LifeMD, Inc. Commitments Disclosure

NOTE 12 - COMMITMENTS AND CONTINGENCIES

 

Purchase Commitments

 

Many of the Company’s vendors require product deposits when a purchase order is placed for goods or fulfillment services related to inventory requirements. The Company’s history of product deposits with its inventory vendors, creates an implicit purchase commitment equalling the total expected product acceptance cost in excess of the product deposit. As of December 31, 2025, the Company approximates its implicit purchase commitments to be $333 thousand.

 

 

Legal Matters

 

In the normal course of business operations, the Company may become involved in various legal matters. As of December 31, 2025, other than as set forth below, the Company’s management does not believe that there are any potential legal matters that could have a material adverse effect on the Company’s consolidated financial position.

 

On August 27, 2025, a purported shareholder filed a putative class action complaint in the United States District Court for the Eastern District of New York (“EDNY”) against the Company, the Company’s Chief Executive Officer, Mr. Schreiber, and the Company’s Chief Financial Officer, Mr. Benathen, (collectively, the “Defendants”), captioned Johnston v. LifeMD, Inc., et al., Case No. 25-cv-04761, alleging: (i) violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder by the Defendants for making false and misleading statements; and (ii) violations of Section 20(a) of the Exchange Act by the individual officer defendants as alleged control persons. On October 24, 2025, the EDNY granted the joint motion to transfer the class action complaint from the EDNY to the United States District Court for the Southern District of New York (“SDNY”). On November 24, 2025, the SDNY appointed a Lead Plaintiff. On January 30, 2026, the Lead Plaintiff filed an amended complaint. Defendants expect to file a motion to dismiss the amended complaint by March 27, 2026; Lead Plaintiff’s opposition would be due on May 15, 2026; and Defendants’ reply brief would be due on June 12, 2026.

 

In the months following filing of the class action complaint, four putative shareholder derivative complaints were filed, captioned: (i) Greenberg v. Schreiber et al., Case No. 25-cv-5075 (EDNY), (ii) Poulos v. Schreiber et al., Case No. 25-cv-5197 (EDNY), (iii) Shibata v. Schreiber et al., Case No. 25-cv-5284-JMW (EDNY) and (iv) Ellis v. Schreiber, et al. 125-cv-09343 (SDNY). These complaints alleged violations of Section 14(a) of the Exchange Act, breach of fiduciary duties, aiding and abetting breaches of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violations of Exchange Act Sections 10(b) and 21D by the Company’s officers and directors. The shareholder derivative complaints are based primarily on the same alleged conduct underlying the class action complaint described above, and seek damages in an unspecified amount and other relief. On December 11, 2025, the three derivative actions filed in the EDNY were consolidated and stayed pending a ruling on the motion to dismiss in the securities class action, including any related appeals. On December 17, 2025, the derivative action filed in the SDNY was stayed on the same terms. While the Company does not believe that any of the class action or shareholder derivative complaints will have a material adverse effect on the Company’s business, results of operations and financial condition, failure to obtain a favorable resolution of these complaints could have such a material adverse effect.

 

On August 23, 2023, a purported putative class action complaint captioned Marden v. LifeMD, Inc., Case No. 23-cv-07469, was filed in the United States District Court for the Southern District of New York (the “Marden Complaint”) against the Company’s RexMD brand. The Marden Complaint alleges, inter alia, unauthorized disclosure of certain information of class members to third parties. On November 21, 2023, the plaintiffs amended the Marden Complaint. On March 4, 2024, the Company moved to dismiss the Marden Complaint. On July 12, 2024, the parties attended a mediation. On November 1, 2024, the plaintiffs filed a notice of voluntary dismissal of the Southern District of New York case and on November 25, 2024, the plaintiffs refiled the case via a new complaint captioned W.M.F. & Matthew Marden v. LifeMD, Inc., Case No. A-24-906800-C, in the District Court of Clark County, Nevada. On June 4, 2025, the Court approved a preliminary class action settlement. On September 30, 2025, the final approval hearing for the settlement was held, and the settlement was formally approved by the Court, certifying the class for settlement purposes and dismissing the case with prejudice. The Company recorded approximately $1.1 million for the settlement liability, which is reflected in the Company’s consolidated financial statements for the year ended December 31, 2025.

 

On September 5, 2023, the Internal Revenue Service (the “IRS”) issued a notice of deficiency to the Company in which the IRS asserted an income tax deficiency of approximately $1.9 million for the Company’s tax year ending December 31, 2019. The Company timely filed a petition in the United States Tax Court disputing all of the proposed tax deficiency. The case was subsequently transferred to the Appeals Division of the IRS. Upon review of the amended return, IRS Appeals agreed to accept the amended return as filed. On April 1, 2025, the United States Tax Court issued a decision that there was no deficiency in federal income tax due for the tax year ending December 31, 2019. All of the issues in the case were resolved in the Company’s favor.