Cardiff Lexington Corp

Previous wording

Revenue. For the three months ended June 30, 2024, and 2023, all of our revenue was generated by our healthcare segment, which generates revenue through a full range of diagnostic and surgical services. Our total revenue decreased by $1,033,542, or 30.72%, to $2,330,964 for the three months ended June 30, 2024 from $3,364,506 for the three months ended June 30, 2023. The decrease in revenue is primarily attributable to the mix of services provided during the quarter with less higher revenue surgical procedures performed and an increase in the lower revenue pain management treatments being performed for approximately the same number of patient visits in the current three month period as compared to the same three month period in the prior year.

Current wording

Revenue. For the three months ended September 30, 2024, and 2023, all of our revenue was generated by our healthcare segment, which generates revenue through a full range of diagnostic and surgical services. Our total revenue decreased by $2,050,218, or 60.20%, to $1,355,641 for the three months ended September 30, 2024 from $3,405,859 for the three months ended September 30, 2023. The decrease in revenue is primarily attributable to the following factors:

Previous wording

Cost of sales. Our cost of sales consists of surgical center and laboratory fees, physician and professional fees, salaries and wages and medical supplies. Our total cost of sales decreased by $288,679, or 26.69%, to $793,010 for the three months ended June 30, 2024 from $1,081,689 for the three months ended June 30, 2023. This decrease is mainly attributable to decreases in salaries and wages, surgical contracted services and laboratory fees.

Current wording

Cost of sales. Our cost of sales consists of surgical center and laboratory fees, physician and professional fees, salaries and wages and medical supplies. Our total cost of sales increased by $449,178, or 81.46%, to $1,000,601 for the three months ended September 30, 2024 from $551,423 for the three months ended September 30, 2023. As a percentage of revenue, cost of sale increased from 16.19% for the three months ended September 30, 2023 to 73.81% for the three months ended September 30, 2024. This increase is mainly attributable to increases in laboratory fees.

Previous wording

Gross profit. As a result of the foregoing, our total gross profit decreased by $744,863, or 32.63%, to $1,537,954 for the three months ended June 30, 2024 from $2,282,817 for the three months ended June 30, 2023. Our total gross margin (as a percent of revenue) decreased from 67.85% for the three months ended June 30, 2023 to 65.98% for the three months ended June 30, 2024.

Current wording

Gross profit. As a result of the foregoing, our total gross profit decreased by $2,499,396, or 87.56%, to $355,040 for the three months ended September 30, 2024 from $2,854,436 for the three months ended September 30, 2023. Our total gross margin (as a percent of revenue) decreased from 83.81% for the three months ended September 30, 2023 to 26.19% for the three months ended September 30, 2024.

Previous wording

Depreciation expense. Our depreciation expense was $3,366, or 0.14% of revenue, for the three months ended June 30, 2024, as compared to $3,365, or 0.10% of revenue, for the three months ended June 30, 2023.

Current wording

Depreciation expense. Our depreciation expense was $3,365, or 0.25% of revenue, for the three months ended September 30, 2024, as compared to $3,365, or 0.10% of revenue, for the three months ended September 30, 2023.

Previous wording

Selling, general and administrative expenses. Our selling, general and administrative expenses consist primarily of accounting, auditing, legal and public reporting expenses, personnel expenses, including employee salaries, bonuses plus related payroll taxes and stock compensation expense, advertising expenses, professional advisor fees, bad debts, rent expense, insurance and other expenses incurred in connection with general operations. Our selling, general and administrative expenses increased by $1,206,920, or 227.72%, to $1,736,933 for the three months ended June 30, 2024 from $530,013 for the three months ended June 30, 2023. As a percentage of revenue, our selling, general and administrative expenses were 74.52% and 15.75% for the three months ended June 30, 2024 and 2023, respectively. Increases were primarily attributable to increases in salaries and wages expense of $311,215, bad debt expense of $902,183, rent expense of $44,363, board fee expense of $30,919, general and administrative expenses of $19,646 and professional fees of $28,605 offset by a decrease in management fees of $150,000. As a result of our efforts to accelerate cash collections throughout 2024, we have experienced lower than normal settlements of our accounts receivable resulting in the increase in bad debt expense in the three months ended June 30, 2024. This may continue as we continue to pay down the liability associated with the third-party factoring of accounts receivable from previous years.

Current wording

Selling, general and administrative expenses. Our selling, general and administrative expenses consist primarily of accounting, auditing, legal and public reporting expenses, personnel expenses, including employee salaries, bonuses plus related payroll taxes and stock compensation expense, advertising expenses, professional advisor fees, rent expense, insurance and other expenses incurred in connection with general operations. Our selling, general and administrative expenses increased by $359,158, or 62.17%, to $936,835 for the three months ended September 30, 2024 from $577,677 for the three months ended September 30, 2023. As a percentage of revenue, our selling, general and administrative expenses were 69.11% and 16.96% for the three months ended September 30, 2024 and 2023, respectively. Increases were primarily attributable to increases in salaries and wages expense of $265,346, professional fees of $153,624, rent expense of $33,386, payroll taxes of $20,010, and board fee expense of $15,000, offset by a decrease in management fees of $180,000.

Previous wording

Total other income (expense). We had $27,898 in total other income, net, for the three months ended June 30, 2024, as compared to total other expense, net, of $889,551 for the three months ended June 30, 2023. Other income, net, for the three months ended June 30, 2024 consisted of gain on debt refinance and forgiveness of $78,834 and other income of $2,047, offset by interest expense of $41,347, amortization of debt discounts of $11,306 and penalties and fees of $330. Other expense, net, for the three months ended June 30, 2023 consisted of interest expense of $843,918, amortization of debt discounts of $30,633 and financing penalties and fees of $15,000. The interest income for the three months ended June 30, 2024 was mainly a result of the write-off of accrued interest as part of the settlement agreement described below.

Current wording

Total other income (expense). We had $1,392,808 in total other expense, net, for the three months ended September 30, 2024, as compared to total other expense, net, of $288,168 for the three months ended September 30, 2023. Other expense, net, for the three months ended September 30, 2024 consisted of interest expense of $1,386,041 and other expense of $6,767. Other expense, net, for the three months ended September 30, 2023 consisted of interest expense of $226,119, amortization of debt discounts of $46,048, financing penalties and fees of $16,000 and other expense of $1.

Previous wording

Discontinued operations. For the three months ended June 30, 2024 and 2023, we recorded a loss from discontinued operations of $0 and $43,810, respectively.

Current wording

Discontinued operations. For the three months ended September 30, 2024 and 2023, we recorded a loss from discontinued operations of $0 and $3,705, respectively.

Previous wording

Net income (loss). As a result of the cumulative effect of the factors described above, our net loss was $174,447 for the three months ended June 30, 2024, as compared to net income of $816,078 for the three months ended June 30, 2023, a decrease of $990,525.

Current wording

Net income (loss). As a result of the cumulative effect of the factors described above, our net loss was $1,977,968 for the three months ended September 30, 2024, as compared to net income of $1,981,521 for the three months ended September 30, 2023, a decrease of $3,959,489.

Previous wording

The following table sets forth key components of our results of operations during the six months ended June 30, 2024 and 2023, both in dollars and as a percentage of our revenue.

Current wording

The following table sets forth key components of our results of operations during the nine months ended September 30, 2024 and 2023, both in dollars and as a percentage of our revenue.

Previous wording

Gross profit. As a result of the foregoing, our total gross profit decreased by $781,155, or 19.37%, to $3,251,766 for the six months ended June 30, 2024 from $4,032,921 for the six months ended June 30, 2023. Our total gross margin (as a percent of revenue) decreased from 66.43% for the six months ended June 30, 2023 to 65.13% for the six months ended June 30, 2024.

Current wording

Gross profit. As a result of the foregoing, our total gross profit decreased by $4,479,706, or 65.04%, to $2,407,651 for the nine months ended September 30, 2024 from $6,887,357 for the nine months ended September 30, 2023. Our total gross margin (as a percent of revenue) decreased from 72.68% for the nine months ended September 30, 2023 to 46.76% for the nine months ended September 30, 2024.

Previous wording

Depreciation expense. Our depreciation expense was $6,731, or 0.13% of revenue, for the six months ended June 30, 2024, as compared to $8,000, or 0.13% of revenue, for the six months ended June 30, 2023.

Current wording

Depreciation expense. Our depreciation expense was $10,096 or 0.20% of revenue, for the nine months ended September 30, 2024, as compared to $11,365, or 0.12% of revenue, for the nine months ended September 30, 2023.

Previous wording

Share based compensation expense. Our share-based compensation expense $300,225, or 6.01% of revenue, for the six months ended June 30, 2024, as compared to $0 for the six months ended June 30, 2023. The increase is due to stock issuances for investor relation services, stock issued to board members and stock issued as compensation for new employment bonuses to management.

Current wording

Share based compensation expense. Our share-based compensation expense $300,225, or 5.83% of revenue, for the nine months ended September 30, 2024, as compared to $0 for the nine months ended September 30, 2023. The increase is due to stock issuances for investor relation services, stock issued to board members and stock issued as compensation for new employment bonuses to management.

Previous wording

Selling, general and administrative expenses. Our selling, general and administrative expenses increased by $1,410,230, or 92.90%, to $2,928,163 for the six months ended June 30, 2024 from $1,517,933 for the six months ended June 30, 2023. As a percentage of revenue, our selling, general and administrative expenses were 58.65% and 25.00% for the six months ended June 30, 2024 and 2023, respectively. Increases were primarily attributable to increases in bad debt expense of $1,242,017, salaries and wages expense of $504,350 and stock compensation expense of $93,600, offset by decreases in professional fees of $21,826 and management fees of $45,000. As a result of our efforts to accelerate cash collections throughout 2024, we have experienced lower than normal settlements of our accounts receivable resulting in the increase in bad debt expense in the three months ended June 30, 2024. This may continue as we continue to pay down the liability associated with the third-party factoring of accounts receivable from previous years.

Current wording

Selling, general and administrative expenses. Our selling, general and administrative expenses increased by $527,370, or 25.17%, to $2,622,981 for the nine months ended September 30, 2024 from $2,095,611 for the nine months ended September 30, 2023. As a percentage of revenue, our selling, general and administrative expenses were 50.94% and 22.11% for the nine months ended September 30, 2024 and 2023, respectively. Increases were primarily attributable to increases in salaries and wages expense of $769,696, stock compensation expense of $93,600, professional fees of $60,367, investor relations and public company fees of $71,431, insurance expense of $71,635 and rent expense of $100,000, offset by decreases in management fees of $225,000, bad debt expense of $270,000, and penalties of $44,670.

Previous wording

Total other expense. We had $362,886 in total other expense, net, for the six months ended June 30, 2024, as compared to total other expense, net, of $1,617,601 for the six months ended June 30, 2023. Other expense, net, for the six months ended June 30, 2024 consisted of interest expense of $417,616, amortization of debt discounts of $24,821 and penalties and fees of $1,330, offset by other income of $78,834 for the gain on debt refinance and forgiveness and other income of $2,047. Other expense, net, for the six months ended June 30, 2023 consisted of interest expense of $1,537,579, amortization of debt discounts of $48,616 and financing penalties and fees of $32,000, offset by a gain on debt refinance and forgiveness of $390 and other income of $204. The decrease is primarily attributable to the decrease in interest expense due to the settlement agreement described below.

Current wording

Total other expense. We had $1,755,694 in total other expense, net, for the nine months ended September 30, 2024, as compared to total other expense, net, of $1,905,768 for the nine months ended September 30, 2023. Other expense, net, for the nine months ended September 30, 2024 consisted of interest expense of $1,803,657, amortization of debt discounts of $24,821, penalties and fees of $1,330, and other expenses of $4,720, offset by other income of $78,834 for the gain on debt refinance. Other expense, net, for the nine months ended September 30, 2023 consisted of interest expense of $1,763,698, amortization of debt discounts of $94,664 and financing penalties and fees of $48,000, offset by a gain on debt refinance and forgiveness of $390 and other income of $204.

Previous wording

Discontinued operations. For the six months ended June 30, 2024 and 2023, we recorded a loss from discontinued operations of $111,312 and $89,300, respectively.

Current wording

Discontinued operations. For the nine months ended September 30, 2024 and 2023, we recorded a loss from discontinued operations of $111,312 and $93,005, respectively.

Previous wording

Net income (loss). As a result of the cumulative effect of the factors described above, our net loss for the six months ended June 30, 2024 was $457,551, as compared to net income of $800,087 for the six months ended June 30, 2023, a decrease of $1,257,638.

Current wording

Net income (loss). As a result of the cumulative effect of the factors described above, our net loss for the nine months ended September 30, 2024 was $2,392,657, as compared to net income of $2,781,608 for the nine months ended September 30, 2023, a decrease of $5,174,265.

Previous wording

As of June 30, 2024, we had $3,196,795 in cash. To date, we have financed our operations primarily through revenue generated from operations, sales of securities, advances from stockholders and third-party and related party debt.

Current wording

As of September 30, 2024, we had $1,949,000 in cash. To date, we have financed our operations primarily through revenue generated from operations, sales of securities, advances from stockholders and third-party and related party debt.

Previous wording

The following table provides detailed information about our net cash flow for the six months ended June 30, 2024 and 2023.

Current wording

The following table provides detailed information about our net cash flow for the nine months ended September 30, 2024 and 2023.

Previous wording

Our net cash used in operating activities from continuing operations was $1,980,727 for the six months ended June 30, 2024, as compared to $260,466 for the six months ended June 30, 2023. The primary drivers of our net cash used in operating activities for the six months ended June 30, 2024 are our net loss of $457,551, decreases of $2,755,040 in accounts receivable, $367,400 in accounts payable and other accrued expenses and $380,001 in accrued officer’s compensation, offset by $1,242,017 in bad debt expense and share based compensation of $788,600. For the six months ended June 30, 2023, our net income of $800,087, an increase in accounts payable and accrued expenses of $738,353, an increase in accrued officer’s compensation of $334,000, bad debt expense of $270,000 and an increase in accrued interest of $248,137, offset by a decrease in accounts receivable of $2,859,607, were the primary drivers for the cash used in operations.

Current wording

Our net cash used in operating activities from continuing operations was $3,996,905 for the nine months ended September 30, 2024, as compared to $557,542 for the nine months ended September 30, 2023. The primary drivers of our net cash used in operating activities for the nine months ended September 30, 2024 are our net loss of $2,392,657, decreases of $1,492,966 in accounts receivable, $691,072 in accounts payable and other accrued expenses and $380,001 in accrued officer’s compensation, offset by share based compensation of $788,600. For the nine months ended September 30, 2023, our net income of $2,781,608, an increase in accounts payable and accrued expenses of $733,125, an increase in accrued officer’s compensation of $514,000, bad debt expense of $270,000 and an increase in accrued interest of $380,020, offset by a decrease in accounts receivable of $5,510,098, were the primary drivers for the cash used in operations.

Previous wording

For the six months ended June 30, 2023, we factored a total of $544,196 of our accounts receivable in exchange for cash of $253,750. We ceased factoring of accounts receivable in the first quarter of 2023. The most recent average collection time for accounts receivable was approximately 470 days from the initial date of service. Typically, a patient will have a series of dates of service over an average of 12 to 16 months.

Current wording

Prior to April 2023, we factored (sold) the vast majority of our accounts receivable to third party(s) to generate working capital to fund ongoing business operations and growth. For the nine months ended September 30, 2023, we factored a total of $544,196 of our accounts receivable in exchange for cash of $253,750. We ceased factoring of accounts receivable in the first quarter of 2023. The most recent average realization time for accounts receivable was approximately eighteen to twenty-four months from the initial date of service. Typically, a patient will have a series of dates of service over an average of 12 to 16 months.

Previous wording

We had no investing activities for the six months ended June 30, 2024 and 2023.

Current wording

We had no investing activities for the nine months ended September 30, 2024 and 2023.

Previous wording

Our net cash provided by financing activities was $4,199,267 for the six months ended June 30, 2024, as compared to $360,470 for the six months ended June 30, 2023. Net cash provided by financing activities for the six months ended June 30, 2024 consisted of the proceeds of $4,522,695 from line of credit, offset by the payment of $120,997 to a director, $100,079 paid on convertible notes payable, $100,000 in dividend payments and $2,352 in payments on the SBA loan described below. Net cash provided by financing activities for the six months ended June 30, 2023 consisted of proceeds from convertible notes payable of $355,500 and proceeds from line of credit of $35,131, offset by repayments of line of credit of $30,161.

Current wording

Our net cash provided by financing activities was $4,968,250 for the nine months ended September 30, 2024, as compared to $426,671 for the nine months ended September 30, 2023. Net cash provided by financing activities for the nine months ended September 30, 2024 consisted of the proceeds of $5,348,871 from line of credit, offset by the payment of $120,997 to a director, $105,080 paid on convertible notes payable, $100,000 in dividend payments, $50,000 paid on a note payable, and $4,545 in payments on the SBA loan described below. Net cash provided by financing activities for the nine months ended September 30, 2023 consisted of proceeds from convertible notes payable of $421,376 and proceeds from line of credit of $35,632, offset by repayments of line of credit of $28,784.

Previous wording

As of June 30, 2024, we had convertible debt outstanding net of amortized debt discount of $110,000. During the six months ended June 30, 2024, we made $100,080 in principal payments and paid the total outstanding accrued interest on these notes in the amount of $22,279. We also paid $100,000 of accrued interest to a convertible noteholder.

Current wording

As of September 30, 2024, we had convertible debt outstanding net of amortized debt discount of $105,000. During the nine months ended September 30, 2024, we made $105,080 in principal payments and paid the total outstanding accrued interest on these notes in the amount of $22,780. We also paid $100,000 of accrued interest to a convertible noteholder.

Previous wording

On June 11, 2024, we entered into a settlement agreement and release of claims with the holder certain notes. Pursuant to the settlement agreement and release of claims, the holder agreed to cancel such notes in exchange for the fixed amount settlement promissory note in the principal amount of $535,000 described below. Additionally, during the six months ended June 30, 2024, we exchanged certain notes for the issuance of 938,908 shares of series Y senior convertible preferred stock to the noteholder.

Current wording

On June 11, 2024, we entered into a settlement agreement and release of claims with the holder certain notes. Pursuant to the settlement agreement and release of claims, the holder agreed to cancel such notes in exchange for the fixed amount settlement promissory note in the principal amount of $535,000 described below. Additionally, during the nine months ended September 30, 2024, we exchanged certain notes for the issuance of 938,908 shares of series Y senior convertible preferred stock to the noteholder.

Previous wording

On June 11, 2024, we entered into a settlement agreement and release of claims with the holder of 165 shares of series R convertible preferred stock and certain convertible promissory notes. Pursuant to the settlement agreement and release of claims, the holder agreed to cancel its shares of series R convertible preferred stock and convertible promissory notes in exchange for a new fixed amount settlement promissory note in the principal amount of $535,000. This transaction was accounted for as a debt extinguishment and a gain on settlement of $78,834 was recorded to the unaudited consolidated statement of operations for the quarter ended June 30, 2024, in accordance with FASB Topic 470Borrower’s Accounting for Debt Modifications.

Current wording

On June 11, 2024, we entered into a settlement agreement and release of claims with the holder of 165 shares of series R convertible preferred stock and certain convertible promissory notes. Pursuant to the settlement agreement and release of claims, the holder agreed to cancel its shares of series R convertible preferred stock and convertible promissory notes in exchange for a new fixed amount settlement promissory note in the principal amount of $535,000. This transaction was accounted for as a debt extinguishment and a gain on settlement of $78,834 was recorded to the unaudited consolidated statement of operations for the nine months ended September 30, 2024, in accordance with FASB Topic 470Borrower’s Accounting for Debt Modifications.

Previous wording

The note does not bear interest and requires fixed payments as follows: (i) if we raise at least $5 million but less than $6 million in our planned underwritten public offering, or the Offering, then we must pay $250,000 on the closing date of the Offering, with payments of $125,000, $125,000 and $35,000 to follow on the 90 th, 180 th, and 240 th days following the closing of the Offering, respectively; (ii) if we raise at least $6 million but less than $7 million in the Offering, then we must pay $390,000 on the closing date of the Offering and $145,000 on the 90 th day following the closing of the Offering; and (iii) if we raise at least $7 million in the Offering, then we must repay the entire principal amount on the closing date of the Offering. If the Offering is not completed by August 15, 2024, then we are required to pay $25,000 on such date and to continue making payments of $25,000 on each monthly anniversary thereof until the entire principal amount is repaid in full. If the Offering is completed after August 15, 2024, then we are required to make payments as described in the schedule above. Notwithstanding the foregoing, if we abandon the Offering and conduct a new public offering thereafter, then we are required to make a payment of $100,000 on the closing date of such other public offering, a second payment of $100,000 on the 90 th day following the closing of such offering and $35,000 each month thereafter until the entire principal amount is repaid in full. If any portion of the principal amount remains unpaid on the second (2 nd) anniversary of the date of the note, it shall become immediately due and payable on such date. We may prepay the entire principal amount at any time without penalty. The note is unsecured and contains customary events of default for a loan of this type. Upon an event of default, interest would automatically begin to accrue at a simple interest rate of ten percent per annum.

Current wording

The note does not bear interest and requires fixed payments as follows: (i) if we raise at least $5 million but less than $6 million in our planned underwritten public offering, or the Offering, then we must pay $250,000 on the closing date of the Offering, with payments of $125,000, $125,000 and $35,000 to follow on the 90 th, 180 th, and 240 th days following the closing of the Offering, respectively; (ii) if we raise at least $6 million but less than $7 million in the Offering, then we must pay $390,000 on the closing date of the Offering and $145,000 on the 90 th day following the closing of the Offering; and (iii) if we raise at least $7 million in the Offering, then we must repay the entire principal amount on the closing date of the Offering. As the Offering was not completed by August 15, 2024, we are required to pay $25,000 on such date and to continue making payments of $25,000 on each monthly anniversary thereof until the entire principal amount is repaid in full. If the Offering is completed after August 15, 2024, then we are required to make payments as described in the schedule above. Notwithstanding the foregoing, if we abandon the Offering and conduct a new public offering thereafter, then we are required to make a payment of $100,000 on the closing date of such other public offering, a second payment of $100,000 on the 90 th day following the closing of such offering and $35,000 each month thereafter until the entire principal amount is repaid in full. If any portion of the principal amount remains unpaid on the second (2 nd) anniversary of the date of the note, it shall become immediately due and payable on such date. We may prepay the entire principal amount at any time without penalty. The note is unsecured and contains customary events of default for a loan of this type. Upon an event of default, interest would automatically begin to accrue at a simple interest rate of ten percent per annum. During the three and nine months ended September 30, 2024, we paid a total of $50,000 against the outstanding principal due.

Previous wording

On June 2, 2020, we obtained a loan from the Small Business Administration of $150,000 at an interest rate of 3.75% with a maturity date of June 2, 2050. The principal balance and accrued interest at June 30, 2024 was $147,301 and $0, respectively.

Current wording

On June 2, 2020, we obtained a loan from the Small Business Administration of $150,000 at an interest rate of 3.75% with a maturity date of June 2, 2050. The principal balance and accrued interest at September 30, 2024 was $145,109 and $0, respectively.

Previous wording

On March 12, 2009, we issued a debenture in the principal amount of $20,000. The debenture bore interest at 12% per year and matured on September 12, 2009. The balance of the debenture was $10,989 at June 30, 2024 and the accrued interest was $8,205. We assigned all of our receivables from consumer activations of the rewards program as collateral on this debenture.

Current wording

On March 12, 2009, we issued a debenture in the principal amount of $20,000. The debenture bore interest at 12% per year and matured on September 12, 2009. The balance of the debenture was $10,989 at September 30, 2024 and the accrued interest was $8,537. We assigned all of our receivables from consumer activations of the rewards program as collateral on this debenture.

Previous wording

On September 29, 2023, our company and Nova entered into a two-year revolving purchase and security agreement with DML HC Series, LLC, or DML, to sell, with recourse, Nova’s accounts receivables for a revolving financing up to a maximum advance amount of $4.5 million. A review is performed on a quarterly basis to assess the adequacy of the maximum amount. If mutually agreed upon by us and DML, the maximum amount may be increased. On April 24, 2024, we entered into amendment No. 1 with DML which increased the maximum advance amount to $8,000,000 and defined the discount fee equal to 2.25% per purchase and claims balance forward on new purchases with a minimum fee to now be $10,000. On June 11, 2024, we entered into amendment No. 2 with DML which further increased the maximum advance amount to $11,000,000. As of June 30, 2024, we had an outstanding balance of $6,675,746 against the revolving receivable line of credit. The revolving purchase and security agreement includes discounts recorded as interest expense on each funding and matures on September 29, 2025.

Current wording

On September 29, 2023, our company and Nova entered into a two-year revolving purchase and security agreement with DML HC Series, LLC, or DML, to sell, with recourse, Nova’s accounts receivables for a revolving financing up to a maximum advance amount of $4.5 million. A review is performed on a quarterly basis to assess the adequacy of the maximum amount. If mutually agreed upon by us and DML, the maximum amount may be increased. On April 24, 2024, we entered into amendment No. 1 with DML which increased the maximum advance amount to $8,000,000 and defined the discount fee equal to 2.25% per purchase and claims balance forward on new purchases with a minimum fee to now be $10,000. On June 11, 2024, we entered into amendment No. 2 with DML which further increased the maximum advance amount to $11,000,000. As of September 30, 2024, we had an outstanding balance of $7,468,971 against the revolving receivable line of credit and accrued interest of $252,628. The revolving purchase and security agreement includes discounts recorded as interest expense on each funding and matures on September 29, 2025.