LifeMD, Inc.
For the period ended Dec 31, 2025. Filed Mar 10, 2026.
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FY2025 · Filed Mar 10, 2026
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ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2025 due to the material weaknesses in our internal control over financial reporting described below.
In designing disclosure controls and procedures, our management is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of its chief executive and chief financial officers and effected by the Company’s Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, 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.
Our management, with the participation of our chief executive officer and chief financial officer, has assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on the framework established inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon that evaluation and subject to the foregoing, our chief executive officer and chief financial officer concluded that our internal control over financial reporting was not effective as December 31, 2025 due to the material weaknesses described below.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be detected or prevented on a timely basis.
We identified material weaknesses in our internal control over financial reporting as we did not:
| (i) | design and maintain effective controls related to the recording of net revenue as agent in certain arrangements with the Company’s third-party pharmacy providers. This material weakness resulted in immaterial misstatements of revenue, deferred revenue, accounts receivable and accrued expenses in the 2023 annual and the Q3 and Q4 interim financial statements, the 2024 annual and interim financial statements, and the Q1 and Q2 2025 interim financial statements that resulted in the revision of the previously issued annual and interim consolidated financial statements. |
| (ii) | design and maintain effective controls to verify the appropriateness of segregation of duties, including assessment of incompatible duties, identification of instances where incompatible duties were assigned to individuals, and addressing conflicts on a timely basis. This material weakness did not result in a misstatement to our interim or annual consolidated financial statements. |
| (iii) | design and maintain effective business process controls related to Information Produced by the Entity (“IPE”) and system generated IPE. Specifically, we did not design effective controls to review and approve procedures over key information utilized in the performance of the control. This material weakness did not result in a misstatement to our interim or annual consolidated financial statements. |
| (iv) | design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of our consolidated financial statements and the effectiveness of IT-dependent controls. Specifically, we did not design and maintain: (a) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to appropriate personnel; (b) program change management controls to ensure that program and data changes are identified, tested, authorized and implemented appropriately; (c) computer operations controls to ensure that processing and transfer of data, and data backups and recovery are monitored; (d) program development controls to ensure that new software development is tested, authorized and implemented appropriately, and (e) review of key third-party service provider Systems and Organizational Controls (“SOC”) reports. These material weaknesses did not result in a misstatement to our interim or annual consolidated financial statements. |
Additionally, these material weaknesses could result in the misstatement of the interim or annual consolidated financial statements that would result in a material misstatement to the interim or annual consolidated financial statements that would not be prevented or detected.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, as stated in their report, which is included in Part II, Item 8 of this Form 10-K.
Management’s Plan to Remediate the Material Weaknesses
To remediate the material weaknesses, our management, with oversight from our audit committee, implemented a remediation plan. The Company has taken the following steps to further our remediation:
Actions taken to date:
| (i) | documented and maintained evidence of the completeness and accuracy of manually generated IPE and system generated IPE and review of controls, including focused training for process owners; |
| (ii) | formalized user access, change management and computer operations controls of our internal information systems as well as SOC report reviews for in-scope third-party systems; |
| (iii) | implemented focused ITGC training for key system owners; and |
| (iv) | increased the frequency of user access reviews of our internal information systems. |
Actions still to be taken:
| (i) | modifying system reporting over revenue to ensure completeness and accuracy of information used in the calculation of revenue, deferred revenue, accounts receivable and accrued expenses for customers of a specific contract; |
| (ii) | designing and implementing a reconciliation process over the recording of net revenue as agent in certain arrangements with the Company’s third-party pharmacy providers to ensure completeness and accuracy of information; |
| (iii) | implementing focused user access deprovisioning training for key system owners particularly for external contractor deprovisioning; |
| (iv) | designing policies, procedures and controls related to program development to ensure new software programs are tested, authorized and implemented appropriately, including focused training for key system owners; and |
| (v) | designing and implementing controls over segregation of duties, including: (a) modifying and validating the journal entry approval process within the general ledger system; (b) reassigning preparation and review responsibilities over certain account reconciliations and financial statement variance analyses to ensure appropriate segregation of duties; (c) implementing controls related to the opening and closing of accounting periods to ensure there are independent reviews and approvals in place; (d) implementing independent review controls over vendor master data, and (e) implementing review controls over chart of account modifications. |
These material weaknesses will not be remediated until all of the related control activities have been fully designed, implemented and operating effectively for a sufficient period of time.
During 2025, the Company invested significantly in our IT environment, enhanced key ITGCs, improved documentation and review of IPE, strengthened oversight of third-party service providers, and implemented additional monitoring activities across several control areas. Management believes these efforts will support the continued execution of the remediation plan into 2026.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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