LifeMD, Inc. (LFMD)

ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note
Regarding Forward-Looking Statements

The
following discussion should be read in conjunction with the financial statements and related notes contained elsewhere in this Quarterly
Report on Form 10-Q. Certain statements made in this discussion are “forward-looking statements” within the meaning of 27A
of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). These statements are based upon beliefs of, and information currently available to, the
Company’s management as well as estimates and assumptions made by the Company’s management. Readers are cautioned not to
place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used
herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,”
“future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,”
“will,” “would,” “could,” “should,” “continue” or the negative of these terms
and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements
reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other
factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations.
Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results
may differ materially from those anticipated, believed, estimated, expected, intended, or planned.

Although
the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the
United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Risk
factors include, by way of example and without limitation:

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.

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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 June 30, 2026, LifeMD served approximately 356,000 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 more than 1,552,000
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:

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 June 30, 2026, our network covers approximately 175 million lives including commercially
insured lives, 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.

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Our
proprietary technology platform integrates:

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 believ

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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.

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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.

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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:

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:

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