MEDIFAST INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MEDIFAST, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm (PCAOB ID: 49 ) 39 Consolidated Statements of Operations 42 Consolidated Statements of Comprehensive Income (Loss) 43 Consolidated Balance Sheets 44 Consolidated Statements of Cash Flows 45 Consolidated Statements of Changes in Stockholders’ Equity 46 Notes to Consolidated Financial Statements 47 38 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Medifast, Inc. Opinion on the Internal Control Over Financial Reporting We have audited Medifast, Inc.’s (the Company) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for the three years in the period ended December 31, 2025, and the related notes to the consolidated financial statements of the Company and our report dated February 17, 2026, expressed an unqualified opinion. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ RSM US LLP Baltimore, Maryland February 17, 2026 39 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Medifast, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Medifast, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in I nternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated February 17, 2026, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. Income Taxes As described in Notes 2 and 11 of the financial statements, the Company operates in multiple markets in the U.S. using an e‑commerce platform and a direct selling network of OPTA VIA coaches. Management prepared the Company’s provision for income taxes using significant judgment when interpreting the provisions of federal, state and local tax regulations. Significant judgment is placed on both the assessment of whether it is more likely than not that some or all the Company's deferred tax assets will be realized and whether the amount of benefit recorded would more likely than not be sustained upon examination. As disclosed in Note 11 of the financial statements, the Company recorded a valuation allowance of $12.1 million during the year ended December 31, 2025 and as of December 31, 2025, the Company had $5.6 million of gross unrecognized tax benefits. We identified the evaluation of the Company’s provision for income taxes as a critical audit matter due to the significant judgments made by management when assessing the complex provisions of the tax laws and regulations. Auditing the matter 40 Table of Contents required significant auditor judgment and increased audit effort, including use of our tax specialists, in evaluating the recorded results of management’s tax positions and their assessment of the sustainability of these tax positions. Our audit procedures related to the Company’s provision for income taxes included the following, among others: • We obtained an understanding of the relevant controls related to the determination of current and deferred taxes and tested such controls for design and operating effectiveness, including controls related to the interpretation and application of tax laws. • We evaluated the reasonableness of management's estimates in regard to the ability to realize deferred tax assets by testing management's assessment of the ability to generate sufficient taxable income and the timing of future reversals of temporary differences. • We utilized personnel with specialized knowledge and skill in income taxes and accounting for income taxes: ◦ to assist in the evaluation of management's assessment of positive and negative evidence and their conclusion that it is more likely than not that the Company will not realize the benefit of its deferred tax assets. ◦ to assist in evaluating the application and sustainability of federal regulations and state and local tax positions. • We tested the accuracy and completeness of the data and inputs used to calculate the effective federal and state tax rates, current provision calculations and deferred tax assets and liabilities. /s/ RSM US LLP We have served as the Company's auditor since 2010. Baltimore, Maryland February 17, 2026 41 Table of Contents MEDIFAST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2025, 2024 and 2023 (U.S. dollars in thousands, except per share amounts & dividend data) 2025 2024 2023 Revenue $ 385,788 $ 602,463 $ 1,072,054 Cost of sales 110,601 157,840 296,204 Gross profit 275,187 444,623 775,850 Selling, general, and administrative 289,400 441,745 649,448 Income (loss) from operations ( 14,213 ) 2,878 126,402 Other income Interest income 5,516 4,804 2,490 Other income (expense) 3,058 ( 3,895 ) ( 95 ) 8,574 909 2,395 Income (loss) before provision for income taxes ( 5,639 ) 3,787 128,797 Provision for income taxes 13,033 1,696 29,382 Net income (loss) $ ( 18,672 ) $ 2,091 $ 99,415 Earnings (loss) per share - basic $ ( 1.70 ) $ 0.19 $ 9.13 Earnings (loss) per share - diluted $ ( 1.70 ) $ 0.19 $ 9.10 Weighted average shares outstanding Basic 10,981 10,930 10,884 Diluted 10,981 10,963 10,921 Cash dividends declared per share $ — $ — $ 4.95 The accompanying notes are an integral part of these consolidated financial statements. 42 Table of Contents MEDIFAST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Years Ended December 31, 2025, 2024 and 2023 (U.S. dollars in thousands) 2025 2024 2023 Net income (loss) $ ( 18,672 ) $ 2,091 $ 99,415 Other comprehensive income (loss), net of tax: Foreign currency translation 4 47 ( 72 ) Unrealized gains (losses) on investment securities, net of tax 50 ( 115 ) 296 Other comprehensive income (loss) 54 ( 68 ) 224 Comprehensive income (loss) $ ( 18,618 ) $ 2,023 $ 99,639 The accompanying notes are an integral part of these consolidated financial statements. 43 Table of Contents MEDIFAST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2025 and 2024 (U.S. dollars in thousands, except par value) 2025 2024 ASSETS Current Assets Cash and cash equivalents $ 89,303 $ 90,928 Inventories, net 20,228 42,421 Investments 77,970 71,416 Income taxes, prepaid 5,116 — Prepaid expenses and other current assets 9,066 9,639 Total current assets 201,683 214,404 Property, plant and equipment - net of accumulated depreciation 31,230 37,527 Right-of-use assets 7,232 11,155 Other assets 7,828 9,667 Deferred tax assets, net — 11,460 TOTAL ASSETS $ 247,973 $ 284,213 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $ 38,359 $ 56,494 Income taxes payable — 1,485 Current lease obligations 4,603 6,182 Total current liabilities 42,962 64,161 Lease obligations, net of current lease obligations 6,091 9,943 Total liabilities 49,053 74,104 Commitments (Note 12) Stockholders' Equity Common stock, par value 0.001 per share: 20,000 shares authorized; 10,991 and 10,938 issued and outstanding at December 31, 2025 and December 31, 2024 11 11 Additional paid-in capital 40,406 33,136 Accumulated other comprehensive income 234 180 Retained earnings 158,269 176,782 Total stockholders' equity 198,920 210,109 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 247,973 $ 284,213 The accompanying notes are an integral part of these consolidated financial statements. 44 Table of Contents MEDIFAST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2025, 2024 and 2023 (U.S. dollars in thousands) 2025 2024 2023 Operating Activities Net income (loss) $ ( 18,672 ) $ 2,091 $ 99,415 Adjustments to reconcile net income to cash provided by operating activities Depreciation and amortization 14,242 12,707 13,107 Non-cash lease expense 4,624 4,490 4,607 Share-based compensation 7,639 7,363 8,188 Loss on sale of disposal of property, plant and equipment 1,373 89 1,172 Realized gain on sale of investment securities ( 3,310 ) ( 95 ) — Amortization of discount on investment securities ( 671 ) ( 799 ) ( 169 ) Deferred income taxes 11,460 ( 7,403 ) 1,211 Unrealized (gain) loss on equity investment securities ( 17 ) 4,089 ( 150 ) Non-cash charges for supply chain optimization — 11,689 — Change in operating assets and liabilities: Inventories 22,193 12,170 64,265 Income taxes ( 6,601 ) 10,212 ( 9,155 ) Prepaid expenses and other current assets 573 2,471 5,567 Other assets ( 2,057 ) 396 ( 4,694 ) Accounts payable and accrued expenses ( 23,913 ) ( 34,994 ) ( 35,707 ) Net cash flow provided by operating activities 6,863 24,476 147,657 Investing Activities Purchase of investment securities ( 84,407 ) ( 46,595 ) ( 59,756 ) Proceeds from sale and maturities of investment securities 82,093 27,529 5,192 Purchase of property and equipment ( 5,614 ) ( 7,454 ) ( 6,483 ) Net cash flow used in investing activities ( 7,928 ) ( 26,520 ) ( 61,047 ) Financing Activities Options exercised by executives and directors — 36 188 Net shares repurchased for employee taxes ( 369 ) ( 836 ) ( 3,358 ) Cash dividends paid to stockholders ( 195 ) ( 715 ) ( 73,017 ) Stock repurchases — — ( 3,602 ) Net cash flow used in financing activities ( 564 ) ( 1,515 ) ( 79,789 ) Foreign currency impact 4 47 ( 72 ) Increase (Decrease) in cash and cash equivalents ( 1,625 ) ( 3,512 ) 6,749 Cash and cash equivalents - beginning of the period 90,928 94,440 87,691 Cash and cash equivalents - end of period $ 89,303 $ 90,928 $ 94,440 Supplemental disclosure of cash flow information Income taxes (refunded) paid $ 10,465 $ ( 1,617 ) $ 34,255 Dividends included in accounts payable and accrued expenses $ 295 $ 648 $ 1,407 The accompanying notes are an integral part of these consolidated financial statements. 45 Table of Contents MEDIFAST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Years Ended December 31, 2025, 2024 and 2023 (U.S. dollars in thousands) Number of Shares Issued Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Balance, January 1, 2023 10,928 $ 11 $ 21,555 $ 24 $ 139,852 $ ( 6,398 ) $ 155,044 Net income — — — — 99,415 — 99,415 Share-based compensation 76 — 8,188 — — — 8,188 Options exercised by executives and directors 7 — 188 — — — 188 Net shares repurchased for taxes ( 31 ) — ( 3,358 ) — — — ( 3,358 ) Treasury stock from stock repurchases — — — — — ( 3,602 ) ( 3,602 ) Treasury stock retired from stock repurchases ( 84 ) — — — ( 10,000 ) 10,000 — Other comprehensive loss — — — 224 — — 224 Cash dividends declared to stockholders — — — — ( 54,618 ) — ( 54,618 ) Balance, December 31, 2023 10,896 $ 11 $ 26,573 $ 248 $ 174,649 $ — $ 201,481 Net income — — — — 2,091 — 2,091 Share-based compensation 60 — 7,363 — — — 7,363 Options exercised by executives and directors 1 — 36 — — — 36 Net shares repurchased for taxes ( 19 ) — ( 836 ) — — — ( 836 ) Other comprehensive income — — — ( 68 ) — — ( 68 ) Forfeiture of dividends on unvested awards — — — — 42 — 42 Balance, December 31, 2024 10,938 $ 11 $ 33,136 $ 180 $ 176,782 $ — $ 210,109 Net loss — — — — ( 18,672 ) — ( 18,672 ) Share-based compensation 80 — 7,639 — — — 7,639 Net shares repurchased for taxes ( 27 ) — ( 369 ) — — — ( 369 ) Other comprehensive loss — — — 54 — — 54 Forfeiture of dividends on unvested awards — — — — 159 — 159 Balance, December 31, 2025 10,991 $ 11 $ 40,406 $ 234 $ 158,269 $ — $ 198,920 The accompanying notes are an integral part of these consolidated financial statements. 46 Table of Contents MEDIFAST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2025, 2024, and 2023 1. NATURE OF THE BUSINESS Medifast, Inc. (the “Company” or “Medifast”) is a Delaware corporation, incorporated in 1989. The Company’s operations are primarily conducted through its wholly owned subsidiaries, Jason Pharmaceuticals, Inc., OPTA VIA LLC, Jason Enterprises, Inc., Jason Properties, LLC, OPTA VIA (Hong Kong) Limited, and OPTA VIA Health Consultation (Shanghai) Co., Ltd. Medifast is the health and wellness company known for its habit-based and coach-guided lifestyle solution OPTA VIA. The Company has one modern, United States Food and Drug Administration (the “FDA”) approved manufacturing facility located in Owings Mills, Maryland. Medifast sells a variety of weight loss, weight management and healthy living products all based on our proprietary formulas under the Essential Fuelings, OPTA VIA ASCEND, and OPTA VIA ACTIVE categories. The Company’s product line includes approximately 74 consumable options, including, but not limited to, bars, cereal, snack straws, hot chocolate, hearty choices, oatmeal, pancakes, pudding, soft serve, shakes, smoothies, soft bakes, and soups. Medifast’s nutritional products are formulated with high-quality ingredients. The processing, formulation, packaging, labeling and advertising of the Company’s products are subject to regulation by one or more federal agencies, including the FDA, the Federal Trade Commission (the “FTC”), the Consumer Product Safety Commission, the United States Department of Agriculture, and the United States Environmental Protection Agency. 2. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company’s fiscal year ends on December 31. Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. The Company is, from time to time, subject to a variety of litigation and similar proceedings that arise out of the ordinary course of its business. Based upon the Company’s experience, current information and applicable law, it does not believe that these proceedings and claims will have a material adverse effect on its results of operations, financial position or liquidity. However, the results of legal actions cannot be predicted with certainty. Therefore, it is possible that the Company’s results of operations, financial condition or cash flows could be materially adversely affected in any particular period by the unfavorable resolution of one or more legal actions. Cash and Cash Equivalents - Cash and cash equivalents consist of cash on deposit in financial institutions, institutional money market funds and other short-term investments with a maturity of 90 days or less at the time of purchase. All credit card and debit card transactions that process in less than seven days are classified as cash and cash equivalents. The amounts due from banks for these transactions classified as cash and cash equivalents totaled $ 3.1 million as of December 31, 2025 and $ 4.8 million as of December 31, 2024. Concentration of Credit Risk - Our cash and cash equivalents and available-for-sale debt securities are maintained at several financial institutions and the balances with these financial institutions often exceed the amount of insurance provided on such accounts by the Federal Deposit Insurance Corporation. The cash and cash equivalents generally are maintained with financial institutions with reputable credit, and therefore bear minimal credit risk. Historically, we have not experienced any losses due to such concentration of credit risk. Fair Value of Financial Instruments - Our financial instruments include cash and cash equivalents, and investments in debt and equity securities. The carrying amounts of cash and cash equivalents approximate fair value due to their short maturities. The fair value of investments in available-for-sale debt securities are based on third-party pricing services provided by the Company’s investment advisory firm. The fair value of investments in equity securities with readily determinable fair values are based on the closing price on the last trading day of the period from the applicable exchange. 47 Table of Contents Inventories - Inventories consist principally of raw materials and packaged meal replacements held in the Company’s warehouses and outsourced distribution center. Inventories are stated at the lower of cost or net realizable value, utilizing the first-in, first-out method. The cost of finished goods includes the cost of raw materials, packaging supplies, direct and indirect labor, and other indirect manufacturing costs. On a quarterly basis, management reviews inventories for unsalable or obsolete inventories. Investments - The Company’s investments consist of debt securities classified as available-for-sale securities and equity investments with readily determinable fair values. Available-for-sale debt securities are stated at fair value and unrealized holding gains and losses, net of the related deferred tax effect, are reported as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity. Interest and dividends on marketable debt securities are recognized in income when declared. Realized gains and losses, if any, are included in income. Equity investments with readily determinable fair values are those securities in which the Company has no control or significant influence and is not the primary beneficiary. The securities are stated at fair value based on a quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs (Level 1). Gains and losses are recorded in other income (expense), net on the accompanying Consolidated Statements of Operations. Property, Plant, and Equipment - Property, plant and equipment are stated at cost less accumulated depreciation and amortization. The Company computes depreciation and amortization using the straight-line method over the estimated useful lives of the assets acquired as follows: Building and building improvements 10 - 35 years Leasehold improvements (1) Lease term Equipment and fixtures 3 - 15 years Software (2) 2 - 5 years Vehicles 5 years (1) The depreciation life for leasehold improvements is the lesser of the estimated useful life or the term of the related lease. (2) Capitalized costs of cloud software are reported in Other assets on the consolidated balance sheet and are amortized over an estimated useful life of 2 to 5 years. Long-lived Asset Impairment - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Revenue Recognition - Our revenue is derived primarily from point-of-sale transactions executed over an e-commerce platform for weight loss, weight management, and other healthy living products. Revenue is recognized when control of the promised products is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those products. When determining whether the customer has obtained control of the products, we consider any future performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. Our contracts have performance obligations to fulfill and deliver products from the point of sale transaction along with the related customer reward programs. Our performance obligations are satisfied at a point in time. Revenue from products transferred to customers at a point in time accounted for substantially all of our revenue for the years ended December 31, 2025, 2024, and 2023. Revenue on these contracts is recognized when the obligations under the terms of the contract with our customer are satisfied. 48 Table of Contents Sales returns Our return policy allows for customer returns of consumable products from the time of order until 30 days following the date of receipt, and upon our authorization. We adjust revenues for the products expected to be returned and a liability is recognized for expected refunds to customers. We estimate expected returns based on historical levels and project this experience into the future. Customer reward programs and sales incentives Our sales contracts may give customers the option to purchase additional products priced at a discount. Options to acquire additional products at a discount can come in many forms, such as customer reward programs and incentive offerings including pricing arrangements and promotions. We reduce the transaction price for certain customer reward programs and incentive offerings including pricing arrangements, promotions, and incentives that represent variable consideration and separate performance obligations. The Company accounts for sales rewards that provide the customer with a material right as a separate performance obligation of the transactions, and therefore allocates consideration between the initial sale of products and the customer reward program and incentive offering. The Company discontinued its reward program in July 2025. Shipping and handling costs Amounts billed to customers for shipping and handling activities are treated as a promised service performance obligation and are recorded in revenue in the accompanying Consolidated Statements of Operations upon fulfillment of the performance obligation. Shipping and handling costs incurred by the Company for the delivery of products to customers are considered a cost to fulfill the contract and are included in cost of sales in the accompanying Consolidated Statements of Operations. Contract costs We expense coach compensation and credit card fees during the period in which the corresponding revenue is earned. These costs are recorded in selling, general and administrative expense in the accompanying Consolidated Statements of Operations. Leases - The Company determines if an arrangement is a lease at inception and categorizes leases with contractual terms longer than twelve months as either operating or finance. All the Company’s leases are operating leases. The right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The ROU asset also consists of any prepaid lease payments and lease incentives received. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense. Advertising Costs - Advertising costs are expensed as incurred. They are recorded in selling, general, and administrative expense in the accompanying Consolidated Statements of Operations. Advertising expense, excluding agency fees, for the years ended December 31, 2025, 2024 and 2023, amounted to $ 7.5 million, $ 14.1 million and $ 3.4 million, respectively. Research and Development - The Company incurs research and development costs in connection with the development of new products and programs and clinical research activities, which are expensed as incurred. They are recorded in selling, general, and administrative expense in the accompanying Consolidated Statements of Operations. The Company incurred $ 4.3 million, $ 4.6 million, $ 4.6 million in research and development expense for the years ended December 31, 2025, 2024 and 2023, respectively. Share-Based Compensation - Share-based compensation consists primarily of restricted stock awards, performance-based share awards, and stock options granted to employees and directors. Restricted stock awards are measured at the grant date, based on the calculated fair value of the award, and are recognized as an expense over the requisite service period. Performance-based share awards are measured based on the grant-date market price of the Company's common stock adjusted by expected level of achievement over the performance period. Market and performance-based share awards that are tied to the Company's total stockholder return ("TSR") are valued using the Monte Carlo method. The fair value of the incentive stock 49 Table of Contents options and non-qualified stock options is calculated using the Black-Scholes option pricing model as of the grant date and recognized over the service period. Income Taxes - Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating losses, capital losses, and tax credit carryforwards. We evaluate the realizability of our deferred tax assets on a quarterly basis to determine whether a valuation allowance is necessary and reduce such assets to the amount that is more likely than not to be realized. This evaluation requires significant judgment and involves the consideration of all available positive and negative evidence, including our historical operating results, the existence of cumulative losses in recent years, ongoing prudent and feasible tax planning strategies, and projections of future taxable income. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more-likely-than-not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying Consolidated Balance Sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Our policy is to recognize interest and penalties accrued on uncertain tax positions as part of income tax expense. For 2025, the Company recorded $ 13.0 million in income tax expense, an effective tax rate of negative 231.1 %, as compared to $ 1.7 million in income tax expense and an effective tax rate of 44.8 %, for 2024. The decrease in the effective tax rate for 2025 as compared to 2024 was primarily driven by the 214.0 % impact of the valuation allowance on the net deferred tax asset balance, the 34.5 % impact of the tax shortfall from stock compensation, and the 23.5 % impact of state taxes, partially offset by the 26.2 % increase from the impact of research and development tax credits, all of which were magnified by the loss position in the current period versus the near breakeven income position in the prior year. On July 4, 2025, the tax legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was signed into law, to provide for reconciliation pursuant to title II of H. Con. Res. 14. The provisions of the OBBBA do not significantly impact the Company’s effective tax rate but do impact timing items such as deductibility of research and development (“R&D”) costs and deductibility of newly acquired fixed assets. Earnings Per Share - Basic earnings per share (“EPS”) computations are calculated utilizing the weighted average number of shares of common stock outstanding during the periods presented. Diluted EPS is calculated utilizing the weighted average number of shares of common stock outstanding adjusted for the effect of dilutive common stock equivalents. Comprehensive Income - Other comprehensive income refers to revenues, expenses, and gains and losses that are not included in net income but rather are recorded directly in stockholders’ equity. Comprehensive income consists of net income, unrealized gains and losses on available-for-sale debt securities, and foreign currency translation adjustments. Accounting Pronouncements - Adopted in 2025 In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures, including jurisdictional information, by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disclosures. The ASU is effective for public business entities for annual periods beginning after December 15, 2024. Prospective application is required, though retrospective application is permitted. Entities are 50 Table of Contents permitted to early adopt the standard. The Company adopted the standard during the period ended December 31, 2025 using the retrospective method. The Company's income tax disclosures are reported in Footnote 11. Recently Issued Accounting Pronouncements - Pending Adoption In November 2024, the FASB issued ASU 2024-03 Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“DISE”) to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions. The ASU is effective for public business entities for annual periods beginning after December 15, 2026. Prospective application is required, though retrospective application is permitted. Entities are permitted to early adopt the standard. The Company did not early adopt for the 2025 reporting period. The Company is currently evaluating the impact of adopting the ASU on its consolidated financial statements. In September 2025, the FASB issued ASU 2025-06 Internal-Use Software (Subtopic 250-40): Targeted Improvements to the Accounting for Internal-Use Software to increase the operability of the recognition guidance considering different methods of software development. The ASU is effective for public business entities for annual periods beginning after December 15, 2026. The amendments can be adopted on a prospective, modified, or retrospective basis. Entities are permitted to early adopt the standard. The Company did not early adopt for the 2025 reporting period. The Company is currently evaluating the impact of adopting the ASU on its consolidated financial statements. 3. INVENTORIES Inventories consisted of the following (in thousands): December 31, 2025 December 31, 2024 Raw materials $ 4,915 $ 6,704 Packaging 1,654 1,429 Non-food finished goods 1,216 2,031 Finished goods 16,785 33,702 Reserve for obsolete inventory ( 4,342 ) ( 1,445 ) Total $ 20,228 $ 42,421 4. PROPERTY, PLANT AND EQUIPMENT Property, plant, and equipment consisted of the following (in thousands): December 31, 2025 December 31, 2024 Land $ 345 $ 345 Building and improvements and leasehold improvements 21,735 21,348 Equipment and fixtures 46,096 44,907 Software 31,215 29,210 Vehicles 58 58 Property, plant and equipment - gross 99,449 95,868 Less: accumulated depreciation ( 68,219 ) ( 58,341 ) Property, plant and equipment - net $ 31,230 $ 37,527 Depreciation expense for the years ended December 31, 2025, 2024 and 2023 was $ 10.5 million, $ 17.4 million and $ 10.0 million, respectively. 51 Table of Contents 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following (in thousands): December 31, 2025 December 31, 2024 Trade payables and accrued expenses $ 15,066 $ 23,051 Accrued payroll and related taxes 8,703 9,953 Coach compensation payable 6,727 8,914 Gross unrecognized tax liability, including interest and penalties 6,898 9,176 Promotional sales incentive accruals — 4,077 Dividends payable 295 648 Sales tax payable 286 359 Deferred revenue 384 316 Total $ 38,359 $ 56,494 6. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted EPS for the years ended December 31, 2025, 2024 and 2023 (in thousands, except per share data): 2025 2024 2023 Numerator: Net income (loss) $ ( 18,672 ) $ 2,091 $ 99,415 Denominator: Weighted average shares of common stock outstanding 10,981 10,930 10,884 Effect of dilutive common stock equivalents — 33 37 Weighted average shares of common stock outstanding 10,981 10,963 10,921 Earnings (loss) per share - basic $ ( 1.70 ) $ 0.19 $ 9.13 Earnings (loss) per share - diluted $ ( 1.70 ) $ 0.19 $ 9.10 The Company was in loss position as of December 31, 2025, and as such all awards were anti-dilutive. If the Company was not in a loss position, the calculation of diluted EPS would have included the effect of dilutive common stock equivalents of 121 thousand and would have excluded 217 thousand antidilutive restricted stock awards for the year ended December 31, 2025. The calculation of diluted EPS for the years ended December 31, 2024 and 2023 excluded 223 thousand and 24 thousand antidilutive restricted stock awards, respectively. 7. EQUITY Authorized Shares Pursuant to the Company’s Restated and Amended Certificate of Incorporation, the Company has the authority to issue 21.5 million capital shares consisting of: (i) 20.0 million shares of common stock having a par value of $ 0.001 per share and (ii) 1.5 million shares of preferred stock having a par value $ 0.001 per share. As of December 31, 2025, there were approximately 11.0 million an d 0 shares of common stock and preferred stock issued, respectively. 52 Table of Contents Issuance of Additional Common Stock The stockholders of the Company approved the Medifast, Inc. Amended and Restated 2012 Share Incentive Plan (the “Amended and Restated 2012 Plan”) that increased the number of shares of the Company’s common stock that may be awarded under the Amended and Restated 2012 Plan by 0.6 million and 0.5 million on June 18, 2025 and June 19, 2024, respectively, resulting in an aggregate of 2.7 million and 2.1 million shares available for issuance under the Amended and Restated 2012 Plan as of these dates. Stock Repurchase Plan The Company implemented a stock repurchase plan on September 16, 2014 (the “Stock Repurchase Plan”). On September 12, 2019, the Company's Board of Directors authorized an additional 2.0 million shares for repurchase under the Stock Repurchase Plan. The Company did not repurchase any shares during the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, there were approximately 1.3 million shares of common stock remaining under the Company’s Stock Repurchase Plan. Th ere is no guarantee as to the exact number of shares of the Company’s common stock, if any, that will be repurchased under the Stock Repurchase Plan. 8. SHARE-BASED COMPENSATION Stock Options: The Company has issued non-qualified and incentive stock options to employees and non-employee directors. The fair value of these options were estimated on the date of grant using the Black-Scholes option pricing model, which required estimates of the expected term of the option, the risk-free interest rate, the expected volatility of the price of the Company’s common stock, and dividend yield. Options outstanding as of December 31, 2025 generally vested over a period of 3 years and expire 10 years from the date of grant. The exercise price of these options is $ 66.68 . Due to the Company’s lack of option exercise history on the date of grant, the expected term was calculated using the simplified method defined as the midpoint between the vesting period and the contractual term of each option. The risk-free interest rate was based on the U.S. Treasury yield curve in effect on the date of grant that most closely corresponded to the expected term of the option. The expected volatility was based on the historical volatility of the Company’s common stock over the period of time equivalent to the expected term for each award. The dividend yield was computed as the annualized dividend rate at the grant date divided by the strike price of the stock option. For the years ended December 31, 2025 and 2024, the Company did no t grant stock options. The number of stock options and weighted-average exercise prices as of December 31, 2025 and 2024 are as follows: 2025 2024 Awards Weighted-Average Exercise Price Awards Weighted-Average Exercise Price (awards in thousands) Outstanding at beginning of period 22 $ 66.68 25 $ 62.20 Exercised — — ( 1 ) 27.68 Forfeited — — ( 2 ) 26.52 Outstanding at end of the period 22 $ 66.68 22 $ 66.68 Exercisable at end of the period 22 $ 66.68 22 $ 66.68 As of December 31, 2025, the weighted-average remaining contractual life for both outstanding and exercisable stock options was 2.1 years with an aggregate intrinsic value of $ 0 . There was no unrecognized compensation on the awards for the period ended December 31, 2025 . The Company received $ 0 thousand, $ 36 thousand, and $ 188 thousand in cash proceeds from the exercise of stock options during the years ended December 31, 2025, 2024, and 2023, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2025, 2024, and 2023 was $ 0 thousand, $ 15 thousand, and $ 440 thousand, respectively. 53 Table of Contents Restricted Stock: The Company has granted restricted stock under the 2012 Plan to employees and non-employee directors generally with vesting terms up to 3 years after the date of grant. The fair value of the restricted stock is equal to the market price of the Company’s common stock on the date of grant. Expense for restricted stock is amortized ratably over the vesting period. A summary of outstanding restricted stock activity as of December 31, 2025 and 2024 are as follows: 2025 2024 Shares Weighted-Average Grant Date Fair Value Shares Weighted-Average Grant Date Fair Value (shares in thousands) Outstanding at beginning of period 279 $ 57.21 114 $ 127.87 Granted 532 13.75 210 32.23 Vested ( 80 ) 67.32 ( 35 ) 138.85 Forfeited ( 54 ) 20.46 ( 10 ) 50.31 Outstanding at end of the period 677 $ 24.76 279 $ 57.21 The Company withheld approximately 27 thousand, 11 thousand, and 9 thousand shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of restricted stock for the years ended December 31, 2025, 2024, and 2023, respectively. The total fair value of restricted stock awards vested during the years ended December 31, 2025, 2024, and 2023 was $ 1.1 million, $ 1.3 million, and $ 8.3 million, respectively. Market and Performance-based Share Awards: The Company has granted market and performance-based share awards in 2022, 2023 and 2025 and performance-based share awards in 2020, 2021, and 2024 under the 2012 Plan to certain key executives who were granted deferred shares and may earn between 0 % and 211 % of the target number depending upon both the Company's total stockholder return ("TSR"), for those with market conditions, and the Company's performance against predetermined performance goals over a three-year performance period after the date of grant. Market and performance-based share awards that are tied to the Company's TSR are valued using the Monte Carlo method and recognized ratably as expense over the award's performance period. The fair value of the performance-based share awards is equal to the market price of the Company’s common stock on the date of grant adjusted by expected level of achievement over the performance period. Expense for performance-based share awards is amortized ratably over the performance period. In the event that management determines that the Company will not reach the lower threshold of the predetermined performance goals established in the grant agreement, any previously recognized expense is reversed in the period in which such a determination is made. Management reversed previously recorded share-based compensation expenses after determining that market and performance-based share awards grants in March 2022, 2023, and 2024 would not meet predetermined performance goals. Specifically, $ 1.4 million was reversed for 2022 awards in December 2023, $ 1.4 million for 2023 awards in September 2024, and $ 1.2 million for 2024 awards in September 2025. The Company continues to record stock-based compensation expense on the performance-based share awards granted in March of 2023 and March of 2024 at the revised performance factor over the life of the awards. No market and performance-based share awards were issued during the year ended December 31, 2025, as a result of the market and performance-based share awards granted in March of 2022 not reaching the lower threshold of the predetermined performance goals. The total fair value of market and performance-based share awards issued during the year ended December 31, 2024 and 2023 was $ 1.3 million and $ 5.7 million, respectively. The Company withheld approximately 8 thousand and 22 thousand shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of performance-based share awards for the years ended December 31, 2024 and 2023, respectively. Share-based compensation expense for all types of awards is recorded in selling, general, and administrative expense in the accompanying Consolidated Statements of Operations. The total expenses during the years ended December 31, 2025, 2024, and 2023 are as follows (in thousands): 54 Table of Contents 2025 2024 2023 Shares Share-Based Compensation Expense Shares Share-Based Compensation Expense Shares Share-Based Compensation Expense Options and restricted stock 699 $ 6,013 301 $ 6,521 139 $ 5,926 Market and performance-based share awards granted in 2025 308 1,299 — — — — Performance-based share awards granted in 2024 38 ( 321 ) 117 1,198 — — Market and performance-based share awards granted in 2023 17 648 47 ( 252 ) 47 1,536 Market and performance-based share awards granted in 2022 — — — — 24 ( 1,388 ) Performance-based share awards granted in 2021 — — — ( 104 ) 14 2,005 Performance-based share awards granted in 2020 — — — — — 109 Total share-based compensation 1,062 $ 7,639 465 $ 7,363 224 $ 8,188 The total income tax benefit recognized in the accompanying Consolidated Statements of Operations for stock awards was $ 0.6 million, $ 1.0 million and $ 0.6 million for the years ended December 31, 2025, 2024, and 2023, respectively. There was $ 7.0 million of total unrecognized compensation expense related to restricted stock awards as of December 31, 2025, which is expected to be recognized over a weighted-average period of 20 months . There was $ 3.8 million of unrecognized compensation expense related to th e 325 thousand market and performance-based shares and 38 thousand performance-based shares presented in the table above as of December 31, 2025, which is expected to be recognized ove r a weighted-average period of 22 months. 9. ACCUMULATED OTHER COMPREHENSIVE INCOME The following table sets forth the components of accumulated other comprehensive income, net of tax where applicable (in thousands): December 31, 2025 December 31, 2024 Foreign currency translation $ 3 $ ( 1 ) Unrealized gains on investment securities 231 181 Accumulated other comprehensive income $ 234 $ 180 10. INVESTMENTS Certain financial assets and liabilities are accounted for at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy prioritizes the inputs used to measure fair value: Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant. 55 Table of Contents The following tables present the Company’s cash and financial assets that are measured at fair value on a recurring basis for each of the hierarchy levels (in thousands): December 31, 2025 Cost Unrealized Gains Accrued Interest Estimated Fair Value Cash & Cash Equivalents Investment Securities Cash and cash equivalents, excluding money market accounts $ 50,187 $ — $ — $ 50,187 $ 50,187 $ — Level 1: Money market accounts 39,116 — — 39,116 39,116 — Government & agency securities 23,247 111 80 23,438 — 23,438 62,363 111 80 62,554 39,116 23,438 Level 2: Corporate bonds 53,801 198 533 54,532 — 54,532 Total $ 166,351 $ 309 $ 613 $ 167,273 $ 89,303 $ 77,970 December 31, 2024 Cost Unrealized Gains (Losses) Accrued Interest Estimated Fair Value Cash & Cash Equivalents Investment Securities Cash and cash equivalents, excluding money market accounts $ 77,551 $ — $ — $ 77,551 $ 77,551 $ — Level 1: Money market accounts 13,377 — — 13,377 13,377 — Government & agency securities 28,920 15 96 29,031 — 29,031 Equity securities 10,000 ( 3,939 ) — 6,061 — 6,061 52,297 ( 3,924 ) 96 48,469 13,377 35,092 Level 2: Corporate bonds 35,771 227 326 36,324 — 36,324 Total $ 165,619 $ ( 3,697 ) $ 422 $ 162,344 $ 90,928 $ 71,416 The Company had $ 3.3 million and $ 95 thousand in realized gains for the years ended December 31, 2025, and 2024. The Company had no realized gains or losses for the year ended December 31, 2023. During the fourth quarter of 2023, the Company entered into an agreement with LifeMD (Nasdaq: LFMD), a leading provider of virtual primary care, to purchase shares of common stock of LifeMD for $ 10 million. The 180-day lock-up period expired on June 8, 2024, and the registration process was completed, effective July 18, 2024. During the second quarter of 2025, the Company sold all of its holdings in LifeMD common stock. Prior to the sale, the fair value of the investment was recorded within the investment securities. The net proceeds received from the sale were recorded within cash and cash equivalents of the 56 Table of Contents Consolidated Balance Sheets. The gains and losses related to the Company’s LifeMD investment for the year ended December 31, 2025, 2024, and 2023 are summarized in the table below (in thousands): Twelve months ended December 31, 2025 2024 2023 Net gains (losses) recognized during the period on equity securities $ 3,222 $ ( 4,089 ) $ 150 Less: Net gains (losses) recognized on equity securities sold 3,222 — — Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date $ — $ ( 4,089 ) $ 150 During the fourth quarter of 2023, the Company concurrently entered into an agreement in which LifeMD would provide services to stand-up the collaboration between LifeMD and the Company. The Company recognized $ 0.0 million , $ 5.0 million , and $ 5.0 million within selling, general, and administrative expenses for services performed by LifeMD for the twelve months ended December 31, 2025, 2024, and 2023. 11. INCOME TAXES Pretax income (loss) for the years ended December 31, 2025, 2024, and 2023 consisted of the following (in thousands): 2025 2024 2023 US $ ( 5,639 ) $ 3,664 $ 125,230 Foreign — 123 3,567 Total $ ( 5,639 ) $ 3,787 $ 128,797 Income tax expense for the years ended December 31, 2025, 2024, and 2023 consisted of the following (in thousands): 2025 2024 2023 Current tax expense (benefit) US Federal $ 195 $ 7,059 $ 25,170 US State 1,378 2,040 3,001 Foreign — — — Total current tax expense 1,573 9,099 28,171 Deferred tax expense (benefit) US Federal 7,973 ( 6,325 ) 1,523 US State 3,487 ( 1,078 ) ( 312 ) Foreign — — — Total deferred tax expense (benefit) 11,460 ( 7,403 ) 1,211 Total provision for income taxes $ 13,033 $ 1,696 $ 29,382 The total provision for income taxes for the years ended December 31, 2025, 2024, and 2023 was $ 13.1 million, $ 1.6 million, and $ 29.5 million, respectively. Those amounts have been allocated to the following financial statement items (in thousands): 57 Table of Contents 2025 2024 2023 Provision for income taxes $ 13,033 $ 1,696 $ 29,382 Stockholders' equity, unrealized (losses) gains on investment securities & foreign currency 17 ( 52 ) 112 Total provision for income taxes $ 13,050 $ 1,644 $ 29,494 The total income tax paid or refunded for the tax years ended December 31, 2025, 2024, and 2023 was a $ 10.5 million payment, a $ 1.6 million refund, and a $ 34.3 million payment, respectively (in thousands): 2025 2024 2023 Income tax paid (refunded), net US Federal $ 2,704 $ ( 2,946 ) $ 30,750 US state and local Texas * 565 * California 7,350 * * Other 411 764 3,505 Total US state and local 7,761 1,329 3,505 Foreign — — — Total income tax paid (refunded), net $ 10,465 $ ( 1,617 ) $ 34,255 *Jurisdiction below the threshold for the period presented The reconciliation of the United States federal statutory tax provision to the Company’s provision for income taxes for the years ended December 31, 2025, 2024, and 2023 (in thousands, except percentages): 2025 2024 2023 Statutory federal tax $ ( 1,184 ) 21.0 % $ 795 21.0 % $ 27,048 21.0 % State income taxes, net of federal benefit 3,284 ( 58.3 ) % 486 12.8 % 1,693 1.3 % Foreign tax effects Hong Kong — — % ( 22 ) ( 0.6 ) % 296 0.2 % Singapore — — % — — % — — % Valuation allowance — — % ( 3 ) ( 0.1 ) % ( 846 ) ( 0.7 ) % Other — — % ( 1 ) — % ( 199 ) ( 0.1 ) % Research and development and jobs credits ( 602 ) 10.7 % ( 589 ) ( 15.5 ) % ( 1,170 ) ( 0.9 ) % Changes to valuation allowances, federal only 9,383 ( 166.4 ) % — — % — — % Unrecognized tax benefit 590 ( 10.4 ) % 269 7.1 % 440 0.3 % Nontaxable or nondeductible items Executive compensation 543 ( 9.7 ) % 52 1.4 % 1,895 1.5 % Charitable donations — — % ( 236 ) ( 6.2 ) % ( 1,094 ) ( 0.8 ) % Intercompany loan restructuring — — % — — % 1,167 0.9 % Share-based compensation 626 ( 11.1 ) % 889 23.4 % 143 0.1 % Meals and entertainment 210 ( 3.7 ) % 314 8.3 % 255 0.2 % Other adjustments 183 ( 3.2 ) % ( 258 ) ( 6.8 ) % ( 246 ) ( 0.2 ) % Provision for income taxes $ 13,033 ( 231.1 ) % $ 1,696 44.8 % $ 29,382 22.8 % 58 Table of Contents The makeup of the majority of the state income tax expense is comprised of state income taxes in Maryland, California, New York, Pennsylvania, Illinois, and Texas for the year ended December 31, 2025; Texas for the year ended December 31, 2024; and Texas, Pennsylvania, and Maryland for the year ended December 31, 2023. Significant components of the Company’s deferred tax assets (liabilities) consisted of the following (in thousands): December 31, 2025 December 31, 2024 Reserves on inventory and sales $ 1,124 $ 472 Credit and loss carryforwards 6,406 2,730 Stock compensation 2,699 2,055 Accrued expenses and deferred costs 1,294 2,235 Inventory capitalization 309 708 Lease obligations 2,685 4,047 Capitalized research costs 6,832 7,028 Charitable donations 77 83 State taxes 1,093 1,594 Unrealized loss on investment 44 967 Other 166 183 Valuation allowance ( 13,690 ) ( 1,624 ) Total deferred tax assets 9,039 20,478 Right-of-use assets ( 1,816 ) ( 2,800 ) Prepaid expenses ( 1,569 ) ( 1,590 ) Depreciation ( 5,654 ) ( 4,628 ) Total deferred tax liabilities ( 9,039 ) ( 9,018 ) Net deferred tax assets $ — $ 11,460 On July 4, 2025, tax legislation entitled an Act to provide for reconciliation pursuant to title II of H. Con. Res. 14 (“the “Act”) and commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The primary provisions of the Act do not impact the Company’s effective tax rate but do impact the timing of tax deductions related to research and development costs and fixed asset expenditures after January 19, 2025. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize our existing deferred tax assets. A significant piece of objective negative evidence evaluated is our current year loss, declining financial performance in recent years, and our projections of short-term future losses. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. We have determined that the reversal of future taxable temporary differences corresponding to our deferred tax liabilities will provide a sufficient source of income for realization of a portion of our deferred tax assets. In 2025, we recorded an additional valuation allowance of $ 12.1 million. We file income tax returns in the United States and various states and foreign jurisdictions. The Company has separate federal, state, and foreign net operating loss ("NOL") carry forwards totaling $ 49.2 million with $ 13.3 million of the state NOLs that start expiring in 2029. The federal NOLs do not have an expiration as do a significant portion of the state NOLs. The Company has recorded a valuation allowance for the net operating loss carry forwards which are not expected to be realized. As of December 31, 2025, the Company had $ 5.6 million of gross unrecognized tax benefits, which would have a net $ 4.5 million impact on the effective tax rate, if recognized. As of December 31, 2024, the Company had $ 7.4 million of gross unrecognized tax benefits, which would have a net $ 6.2 million impact on the effective tax rate, if recognized. The change for 2025 primarily relates to a settlement of tax examination and for 2024 primarily relates to additional gross unrecognized benefits for current tax positions and reductions of gross unrecognized benefits for prior year tax positions and lapses in statute of limitations. The amounts of unrecognized tax benefits were as follows (in thousands): 59 Table of Contents December 31, 2025 December 31, 2024 Unrecognized tax benefit at the beginning of the period $ 7,433 $ 7,502 Increase for current year tax positions 60 71 (Decrease) increase for prior period tax positions 298 ( 5 ) Settlement with tax authorities ( 2,029 ) — Reduction due to lapse in statute of limitations ( 126 ) ( 135 ) Unrecognized tax benefit at the end of the period $ 5,636 $ 7,433 The Company recognizes interest and penalty expenses related to unrecognized tax positions as a component of the income tax provision. As of December 31, 2025, and 2024, interest and penalties accrued were $ 1.3 million and $ 1.7 million, respectively. For 2025 and 2024, the Company recorded expenses related to interest and penalties of $ 0.6 million and $ 0.4 million, respectively. As of December 31, 2025, the current year reduction primarily relates to the settlement of a tax examination. Our tax returns are subject to examination by various federal, state, and local tax authorities. The Company believes that it has adequately provided for all tax positions; however, amounts asserted by taxing authorities could be greater than our accrued position. Pending the resolution of two examinations, and specific to jurisdictions where the Company has filed tax returns and examination of such returns is constrained by a statute of limitations, we are no longer subject to United States federal, state, and local income tax examinations by tax authorities for years prior to 2022. 12. COMMITMENTS Unconditional purchase obligations: At December 31, 2025, the Company had $ 3.5 million in unconditional purchase obligations with a remaining term in excess of one year primarily for outsourced information technology. 13. LEASES Operating Leases: The Company has operating leases for office and warehouse space and certain equipment. In certain of the Company’s lease agreements, the rental payments are adjusted periodically based on defined terms within the lease. The Company did not have any finance leases for the years ended December 31, 2025 and 2024. Our leases relating to office and warehouse space have lease terms of 65 months to 102 months. Our leases relating to equipment have lease terms of 36 months, with certain of them having clauses relating to automatic renewal clauses. The Company’s warehouse agreements also contain non-lease components, in the form of payments towards variable logistics services and labor charges, which the Company is obligated to pay based on the services consumed by it. Such amounts are not included in the measurement of the lease liability but will be recognized as expense when they are incurred. The operating lease expense was $ 4.9 million, $ 4.9 million and $ 5.1 million for the years ended December 31, 2025, 2024 and 2023, respectively. 60 Table of Contents Supplemental cash flow information related to the Company’s operating leases were as follows (in thousands): 2025 2024 2023 Cash paid for amounts included in the measurements of lease liabilities Operating cash flow used in operating leases $ 6,462 $ 6,312 $ 6,333 Right-of-use assets obtained in exchange for lease obligations Operating leases $ 701 $ — $ 1,785 As of December 31, 2025, the weighted average remaining lease term was 3 years and the weighted average discount rate was 2.3 %. The following table presents the maturity of the Company’s operating lease liabilities as of December 31, 2025 (in thousands): 2026 4,783 2027 2,789 2028 2,895 2029 525 2030 49 Thereafter — Total lease payments $ 11,041 Less: imputed interest ( 347 ) Total $ 10,694 During the three months ended September 30, 2025 , the Company entered into a lease agreement for new headquarters office space in 1501 South Clinton Street, Baltimore, Maryland 21224, with a lease term of 8 years and 7 months. The lease is expected to commence in March 2026, at which time the Company will record a right-of-use asset and corresponding lease liability. The Company will not renew its office space lease in 100 International Drive, Baltimore, Maryland 201202, when it expires in February 2026. As of December 31, 2025, the future minimum lease commitments related to this lease are not included in the tables above as the lease has not yet commenced. 14. DEBT Credit Agreement On April 13, 2021, the Company and certain of its subsidiaries (collectively, the “Guarantors”) entered into a credit agreement (the “Credit Agreement”) among the Company, the Guarantors, the lenders party thereto and Citibank, N.A., in its capacity as administrative agent. On May 31, 2022, the Credit Agreement was amended to increase the borrowing capacity and convert the interest rate to be based on Secured Overnight Financing Rate ("SOFR"), from London Inter-Bank Offered Rate (LIBOR) ("the "Amended Credit Agreement"). The Amended Credit Agreement provided for a $ 225.0 million senior secured revolving credit facility with a $ 20.0 million letter of credit sublimit. The Amended Credit Agreement also provided for an uncommitted incremental facility that permitted the Company, subject to certain conditions, to increase the senior secured revolving credit facility by up to $ 100.0 million. The Credit Agreement otherwise would have matured on April 13, 2026. On October 30, 2024, the Company terminated its Amended Credit Agreement with Citibank, N.A. The Company had no borrowings under the Amended Credit Agreement, inclusive of the credit facility and letter of credit sublimit as of the termination date. 15. SEGMENT REPORTING The Company's OPTA VIA segment derives revenues from customers through the sale of our products which are shipped directly to customers. Our coaches help customers adopt healthy habits and learn the benefits of our products. The accounting policies of the Company's single segment are the same as those described in the Company's Significant Accounting Policies. 61 Table of Contents The Company’s chief operating decision maker (“CODM”) is the chief executive officer. The CODM assesses performance for the segment and decides how to allocate resources based on net income that also is reported on the accompanying Consolidated Statements of Operations as net income. The measure of segment assets is reported on the Consolidated Balance Sheets as total assets. The CODM uses net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the segment or into other parts of the entity, such as for share buybacks. Net income is used to monitor budget versus actual results. The CODM also uses net income in competitive analysis by benchmarking to the Company’s competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation. The Company does not have significant intra-entity sales or transfers. The Company has one reportable segment: OPTA VIA. The OPTA VIA segment recognizes revenue when control of the products is transferred to the customer. The segment pays commissions on the sale of products to coaches. The Company derives all of its revenue from sales within the United States and manages the business activities on a consolidated basis. The following table presents the OPTA VIA segment's revenue, significant segment expenses, and segment net income for the years ended December 31, 2025, 2024, and 2023 (in thousands): 2025 2024 2023 Revenue 385,788 602,463 1,072,054 Less: Cost of sales 110,601 157,840 296,204 Selling, marketing, and after sales support 187,986 304,481 501,188 Distribution 17,767 37,710 40,534 Technology 43,744 49,939 56,595 Administrative and corporate support functions 32,264 42,252 42,943 Equity compensation 7,639 7,363 8,188 Other income (1) ( 8,574 ) ( 909 ) ( 2,395 ) Provision for income taxes 13,033 1,696 29,382 Segment net income (loss) $ ( 18,672 ) $ 2,091 $ 99,415 Reconciliation of profit or loss Adjustments and reconciling items — — — Consolidated net income (loss) $ ( 18,672 ) $ 2,091 $ 99,415 (1) Other income included within Segment net income includes interest income, interest expense, and realized and unrealized gains and losses on LifeMD common stock . Segment depreciation expense for the years ended December 31, 2025, 2024, and 2023 was $ 10.5 million, $ 17.4 million and $ 10.0 million, respectively. Segment additions of property, plant, and equipment for the years ended December 31, 2025, 2024, and 2023 were $ 5.6 million, $ 7.5 million, and $ 6.5 million, respectively. 16. SUPPLY CHAIN OPTIMIZATION During the year ended December 31, 2024, the Company completed a supply chain optimization initiative with the goal of aligning the Company’s distribution footprint with current demand levels. On June 28, 2024, the Company closed its Maryland Distribution Center located in Ridgely, Maryland. The assets within the facility were sold during the year ended December 31, 2024, with the impact reflected below as the loss of impairment of equipment held for sale. The Company identified certain other supply chain assets at other locations within its distribution network that will no longer be utilized and are no longer useful to the Company’s operations, and adjusted their respective useful lives accordingly, with the impact reflected below in the accelerated depreciation charges. The components of the Company’s supply chain optimization charges were as follows: 62 Table of Contents Twelve Months Ended December 31, 2024 Loss on impairment of equipment held for sale $ 2,499 Accelerated depreciation charges 9,190 Non-cash charges for supply chain optimization 11,689 One-time severance costs 813 Total supply chain optimization $ 12,502 The supply chain optimization charges were recorded in the Company’s accompanying Consolidated Statements of Operations as follows: Twelve Months Ended December 31, 2024 Selling, general, and administrative $ 12,502 Total supply chain optimization $ 12,502 During the three months ended December 31, 2024 , the Company readied and listed the Maryland Distribution Center building and land for sale. The building and land remain held for sale through December 31, 2025. The net book value of the building and land is $ 1.4 million. The fair value of assets exceed their carrying value and no impairment was recognized. The assets are recorded within prepaid expenses and other current assets on the Consolidated Balance Sheets. The Company closed on the sale of the land and building in February 2026. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES There were no disagreements with the Company’s independent auditors regarding accounting and financial disclosures for the fiscal year ended December 31, 2025.