Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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.

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.

Business Overview

LifeMD is a patient-centric, direct-to-patient healthcare company providing a high-quality, cost-effective, and convenient way for patients to access virtual medical care and pharmacy services. We believe the traditional healthcare model requiring patients to visit a physician's office, travel to a retail pharmacy, and return for follow-up appointments or prescription refills is complex, inefficient, and costly which can discourage individuals from seeking necessary medical care and medications. At the same time, the United States ("U.S.") continues to experience shortages in primary care key specialty areas.

Through our vertically integrated care model, we combine proprietary technology, affiliated clinical services, pharmacy infrastructure, and artificial intelligence ("AI")-enabled operational systems to deliver longitudinal care at scale. Our mission is to empower individuals to live healthier lives by expanding access to high-quality virtual and in-home healthcare services. We believe our success is driven by an exceptional patient experience, our affiliated medical group comprised of high-quality and dedicated providers, and our vertically integrated care platform.

As of March 31, 2026, LifeMD served over 365,000 active patient subscribers across a range of healthcare needs, including primary care, men's and women's health, hormone health, weight management, insomnia, dermatology and cardiology. We provide virtual clinical services as well as prescription and over-the-counter ("OTC") treatments, when medically appropriate.

Our virtual primary care services are primarily offered through a subscription model. Since inception, we have served approximately 1,492,000 patients and customers, expanding access to convenient, and high-quality healthcare.

Our End-to-End Telehealth Platform

LifeMD has developed a proprietary, fully integrated telehealth and pharmacy platform designed to support diagnosis, treatment, prescription fulfillment, and ongoing care management within a unified ecosystem. We believe this vertical integration differentiates LifeMD from point-solution telehealth providers and enables us to deliver more cohesive patient experiences for patients electing to utilize our affiliated pharmacy while maintaining clinical rigor and operational efficiency.

Our telehealth technology platform is continually optimized to serve more patients, and this flexible infrastructure can be repurposed for a variety of existing or future telehealth offerings. Further, this platform allows for rapid development and the scale up of new telehealth offerings as we identify attractive opportunities. Our platform integrates core capabilities, including:

	●	A 50-state affiliated provider network;
	●	A nationwide pharmacy network;
	●	A wholly-owned commercial pharmacy;
	●	Nationwide laboratory and diagnostic integrations;
	●	A fully integrated patient care center;
	●	A direct-to-patient marketing infrastructure for acquisition and retention; and
	●	AI-enabled clinical and operational technologies.

Through our desktop and mobile applications, patients move seamlessly from onboarding and consultation to prescription fulfillment and longitudinal care. We continue to augment our platform with new features selected to better serve our patients.

In June 2024, we began accepting commercial and government health insurance for our virtual primary care services, including obesity-related care for medically qualified patients. As of March 31, 2026, our network covered approximately 112 million lives, including approximately 30 million Medicare Fee-for-Service beneficiaries. By June 1, 2026, we expect to expand coverage to approximately 230 million lives, representing approximately 80% of commercially insured lives in the U.S., 70% of Medicare Advantage beneficiaries, and Medicare Fee-for-Service beneficiaries.

Affiliated Provider Network

Care delivery across the LifeMD platform is supported by an affiliated 50-state medical group composed of licensed physicians and nurse practitioners. A significant portion of this network consists of full-time providers dedicated to LifeMD's platform and clinical protocols. Our providers deliver synchronous and asynchronous virtual consultations across primary care, chronic disease management, metabolic health, hormone optimization, behavioral health, and other specialty programs. Clinical workflows are supported by our integrated EMR system, case-load balancing algorithms, secure communications infrastructure, and prescription management tools. We believe that maintaining a dedicated affiliated provider network, integrated directly into our proprietary systems, enables consistent clinical standards, operational efficiency, and scalable care delivery across multiple specialty verticals.

Patient Care Center

We have an internal patient care center staffed by LifeMD employees to support clinical coordination and customer experience functions. The patient care center provides hands-on support throughout the patient journey, including care coordination, onboarding assistance, follow-up communication, and general support services. This infrastructure is designed to enhance accessibility, improve continuity of care, and support retention within our subscription-based model. We believe the integration of our patient care center with our technology platform strengthens patient engagement, supports adherence to prescribed therapies, and contributes to sustained patient satisfaction as we scale.

Our proprietary technology platform integrates:

	●	Scheduling across a national provider network;
	●	Secure patient-provider communications;
	●	Case-load balancing algorithms;
	●	Clinical documentation and EMR functionality; and
	●	Prescription management.

These features support longitudinal care relationships and subscription-based models.

Pharmacy and Fulfillment

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.

AI and Data Infrastructure

We have been an early adopter of AI and large language models ("LLMs") to integrate and analyze data across the Company. These technologies support clinical operations, product development, customer service, and internal workflows. We believe these capabilities have the potential to significantly improve operational efficiency, reduce costs, and increase the agility of our technology, products, operations, and medical teams, if we are able to mitigate accompanying risks addressed under "Risk Factors."

Our Brands and Specialty Care Programs

We operate three consumer healthcare brands focused on largely unaddressed or underserved healthcare needs.

1)

LifeMD

The LifeMD brand is our flagship virtual primary care and specialty platform, having served over 514,000 customers and patients to date. This brand provides patients with access to affiliated high-quality providers for their urgent care and chronic care needs. The LifeMD brand 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 direct integrations and collaborations with pharmaceutical manufacturers that offer patients convenient and affordable access to important medications. The LifeMD brand addresses high-growth and historically underserved healthcare verticals through defined specialty care programs as noted below.

Weight Management

Our Weight Management Program, launched in April 2023 with a focus on GLP-1 medications, provides primary care, metabolic coaching, lab work and prescription services (as appropriate) to patients seeking to access a medically supported weight loss solution. In September 2024, we expanded our Weight Management Program to offer 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. Since inception, our Weight Management Program has grown exponentially to over 98,000 patient subscribers as of March 31, 2026.

As part of our 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 have established 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 the LifeMD brand's offerings.

Women's Health

LifeMD's women's health platform with a focus on perimenopause and menopause, bone health, and hormone optimization. Women's health conditions often require multi-year, longitudinal management. Our platform is designed to provide continuous, coordinated care across a woman's lifespan, supported by:

	●	Highly specialized providers;
	●	In-Home and remote diagnostics;
	●	Generic and compounded medications;
	●	Supplements;
	●	Diet and lifestyle education and support; and
	●	Community.

As we expand this platform and shape our strategy, we are engaging with renowned specialists in their field, including a focus on menopause and osteoporosis. We feel LifeMD is uniquely positioned to provide continuous support throughout a woman's lifespan with our holistic, personalized and accessible care philosophy.

Behavioral Health

LifeMD's behavioral health program provides teletherapy, psychiatry, and medication management for common mental health conditions. Behavioral health services are delivered through our affiliated provider network and are integrated into our longitudinal care framework. We are focused on expanding insurance coverage across commercial and government payers to reduce financial barriers and improve access. We believe behavioral health represents a significant opportunity to drive improved patient outcomes and deepen engagement within our subscription-based model. According to the National Institute of Mental Health, approximately 59.3 million adults in the U.S. were living with a mental illness in 2022, yet only 50.6% received treatment.

LifeMD+ Membership

LifeMD+ is our membership-based virtual primary care offering, providing 24/7 access to synchronous and asynchronous care for urgent care, urgent prescriptions and refills, diagnostics and more. LifeMD+ is designed to serve as an entry point into the LifeMD ecosystem, expanding customer access through both cash-pay and insurance reimbursement models. This membership forms the foundation of our subscription-based model and supports cross-vertical expansion into our specialty care programs such as weight management.

2)

Rex MD

Rex MD is our men's telehealth platform focused on conditions that are often underdiagnosed or undertreated due to stigma, inconvenience, or limited access to specialized providers. Since launch, Rex MD has served approximately 717,000 customers and patients. The platform delivers virtual diagnosis, treatment, and prescription medications for men's health conditions including erectile dysfunction, premature ejaculation, hair loss, insomnia, weight loss and performance anxiety. Services are provided through our affiliated licensed medical providers, and prescription therapies are dispensed either through our wholly owned pharmacy or through partner pharmacies, as clinically appropriate.

Testosterone Replacement Therapy ("TRT")

TRT represents a defined specialty care program within Rex MD and a growing focus area for the brand. Low testosterone is associated with a range of clinical symptoms, including fatigue, decreased libido, reduced muscle mass, and mood changes, and often requires longitudinal evaluation and management. Our TRT program is designed to provide comprehensive, ongoing care rather than episodic prescription access.

The program includes:

	●	Virtual clinical evaluation and laboratory testing;
	●	Diagnosis and treatment planning by affiliated providers;
	●	Ongoing hormone monitoring and dosage management; and
	●	Prescription fulfillment and follow-up care.

Because TRT typically requires continuous monitoring and long-term management, the TRT program aligns with our subscription-based care model and supports recurring patient engagement. We believe the combination of diagnostic integration, prescription management, pharmacy infrastructure, and longitudinal clinical oversight differentiates our approach from transactional telehealth offerings and positions Rex MD to address a growing segment of men seeking accessible hormone health services.

3)

ShapiroMD

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 U.S. and has served over 261,000 customers and patients to date.

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.

	○	LifeMD executed its integration with LillyDirect's ("Lilly") pharmacy provider, Gifthealth, to provide eligible patients with streamlined access to single-dose vials of Lilly's prescription obesity treatment Zepbound® (tirzepatide). This integration enables a more direct pathway for patients prescribed Zepbound® through LifeMD's virtual care platform. LifeMD established an integrated pathway within its virtual care platform to facilitate patient access to Wegovy® and Ozempic®. As part of this collaboration, LifeMD integrated with CenterWell Pharmacy, Novo Nordisk's pharmacy partner, to support prescription fulfillment for eligible patients prescribed Wegovy® for chronic weight management and Ozempic® for type 2 diabetes. In January 2026, the Company began offering Novo Nordisk's Wegovy® (semaglutide) pill -an oral GLP-1 therapy for chronic weight management and cardiovascular health.
	○	In May 2024, LifeMD executed a partnership agreement with Withings, Inc. ("Withings") designed to revolutionize weight management patient care by providing LifeMD's GLP-1 weight-loss patients with Withings advanced in-home health monitoring devices, including the Body Pro 2 scale and the BPM Connect Pro blood pressure monitor. With these devices, LifeMD is setting a new standard in virtual care by providing clinicians with near real-time and actionable patient data that can drive compliance, enhance clinical decision-making, encourage preventive healthcare and, most importantly, improve long-term outcomes.
	○	In May 2024, LifeMD launched a partnership with Ash Wellness, a leading at-home, self-collection laboratory health testing platform. Ash Wellness offers a network of over ten Clinical Laboratory Improvement Amendments ("CLIA") and College of American Pathologists ("CAP") certified labs, supporting over one hundred biomarkers and multiple collection methods. Application program interface and a fully white labelled experience supports a streamlined and convenient patient experience. Initially introduced as part of our Weight Management Program to monitor and qualify patients for treatment, LifeMD plans to use at-home collection testing across various clinical care scenarios, giving patients greater control over their health and making remote healthcare more inclusive.
	○	On December 11, 2023, the Company entered into a collaboration with Medifast, Inc. through and with certain of its wholly-owned subsidiaries ("Medifast"). Medifast utilizes the Company's virtual care technology platform to provide its clients access to a clinically supported weight management program, including GLP-1 medications. Pursuant to certain agreements between the parties, Medifast paid the Company the amount of $10 million to support the collaboration, funding enhancements to the Company platform, operations and supporting infrastructure, of which $5 million was paid at the closing on December 12, 2023, $2.5 million was paid during the three months ended March 31, 2024, and the remaining $2.5 million was paid during the three months ended June 30, 2024 (the "Medifast Collaboration").
		In addition, in connection with the Medifast Collaboration, the Company entered into a stock purchase agreement and registration rights agreement with Medifast's wholly-owned subsidiary, Jason Pharmaceuticals, Inc. ("Jason Pharmaceuticals"), whereby the Company issued 1,224,425 shares of its common stock in a private placement (the "Medifast Private Placement") at a purchase price of $8.1671 per share, for aggregate proceeds of approximately $10 million. The Company granted Jason Pharmaceuticals the right, for a period contemporaneous with the ongoing collaboration, to appoint one non-voting observer to the Board of Directors of the Company, entitled to attend Board meetings.
	○	In September 2023, LifeMD executed a partnership agreement with ASCEND Therapeutics, LLC ("ASCEND"), a subsidiary of Besins Healthcare, and a specialty pharmaceutical company concentrating on women's health, to provide integrated telehealth services to improve access to EstroGel®. Under the terms of the agreement, LifeMD receives fees related to certain corporate services provided to ASCEND while having our telehealth services featured on the www.estrogel.com website.

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 months ended March 31, 2025 has been revised to reflect these corrections. See Note 3-Revisions to Previously Issued Financial Statements for more details.

Our financial results for the three months ended March 31, 2026 are summarized as follows in comparison to the three months ended March 31, 2025:

		March 31, 2026								March 31, 2025
		$				% of Sales				$				% of Sales
Telehealth revenue, net		$	50,162,956				100.00	%		$	50,887,899				100.00	%
Cost of telehealth revenue			5,925,499				11.81	%			8,136,462				15.99	%
Gross profit			44,237,457				88.19	%			42,751,437				84.01	%
Selling and marketing expenses			29,874,860				59.56	%			22,272,924				43.77	%
General and administrative expenses			15,176,355				30.25	%			14,340,151				28.18	%
Other operating expenses			3,179,946				6.34	%			2,389,536				4.70	%
Customer service expenses			3,139,305				6.26	%			3,071,494				6.04	%
Development costs			1,796,063				3.58	%			1,859,049				3.65	%
Total expenses			53,166,529				105.99	%			43,933,154				86.34	%
Operating loss from continuing operations			(8,929,072	)			(17.80	)%			(1,181,717	)			(2.32	)%
Interest income (expense), net			56,476				0.11	%			(463,638	)			(0.91	)%
Loss from continuing operations before income taxes			(8,872,596	)			(17.69	)%			(1,645,355	)			(3.23	)%
Income tax provision			-				-	%			-				-	%
Net loss from continuing operations			(8,872,596	)			(17.69	)%			(1,645,355	)			(3.23	)%
Net income from discontinued operations			-				-	%			1,993,422				3.92	%
Net (loss) income			(8,872,596	)			(17.69	)%			348,067				0.69	%
Net income attributable to non-controlling interest of discontinued operations			-				-	%			531,845				1.05	%
Net loss attributable to LifeMD, Inc.			(8,872,596	)			(17.69	)%			(183,778	)			(0.36	)%
Preferred stock dividends			(776,563	)			(1.55	)%			(776,563	)			(1.53	)%
Net loss attributable to common stockholders		$	(9,649,159	)			(19.24	)%		$	(960,341	)			(1.89	)%

Telehealth revenue, net. Telehealth revenues for the three months ended March 31, 2026 decreased by approximately 1% to approximately $50.2 million compared to approximately $50.9 million for the three months ended March 31, 2025. The decrease in revenues was attributable to a decrease in telehealth product revenue of approximately $1.0 million due to a decrease in online sales demand partially offset by an increase in telehealth subscription revenue which experienced an increase of approximately $280 thousand during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily due to an increase in online sales demand.

Cost of telehealth revenue. Cost of telehealth revenue, which primarily include product costs, pharmacy fulfilment costs, physician consult fees, and shipping costs directly attributable to our prescription and OTC products decreased by approximately 27% to approximately $5.9 million for the three months ended March 31, 2026 compared to approximately $8.1 million for the three months ended March 31, 2025. The cost of telehealth revenue decrease was due to product mix, decreased telehealth product sales volume and decreased shipping costs during the three months ended March 31, 2026 when compared to the three months ended March 31, 2025. Telehealth costs were 12% of associated telehealth revenues during the three months ended March 31, 2026 compared to 16% of associated telehealth revenues during the three months ended March 31, 2025.

Gross profit. Gross profit increased by 3% to approximately $44.2 million for the three months ended March 31, 2026 compared to approximately $42.8 million for the three months ended March 31, 2025. Gross profit as a percentage of revenues was approximately 88% for the three months ended March 31, 2026 as compared to approximately 84% for the three months ended March 31, 2025. The increase in gross profit as a percentage of revenues was primarily due to product mix and decreased shipping costs on telehealth product revenues in the three months ended March 31, 2026.

Total expenses. Operating expenses for the three months ended March 31, 2026 were approximately $53.2 million, as compared to approximately $43.9 million for the three months ended March 31, 2025. This represents an increase of 21%, or approximately $9.2 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 March 31, 2026, the Company had an increase of approximately $7.6 million, or 34% in selling and marketing costs resulting from additional sales and marketing initiatives to drive the current and future periods' sales growth primarily for telehealth subscription revenue and new telehealth offerings. 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 three months ended March 31, 2026, the Company had an increase of approximately $836 thousand in general and administrative expenses, primarily related to an increase in compensation costs of $1.1 million, an accounts receivable reserve adjustment of $450 thousand recorded during the three months ended March 31, 2026, and an increase in legal and professional fees of $200 thousand. These increases were partially offset by a decrease in stock-based compensation expense of $1.1 million.
(iii)	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 March 31, 2026, the Company had an increase of approximately $790 thousand, or 33%, primarily related to increases in software subscriptions to support the Company's growth and compliance initiatives and an increase in depreciation expense.
(iv)	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 March 31, 2026, the Company had an increase of approximately $68 thousand, or 2%, primarily related to increases in compensation costs.

The above increases in expenses were partially offset by the following decrease in expenses:

(i)	Development costs: This mainly relates to third-party technology services for developing and maintaining our online platforms. During the three months ended March 31, 2026, the Company had a decrease of approximately $63 thousand, or 3%, primarily due to lower third-party service provider costs.

Interest income (expense), net. Interest income (expense), net consists of interest income on the Company's cash account balances for the three months ended March 31, 2026 and interest expense on the Avenue Facility, partially offset by interest income on the Company's cash account balances for the three months ended March 31, 2025. Interest income was approximately $56 thousand for the three months ended March 31, 2026 compared to interest expense of $464 thousand for the three months ended March 31, 2025. The Company extinguished the Avenue Facility on August 5, 2025.

Working Capital

		March 31, 2026				December 31, 2025
Current assets		$	51,697,046			$	51,831,465
Current liabilities			49,585,750				41,573,365
Working capital		$	2,111,296			$	10,258,100

Working capital decreased by approximately $8.1 million during the three months ended March 31, 2026. The decrease in current assets is primarily attributable to a decrease in cash of $2.3 million, partially offset by an increase in other current assets of $1.2 million and an increase in accounts receivable of $550 thousand. Current liabilities increased by $8.0 million, which was primarily attributable to an increase in accounts payable and accrued expenses of $6.8 million and an increase in deferred revenue of $1.2 million.

Liquidity and Capital Resources

		Three Months Ended March 31,
		2026				2025
Net cash provided by operating activities		$	444,624			$	3,068,387
Net cash used in investing activities			(2,056,762	)			(2,867,338	)
Net cash used in financing activities			(696,043	)			(812,563	)
Net decrease in cash			(2,308,181	)			(611,514	)

Net cash provided by operating activities was approximately $445 thousand for the three months ended March 31, 2026, as compared with approximately $3.1 million for the three months ended March 31, 2025. The significant factors contributing to the net cash provided by operating activities during the three months ended March 31, 2026, include: (1) an increase in accounts payable and accrued expenses of $6.8 million, (2) $2.0 million in non-cash depreciation and amortization, (3) $1.4 million in non-cash stock-based compensation charges, and (3) an increase in deferred revenue of $1.2 million. These increases were partially offset by: (1) the Company's net loss of $8.9 million for the three months ended March 31, 2026, (2) an increase in other current assets of $1.2 million, and (3) an increase in accounts receivable of $550 thousand. The significant factors contributing to the net cash provided by operating activities during the three months ended March 31, 2025, include: (1) $2.5 million in non-cash stock-based compensation charges and (2) $1.8 million in non-cash depreciation and amortization. These increases were partially offset by: (1) a decrease in accounts payable and accrued expenses of $2.3 million and (2) the Company's net loss of $1.6 million for the three months ended March 31, 2025. Net cash provided by operating activities of discontinued operations was $2.8 million for the three months ended March 31, 2025.

Net cash used in investing activities for the three months ended March 31, 2026 was approximately $2.1 million, as compared with approximately $2.9 million for the three months ended March 31, 2025. Net cash used in investing activities for the three months ended March 31, 2026, was due to cash paid for capitalized software costs of approximately $2.0 million, and cash paid for the purchase of equipment of approximately $105 thousand. Net cash used in investing activities for the three months ended March 31, 2025, was due to cash paid for capitalized software costs of approximately $1.9 million, and cash paid for the purchase of equipment of approximately $118 thousand. Net cash used in investing activities of discontinued operations was $863 thousand for the three months ended March 31, 2025.

Net cash used in financing activities for the three months ended March 31, 2026 was approximately $696 thousand as compared with approximately $813 thousand for the three months ended March 31, 2025. Net cash used in financing activities for the three months ended March 31, 2026, consisted of preferred stock dividends of $777 thousand partially offset by $81 thousand of cash proceeds received from the exercise of options. Net cash used in financing activities for the three months ended March 31, 2025, consisted of preferred stock dividends of $777 thousand. Net cash used in financing activities of discontinued operations was $36 thousand for the three months ended March 31, 2025.

Liquidity and Capital Resources Outlook

To date, the Company has been funding operations primarily through cash generated from operating activities, 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 11-Leases to our unaudited consolidated financial statements included in this report.

On January 2, 2026, the Company entered into a Credit Agreement (the "Credit Agreement") with Citizens Bank, N.A. ("Citizens"), which provides for a senior secured revolving credit facility in an aggregate outstanding amount not exceeding $30 million (the "Credit Facility") to support potential corporate development and/or shareholder value creation initiatives. The Credit Facility may be increased in the aggregate principal amount of up to $20 million on the terms and subject to the conditions described in the Credit Agreement. In connection with the Credit Agreement, among other things, the Company issued a revolving loan note to Citizens for any loans that may be made under the Credit Facility. Additionally, among other things, the Company and its subsidiaries entered into a pledge and security agreement and a guarantee agreement to provide credit support for the Credit Facility. The Credit Facility requires the Company to maintain (i) a Consolidated Leverage Ratio not to exceed 2.50 to 1.00 and (ii) a Consolidated Interest Coverage Ratio of at least 3.00 to 1.00. As of March 31, 2026, the Company was in compliance with the Consolidated Leverage Ratio covenant and was out of compliance with the Consolidated Interest Coverage Ratio covenant contained in the Credit Facility, which is the ratio of (a) the Consolidated EBIT of the Company and its Subsidiaries for the most recently completed four consecutive fiscal quarters ended March 31, 2026, to (b) Consolidated Interest Expense of the Company and its Subsidiaries for the most recently completed four consecutive fiscal quarters ended March 31, 2026, as those capitalized terms are defined in the Credit Agreement. Compliance with the Consolidated Interest Coverage Ratio was adversely impacted by an increase of approximately $7.6 million, or 34%, in selling and marketing costs during the three months ended March 31, 2026, resulting from additional sales and marketing initiatives to drive the current and future periods' sales growth. Among its remedies, Citizens could determine that there has been an Event of Default, deny access to funds under the Credit Facility, and/or it could terminate the Credit Facility. Discussions on the terms of an amendment to the Credit Agreement or waiver of compliance with the covenant are ongoing. As of March 31, 2026 and to date, the Company had not drawn any amounts under the Credit Facility.

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. As of March 31, 2026, the Company had $44.6 million available under the ATM Sales Agreement.

The Company expects that its existing cash as of March 31, 2026 of $34.5 million and net proceeds from the sale of common stock under the ATM Sales Agreement 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 consolidated financial statements.

Critical Accounting Estimates

We prepare our unaudited 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 consolidated financial statements included in this report.

Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 unaudited consolidated financial statements. In January 2025, the FASB issued ASU 2025-01, which clarifies the effective date of ASU 2024-03 for interim reporting periods. 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 unaudited 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 unaudited 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 unaudited consolidated financial statements upon adoption.