Cardiff Lexington Corp

Previous wording

In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2024. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

Current wording

In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A “Risk Factors” included in our Annual Report on Form 10-K/A for the year ended December 31, 2024. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

Previous 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.

Current wording

Revenue. For the three months ended September 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 $1,703,099, or 125.63%, to $3,058,740 for the three months ended September 30, 2025 from $1,355,641 for the three months ended September 30, 2024. Excluding the one-time change to revenue of $1,650,474 for a change in accounting estimate recorded in the third quarter of 2024 (discussed below), revenue increased by $52,625, or 1.75%.

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 $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.

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 $148,560, or 14.85%, to $1,149,161 for the three months ended September 30, 2025 from $1,000,601 for the three months ended September 30, 2024.

Previous 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.

Current wording

As a percentage of revenue, cost of sales decreased from 73.81% for the three months ended September 30, 2024 to 37.57% for the three months ended September 30, 2025. Excluding the cumulative catch up reduction to revenue of $1,650,474 noted above, as a percentage of revenue, cost of sales decreased from 39.17% for the three months ended September 30, 2024 to 37.57% for the three months ended September 30, 2025. The decrease is attributable to an increase in revenue as noted above, partially offset by increased laboratory fees and personnel-related fees.

Previous 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.

Current wording

Gross profit. As a result of the foregoing, our total gross profit increased by $1,554,539, or 437.85%, to $1,909,579 for the three months ended September 30, 2025 from $355,040 for the three months ended September 30, 2024. Our total gross margin (as a percentage of revenue) increased from 26.19% for the three months ended September 30, 2024 to 62.43% for the three months ended September 30, 2025.

Previous 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.

Current wording

Depreciation expense. Our depreciation expense was $762, or 0.02% of revenue, for the three months ended September 30, 2025, as compared to $3,365, or 0.25% of revenue, for the three months ended September 30, 2024.

Previous 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.

Current wording

Share based compensation expense. Share based compensation expense was $41,188 and $0 for the three months ended September 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 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.

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 $287,515, or 30.69%, to $1,224,350 for the three months ended September 30, 2025 from $936,835 for the three months ended September 30, 2024. As a percentage of revenue, our selling, general and administrative expenses were 40.03% and 69.11% for the three months ended September 30, 2025 and 2024, respectively. The increase in selling, general and administrative expenses was primarily attributable to higher personnel and business development consulting related expenses.

Previous 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.

Current wording

Total other (expense) income. We had $1,787,578 in total other expense, net, for the three months ended September 30, 2025, as compared to $1,392,808 in total other expense, net, for the three months ended September 30, 2024. Total other expense, net, for the three months ended September 30, 2025 consisted of interest expense of $1,765,528, a conversion penalty of $1,500 and other expense of $20,550. 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. 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 described below.

Previous wording

Net loss. As a result of the cumulative effect of the factors described above, our net loss was $1,677,172 for the six months ended June 30, 2025, as compared to $414,689 for the six months ended June 30, 2024, an increase of $1,262,483, or 304.44%.

Current wording

Net loss. As a result of the cumulative effect of the factors described above, our net loss was $1,144,299 for the three months ended September 30, 2025, as compared to $1,977,968 for the three months ended September 30, 2024, a decrease in loss of $833,669, or 42.15%.

Previous wording

The following table sets forth key components of our results of operations during the six months ended June 30, 2025 and 2024, 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, 2025 and 2024, both in dollars and as a percentage of our revenue.

Previous wording

Cost of sales. Our total cost of sales increased by $427,618, or 25.46%, to $2,168,782 for the six months ended June 30, 2025 from $1,741,164 for the six months ended June 30, 2024.

Current wording

Cost of sales. Our total cost of sales increased by $576,178, or 21.01%, to $3,317,943 for the nine months ended September 30, 2025 from $2,741,765 for the nine months ended September 30, 2024.

Previous wording

As a percentage of revenue, cost of sales decreased from 45.90% for the six months ended June 30, 2024 to 38.02% for the six months ended June 30, 2025. Excluding the cumulative catch up reduction to revenue of $1,199,155 noted above, as a percentage of revenue, cost of sales increased from 34.87% to 38.02% for the six months ended June 30, 2025. The increase is attributable to increases in laboratory fees and personnel related fees.

Current wording

As a percentage of revenue, cost of sales decreased from 53.24% for the nine months ended September 30, 2024 to 37.86% for the nine months ended September 30, 2025. Excluding the cumulative catch up reduction to revenue of $1,199,155 noted above, as a percentage of revenue, cost of sales decreased from 40.32% for the nine months ended September 30, 2024 to 37.86% for the nine months ended September 30, 2025. The decrease is attributable to an increase in revenue as noted above, partially offset by increased laboratory fees and personnel-related fees.

Previous wording

Gross profit. As a result of the foregoing, our total gross profit increased by $1,483,181, or 72.26%, to $3,535,792 for the six months ended June 30, 2025 from $2,052,611 for the six months ended June 30, 2024. Our total gross margin (as a percentage of revenue) increased from 54.10% for the six months ended June 30, 2024 to 61.98% for the six months ended June 30, 2025.

Current wording

Gross profit. As a result of the foregoing, our total gross profit increased by $3,037,720, or 126.17%, to $5,445,371 for the nine months ended September 30, 2025 from $2,407,651 for the nine months ended September 30, 2024. Our total gross margin (as a percentage of revenue) increased from 46.76% for the nine months ended September 30, 2024 to 62.14% for the nine months ended September 30, 2025.

Previous wording

Depreciation expense. Our depreciation expense was $4,128 or 0.07% of revenue, for the six months ended June 30, 2025, as compared to $6,731, or 0.18% of revenue, for the six months ended June 30, 2024.

Current wording

Depreciation expense. Our depreciation expense was $4,890 or 0.06% of revenue, for the nine months ended September 30, 2025, as compared to $10,096, or 0.20% of revenue, for the nine months ended September 30, 2024.

Previous 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.

Current wording

Loss on disposal of fixed assets. For the nine months ended September 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

Share based compensation expense. Share based compensation expense was $97,500 and $300,225 for the six months ended June 30, 2025 and 2024, respectively.

Current wording

Share based compensation expense. Share based compensation expense was $138,688 and $300,225 for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

Selling, general and administrative expenses. Our selling, general and administrative expenses increased by $581,814, or 34.51%, to $2,267,960 for the six months ended June 30, 2025 from $1,686,146 for the six months ended June 30, 2024. As a percentage of revenue, our selling, general and administrative expenses were 39.76% and 44.45% for the six months ended June 30, 2025 and 2024, respectively. The increase in selling, general and administrative expenses was primarily attributable to higher personal related expenses of $432,746 and bad debt expense of $112,727.

Current wording

Selling, general and administrative expenses. Our selling, general and administrative expenses increased by $869,329, or 33.14%, to $3,492,310 for the nine months ended September 30, 2025 from $2,622,981 for the nine months ended September 30, 2024. As a percentage of revenue, our selling, general and administrative expenses were 39.85% and 50.94% for the nine months ended September 30, 2025 and 2024, respectively. The increase in selling, general and administrative expenses was primarily attributable to higher personnel and business development consulting related expenses of $664,909 and bad debt expense of $112,727.

Previous wording

Total other expense. We had $2,830,783 in total other expense, net, for the six months ended June 30, 2025, as compared to total other expense, net, of $362,886 for the six months ended June 30, 2024. Total other expense, net, for the six months ended June 30, 2025 consisted of interest expense of $2,829,186 and other expense of $1,597. 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 a gain on debt refinance and forgiveness of $78,834 and other income of $2,047. 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 six months ended June 30, 2025 versus the six months ended June 30, 2024.

Current wording

Total other expense. We had $4,618,361 in total other expense, net, for the nine months ended September 30, 2025, as compared to total other expense, net, of $1,755,694 for the nine months ended September 30, 2024. Total other expense, net, for the nine months ended September 30, 2025 consisted of interest expense of $4,594,714, a conversion penalty of $1,500, and other expense of $22,147. 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 a gain on debt refinance and forgiveness of $78,834. 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 described below.

Previous 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.

Current wording

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

Previous 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%.

Current wording

Net loss. As a result of the cumulative effect of the factors described above, our net loss was $2,821,471 for the nine months ended September 30, 2025, as compared to $2,392,657 for the nine months ended September 30, 2024, an increase of $428,814, or 17.92%.

Previous 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.

Current wording

As of September 30, 2025, we had $232,033 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, 2025 and 2024.

Current wording

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

Previous 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.

Current wording

Our net cash used in operating activities from continuing operations was $2,463,300 for the nine months ended September 30, 2025, as compared to $2,043,238 for the nine months ended September 30, 2024. The primary drivers of our net cash used in operating activities for the nine months ended September 30, 2025 are our net loss of $2,821,471 and an increase of $4,878,236 in accounts receivable, offset by an increase of $4,292,471 in interest expense in the line of credit balance. For the nine months ended September 30, 2024, the primary drivers of our net cash used in operating activities was our net loss of $2,392,657, an increase of $3,143,440 in accounts receivable and a decrease of $691,072 in accounts payable and accrued expense, offset by an increase of $1,953,667 in interest expense in the line of credit balance and a $1,650,474 one-time change in estimate for the adjustment to the realization rate.

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, 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%.

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 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. As of September 30, 2025 the settlement realization rate was 42%.

Previous wording

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

We will continue to evaluate our estimate of our settlement realization rates in the future, which will include a monthly review of historical settlement realization rates, 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

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.

Current wording

Our net cash provided by financing activities was $1,507,148 for the nine months ended September 30, 2025, as compared to $3,014,583 for the nine months ended September 30, 2024. Net cash provided by financing activities for the nine months ended September 30, 2025 consisted of proceeds from line of credit of $1,788,727, offset by the payment of note payable of $225,000, payment of preferred stock dividends of $50,000 and repayments of the Small Business Administration loan described below of $6,579. Net cash provided by financing activities for the nine months ended September 30, 2024 consisted of proceeds from line of credit of $3,395,204, offset by the payment of $120,997 to a director, $105,079 paid on convertible notes payable, $100,000 in dividend payments, $50,000 paid on a note payable, and $4,545 in payments on the Small Business Administration loan described below.

Previous wording

On January 24, 2017, we issued a convertible promissory note in the principal amount of $80,000 for services rendered, which matured on January 24, 2018. This note is currently in default and accrues interest at a default interest rate of 20% per annum. On March 30, 2023, we executed an additional tranche under this note in the principal amount of $25,000. This note is currently in default and accrues interest at a default interest rate of 20% per annum. On August 11, 2023, we executed an additional tranche under this note in the principal amount of $25,000. This note accrues interest at a rate of 15% per annum.

Current wording

On January 24, 2017, we issued a convertible promissory note in the principal amount of $80,000 for services rendered, the remaining balance of which was converted into common stock on August 26, 2025. On March 30, 2023, we executed an additional tranche under this note in the principal amount of $25,000. This note is currently in default and accrues interest at a default interest rate of 20% per annum. On August 11, 2023, we executed an additional tranche under this note in the principal amount of $25,000. This note accrues interest at a rate of 15% per annum.

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 six months ended June 30, 2025, we paid a total of $150,000 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 nine months ended September 30, 2025, we paid a total of $225,000 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, 2025 was $145,215 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, 2025 was $144,404 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, 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.

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, 2025 and the accrued interest was $9,856. We assigned all 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 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.

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, which was automatically renewed for a term of one year on September 29, 2025, 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 September 30, 2025, we had an outstanding balance of $14,727,190 against the revolving receivable line of credit and accrued interest of $537,284. The revolving purchase and security agreement includes discounts recorded as interest expense on each funding and matures on September 29, 2026.