MED 10-K & 10-Q changes, risk factors and insider trading

You should consider carefully the following risks and uncertainties when reading this Report. If any of the events described below actually occur, the Company’s business, financial condition, and operating results could be materially adversely affected. You should understand that it is not possible to predict or identify all such risks and uncertainties. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

The metabolic health and weight management industry is highly competitive and the development and acceptance of weight-loss medicines and other products could result in decreased demand for our services and products.

Competition is intense in the metabolic health and weight management industry and we must remain competitive in the areas of program efficacy, price, taste, customerclient service and brand recognition. Our competitors include companies selling metabolic health and weight loss medications, pharmaceutical products and weight loss programs, digital tools, app-based health and wellness monitoring solutions and wearable trackers, as well as a wide variety of diet foods and meal replacement bars and shakes, appetite suppressants and nutritional supplements. Some of our competitors are significantly larger than we are and have substantially greater resources. Any increased competition from new entrants into our industry or any increased success by existing competition could result in reductions in our sales or prices, or both, which could have an adverse effect on our business and results of operations. Additionally, the entrance into the market and growing acceptance of the favorably perceived and easier to use weight loss medications, such as GLP-1s, has reduced and may further reduce demand for our services and products.

The success of our business is dependent on our ability to maintain and grow our network of OPTAVIA coaches.

We consider our number of active earning OPTAVIA coaches and average quarterly revenue per active earning OPTAVIA coach to be key indicators of our financial performance and condition. AsFor ofthe quarter ended December 31, 2024,2025, the Company had 27,10016,100 total active earning OPTAVIA coaches as compared to 30,00019,500 asfor ofthe quarter ended September 30, 20242025 and 41,10027,100 asfor ofthe quarter ended December 31, 2023.2024. If we are unable to reverse the downtrend of the number of active earning coaches, which has been declining since Q3the 2022,first orquarter revenue per active earning coach, which has been declining since Q2of 2023, our future revenue and operating results will continue to be adversely affected, as we believe that the success of the Company depends on the success of our OPTAVIA coaches.

Additionally, OPTAVIA coaches are subject to high turnover, and we depend on our network of OPTAVIA coaches to continually grow their businesses by supporting customersclients and attracting, training and motivating new OPTAVIA coaches. Our failure to provide the business essentials, education, and competitive compensation necessary to motivate OPTAVIA coaches to grow their businesses will adversely affect our future growth and operating results. The growth and sustainability of our network of OPTAVIA coaches is also subject to risks which may be outside of our control. These include: potential misconduct or improper claims by OPTAVIA coaches; negative public perceptions of multi-level marketing; general economic conditions; failure to develop innovative products to meet consumer demands; adverse opinions of our products, services, or industry; and regulatory actions against our Company, competitors in our industry, or other direct selling companies.

The increasing focus of consumers on more integrated lifestyle and fitness approaches rather than just food, nutrition and diet could adversely impact the popularity of our programs. Our future success depends on our ability to continue to develop and market new, innovative products and to enhance our existing products, each on a timely basis to respond to new and evolving consumer demands, achieve market acceptance and keep pace with new nutritional, weight management, technological and other developments. We may not be successful in developing, introducing on a timely basis or marketing any new or enhanced products, and we cannot assure you that any new or enhanced products will appeal to the market. Our results of operations are highly dependent on the number of product sales generated by our OPTAVIA coaches. Our failure to develop new products and to enhance our existing products, and the failure of our products to continue to appeal to the market could have an adverse impact on our ability to attract and retain customersclients and thus adversely affect our business, financial condition or results of operations. Additionally, we commit and invest substantial time and resources into developing innovative new products. There is no assurance that any new productsproducts, including the reformulation of our Essential line of products, will be successfully adopted by our customerclient base, or that we will be able promote such new products without taking steps such as reducing pricing or incurring acquisition costs that would affect our revenues and/or profitability.

Our business depends on the effectiveness of our advertising and marketing programs, including the strength of the Company's and our OPTAVIA coaches’ social media presence, to attract and retain customers.clients. Use of social media may materially and adversely affect our reputation or subject us to fines or other penalties, and restrictions on the use of or access to social media may adversely impact sales of our products and services.

Our business success depends on our ability to attract and retain customers.clients. Our ability to attract and retain customersclients depends significantly on the effectiveness of our OPTAVIA coaches’ advertising and marketing practices. Our OPTAVIA coaches support our customersclients and market our products and services primarily through word of mouth, email and via social media channels such as Facebook, Instagram, X, and video conferencing platforms. If their advertising and marketing campaigns do not generate a sufficient number of customers,clients, our business, financial condition and results of operations will be adversely affected.

We and our OPTAVIA coaches, as well as social media influencers or other brand ambassadors that we may utilize from time to time, use email and social media platforms as a means of communicating with customers.clients. We use digital marketing, social media, and email marketing, among other means, to attract and retain customers.clients. Unauthorized or inappropriate use of these channels could result in harmful publicity or negative consumer experiences, which could have an adverse impact on the effectiveness of our marketing through these channels. In addition, the rising popularity of social media and other consumer-oriented technologies has increased the speed and accessibility of information dissemination. Our target consumers often value readily available information and often act on such information without further investigation and without regard to its accuracy. The harm may be immediate without affording us an opportunity for redress or correction. Negative or false commentary about us may be posted on social media platforms or similar devices at any time and may harm our business, brand, reputation, coaches, financial condition, and results of operations, regardless of the information’s accuracy.

Settlements between the FTC and other direct selling companies and guidance from the FTC have addressed inappropriate earnings and lifestyle claims and the importance of focusing on consumer sales. These developments have created a level of ambiguity as to the proper interpretation of the law and related court decisions. Any adverse rulings or legal actions could impact our business if direct selling laws or anti-pyramid laws are interpreted more narrowly or in a manner that results in additional burdens or restrictions on direct selling companies. For example, in 2019, the FTC took aggressive actions against a multi-level marketing company, which ultimately led to the company being permanently prohibited from using a multilevel compensation plan in the United States. If our OPTAVIA coaches make improper claims regarding our products or business, or if regulators determine we are making any improper claims, this could lead to an FTC investigation and could harm our business.

In addition, our ability to sustain satisfactory levels of sales is dependent in significant part on our ability to introduce innovative products. However, governmental regulations can delay or prevent the introduction, or require the reformulation or withdrawal, of certain of our products. Any such regulatory action, whether or not it results in a final determination adverse to us, could create negative publicity, with detrimental effects on the motivation and recruitment of OPTAVIA coaches and, consequently, on sales.

We could also be subject to challenges by private parties in civil actions. We are aware of recent civil actions against other companies in the United States that use a direct selling model, which have and may in the future result in significant legal costs. Allegations against companies that use a multi-level marketing strategy in various markets have also created intense public scrutiny of companies in the direct selling industry. Similarly, the FTC continues to scrutinize multi-level marketers. All of these actions and any future scrutiny of us or the direct selling industry could generate negative publicity or further regulatory actions that could result in fines, restrict our ability to conduct our business, enter into new markets, and ultimately attract customers.clients.

We rely on third-party manufacturers to supply a majority of the food and other products we sell. If we are unable to obtain a sufficient quantity, quality and variety of foods and other products from these manufactures in a timely and low-cost manner, we will be unable to fulfill our customers’clients’ orders in a timely manner, which may cause us to lose revenue and market share or incur higher costs, as well as damage our reputation and the value of our brands. We also rely on third-parties to distribute and deliver our products.

We rely on our suppliers, and their supply chains, to meet our quality and production standards and specifications and supply ingredients and other products in a timely and safe manner. However, no safety and quality measures can eliminate the possibility that suppliers may provide us with defective or out-of-specification products against which regulators may take action or which may subject us to litigation or require a recall. Suppliers may provide us with ingredients that are or may be unsafe, below our quality standards or improperly labeled. In addition to a negative customerclient experience, we could face possible seizure or recall of our products and the imposition of civil or criminal sanctions if we incorporate a defective or out-of-specification item into one of our deliveries.

We may be subject to claims that our OPTAVIA coaches are unqualified to provide proper metabolic health and weight loss advice.

Our OPTAVIA coaches are independent contractors and, accordingly, we are not in a position to provide the same level of oversight as we would if these OPTAVIA coaches were our own employees. As a result, there can be no assurance that our OPTAVIA coaches will comply with our policies and procedures. Additionally, most of our OPTAVIA coaches do not have extensive training or certification in nutrition, diet or health fields and have only undergone the education they receive from us. We may be subject to claims from our customersclients alleging that our OPTAVIA coaches lack the qualifications necessary to provide proper advice regarding metabolic health, weight lossloss, and related topics. We may also be subject to claims that our OPTAVIA coaches have provided inappropriate advice or have failed to recommend customersclients consult with their health care providers during the course of the customers’clients’ metabolic health and weight loss journey, as recommended in the Company’s Medical Disclaimer. Such claims could result in lawsuits, damage to our reputation and divert management’s attention from our business, which would adversely affect our business.

We may be subject to health or advertising related claims from our customers.clients.

While we collaborate with LifeMD healthcare providers, our businesses are separate, and our weight loss and weight management programs do not include medical treatment or medical advice, and weWe do not engage physicians or nurses, with LifeMD or otherwise,nurses to monitor the progress of our customers.clients. Many people who are overweight suffer from other physical conditions, and our target consumers could be considered a high-risk population. A customerclient who experiences health problems could allege or bring a lawsuit against us on the basis that those problems were caused or worsened by participating in our programs, including outcomes based on interactions with our independent OPTAVIA coaches or healthcare providers associated with LifeMD.coaches. Further, customersclients who allege that they were deceived by any statements that we made in advertising or labeling could bring a lawsuit against us under consumer protection laws. From time-to-time we are subject to such allegations and have been involved in such litigation. We may ultimately be unsuccessful in defending ourselves against such claims. Also, defending ourselves against such claims, regardless of their merit and ultimate outcome, may be lengthy and costly, and could adversely affect our brand image, customerclient loyalty and results of operations.

As a result of such possible defects, failures, interruptions or other problems, our services and products could be rendered unreliable or be perceived as unreliable by customers,clients, which could result in harm to our reputation and brand. Any failure of our technology or systems could result in an adverse impact on our business.

Unauthorized users who penetrate our information security systems could misappropriate proprietary or customerclient information or data or cause interruptions to the product offerings on our website. As a result, it may become necessary to expend significant additional amounts of capital and resources to protect against, or to alleviate, problems caused by unauthorized users. These expenditures, however, may not prove to be a timely remedy against unauthorized users who are able to penetrate our information security systems. In addition to purposeful security breaches, the inadvertent transmission of computer viruses could adversely affect our computer systems and, in turn, harm our business.

Existing, proposed or new data privacy legislation and regulations, including interpretations thereof, could also significantly affect our business. For example, data protection and privacy laws have been enacted by the U.S. federal and state governments, including the California Privacy Rights Act, which became effective on January 1, 2023 and replaced the previously established California Consumer Privacy Act (CCPA) and other relevant statutes. These laws typically impose significant penalties for non-compliance. Further, a significant number of states require that customersclients be notified if a security breach results in the disclosure of their personal financial account or other information. Additional states and governmental entities are considering such “notice” laws. In addition, other public disclosure laws may require that material security breaches be reported. If we experience a security breach and such notice or public disclosure is required in the future, our reputation and our business may be harmed. The effects of these new and evolving laws, regulations, and other obligations potentially are far-reaching and may require us to further modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

In addition, if we choose to expand our business internationally in the future, we may be subject to international privacy, data protection, consumer protection and other laws and regulations, which in some cases are more restrictive than those in the United States. For example, the European Union traditionally has imposed stricter obligations under such laws than the United States. Consequently, any future expansion of our international operations may require changes to the ways we collect and use consumer information. In the ordinary course of our business, we collect and utilize proprietary and customerclient information and data. As a result, we have developed systems that are designed to protect consumer information and prevent fraudulent transactions and other security breaches. Privacy concerns among prospective and existing customersclients regarding our use of such information or data collected on our website or through our services and products, such as weight management information, financial data, email addresses and home addresses, could keep them from using our website or purchasing our services or products. We currently face certain legal obligations regarding the manner in which we treat such information and data. Businesses have been criticized by privacy groups and governmental bodies for their use and handling of such information and data. We rely on third-party software products to secure our credit card transactions. Failure to prevent or mitigate fraudulent payment transactions or security breaches or changes in industry standards or regulations may adversely affect our business and operating results or cause us to lose our ability to accept credit cards as a form of payment and result in chargebacks of fraudulently charged amounts. Furthermore, widespread credit card fraud may lessen our customers’clients’ willingness to purchase our products on our website.

The metabolic health and weight management industry is subject to changing consumer demands based, in large part, on the efficacy and popular appeal of weight management programs. The popularity of weight management programs is dependent, in part, on their ease of use, cost and channels of distribution as well as consumer trends, which continue to evolve with the introduction of new technologies and innovations, and, on an ongoing basis, many existing and potential providers of metabolic health and weight loss solutions, including many pharmaceutical firms with significantly greater financial and operating resources than we have, are developing new products and services. The growing popularity of weight loss solutions, such as a drug therapy or GLP-1 medications, which may be perceived to be safe, effective and “easier” than a portion-controlled meal plan has affected the marketplace and could negatively impact our results of operations.

Changes in consumer tastes and preferences away from our pre-packaged food and support and coaching services, and any failure to provide innovative responses to these changes, may have a materially adverse impact on our business, financial condition, operating results, cash flows and prospects. Our success is also dependent on our food innovation including maintaining a robust array of food items and improving the quality of existing items. If we do not continually expand our food items or provide customersclients with items that are desirable in taste and quality, our business could be harmed. Additionally, we anticipate competition from other companies that provide telehealth services associated with weight management, and certain of these competitors have greater financial and other resources than us and have operations in therapeutic or other areas where we may seek to expand in the future.

The metabolic health and weight loss industry is subject to adverse publicity, which could harm our business.

The metabolic health and weight loss industry receives adverse publicity from time to time, and the occurrence of such publicity could harm us, even if the adverse publicity is not directly related to us. Congressional hearings about practices in the weight loss industry have also resulted in adverse publicity and a consequent decline in the revenue of weight loss businesses. Future research or investigative reports or publicity that is perceived as unfavorable or that question certain weight loss programs, products or methods could result in a decline in our revenue. Because of our dependence on consumer perceptions, adverse publicity associated with illness or other undesirable effects resulting from the consumption of our products or similar products by competitors, whether or not accurate, could also damage customerclient confidence in our weight loss program and result in a decline in revenue. Adverse publicity could arise even if the unfavorable effects associated with weight loss products or services resulted from the user’s failure to use such products or services appropriately.

Other aspects of our industry are also subject to government regulation. For example, the labeling and distribution of food products, including dietary supplements, are subject to strict USDA and FDA requirements and food manufacturers are subject to rigorous inspection and other requirements of the USDA and FDA, and companies operating in foreign markets must comply with those countries’ requirements for proper labeling, controls on hygiene, food preparation, and other matters. If federal, state, local, or foreign regulation of our industry increases for any reason, then we may be required to incur significant expenses, as well as modify our operations to comply with new regulatory requirements, which could harm our operating results. Additionally, remedies available in any potential administrative or regulatory actions may include product recalls and require us to refund amounts paid by all affected customersclients or pay other damages, which could be substantial.

Like other manufacturers and distributors of products that are ingested, we face an inherent risk of exposure to product liability claims if the use of our products results in illness or injury. The foods and products that we manufacture and sell in the United States are subject to laws and regulations, including those administered by the USDA and FDA that establish manufacturing practices and quality standards for food products. Product liability claims could have a material adverse effect on our business as existing insurance coverage may not be adequate. Distributors of weight loss food products, including dietary supplements, have been named as defendants in product liability lawsuits from time to time. The successful assertion or settlement of an uninsured claim, a significant number of insured claims or a claim exceeding the limits of our insurance coverage would harm us by adding costs to the business and by diverting the attention of senior management from the operation of the business. We may also be subject to claims that our products contain contaminants, are improperly labeled, include inadequate instructions as to useuse, or include inadequate warnings covering interactions with other substances. Additionally, the manufacture and sale of these products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Product liability litigation, even if not meritorious, is very expensive and could also entail adverse publicity for us and reduce our revenue. Furthermore, the products we manufacture and distribute, or certain components of those products, may be subject to product recalls or other deficiencies. Any negative publicity associated with these actions would adversely affect our brand and may result in decreased product sales and, as a result, lower revenue and profits.

We have been the target of activist stockholder activities in the past. If a new activist investor purchased our stock, our business could be adversely affected because responding to proxy contests and reacting to other actions by activist stockholders can be costly and time-consuming, disruptive to our operations and divert the attention of management and our employees. In addition, perceived uncertainties as to our future direction, strategy or leadership created as a consequence of activist stockholder initiatives may result in the loss of potential business opportunities, harm our ability to attract new investors, customers,clients, employees, suppliers and other strategic partners, and cause our share price to experience periods of volatility or stagnation.

On December 13, 2023, we announced that the Company updated its capital allocation priorities following a thorough review, and decided to discontinue the Company’s quarterly cash dividend. Our Board of Directors periodically reviews our capital allocation strategy to ensure that it is in the best interest of our stockholders and is in compliance with all applicable laws and agreements. Our capital allocation strategy may change from time to time, and we cannot provide any assurance that we will declare dividends in the future or in any particular amounts. The 2023 discontinuation of our dividend payments could have a negative effect on our stock price.

Revenue Recognition: Our revenue is derived primarily from point of sale transactions executed over an e-commerce platform for weight loss, weight management, and other healthy living products. Prior to a change in our Customer Terms & Conditions (Customer T&Cs) in the first quarter of 2023, revenue was recognized upon receipt by the customer and net of discounts, rebates, promotional adjustments, price adjustments, allocated consideration to loyalty programs, and estimated returns. Upon the change of our Customer T&Cs, revenueRevenue is now recognized upon delivery to the shipping carrier and net of discounts, rebates, promotional adjustments, price adjustments, allocated consideration to loyalty programs, and estimated returns.

Our performance obligations are satisfied at a point in time. Revenue from products transferred to customers at a point in time accounted for substantially all of our revenue for the years ended December 31, 2025, 2024, 2023, and 2022. Revenue on these contracts is recognized when the obligations under the terms of the contract with our customer are satisfied.2023.

We reduce the transaction price for customer reward programs and certain incentive offerings including pricing arrangements, promotions, and incentives that represent variable consideration and separate performance obligations. The Company accounts for sales rewards that provide the customer with a material right as a separate performance obligation of the transactions, and therefore allocates consideration between the initial sale of products and the customer reward program and incentive offering. The Company discontinued its reward program in July 2025.

We expense OPTAVIA coach compensation and credit card fees during the period in which the corresponding revenue is earned. These costs are recorded in selling, general and administrative expense in our Consolidated Statements of Operations.

Medifast (NYSE: MED) is the 40+ year old health and wellness company known for its habit-based andscience-backed, coach-guided lifestyle solutionsystem. OPTAVIADesigned whichto provideshelp peopleaddress withthe challenges of metabolic dysfunction, the Company’s holistic approach integrates personalized plans, scientifically developed products and a simple,framework yetfor habit creation — all supported by a dedicated network of independent coaches. Driven to improve metabolic health through advanced science and comprehensive approachbehavioral support, Medifast has introduced Metabolic Synchronization™, a breakthrough science that reverses metabolic dysfunction through a targeted reset of the body’s metabolism. Research shows the Company’s comprehensive system activates strong and targeted fat burn to addressenhance obesitymetabolic health and supportbody acomposition healthyby life.reducing OPTAVIAvisceral providesfat, unparalleledpreserving coachinglean support along with community, tailored nutritionmass and healthyprotecting habitsmuscle. andBacked empowersby peoplemore tothan master40 their weight loss journey through each stageyears of life.clinical Throughheritage, the company’s collaboration with national virtual primary care provider LifeMD® and its affiliated medical group, customers now have access to GLP-1 medications where clinically appropriate. The CompanyMedifast continues to innovate and build upon its scientific and clinical heritage to fulfilladvance its mission of offering the world Lifelong Transformation, Making a Healthy Lifestyle Second Nature. Our product sales accounted for approximately 96.8%,96.4%, 97.5%96.8% and 97.2%97.5% of our revenues in each of 2025, 2024, 2023, and 2022,2023, respectively. We review and analyze a number of key operating and financial metrics to manage our business, including the number of active earning OPTAVIA coaches and average quarterly revenue generated per active earning OPTAVIA coach. The number of active earning OPTAVIA coaches decreased by approximately 34.1%40.6% to 27,10016,100 asfor ofthe quarter ended December 31, 20242025 from the quarter ended December 31, 2023,2024, and the average revenue per active earning OPTAVIA coach was $4,391increased 6.2% to $4,664 for the quarter ended December 31, 2025 from the quarter ended December 31, 2024.

Our OPTAVIA business unit accounted for all of our revenues for each the years ended 2024,2025, 20232024 and 2022.2023. We have operated and reported as a single sales segment, OPTAVIA, since 2018. By maintaining our commitment to building capabilities in the areas that matter most to our OPTAVIA coaches and customersclients within the OPTAVIA channel, we believe our strong financial foundation, flexible model and variable cost structure coupled with disciplined growth initiatives position Medifast for the current environment and the future.

Revenue: Revenue decreased $469.6$216.7 million, or 43.8%,36.0%, to $385.8 million in 2025 from $602.5 million in 2024 from $1.1 billion in 2023.2024. The year-over-year decline in revenue was primarily driven by a decrease in the number of active earning OPTAVIA coaches and lower coach productivity, and a $9.1 million impact from a timing difference related to changes in the Company’s sales order terms and conditions with its customers realized in the first quarter of 2023.coaches. The total number of active earning OPTAVIA coaches for the three months ended December 31, 20242025 decreased to 27,10016,100 from 41,10027,100 for the corresponding period in 2023,2024, a decrease of 34.1%.40.6%. The number of active earning coaches has been trending downward year-over-year since the first quarter of 2023. The decrease in the number of active earning coaches was driven by continued pressure with client acquisition reflecting broader challenges in the operating environment, including rapid adoption of GLP-1 medications for weight loss. The average revenue per active earning OPTAVIA coach decreasedincreased 5.5%6.2% to $4,664 for the three months ended December 31, 2025 from $4,391 for the three months ended December 31, 2024 from $4,648 for the three months ended December 31, 2023.2024. The decreaseincrease in the revenue per active earning OPTAVIA coach for the quarter was driven by continuedgreater pressurealignment onof customerour acquisition.network of coaches, prioritizing productive coaches and efficient coach network structures.

Costs of Salessales: Cost of sales decreased $138.4$47.2 million, or 46.7%,29.9%, to $110.6 million in 2025 from $157.8 million in 2024 from $296.2 million in 2023.2024. The decrease in cost of sales was primarily driven by an approximately $123.9$54.9 million decrease due to lower sales volumes,volumes $5.3and a $2.6 million decrease due to restructuring of external manufacturing agreements that did not recur in inventory2025, donations,partially andoffset $4.7by $8.0 million of efficienciesloss inof leverage on fixed costs and $3.0 million of inventory management.reserves which are primarily related to the reformulation of the Essential product line.

Gross Profitprofit: In 2024,2025, gross profit decreased $331.2$169.4 million, or 42.7%,38.1%, to $275.2 million from $444.6 million from $775.9 million in 2023.2024. The decrease in gross profit was primarily attributable to lower revenue. As a percentage of sales, gross profit increaseddecreased 140250 basis points to 71.3% for 2025 from 73.8% for 2024 fromprimarily 72.4%driven forby 2023.the loss of leverage on fixed costs.

Selling, Generalgeneral and Administrativeadministrative: Selling, general and administrative (“SG&A”) expenses were $289.4 million in 2025, a decrease of $152.3 million, or 34.5%, as compared to $441.7 million in 2024, a decrease of $207.7 million, or 32.0%, as compared to $649.4 million in 2023, primarily due to a $188.7$85.1 million decrease in OPTAVIA coach compensation due to lower sales volumes,volumes and a $13.8decrease in the number of active earning coaches, a $13.4 million decrease in employeecompany-led compensation,marketing related expenses, a $9.7$12.5 million decrease for supply chain optimization that did not recur in 2025, a $9.3 million net decrease in employee compensation resulting from the realignment of the employee base to lower revenue levels partially offset by one-time restructuring charges, a $7.5 million decrease for medically supported weight loss expenses that did not recur in 2025, and a $5.7 million decrease in creditcoach card fees, and a $7.1 million decrease in costs for coach-related events. These decreases are partially offset by $22.9 million of customer led acquisition costs and $12.5 million of supply chain optimizationevent costs. As a percentage of sales, SG&A expenses were 73.3%75.0% for 20242025 as compared to 60.6%73.3% for 2023,2024, primarily due to a 330340 basis pointpoints increaseof forloss ourof companyleverage ledon acquisitionfixed efforts,costs aand 330300 basis pointpoints increase forof loss of leverage on employee compensation, apartially 160offset basis point increase due to loss of leverage on fixed costs, andby a 200 basis point increasedecrease due to supply chain optimization efforts.that did not recur in 2025, 130 basis points of reduced company-led marketing related expenses, and 120 basis points of medically supported weight loss expenses that did not recur in 2025. SG&A expenses included research and development costs of $4.6$4.3 million and $4.6 million for 20242025 and 2023,2024, respectively, in connection with the development of new products and programs and clinical research activities.

Income (loss) from operations: Income (loss) from operations in 20242025 decreased $123.5$17.1 million to $2.9a $14.2 million loss from $126.4operations, compared to income from operations of $2.9 million in 20232024 primarily as a result of decreased gross profit, partially offset by decreased SG&A expenses. Income (loss) from operations as a percentage of sales decreased to 0.5%a 3.7% loss from operations as a percentage of revenue for 20242025 as compared to 11.8%0.5% income from operations as a percentage of revenue for 20232024 due to the factors described above in the explanations for gross profit and SG&A expenses.

Provision for income taxes: For 2024,2025, the Company recorded $1.7$13.0 million in income tax expense, an effective tax rate of 44.8%,negative 231.1%, as compared to $29.4$1.7 million in income tax expense and an effective tax rate of 22.8%,44.8%, for 2023.2024. The increasedecrease in the effective tax rate for 20242025 as compared to 20232024 was primarily driven by the 18.3%214.0% impact of statea taxesvaluation andallowance on the 23.3%net deferred tax asset balance, the 34.5% impact of the tax shortfall forfrom stock compensation, and the 23.5% impact of state taxes, partially offset by the 17.9%26.2% reductionincrease from the impact of research and development tax credits, all of which were magnified by the loss position in the current period versus the near break-even pre-taxbreakeven income position in the currentprior year.

Non-GAAP adjusted netNet income (loss): Net loss was $20.2$18.7 millionmillion, or $1.84a loss of $1.70 per diluted shareshare, forin 20242025 as compared to $105.2income millionof $2.1 million, or $9.64$0.19 per diluted shareshare, forin 2023.2024. The period-over-period changes were driven by the factors described above in the Non-GAAP explanations from operations.operations, Referother toincome, theand section titled “Non-GAAP Financial Measures” belowprovision for aincome reconciliation of each of Non-GAAP financial measures to its most comparable GAAP financial measure.taxes.

The Company had stockholders’ equity of $210.1$198.9 million and working capital of $158.7 million at December 31, 2025 compared with $210.1 million and $150.2 million at December 31, 2024 compared with $201.5 million and $131.7 million at December 31, 2023.2024. The $8.6$11.2 million net increasedecrease in stockholders’ equity reflects $2.1the $18.7 million in net incomeloss for 20242025 and $7.4$7.6 million for shared-based compensation offset by other equity transactions described in the Consolidated Statements of Changes in Stockholders’ Equity included in our consolidated financial statements included in this report. The Company’s cash, cash equivalents and investment securities increased to $167.3 million at December 31, 2025 from $162.3 million at December 31, 2024 from $150.0 million at December 31, 2023.2024. In December 2023, the Company’s board of directors determined to change the Company’s capital allocation priorities and discontinued the Company’s quarterly cash dividend to support investments in technology and future growth. The decision to declare and pay dividends in the future will depend on general business conditions, the effect of such payments on our financial condition and other factors the Company’s board of directors consider relevant.

Net cash used in investing activities was $26.5$7.9 million for 20242025 as compared to $61.0$26.5 million for 2023.2024. This year-over-year change resulted primarily from a $22.3$54.6 million increase in proceeds from sale and maturities of investment securities andpartially offset by a $13.2$37.8 million decreaseincrease in cash used in the purchasepurchases of investment securities for 20242025 as compared to 2023.2024.

Net cash used in financing activities decreased $78.3$1.0 million to $0.6 million for 2025 from $1.5 million for 2024 from $79.8 million for 2023.2024. This decrease was primarily due to a $72.3$0.5 million decrease in cash dividends paid to stockholders, a $3.6 million decrease in stock repurchases,stockholders and a $2.5$0.5 million decrease in net shares repurchased for employee taxes for 20242025 as compared to 2023.2024.

The Company is currently investing in new growth initiatives which have the potential to impact liquidity in future periods. The Company’s current growth initiatives, which are primarilyfocused comprisedon ofadvancing Company-ledits marketingbreakthrough activities,science newand product developmentofferings andthat thereverses Company’smetabolic Medically Supported Weight Loss collaboration with LifeMD, do not require any material contractual commitments or capital expenditures in future periods. Since the future costs of these endeavorsdysfunction, are variable in nature and will be scaled at the discretion of management,management. weWe do not believe there is any significant impact on our liquidity or capital resources In pursuing its business strategy, the Company may require additional cash for operating and investing activities. The Company expects future cash requirements, if any, to be funded from operating cash flow and financing activities.resources.

(b)The Company has unconditional purchase obligations primarily for inventoriesinventories, consulting services, insurance, and outsourced information technology.

Certain information in this report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Act”). Forward-looking statements generally can be identified by use of phrases or terminology such as “intend,” “anticipate,” “expectexpect,” or other similar words or the negative of such terminology. Similarly, descriptions of Medifast's objectives, strategies, plans, goals, or targets contained herein are also considered forward-looking statements. These statements are based on the current expectations of our management of Medifast and are subject to certain events, risks, uncertainties, and other factors. These risks and uncertainties include, but are not limited to, those described in our 2025 Form 10-K and those described from time to time in our future reports filed with the SEC. Although Medifast believes that the expectations, statements, and assumptions reflected in these forward-looking statements are reasonable, it cautions readers to always consider all of the risk factors and any other cautionary statements carefully in evaluating each forward-looking statement in this report. All of the forward-looking statements contained herein speak only as of the date of this report. We undertake no obligation to update any information contained in this report or to publicly release the results of any revisions to forward-looking statements to reflect events or circumstances of which we may become aware after the date of this report.

Medifast, Inc. (“Medifast,” the “Company,” “we” or “us”) is the 40+ year old metabolic health and wellness company known for its science-backed, coach-guidedcomprehensive lifestylemetabolic health system. In October 2025, Medifast announced its strategic transformation, unveiling its focus on holistic metabolic health. The Company started 2026 by moving from transformation to execution, leveraging its extensive experience in structured weight loss coupled with recent scientific research and enhanced product offerings to address the needs of a broader metabolic health market. In July 2026, Medifast announced the launch of Trilivy, a comprehensive metabolic health system uniquely designed to support healthy lifestyle change. The transition from OPTAVIA® to a new brand with the launch of Trilivy represents an evolution of the company’s vision, platform, and purpose, expanding beyond traditional weight loss to address the broader metabolic health challenges impacting more than 90% of U.S. adults today. Medifast’s approach focuses on addressing the root cause of metabolic dysfunction. This strategic shift targets a larger and what is believed to be a more sustainable market, focusing on a long-term growth strategy designedintended to guide the Company over the next decade by aligning science, products, and coaching with increasing demand for new solutions as awareness of metabolic dysfunction grows.

This growth strategy iswill fueledinitially bybe focused on improving coach productivity and expanding our coach network. We operate a well-capitalized business with strong effective leadership, a powerful lifestyle solution,solution and a business model that has impacted over 3 million lives and, for the quarter ended MarchJune 31,30, 2026, had a network of approximately 14,00011,700 active earning independent coaches. Medifast stands at the forefront of evidence-based wellness solutions, and its coach-first model creates significant opportunities for coaches’ individual businesses. This is designed to create a “flywheel effect” as new clients join, driving coach productivity, which in turn attracts new active earning coaches, leading to even more new clients and further productivity.

Our scientifically developed products and habit creation framework, reinforced by coaches and community support, provide proven health benefits and serve as a promising foundation to develop a comprehensive metabolic health system. We continuously innovate and build upon our scientific and clinical heritage to fulfill our mission of Lifelonglifelong Transformation,transformation, Makingthrough ametabolic Healthyscience Lifestyleand Secondhuman Nature®.connectionTM. Coaches provide unparalleled support along with community, nutrition, and healthy habits. In a world where health and well-being can often be a difficult and solitary journey, our comprehensive system offers intensely personalized support to individuals seeking to transform their health. The goal of this holistic approach is to empower people to master their metabolic health and improve body composition, beginning with a quality weight loss journey and offering the flexibility to achieve it on their own terms. TheAt the heart of the metabolic health system is designeda forpowerful realthree-part lifedelivery model that helps individuals build healthier habits, unlock their potential and builtachieve aroundoptimal fourmetabolic key componentshealth:

Independent Coaches & Community: Coaches provide individualized support and guidance to clients on their path to optimal metabolic health and well-being.well-being and a community of like-minded individuals offer real-time connection and support.

ProductsScience & PlansProducts: Clinically proven plans and scientifically developed products, backed by dietitians, scientists, and physicians.

In October 2025, the Company introduced Metabolic Synchronization® — a breakthrough science that reverses metabolic dysfunction through a targeted reset of the body’s metabolism. Research demonstrates that the Company's comprehensive system improves metabolic health by activating strong and targeted fat burn,burn (i.e., by reducing bad visceral fat), preserving lean mass, and protecting muscle.1 This approach results in healthy, quality weight loss that extends beyond the scale, ultimately empowering individuals to achieve their health goals.

Science has always been integral to Medifast’s identity. Through ongoing research and compelling data that elevate the science behind the Company’s plans and innovative products, the Company is energizing its coach community to empower individuals to take control of their metabolic health. LookingIn ahead,July Medifast2026, plansthe tocompany launchintroduced significantthe productTrilivy innovations,Reset incorporatingFueling next-generationline, ingredientsenhanced forwith MetaVantage Technology™, which further supports metabolic enhancement.health by helping reduce waist circumference while also supporting normal fat metabolism and healthy insulin function.2 We expect to bring anthe updated product line fully to market this year.quarter. These upcoming innovations are designedexpected to further strengthen the Company’s offerings to help clients achieve optimal metabolic health.

While GLP-1 medication usage continues to accelerate, medication alone may not be adequate.adequate for achieving sustainable, long-term health outcomes without the integration of comprehensive lifestyle modifications, nutritional guidance, and behavioral support. Recent research indicates that approximately one-third of users discontinue the medication after six months, and up to 74% stop after a year.2year.3 Furthermore, studies show that two-thirds of weight lost on GLP-1 medications is typically regained within 12 months of stopping treatment, with cardiometabolic benefits often reversing as well.3well.4 GLP-1 medications can be effective tools, but lasting results require more than just medication—they demand holistic behavior change.

The need for change extends beyond the obesity epidemic, as over 90% of Americans are metabolically unhealthy,4unhealthy,5 impacting biomarkers of poor health, energy regulation, and weight management. HealthyHealthy, quality weight loss that prioritizes burning fat while preserving muscle is essential for improving metabolic health but it demands commitment, consistency, and support. Given that GLP-1 medications are shown to be most effective when combined with lifestyle changes, we see strong alignment with our expertise in helping people create durable habits through coach-supported, behavior-based systems. Our experience in guiding individuals towards change through habit-based systems, supported by a coach, is highly compatible with the demonstrated effectiveness of these medications when paired with lifestyle modifications. Coaches remain central to everything we do, fostering a continuous cycle of growth by attracting and activating new clients, some of whom go on to become coaches themselves.

InFinding allnew cases,clients theand reactivating former clients remains an important area of focus for our business and our coaches. We believe our coach-based model is scalable, drives both client success and growth, and represents a key competitive advantage. The coaching model is anchored on clients’ needs, helping place them into supportive and energized health and wellness communities that share similar challenges and goals. With a coach, clients successfully lost 10 times more weight and 17 times more fat than those attempting to lose weight on their own.5own.6 Coaches deliver highly tailored and personalized support and motivation, sharing their passion for healthy living and lifestyle transformation. Despite their diverse geographies and backgrounds, our coaches form a tight-knit community that supports, encourages, and inspires one another.

Our coaches are independent contractors, not employees, who support clients and market our products and services to friends, family, and other people in their communities, primarily through word-of-mouth, email, and social media channels including Facebook, Instagram, TikTok, X (formerly known as Twitter), and video conferencing platforms. Products are shipped directly to clients; coaches do not handle or deliver products. This model enables our coaches to focus on client support and encouragement without having to manage inventory and allows them to maintain an arms-length transactional relationship. We provide economic incentives designed to support long-term coach success, which we believe contributes to their financial wellness, and offers the opportunity to improve their personal finances while elevating the health trajectories of those they support.6support.7 In 2025,the third quarter of 2026, the Company launched a new programscompensation thatplan offeralong with a clearnew roadmap,coach-developed incentives,Trilivy Coach Hub training platform for coaches. The new compensation plan and recognitiontraining platform are designed to helpdevelop coachesand growduplicate theirhighly businesses.successful Onecoaches, suchwhich initiativehas ishistorically thebeen a significant driver of growth. The new EDGEcompensation program thatplan emphasizes progressive business building behaviors and rewards, designed to be easily adoptable by new and experienced coaches alike. It prioritizes leading indicators of success, not just outcomes or ranking. WhileThe thecompensation mainplan goalsand oftraining theplatform program are totogether provide a structured approach for coaches to maximize their potential, improve their leadership skills, expand their reach, and achieve recognition for their progress,progress. We expect that simplifying the fundamentals of our products and programs, and also the way we alsotalk expectabout itthem, towill increase client acquisition and the conversion of clients into new coaches.

Like many product-focused companies, we are exposed to market risks from changes in commodity, or other raw material prices. An inflationary economy could impact our cost structure and put pressure on consumer spending. Increases in commodity prices, food costs, or tariffs,tariffs could affect the global and U.S. economies and could also adversely impact our business, financial condition, or results of operations. Additionally, changes in tariff regulations, particularly those involving trade between the United States and key global markets, may affect the cost and availability of certain raw materials. While the full impact of potential tariff policy changes remains uncertain, we remain attentive to policy developments, and we may reassess our supply chain and investment strategies in response to further volatility in the trade environment.

Our variable cost structure can be utilized to adapt to changing market conditions with potential actions including adjustments to our manufacturing, distribution, and client support infrastructure. As a response, we may periodically take incremental pricing actions to offset supply chain costs, increases in tariff-related costs, and inflationary pressures. In addition, prolonged tariff uncertainty may influence consumer sentiment and purchasing behavior, particularly in discretionary spending categories. Fluctuations in consumer confidence, driven by economic concerns or anticipated price increases, could further reduce demand for our products.

The metabolic health and weight loss industry is very competitive and encompasses a multitude of metabolic health and weight loss products and programs. These include a wide variety of commercial metabolic health and weight loss programs, medications, pharmaceutical products, surgical interventions, books, self-help diets, dietary meal replacements, protein-fortified consumables, and appetite suppressants as well as digital tools, app-based health and wellness monitoring solutions, and wearable trackers. The metabolic health and weight loss market is served by a diverse array of competitors. Potential clients seeking to manage their metabolic health or weight can turn to traditional center-based competitors, online diet-oriented sites, self-directed dieting and self-administered products such as prescription medications, over-the-counter medications and supplements, as well as medically supervised programs. Recently, it became clear that medicalMedical weight loss solutions, such as GLP-1 medications, have become an increasingly key component of the overall health and wellness ecosystem, and the recent surging acceptance and popularity of these weight loss medications serve as another major competitor, as these products have prompted a huge change in the way that consumers think about weight loss and lifestyle modification solutions in general. We recognize that these weight loss medications have attracted significant attention from the market and pose a threat to our interactions with our traditional client base. Importantly, the efficacy claims of GLP-1 medications for weight loss are based specifically on their incorporation of lifestyle changes that include a reduced calorie diet and increased physical activity. As a result, under Medifast’s offerings, weight loss medications can be an important element that fits into the overall tailored lifestyle plans that also include coaching, community support, nutritionally balanced meals, and exercise.

•Promotes a unified Habits of Health training system that aligns its coach leaders around a common mission of Lifelonglifelong Transformation,transformation, Makingthrough ametabolic Healthyscience Lifestyleand Secondhuman Nature.connection.

Medifast has perfected our model over the last 40+45 years, with habits, coaches, and community at the core, and we will continue to innovate as the industry evolves.

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management develops, and changes periodically, these estimates and assumptions based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. Our significant accounting policies are described in Note 2 to the audited consolidated financial statements included in the 2025 Form 10-K. There were no significant changes in our critical estimates or policies during the first threesix months of 2026.

Our product sales accounted for approximately 98%96% of our revenues for each of the three months ended MarchJune 31,30, 2026 and 2025.2025, respectively, and approximately 96% and 97% for the six months ended June 30, 2026 and 2025, respectively.

Revenue: Revenue decreased $39.7$29.2 million, or 34.3%,27.6%, to $76.0$76.4 million for the three months ended MarchJune 31,30, 2026 from $115.7$105.6 million for the three months ended MarchJune 31,30, 2025. The decline in revenue for the three months ended MarchJune 31,30, 2026 was primarily driven by a decrease in the number of active earning coaches to 14,00011,700 asfor ofthe Marchthree 31,months ended June 30, 2026 from 25,40022,800 asfor the three months ended June 30, 2025. Revenue decreased $68.9 million, or 31.1%, to $152.4 million for the six months ended June 30, 2026 from $221.3 million for the six months ended June 30, 2025. The decline in revenue for the six months ended June 30, 2026 was primarily driven by a decrease in the number of Marchactive 31,earning 2025.coaches. The decrease in active earning coaches for the quarter,coaches, which has been trending downward year-over-year since the first quarter of 2023, was driven by continued pressure with client acquisition reflecting broader challenges in the operating environment, including rapid and continued adoption of GLP-1 medications for weight loss.loss, and prioritizing productive coaches and efficient coach network structures. While the Company continues its transformation to focus on metabolic health, we expect the number of active earning coaches to continue to decline in 2026. The average revenue per active earning OPTAVIA coach was $5,432$6,529 for the three months ended MarchJune 31,30, 20262026, a 41.0% increase compared to $4,556$4,630 for the three months ended MarchJune 31,30, 2025. TheWe believe that the increase in revenue per active earning coach for the three months ended June 30, 2026 was driven by greater alignment of our network of coaches, prioritizing productive coaches and efficient coach network structures.

Cost of sales: Cost of sales decreased $7.2$5.9 million, or 22.9%,20.5%, to $24.3 million from $31.5$23.0 million for the three months ended MarchJune 31,30, 2026 from $28.9 million for the correspondingthree periodmonths inended June 30, 2025. The decrease in cost of sales for the three months ended MarchJune 31,30, 2026 was primarily duedriven to $10.4 million ofby lower sales volumes. Cost of sales decreased $13.1 million, or 21.7%, to $47.3 million from $60.4 million for the six months ended June 30, 2026. The decrease in cost of sales for the six months ended June 30, 2026 was primarily driven by a $18.0 million decrease attributable to lower volumes, partially offset by $3.2$4.7 million ofattributable to loss of leverage on fixed costs.

Gross profit: For the three months ended March 31, 2026, grossGross profit decreased $32.5$23.2 million, or 38.6%,30.3%, to $51.8 million from $84.2$53.4 million for the three months ended MarchJune 31,30, 2026 from $76.6 million from the corresponding period in 2025. The decrease in gross profit for the three months ended MarchJune 31,30, 2026 was primarily attributabledue to lower revenue.revenue, partially offset by lower cost of sales. As a percentage of revenue, gross profit wasdecreased 68.1%270 basis points to 69.9% for the three months ended MarchJune 31,30, 2026 comparedfrom to 72.8%72.6% for the threecorresponding period in 2025 primarily due to loss of leverage on fixed costs. Gross profit decreased $55.7 million, or 34.6%, to $105.2 million from $160.9 million for the six months ended MarchJune 31,30, 2025. The decrease in gross profit isfor the six months ended June 30, 2026 was due to lower revenue, partially offset by lower cost of sales. As a percentage of revenue, gross profit decreased 370 basis points to 69.0% for the six months ended June 30, 2026 from 72.7% for the corresponding period in 2025 primarily attributabledue to the loss of leverage on fixed costs.

Selling, general, and administrative (“SG&A”): SG&A expenses were $55.1$57.7 million for the three months ended MarchJune 31,30, 2026, a decrease of $30.5$20.0 million, or 35.6%,25.7%, as compared to $85.5$77.7 million from the corresponding period in 2025. The decrease in SG&A expenses decreased for the three months ended MarchJune 31,30, 2026 was primarily due to a $16.2$12.6 million decrease in coach compensation on lower volume and fewer active earningsearning coaches, a $5.6$2.3 million decrease in company-ledemployee marketing related expenses, a one-time $2.2 million gain on the sale of our Maryland Distribution Center buildingsalary and landbenefit previously classified as held for sale,expenses, and a $2.0 million decrease in employeeCompany-led compensationmarketing resulting from the realignment of the employee base to lower revenue levels.costs. As a percentage of revenue, SG&A expenses were 72.4%75.6% for the three months ended MarchJune 31,30, 2026 as compared to 73.9%73.6% for the corresponding period in 2025. The decrease in SG&A expenses as a percentage of revenue increased for the three months ended MarchJune 31,30, 2026 wasprimarily reflecting approximately 290 basis points associated with loss of leverage on fixed costs and 60 basis points associated with the launch of our new Trilivy Reset product line, partially offset by a 190 basis point reduction related to Company-led marketing. SG&A expenses included research and development costs of $1.1 million for both the three months ended June 30, 2026 and 2025, in connection with the development of new products and plans, and clinical research activities. SG&A expenses were $112.8 million for the six months ended June 30, 2026, a decrease of $50.4 million, or 30.9%, as compared to $163.2 million from the corresponding period in 2025. SG&A expenses decreased for the six months ended June 30, 2026 primarily due to approximatelya 470$28.7 basismillion pointsdecrease ofin decreasedcoach company-ledcompensation on lower volume and fewer active earning coaches, a $7.6 million decrease in Company-led marketing relatedcosts, expensesa $4.3 million decrease in employee salary and 240benefit basisexpenses, pointsand ofa $2.2 million one-time gain on the sale of our Maryland Distribution Center building and land previously classified as held for sale,sale. partiallyAs offseta bypercentage 620of revenue, SG&A expenses were 74.0% for the six months ended June 30, 2026 as compared to 73.8% for the corresponding period in 2025 primarily reflecting 430 basis points ofassociated to loss of leverage on fixed costscosts, duepartially offset by a 340 basis point reduction related to lowerCompany-led salesmarketing volume.costs. SG&A expenses included research and development costs of $1.1$2.1 million and $2.2 million for both the threesix months ended MarchJune 31,30, 2026 and 2025, respectively, in connection with the development of new products,products programsand plans, and clinical research activities.

Loss from operations: TheFor the three months ended June 30, 2026, the Company’s loss from operations for the three months ended March 31, 2026 was $3.3 million, a decrease of $2.0$4.3 million as compared to loss from operations of $1.3$1.1 million for the corresponding period in 2025, a change of $3.3 million, primarily as a result of decreased gross profit partially offset by decreased SG&A expenses. Loss from operations as a percentage of revenue forFor the three months ended MarchJune 31,30, 2026 wasthe 4.3% as compared toCompany’s loss from operations as a percentage of revenue was 5.7% as compared to 1.0% for the corresponding period in 2025, due to the factors described above impacting gross profit and the factors impacting SG&A expenses. For the six months ended June 30, 2026, the Company’s loss from operations was $7.6 million as compared to $2.3 million for the corresponding period in 2025, a change of $5.3 million, primarily as a result of decreased gross profit and the factors impacting SG&A expenses. Loss from operations as a percentage of revenue was 5.0% for the six months ended June 30, 2026 compared to 1.1% for the corresponding period in 2025 due to the factors described above impacting revenuegross profit and the factors impacting SG&A expenses.

Other income: Other income for the three months ended MarchJune 31,30, 2026 was $1.4$1.3 million, a decrease of $0.4$2.6 million, or 24.3%,66.1%, as compared to $1.8$3.9 million for the corresponding period in 2025. The decrease in other income for the three months ended MarchJune 31,30, 2026 was primarily due to unrealizeda gains$2.6 million gain on our investment in LifeMD common stock inthat occurred during the priorcorresponding yearperiod period.in 2025. The Company sold its investment in LifeMD during the second quarter of 2025. Other income for the six months ended June 30, 2026 was $2.7 million, a decrease of $3.0 million, or 53.1%, as compared to $5.7 million for the corresponding period in 2025. The decrease in other income for the six months ended June 30, 2026 was primarily due to a $3.2 million gain on our investment in LifeMD common stock that occurred during the corresponding period in 2025.

Provision for income taxes: The Company computes its income tax provision for interim periods in accordance with ASC 740. For interim periods during the year ended December 31, 2025, the Company calculated an annual effective tax rate and applied that rate to year-to-date ordinary income or loss to calculate its quarterly income tax provision (“AETR Approach”). Due to the existence of a full valuation allowance against its deferred tax assets recorded as of December 31, 2025, the Company did not apply the AETR Approach for the period ended March 31, 2026. Instead, the Company calculatedcalculates income tax expense for the interim periodperiods based on actual results for the quarter. As a result, the Company’s income tax provision for the three months ended March 31, 2026 reflects discrete items, primarily state income taxes. Income tax expense for the three months ended MarchJune 31,30, 2026 was $0.2$0.1 million, an effective rate of negative 9.3%,3.6%, as compared to $1.3$0.4 million for the three months ended MarchJune 31,30, 2025, an effective rate of 246.8%.13.7%. The decrease in the effective tax rate was primarily driven by the increased loss incurred during the three months ended June 30, 2026 and the valuation allowance on the net deferred tax assets. Income tax expense for the six months ended June 30, 2026 was $0.3 million, an effective rate of negative 5.9%, as compared to $1.7 million for the six months ended June 30, 2025, an effective rate of 49.8%. The decrease in the Marcheffective 31,tax rate was primarily driven by the increased loss incurred during the six months ended June 30, 2026 period and the valuation allowance on the net deferred tax assets. The Company will continue to assess the realizability of its deferred tax assets and the need for a valuation allowance on a quarterly basis. Should the valuation allowance be released in whole or in part, the Company expects to return to applying an estimated annual effective tax rate in future interim periods.

Net income (loss): Net loss was $2.1$3.1 million, or $0.19$0.28 loss per diluted share for the three months ended MarchJune 31,30, 2026 as compared to net lossincome of $0.8$2.5 million, or $0.07$0.22 per diluted share, for the three months ended MarchJune 31,30, 2025. Net loss was $5.2 million, or $0.47 per diluted share for the six months ended June 30, 2026, as compared to net income of $1.7 million, or $0.15 per diluted share for the six months ended June 30, 2025. The period-over-period changes were driven by the factors described above in the section titled “Loss from operations.”above.

The Company had stockholders’ equity of $197.7$196.4 million and working capital of $160.4$160.5 million at MarchJune 31,30, 2026 as compared with $198.9 million and $158.7 million at December 31, 2025, respectively. The $1.2$2.5 million net decrease in stockholders’ equity was primarily driven by a net loss of $2.1$5.2 million for the threesix months ended MarchJune 31,30, 20262026, partially offset by $1.9$3.7 million for share-based compensation. The Company’s cash, cash equivalents,equivalents and investmentsinvestment securities increased to $169.8 million at June 30, 2026 from $167.3 million at December 31, 2025 to $168.9 million at March 31, 2026.2025.

Net cash usedprovided inby financingoperating activities increased by $0.3$1.9 million to $0.9$2.0 million for the threesix months ended MarchJune 31,30, 2026 from $0.6less than $0.1 million for the threesix months ended MarchJune 31,30, 2025. This increase was2025 primarily duedriven toby a $0.4$14.9 million increase inattributable netto sharesaccounts repurchasedpayable forand employeeaccrued expenses and a $5.9 million increase from income taxes, partially offset by a $0.1$13.2 million decrease related to changes in inventory balances and a $6.9 million decrease in cashnet dividends paid to stockholders.income.

In pursuing its business strategy, the Company may require additional cash for operating and investing activities. The Company expects future cash requirements,requirements in both the short term and the long term, if any, to be funded from operating cash flowflow, and financing activities.activities as warranted by management’s investment and leverage strategies.

From time to time, the Company evaluates potential acquisitions that complement our business. If consummated, any such transactions may use a portion of our working capital or require the issuance of equity or debt. We have no present understandings, commitments,commitments or agreements with respect to any material acquisitions.