Cardiff Lexington Corp

Previous wording

On May 31, 2021, we acquired Nova Ortho and Spine, LLC, or Nova, which operates a group of regional primary specialty and ancillary care facilities throughout Florida that provide traumatic injury victims with primary care evaluations, interventional pain management, and specialty consultation services. We focus on plaintiff related care are and a highly efficient provider of emergency medical condition, or EMC, assessments. We provide a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments, and nerves. From sports injuries, to sprains, strains, and fractures, our doctors are dedicated to helping patients return to active lifestyles.

Current wording

On May 31, 2021, we acquired Nova Ortho and Spine, LLC, or Nova, which operates a group of regional primary specialty and ancillary care facilities throughout Florida that provide traumatic injury victims with primary care evaluations, interventional pain management, and specialty consultation services. We focus on plaintiff related care and are a highly efficient provider of emergency medical condition, or EMC, assessments. We provide a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments, and nerves. From sports injuries, to sprains, strains, and fractures, our doctors are dedicated to helping patients return to active lifestyles.

Previous wording

These segments are a result of differences in the nature of the products and services sold. Corporate administration costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated to the three operating segments. Other revenue consists of nonrecurring items.

Current wording

These segments are a result of differences in the nature of the products and services sold. Corporate administration costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated to the two operating segments.

Previous wording

Management uses numerous tools and methods to evaluate and measure our subsidiaries’ success. To help succeed, management retains the prior owners of the subsidiaries and allows them to do what they do best is run the business. Additionally, management monitors key metrics primarily revenues and net income from operations.

Current wording

Management uses revenues, cost of sales, operating expenses, and income (loss) before taxes to evaluate and measure its subsidiaries’ success. To help the segments achieve optimal operating performance, management retains the prior owners of the subsidiaries and allows them to do what they do best, which is run the business. Additionally, management monitors key metrics primarily revenues and income from operations in order to allocate resources accordingly.

Previous 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:

Current wording

Revenue. For the three months ended March 31, 2025, and 2024, 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 increased by $593,435, or 25.56%, to $2,915,567 for the three months ended March 31, 2025 from $2,322,132 for the three months ended March 31, 2024. The increase in revenue is primarily attributable to an overall increase in patient volume and more complex medical procedures.

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 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.

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 $126,880, or 13.38%, to $1,075,034 for the three months ended March 31, 2025 from $948,154 for the three months ended March 31, 2024. This increase is mainly attributable to increases in laboratory fees and salaries, wages and management fees.

Previous 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.

Current wording

Gross profit. As a result of the foregoing, our total gross profit increased by $466,555, or 33.96%, to $1,840,533 for the three months ended March 31, 2025 from $1,373,978 for the three months ended March 31, 2024. Our total gross margin (as a percent of revenue) increased from 59.17% for the three months ended March 31, 2024 to 63.13% for the three months ended March 31, 2025.

Previous 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.

Current wording

Depreciation expense. Our depreciation expense was $3,365, or 0.12% of revenue, for the three months ended March 31, 2025, as compared to $3,365, or 0.14% of revenue, for the three months ended March 31, 2024.

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, 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.

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 $429,245, or 50.42%, to $1,280,641 for the three months ended March 31, 2025 from $851,396 for the three months ended March 31, 2024. As a percentage of revenue, our selling, general and administrative expenses were 43.92% and 36.66% for the three months ended March 31, 2025 and 2024, respectively. Increases were primarily attributable to increases in salaries and wages expense of $255,387, bad debt expense of $112,727, and billing costs $57,735.

Previous 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.

Current wording

Total other income (expense). We had $994,711 in total other expense, net, for the three months ended March 31, 2025, as compared to total other expense, net, of $390,784 for the three months ended March 31, 2024. Total other expense, net, for the three months ended March 31, 2025 consisted of interest expense of $993,114 and other expense of 1,597. Other expense, net, for the three months ended March 31, 2024 consisted of interest expense of $376,269, amortization of debt discounts of $13,515 and financing penalties and fees of $1,000.

Previous 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.

Current wording

Discontinued operations. For the three months ended March 31, 2025 and 2024, we recorded a loss from discontinued operations of $0 and $111,312, respectively.

Previous 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.

Current wording

Net loss. As a result of the cumulative effect of the factors described above, our net loss was $450,777 for the three months ended March 31, 2025, as compared to $283,104 for the three months ended March 31, 2024, an increase of $167,673, or 59.23%.

Previous 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.

Current wording

As of March 31, 2025, we had $996,758 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

We believe, based on our operating plan, that current working capital and current and expected additional financing should be sufficient to fund operations and satisfy our obligations as they come due for at least one year from the financial statement issuance date. However, additional funds from new financing and/or future equity raises are required for continued operations and to execute our business plan and our strategy of acquiring additional businesses. The funds required to sustain operations ranges between $600,000 to $1 million and additional funds execute our business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase price of a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one of our subsidiaries. Given these factors, we believe that the amount of outside additional capital necessary to execute our business plan on the low end (assuming target company sellers accept a significant portion of the purchase price in the form of seller notes or our equity or equity in one of our subsidiaries) ranges between $4 million to $8 million. If, and to the extent, that sellers are unwilling to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan could be as much as $10 million.

Current wording

We believe, based on our operating plan, that current working capital and current and expected additional financing should be sufficient to fund operations and satisfy our obligations as they come due for at least one year from the financial statement issuance date. However, additional funds from new financing and/or future equity raises are required for continued operations and to execute our business plan and our strategy of acquiring additional businesses. The funds required to sustain operations range between $600,000 to $1 million and additional funds execute our business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase price of a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one of our subsidiaries. Given these factors, we believe that the amount of outside additional capital necessary to execute our business plan on the low end (assuming target company sellers accept a significant portion of the purchase price in the form of seller notes or our equity or equity in one of our subsidiaries) ranges between $5 million to $10 million. If, and to the extent, that sellers are unwilling to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan could be as much as $10 million.

Previous wording

The financial statements were prepared on a going concern basis and do not include any adjustment with respect to these uncertainties.

Current wording

The financial statements were prepared on a going concern basis and do not include any adjustment with respect to these uncertainties. Our ability to continue as a going concern and the appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusions. We have prospective investors and believe the raising of capital will allow us to fund our cash flow shortfalls and pursue new acquisitions. There can be no assurance that we will be able to obtain sufficient capital from debt or equity transactions or from operations in the necessary time frame or on terms acceptable to us. Should we be unable to raise sufficient funds, we may be required to curtail our operating plans. In addition, increases in expenses may require cost reductions. No assurance can be given that we will be able to operate profitably on a consistent basis, or at all, in the future. Should we not be able to raise sufficient funds, it may cause cessation of operations.

Previous wording

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

Current wording

The following table provides detailed information about our net cash flow for the three months ended March 31, 2025 and 2024.

Previous 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.

Current wording

Our net cash used in operating activities from continuing operations was $1,628,728 for the three months ended March 31, 2025, as compared to $1,187,816 for the three months ended March 31, 2024. The primary drivers of our net cash used in operating activities for the three months ended March 31, 2025 are our net loss of $450,777 and an increase of $1,680,291 in accounts receivable, offset by increases of $230,608 in accounts payable and other accrued expenses and $101,773 in accrued interest. For the three months ended March 31, 2024, our net loss of $283,104 and an increase in accounts receivable of $1,344,676, offset by an increase in share based compensation of $300,225 were the primary drivers of our net cash used in operating activities.

Previous wording

We monitor outstanding cases as they develop through ongoing discussions with attorneys, doctors and our third-party medical billing company and additionally monitor our settlement realization rates over time. We have two primary methods of accelerating our cash settlement of our revenue and related accounts receivable. The first is through factoring our receivables, which was done in 2023, but ended prior to April 2023. The second method is through accepting lower settlement amounts during the final negotiations of the settlement, which is coordinated through our third-party medical billing company. When our third-party medical billing company is provided with a settlement amount of 49% of gross charges or greater they will accept. When presented with a lower amount we will discuss the reasons for the reduced rate and negotiate a higher rate. Shortening our negotiation timeframe will typically result in a lower settlement realization rate, but will accelerate the cash settlement of the outstanding accounts receivable. We began employing this second method in 2024, which reduced our settlement realization rate as described below. We have employed both methods from time to time to accelerate our cash settlement and may employ one or both in the future.

Current wording

We monitor outstanding cases as they develop through ongoing discussions with attorneys, doctors and our third-party medical billing company and additionally monitor our settlement realization rates over time. We currently have one primary method of accelerating our cash settlement of our revenue and related accounts receivable through accepting lower settlement amounts during the final negotiations of the settlement, which is coordinated through our third-party medical billing company. When our third-party medical billing company is provided with a settlement amount of 49% of gross charges or greater they will accept. When presented with a lower amount we will discuss the reasons for the reduced rate and negotiate a higher rate. Shortening our negotiation timeframe will typically result in a lower settlement realization rate, but will accelerate the cash settlement of the outstanding accounts receivable. We began employing this method in 2024, which reduced our settlement realization rate as described below. We may employ this method in the future. The most recent average realization time for accounts receivable was approximately 18 to 24 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

Prior to fiscal year 2024, we historically realized a 49% settlement rate from total gross billed charges. Accordingly, we had historically recognized net healthcare service revenue as 49% of gross billed amounts. During the nine months ended September 30, 2024, we underwent efforts to accelerate cash settlement of our accounts receivable throughout 2024 to generate cash flow for operations. We did this by shortening our settlement negotiations with insurance companies and accepting lower settlement amounts. We expect this trend to continue in the short term as we work to settle our accounts receivables more quickly to generate cash flow for operations. Additionally, during the third quarter of 2024, we completed a thorough review of our third-party billing data, including reviewing historical reports and new reporting methods as a part of our updated analysis. Based upon this review it was determined that a 24-month lookback period should be used in the analysis of our historical settlement realization rates. As a result of the new efforts to accelerate cash settlement during the nine months ended September 30, 2024, we realized a 44% average settlement rate of our gross billed charges during this time frame, which were historically recorded in accounts receivable and revenue at 49% of gross billings. Accordingly, we recorded reductions to net revenue of $1,199,155 for the nine months ended September 30, 2024. Additionally, with the reduction in our estimate of our settlement realization rate from 49% to 44%, a $1,650,474 change in accounting estimate was taken during the third quarter of 2024 in our accounts receivable and revenue.

Current wording

Prior to fiscal year 2024, we historically realized a 49% settlement rate from total gross billed charges. Accordingly, we had historically recognized net healthcare service revenue as 49% of gross billed amounts. During 2024, we underwent efforts to accelerate cash settlement of our accounts receivable to generate cash flow for operations. We did this by shortening our settlement negotiations with insurance companies and accepting lower settlement amounts. Additionally, during 2024, we completed a thorough review of our third-party billing data, including reviewing historical reports and new reporting methods as a part of our updated analysis. Based upon this review, we determined that a 24-month lookback period should be used in the analysis of our historical settlement realization rates. As a result of the new efforts to accelerate cash settlement, we realized a 42.9% average settlement rate of our gross billed charges during this time frame, which were historically recorded in accounts receivable and revenue at 49% of gross billings. Accordingly, we recorded reductions to net revenue of $339,834 for the three months ended March 31, 2024. We will continue to evaluate our estimate of our settlement realization rates in the future, which will include a monthly review of our trailing 24-month historical settlement realization rate, along with estimates of current and pending settlements through ongoing discussions with attorneys, doctors and our third-party medical billing company in order to determine our variable consideration under ASC 606 and the net transaction price. We will update our settlement realization rate estimate used in determining our accounts receivable and revenue each quarter based on this review.

Previous wording

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

Current wording

We had no investing activities for the three months ended March 31, 2025 and 2024.

Previous 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.

Current wording

Our net cash provided by financing activities was $1,437,301 for the three months ended March 31, 2025, as compared to $1,463,113 for the three months ended March 31, 2024. Net cash provided by financing activities for the three months ended March 31, 2025 consisted of proceeds from line of credit of $1,564,494, offset by the payment of note payable of $75,000, payment of preferred stock dividends of $50,000 and repayments of the Small Business Administration loan described below of $2,193. Net cash provided by financing activities for the three months ended March 31, 2024 consisted of proceeds from line of credit of $1,463,273, offset by repayments of the Small Business Administration loan described below of $160.

Previous 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.

Current wording

As of March 31, 2025, we had convertible debt outstanding net of amortized debt discount of $105,000.

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 nine months ended September 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 year ended December 31, 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. 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.

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 months ended March 31, 2025, we paid a total of $75,000 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 September 30, 2024 was $145,109 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 March 31, 2025 was $146,045 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 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.

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 March 31, 2025 and the accrued interest was $9,195. 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 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.

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. On December 27, 2024, we and Nova entered into amendment No. 3 with DML which further increased the maximum advance amount to $15,000,000. As of March 31, 2025, we had an outstanding balance of $10,210,485 against the revolving receivable line of credit and accrued interest of $411,300. The revolving purchase and security agreement includes discounts recorded as interest expense on each funding and matures on September 29, 2025.