captions in the consolidated financial statements. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and the amendments in this update should be applied either prospectively or retrospectively. The Company is evaluating the impact this guidance will have on the disclosures in the consolidated financial statements. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software , to simplify and modernize the accounting for internal-use software costs. The amendments remove references to prescriptive software development stages and clarify that capitalization of eligible software development costs begins when management authorizes and commits to funding the project and it is probable the project will be completed, and the software will be used as intended. The amendments in this update are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual periods. Early adoption is permitted, and the guidance may be applied prospectively, retrospectively, or using a modified approach for in-process projects. The Company is evaluating the impact this guidance will have on the consolidated financial statements and related disclosures. All 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. Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, we are not required to provide the information required by this Item.