Cardiff Lexington Corp

Previous 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.

Current wording

Revenue. For the three months ended June 30, 2025 and 2024, all of our revenue was generated by our healthcare segment, which is through a full range of diagnostic and surgical services. Our total revenue increased by $1,317,364, or 89.52%, to $2,789,007 for the three months ended June 30, 2025 from $1,471,643 for the three months ended June 30, 2024. The increase in revenue is mainly attributable to the higher settlement realization rate on gross billed charges of 43.18% as of June 30, 2025, versus the settlement realization rate of 41.80% as of June 30, 2024. For the three months ended June 30, 2024, we recorded a cumulative catch up reduction to net revenue of $859,321 which adjusted our accounts and receivable and revenue to the 41.80% settlement realization rate.

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 $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.

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 $300,738, or 37.92%, to $1,093,748 for the three months ended June 30, 2025 from $793,010 for the three months ended June 30, 2024.

Previous wording

As a percentage of revenue, cost of sales decreased from 40.83% for the three months ended March 31, 2024 to 36.87% for the three months ended March 31, 2025.

Current wording

As a percentage of revenue, cost of sales decreased from 53.89% for the three months ended June 30, 2024 to 39.22% for the three months ended June 30, 2025. Excluding the cumulative catch up reduction to revenue of $859,321 noted above, as a percentage of revenue, cost of sales increased from 34.02% to 39.22% for the three months ended June 30, 2025. The increase is attributable to increases in laboratory fees and personnel related fees.

Previous 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.

Current wording

Gross profit. As a result of the foregoing, our total gross profit increased by $1,016,626, or 149.80%, to $1,695,259 for the three months ended June 30, 2025 from $678,633 for the three months ended June 30, 2024. Our total gross margin (as a percentage of revenue) increased from 46.11% for the three months ended June 30, 2024 to 60.78% for the three months ended June 30, 2025.

Previous 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.

Current wording

Depreciation expense. Our depreciation expense was $763, or 0.03% of revenue, for the three months ended June 30, 2025, as compared to $3,366, or 0.23% of revenue, for the three months ended June 30, 2024.

Previous wording

Share based compensation expense. Share based compensation expense was $0 and $300,225 for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Share based compensation expense. Share based compensation expense was $97,500 and $0 for the three months ended June 30, 2025 and 2024, respectively.

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 $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.

Current wording

Selling, general and administrative expenses. Our selling, general and administrative expenses consist primarily of accounting, auditing, legal and public reporting expenses, personnel related expenses, 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 $152,569, or 18.28%, to $987,319 for the three months ended June 30, 2025 from $834,750 for the three months ended June 30, 2024. As a percentage of revenue, our selling, general and administrative expenses were 35.40% and 56.72% for the three months ended June 30, 2025 and 2024, respectively. The increase in selling, general and administrative expenses was primarily attributable to higher personnel related expenses.

Previous 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.

Current wording

Total other (expense) income. We had $1,836,072 in total other expense, net, for the three months ended June 30, 2025, as compared to total other income, net, of $27,898 for the three months ended June 30, 2024. Total other expense, net, for the three months ended June 30, 2025 consisted entirely of interest expense. 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. The increase in interest expense is primarily attributable to the increase in initial and incremental fees charged on the number of existing purchases and claims under the line of credit for the three months ended June 30, 2025 versus the three months ended June 30, 2024.

Previous 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%.

Current wording

Net loss. As a result of the cumulative effect of the factors described above, our net loss was $1,226,395 for the three months ended June 30, 2025, as compared to $131.585 for the three months ended June 30, 2024, an increase of $1,094,810, or 832.00%.

Previous wording

Loss on disposal of fixed assets. Loss on disposal of fixed assets was $12,593 and $0 for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Loss on disposal of fixed assets. For the six months ended June 30, 2025, we recorded a loss on disposal of fixed assets of $12,593 due to the disposal of medical equipment that was no longer functional in our medical facilities.

Previous 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.

Current wording

Discontinued operations. For the six months ended June 30, 2025 and 2024, we recorded a loss from discontinued operations of $0 and $111,312, respectively.

Previous 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.

Current wording

As of June 30, 2025, we had $559,715 in cash. This Quarterly Report on Form 10-Q reflects a restatement limited to reclassifying noncash interest expense in the consolidated statements of cash flows from financing to operating activities for the six months ended June 30, 2024. This change in presentation did not affect our cash balance for any period presented. 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 three months ended March 31, 2025 and 2024.

Current wording

The following table provides detailed information about our net cash flow for the six months ended June 30, 2025 and 2024.

Previous 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.

Current wording

Our net cash used in operating activities from continuing operations was $1,889,003 for the six months ended June 30, 2025, as compared to $1,135,300 for the six months ended June 30, 2024. The primary drivers of our net cash used in operating activities for the six months ended June 30, 2025 are our net loss of $1,677,172 and an increase of $3,371,656 in accounts receivable, offset by increases of $2,579,283 in interest expense in the line of credit balance, $119,855 in accounts payable and other accrued expenses, $112,468 in accrued officers compensation, and $137,211 in accrued interest. For the six months ended June 30, 2024, the primary drivers of our net cash used in operating activities was our net loss of $414,689, decreases of $1,555,885 in accounts receivable and $367,400 in accounts payable and other accrued expenses, offset by increases in interest expense in the line of credit balance of $845,427 and share based compensation of $300,225.

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 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.

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 time frame 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 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.

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, during the six months ended June 30, 2024 we realized a 42.3% 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. As of June 30, 2025 the settlement realization rate was 43.18%.

Previous 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.

Current wording

Our net cash provided by financing activities was $1,260,533 for the six months ended June 30, 2025, as compared to $3,353,840 for the six months ended June 30, 2024. Net cash provided by financing activities for the six months ended June 30, 2025 consisted of proceeds from line of credit of $1,464,919, offset by the payment of note payable of $150,000, payment of preferred stock dividends of $50,000 and repayments of the Small Business Administration loan described below of $4,386. Net cash provided by financing activities for the six months ended June 30, 2024 consisted of proceeds from line of credit of $3,677,268, 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 Small Business Administration loan described below.

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 months ended March 31, 2025, we paid a total of $75,000 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 six months ended June 30, 2025, we paid a total of $150,000 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 March 31, 2025 was $146,045 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 June 30, 2025 was $145,215 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 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.

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 June 30, 2025 and the accrued interest was $9,523. 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. 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.

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 June 30, 2025, we had an outstanding balance of $12,690,193 against the revolving receivable line of credit and accrued interest of $441,174. The revolving purchase and security agreement includes discounts recorded as interest expense on each funding and matures on September 29, 2025.

Previous wording

For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission, or the SEC, on March 14, 2025.

Current wording

For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission, or the SEC, on August 19, 2025.