Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our audited consolidated financial statements for the period ended December 31, 2025 and highlight certain other information which, in the opinion of management, will enhance a reader's understanding of our financial condition, changes in financial condition and results of operations. In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the fiscal year ended December 31, 2025, as compared to the fiscal year ended December 31, 2024. This discussion should be read in conjunction with our consolidated financial statements for the two-year period ended December 31, 2025 and related notes included elsewhere in this Annual Report on Form 10-K. These historical financial statements may not be indicative of our future performance. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains numerous forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described throughout this filing, particularly in "Item 1A. Risk Factors."

Overview

We are a direct-to-patient telehealth company providing a high-quality, cost-effective, and convenient way to access comprehensive, virtual and in-home healthcare. We believe the traditional model of visiting a doctor's office, traveling to a retail pharmacy, and returning for follow-up care or prescription refills is complex, inefficient, and costly, which discourages many individuals from seeking much-needed medical care. LifeMD is improving the delivery of the healthcare experience through telehealth with our proprietary technology platform, affiliated and dedicated provider network, broad and expanding treatment capabilities, and the unique ability to nurture patient relationships.

The LifeMD telehealth platform integrates best-in-class capabilities including a 50-state medical group, a nationwide pharmacy network, a wholly-owned affiliated commercial pharmacy, nationwide laboratory and diagnostic testing capabilities, a fully integrated electronic medical records ("EMR") system and a patient care and service call center. These capabilities are integrated by an industry-leading, proprietary telehealth technology that supports a broad range of primary care, chronic disease and lifestyle healthcare needs. Currently, LifeMD treats approximately 328,000 active patient subscribers across a range of their medical needs including primary care, men's sexual health, weight management, sleep, hair loss and hormonal therapy by providing telehealth clinical services and prescription and over-the-counter ("OTC") treatments, as medically appropriate. Our virtual primary care services are primarily offered on a subscription basis. Since inception, we have helped more than 1,387,000 customers and patients by providing them with greater access to high quality, convenient, and affordable care.

Our mission is to empower people to live healthier lives by increasing access to high-quality and affordable virtual and in-home healthcare. We believe our success has been, and will continue to be, attributable to an amazing patient experience, made possible by attracting and retaining the highest-quality providers in the country, and our vertically integrated care platform. As we continue to pursue long-term growth, we plan to continue to introduce new telehealth product and service offerings that complement our already expansive treatment areas.

In June 2024, the Company launched the acceptance of private health insurance for its virtual primary care services, including weight management for medically qualified patients. Initially available in select states, the Company plans to continue enrollments with private payors to facilitate access to medically necessary services, ultimately having broad coverage options across all 50 states. In April 2025, the Company expanded acceptance of insurance to Medicare beneficiaries for qualifying care. Initially available to more than 21 million Medicare Part B beneficiaries in 26 states, the Company has continued investing in its Medicare Part B offering and now has the infrastructure in place to deliver qualifying services to Medicare Part B beneficiaries across 49 states. The One Big Beautiful Bill Act (the "OBBBA"), which was signed in July 2025, permanently extends the safe harbor for high-deductible health plans to cover telehealth services before the deductible is met, effective for plan years starting on or after January 1, 2025. This ensures employees with health savings accounts can access, and employers can offer, pre-deductible virtual care without losing tax-advantaged status.

Developments in 2025

Key developments in our business during 2025 are described below:

Discontinued Operations

On November 4, 2025, we sold our majority ownership interest in WorkSimpli to Lion Buyer, LLC. This transaction represents a key milestone in the Company's strategic transformation, further positioning the Company as a pure-play healthcare company exclusively focused on expanding its virtual care and pharmacy offerings. WorkSimpli is classified as discontinued operations for all periods presented in these consolidated financial statements included in this Annual Report on Form 10-K. The Company recorded a gain on sale of discontinued operations, net of tax, of $21.3 million which is included in net income from discontinued operations in the consolidated statement of operations for the year ended December 31, 2025. See Note 4-Discontinued Operations to our consolidated financial statements included in this report.

Optimal Human Health MD ("OHHMD" Acquisition)

On April 24, 2025, the Company closed on the OHHMD Asset Purchase Agreement (the "OHHMD APA") with OHHMD, PLLC, a North Carolina professional limited liability company, Doug Lucas, DO, the sole member of OHHMD, and the Company's affiliate LifeMD Southern Patient Medical Care, P.C., a Florida professional corporation (the "PC Purchaser"), whereby the Company and the PC Purchaser acquired certain intangible assets of OHHMD, a nationwide virtual care provider focused on women's health and hormone replacement therapies. The acquisition marked the launch of the Company's official entry into the women's health market and establishes a scalable clinical foundation for a comprehensive virtual health program under the LifeMD brand, focused on hormone health, bone density, metabolism, and long-term wellness.

Results of Operations

Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024

Our financial results for the year ended December 31, 2025 are summarized as follows in comparison to the year ended December 31, 2024:

		December 31, 2025								December 31, 2024
		$				% of Sales				$				% of Sales
Telehealth revenue, net		$	194,055,198				100.00	%		$	154,824,075				100.00	%
Cost of telehealth revenue			27,714,808				14.28	%			21,440,799				13.85	%
Gross profit			166,340,390				85.72	%			133,383,276				86.15	%
Selling and marketing expenses			86,074,473				44.34	%			70,102,961				45.28	%
General and administrative expenses			57,937,023				29.86	%			57,947,932				37.43	%
Customer service expenses			11,579,636				5.97	%			10,217,654				6.60	%
Other operating expenses			11,073,155				5.71	%			8,659,712				5.59	%
Development costs			7,345,797				3.79	%			6,857,005				4.43	%
Total expenses			174,010,084				89.67	%			153,785,264				99.33	%
Operating loss from continuing operations			(7,669,694	)			(3.95	)%			(20,401,988	)			(13.18	)%
Interest expense, net			(1,360,967	)			(0.70	)%			(2,175,405	)			(1.40	)%
Loss on debt extinguishment			(1,155,851	)			(0.60	)%			-				-	%
Loss from continuing operations before income taxes			(10,186,512	)			(5.25	)%			(22,577,393	)			(14.58	)%
Income tax provision			(45,721	)			(0.02	)%			(598,000	)			(0.39	)%
Net loss from continuing operations			(10,232,233	)			(5.27	)%			(23,175,393	)			(14.97	)%
Net income from discontinued operations			25,852,024				13.32	%			2,315,252				1.50	%
Net income (loss)			15,619,791				8.05	%			(20,860,141	)			(13.47	)%
Net income attributable to non-controlling interest of discontinued operations			1,265,685				0.65	%			548,875				0.36	%
Net income (loss) attributable to LifeMD, Inc.			14,354,106				7.40	%			(21,409,016	)			(13.83	)%
Preferred stock dividends			(3,106,250	)			(1.60	)%			(3,106,250	)			(2.00	)%
Net income (loss) attributable to common stockholders		$	11,247,856				5.80	%		$	(24,515,266	)			(15.83	)%

Telehealth revenue, net. Telehealth revenues for the year ended December 31, 2025 were approximately $194.1 million, an increase of 25% compared to approximately $154.8 million for the year ended December 31, 2024. The increase in telehealth revenues was attributable to an increase in online sales demand primarily related to telehealth subscription revenue which experienced an increase of approximately $45.6 million during the year ended December 31, 2025 compared to the year ended December 31, 2024.

Cost of telehealth revenue. Cost of telehealth revenues, which primarily include product costs, pharmacy fulfilment costs, physician consult fees, and shipping costs directly attributable to our prescription and OTC products increased by approximately 29% to approximately $27.7 million for the year ended December 31, 2025 compared to approximately $21.4 million for the year ended December 31, 2024. The cost of telehealth revenue increase was due to increased telehealth sales volume during the year ended December 31, 2025 when compared to the year ended December 31, 2024. Telehealth costs stayed consistent at 14% of associated telehealth revenues during both the year ended December 31, 2025 and 2024.

Gross profit. Gross profit increased by approximately 25% to approximately $166.3 million for the year ended December 31, 2025 compared to approximately $133.4 million for the year ended December 31, 2024. Gross profit as a percentage of revenues stayed consistent at 86% for both the year ended December 31, 2025 and 2024.

Total expenses. Operating expenses for the year ended December 31, 2025 were approximately $174.0 million, as compared to approximately $153.8 million for the year ended December 31, 2024. This represents an increase of 13%, or $20.2 million. The increase is primarily attributable to:

(i)	Selling and marketing expenses: This mainly consists of online marketing and advertising expenses. During the year ended December 31, 2025, the Company had an increase of approximately $16.0 million, or 23%, in selling and marketing costs resulting from additional sales and marketing initiatives to drive the current period's sales growth primarily for LifeMD virtual primary care. This ramp up is expected to both increase and maintain sustained revenue growth in future years, based on the Company's recurring revenue subscription-based sales model.
(ii)	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 year ended December 31, 2025, the Company had an increase of approximately $1.4 million, or 13%, primarily related to increases in infrastructure costs and compensation costs due to increased headcount to support the Company's growth.

(iii)	Other operating expenses: This consists of rent and lease expense, insurance, office supplies and software subscriptions, royalty expense and bank charges. During the year ended December 31, 2025, the Company had an increase of approximately $2.4 million, or 28%, primarily related to increases in software subscriptions.
(iv)	Development costs: This mainly relates to third-party technology services for developing and maintaining our online platforms and information technology services for our online products. During the year ended December 31, 2025, the Company had an increase of approximately $489 thousand, or 7%, primarily resulting from technology platform improvements and amortization expenses.

These increases in operating expenses were partially offset by a decrease in 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 year ended December 31, 2025, the Company had a decrease of approximately $11 thousand, or 0.02%, in general and administrative expenses. Decreases in stock-based compensation expense of $1.7 million and taxes and licenses of $236 thousand were partially offset by increases in legal and professional fees of $1.3 million and merchant processing fees of $490 thousand.

Interest expense, net. Interest expense, net consists of interest expense on the Avenue Facility (as defined below), partially offset by interest income on the Company's cash account balances for the year ended December 31, 2025 and interest expense related to the Avenue Facility and notes payable, partially offset by interest income on the Company's cash account balances for the year ended December 31, 2024. Interest expense decreased by approximately $814 thousand during the year ended December 31, 2025 as compared to the year ended December 31, 2024 primarily due to the extinguishment of the Avenue Facility during the year ended December 31, 2025.

Loss on debt extinguishment. The Company recorded a $1.2 million loss on debt extinguishment related to the repayment of the Avenue Facility during the year ended December 31, 2025 due to a prepayment penalty and various fees associated with the Avenue Facility. There were no similar losses on debt extinguishment recorded during the year ended December 31, 2024.

Working Capital (Deficit)

		December 31, 2025				December 31, 2024
Current assets		$	51,831,465			$	52,369,360
Current liabilities			41,573,365				67,400,168
Working capital (deficit)		$	10,258,100			$	(15,030,808	)

Working capital increased by approximately $25.3 million during the year ended December 31, 2025. Current assets decreased by approximately $538 thousand, which was primarily attributable to a decrease of $3.4 million related to the Company's current assets of discontinued operations that were sold on November 4, 2025 and a decrease in accounts receivable of $1.2 million, partially offset by an increase in cash of approximately $4.1 million. Current liabilities decreased by approximately $25.8 million, which was primarily attributable to a decrease of $8.9 million related to the Company's current liabilities of discontinued operations that were sold on November 4, 2025, a decrease in the current portion of long-term debt of $8.4 million, a decrease in deferred revenue of approximately $6.3 million, and a net decrease in accounts payable and accrued expenses of $2.5 million.

Liquidity and Capital Resources

		Year Ended December 31,
		2025				2024
Net cash provided by operating activities		$	8,280,175			$	17,513,190
Net cash provided by (used in) investing activities			6,908,231				(11,536,318	)
Net cash used in financing activities			(13,407,012	)			(4,118,673	)
Net increase in cash			1,781,394				1,858,199

Net cash provided by operating activities was approximately $8.3 million for the year ended December 31, 2025, as compared with approximately $17.5 million for the year ended December 31, 2024. Significant factors contributing to net cash provided by operating activities during the year ended December 31, 2025, include: (1) $10.5 million in non-cash stock-based compensation charges, (2) $7.5 million in non-cash depreciation and amortization, (3) net cash provided by operating activities of discontinued operations of $6.0 million, (4) the $1.2 million loss on debt extinguishment recorded related to the repayment of the Avenue Facility on August 5, 2025, and (5) a decrease in accounts receivable of $1.2 million. These factors were partially offset by: (1) the Company's net loss from continuing operations of $10.2 million, (2) a decrease in deferred revenue of $6.3 million, and (3) a net decrease in accounts payable and accrued expenses of $2.5 million. The significant factors contributing to net cash provided by operating activities during the year ended December 31, 2024, include: (1) an increase in accounts payable and accrued expenses of $14.9 million, (2) $12.2 million in non-cash stock-based compensation charges, (3) an increase in deferred revenue of $9.8 million, (4) $6.6 million in non-cash depreciation and amortization, and (5) net cash provided by operating activities of discontinued operations of $3.1 million. These factors were partially offset by the Company's net loss from continuing operations of $23.2 million for the year ended December 31, 2024 and an increase in accounts receivable of $4.5 million.

Net cash provided by investing activities for the year ended December 31, 2025 was approximately $6.9 million, as compared with net cash used in investing activities of $11.5 million for the year ended December 31, 2024. Net cash provided by investing activities for the year ended December 31, 2025 was primarily due to net cash provided by investing activities of discontinued operations, including the net proceeds received from the WorkSimpli sale of $19.4 million, partially offset by cash paid for capitalized software costs of approximately $7.6 million, and cash paid for the purchase of equipment of approximately $1.9 million. Net cash used in investing activities for the year ended December 31, 2024 was primarily due to cash paid for capitalized software costs of approximately $6.7 million and cash paid for the purchase of equipment of $1.5 million. Net cash used in investing activities of discontinued operations was $3.3 million for the year ended December 31, 2024.

Net cash used in financing activities for the year ended December 31, 2025 was approximately $13.4 million as compared with approximately $4.1 million for the year ended December 31, 2024. Significant factors contributing to net cash used in financing activities during the year ended December 31, 2025, include: (1) total repayments of debt instruments of $18.7 million, of which $14.7 million relates to the extinguishment of the Avenue Facility on August 5, 2025 and $4.0 million relates to principal payments made on the Avenue Facility prior to extinguishment, and (2) preferred stock dividends of approximately $3.1 million, partially offset by $8.7 million net proceeds received related to sales of common stock under the ATM Sales Agreement and $471 thousand of cash proceeds received from the exercise of options and warrants. Net cash used in financing activities of discontinued operations was $774 thousand for the year ended December 31, 2025. During the year ended December 31, 2024, net cash used in financing activities consisted of: (1) preferred stock dividends of approximately $3.1 million, and (2) repayments of notes payable of approximately $328 thousand, partially offset by proceeds from the exercise of options of approximately $120 thousand. Net cash used in financing activities of discontinued operations was $805 thousand for the year ended December 31, 2024.

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 consolidated financial statements included in this report.

On March 21, 2023, the Company entered into and closed on a loan and security agreement (the "Avenue Credit Agreement"), and a supplement to the Credit Agreement (the "Avenue Supplement"), with Avenue Venture Opportunities Fund II, L.P. and Avenue Venture Opportunities Fund, L.P. (collectively, "Avenue"). The Avenue Credit Agreement provided for a convertible senior secured credit facility of up to an aggregate amount of $40 million, comprised of the following: (1) $15 million in term loans funded at closing, (2) $5 million of additional committed term loans which the Company received on September 26, 2023 under the First Amendment to the Avenue Credit Agreement (the "Avenue First Amendment") and (3) $20 million of additional uncommitted term loans, collectively referred to as the "Avenue Facility". The Company issued Avenue warrants to purchase $1.2 million of the Company's common stock at an exercise price of $1.24, subject to adjustments, of which $660 thousand have been exercised (the "Avenue Warrants"). In addition, Avenue converted $2 million of the $15 million in term loans funded at closing into shares of the Company's common stock at a price per share equal to $1.49. Proceeds from the Avenue Facility were used to repay the Company's outstanding notes payable balances with CRG Financial. On August 5, 2025, the Company paid the remaining $14.0 million in outstanding principal payments on the Avenue Facility and the prepayment penalty as noted in the Avenue Credit Agreement. As of December 31, 2025, there is no outstanding balance on the Avenue Facility. The Company recorded a loss on debt extinguishment of $1.2 million within its consolidated financial statements for the year ended December 31, 2025. As of December 31, 2025, $540 thousand Avenue Warrants remain outstanding.

The Company entered into an At Market Issuance Sales Agreement (the "ATM Sales Agreement") with B. Riley Securities, Inc. and Cantor Fitzgerald & Co. relating to the sale of its common stock. In accordance with the terms of the ATM Sales Agreement, the Company may, but is not obligated to, offer and sell, from time to time, shares of common stock, through or to the Agents, acting as agent or principal. Sales of common stock, if any, will be made by any method permitted that is deemed an "at the market offering" as defined in Rule 415 under the Securities Act. On June 7, 2024, the Company filed a shelf registration statement on Form S-3 under the Securities Act, which was declared effective on July 18, 2024 (the "2024 Shelf"). Under the 2024 Shelf at the time of effectiveness, the Company had the ability to raise up to $150.0 million by selling common stock, preferred stock, debt securities, warrants, and units including $53.3 million of its common stock under the ATM Sales Agreement. During the year ended December 31, 2025, the Company sold 762,990 shares of common stock under the ATM Sales Agreement and net proceeds received were $8.7 million. As of December 31, 2025, the Company had $44.6 million available under the ATM Sales Agreement.

The Company expects that its existing cash as of December 31, 2025 of $36.8 million will be sufficient to fund our planned operating expenses and capital expenditure requirements for at least the next 12 months from the issuance date of the consolidated financial statements included in this Annual Report on Form 10-K.

Critical Accounting Estimates

We prepare our 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 consolidated financial statements included in this report.

Recently Adopted Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to improve its income tax disclosure requirements. Under ASU 2023-09, entities must annually: (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 became effective for the Company's annual period beginning on January 1, 2025. The Company adopted this guidance in the fourth quarter of 2025 on a prospective basis. Refer to Note 14-Income Taxes for additional information.

Other Recent Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) to improve the disclosures about a public business entity's expenses and provide more detailed information about the types of expenses included in certain expense captions in the consolidated financial statements. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and the amendments in this update should be applied either prospectively or retrospectively. The Company is evaluating the impact this guidance will have on the disclosures in the consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, to simplify and modernize the accounting for internal-use software costs. The amendments remove references to prescriptive software development stages and clarify that capitalization of eligible software development costs begins when management authorizes and commits to funding the project and it is probable the project will be completed, and the software will be used as intended. The amendments in this update are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual periods. Early adoption is permitted, and the guidance may be applied prospectively, retrospectively, or using a modified approach for in-process projects. The Company is evaluating the impact this guidance will have on the consolidated financial statements and related disclosures.

All other accounting standards updates that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.