Cardiff Lexington Corp
For the period ended Mar 31, 2026. Filed May 13, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 13, 2026
CDIXStored price and day change unavailable
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-12.
0001683168-25-008221
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-13.
0001683168-26-003791
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 81 previous paragraphs and 67 current paragraphs.
37 unchanged; 21 reworded; 9 added; 18 removed; 5 previous and 0 current paragraphs rearranged.
Tables are not compared: 6 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Our company is a targeted healthcare holding company dedicated to acquiring and building middle-market niche healthcare clinics, primarily in orthopedics, spine care, and pain management. Our partnership-driven culture emphasizes service excellence, teamwork, accountability, and performance.
Current report
We are focused on the acquisition of orthopedic and related modality practices with strong organic growth plans that are materially cash generative to maximize value and providing greater coverage for our patients, and diversification and risk mitigation for our stockholders.
Current report
Convertible Promissory Note
Current report
On April 8, 2026, we entered into a securities purchase agreement with an accredited investor, pursuant to which we issued to such investor a convertible promissory note in the principal amount of $268,889 with a $26,889 original issuance discount, $5,000 in associated legal fees and $7,000 for due diligence costs, for total proceeds of $230,000. This convertible promissory note carries a one-time interest charge of $32,267 (rate of twelve percent (12%)) which is guaranteed at issuance. This note matures on April 8, 2027. The note may be converted at any time after issuance at a variable conversion price equal to 60% of the lowest trading price of our common stock over the ten trading days prior to the conversion date. The note also contains an ownership limitation, which provide that we shall not effect any conversion, and a holder shall not have the right to convert, to the extent that after giving effect to the issuance of common stock upon such conversion such holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of common stock upon such conversion.
Current report
As of March 31, 2026, we had convertible debt outstanding, at carrying value, of $279,772. During the three months ended March 31, 2026, we received $702,600 in net proceeds from convertible notes and no interest was repaid. Debt discounts associated with the convertible debt at March 31, 2026 were $815,228. Please see Note 9 to the accompanying unaudited condensed consolidated financial statements for a description of the terms of our convertible debt.
Current report
In June 2024, we issued a settlement promissory note in the amount of $535,000 in connection with the cancellation of certain preferred stock and convertible notes. The note does not bear interest and requires fixed principal payments based on the timing and amount of capital raised in future offerings. During the three months ended March 31, 2026, we paid $75,000 toward the outstanding principal balance. At March 31, 2026 and December 31, 2025, the remaining principal balance was $35,000 and $110,000, respectively.
Current report
We maintain a revolving purchase and security agreement with DML HC Series, LLC, or DML, which is accounted for as a secured borrowing. Under the facility, eligible accounts receivable are pledged as collateral, and advances of up to 70% of eligible receivables may be requested, subject to a maximum advance amount of $23,000,000. The related accounts receivable remain recorded as assets on our balance sheet, and the amounts drawn are recorded as a liability under ‘Line of Credit’ until repaid. We are required to repurchase or replace certain ineligible or uncollected receivables. Collections on pledged receivables are remitted directly to the lender and applied against outstanding borrowings. The revolving purchase and security agreement includes discounts recorded as interest expense on each funding and matures on September 28, 2028. As of March 31, 2026, we had an outstanding balance of $18,922,173 against the revolving receivable line of credit and accrued interest of $660,979.
Current report
On March 6, 2026, we entered into a lock-up and compensation resolution agreement with Daniel Thompson, our former Chairman of the Board and a significant stockholder, to resolve outstanding accrued compensation obligations. Under the agreement, we issued an unsecured promissory note in the principal amount of $116,667 bearing interest at 10% annually, payable interest-only in year one and 50% principal in each of years two and three, with all amounts due within three years. As of March 31, 2026, we had an outstanding balance of $116,667 on this note and accrued interest of $23,493.
Current report
On December 21, 2025, in connection with bonuses earned by certain employees, we issued promissory notes in the aggregate principal amount of $1,085,703, in lieu of cash payment, including a promissory note in the principal amount of $460,000 to Alex Cunningham, our Chairman and Chief Executive Officer, a promissory note in the principal amount of $122,550 to Matthew T. Shafer, our Chief Financial Officer, and a promissory note in the principal amount of $460,000 to Daniel Thompson. These notes bear interest of 5% per annum and mature on June 30, 2026. As of March 31, 2026, we had an outstanding balance of $1,085,703 on these notes and accrued interest of $15,021.
Removed paragraphs (18)
Previous report
We are an acquisition holding company focused on locating undervalued and undercapitalized companies, primarily in the healthcare industry, and providing them capitalization and leadership to maximize the value and potential of their private enterprises while also providing diversification and risk mitigation for our stockholders. Specifically, we have and will continue to look at a diverse variety of acquisitions in the healthcare sector in terms of growth stages and capital structures and we intend to focus our portfolio of subsidiaries approximately as follows: 80% will be targeted to established profitable niche small to mid-sized healthcare companies and 20% will be targeted to second stage startups in healthcare and related financial services (emerging businesses with a strong organic growth plan that is materially cash generative).
Previous report
On October 1, 2025, we and Nova entered into amendment No. 4 to the revolving purchase and security agreement described below, which further increased the maximum advance amount to $23,000,000.
Previous report
For the three months ended September 30, 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, 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. 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.
Previous report
Comparison of Nine Months Ended September 30, 2025 and 2024
Previous report
Revenue. Our total revenue increased by $3,613,898, or 70.18%, to $8,763,314 for the nine months ended September 30, 2025 from $5,149,416 for the nine months ended September 30, 2024. Excluding the cumulative catch up reduction to revenue of $1,199,155 and the one-time change in accounting estimate of $1,650,474 (both discussed below), revenue increased by $764,269, or 9.55%. The increase in revenue is mainly attributable to an increase in both office visits and surgical procedures performed year over year.
Previous report
For 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 a cumulative catch up reduction 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.
Previous report
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 report
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 report
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 report
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 report
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 report
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 report
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 report
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 report
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 report
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 report
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.
Previous report
In connection with the acquisition of Edge View on July 16, 2014, we assumed amounts due to previous owners who are current managers of Edge View. These amounts are due on demand and do not bear interest. The balance of these amounts is $4,979 as of September 30, 2025.
Reworded paragraphs (21)
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/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.
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 for the year ended December 31, 2025, or the Form 10-K. 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
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.
Current wording
All current revenue is derived from Nova Ortho and Spine, LLC, or Nova,, which was acquired on May 31, 2021. It operates a group of regional primary specialty and ancillary care facilities across Florida and Georgia that provide traumatic injury victims with primary care evaluations, interventional pain management, and specialty consultation services, including emergency medical condition assessments. We currently primarily focus on plaintiff-related care and provide healthcare to uninsured patients. Our patients have typically been in an accident and have filed a lawsuit as a plaintiff against the defendant who is allegedly responsible for the accident as the result of negligence or another tort. 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
We also own a real estate company, Edge View Properties, Inc., or Edge View, which we acquired on July 16, 2014. Edge View owns five (5) acres zoned medium density residential (MDR) with 12 lots already platted, six (6) acres zoned high-density residential (HDR) that can be platted in various configurations to meet current housing needs, and twelve (12) acres zoned in Lemhi County as Agriculture that is available for further annexation into the City of Salmon for development, as well as a common area for landowners to view wildlife, provide access to the Salmon River and fishing in a two (2) acre pond. Management has invested years working to develop a new and exciting housing development in Salmon, Idaho and plans to enter into a joint venture agreement with a developer for this planned concept development.
Current wording
We also own a real estate company, Edge View Properties, Inc., or Edge View, which we acquired on July 16, 2014. Edge View owns five (5) acres zoned medium density residential (MDR) with 12 lots already platted, six (6) acres zoned high-density residential (HDR) that can be platted in various configurations to meet current housing needs, and twelve (12) acres zoned in Lemhi County as Agriculture that is available for further annexation into the City of Salmon for development, as well as a common area for landowners to view wildlife, provide access to the Salmon River and fishing in a two (2) acre pond. Management does not currently have any plans to develop this property and expects to eventually sell the property.
Previous 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%.
Current wording
Revenue. For the three months ended March 31, 2026 and 2025 all 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 $693,287, or 23.78%, to $2,222,280 for the three months ended March 31, 2026 from $2,915,567 for the three months ended March 31, 2025. The decrease in revenue is mainly attributable to a decrease in surgical procedures services in the first quarter of 2026 from the first quarter of 2025 and due to the decrease in the realization rate to 41% in the first quarter of 2026 from 44% the first quarter of 2025.
Previous 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.
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 decreased by $170,809, or 15.89%, to $904,225 for the three months ended March 31, 2026 from $1,075,034 for the three months ended March 31, 2025. As a percentage of revenue, cost of sales increased from 36.87% for the three months ended March 31, 2025 to 40.69% for the three months ended March 31, 2026. The increase is attributable to a decrease in revenue as noted above, a decrease in personnel related expenses and a decrease in laboratory fees.
Previous 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.
Current wording
Gross profit. As a result of the foregoing, our total gross profit decreased by $522,478, or 28.39%, to $1,318,055 for the three months ended March 31, 2026 from $1,840,533 for the three months ended March 31, 2025. Our total gross margin (as a percentage of revenue) decreased from 63.13% for the three months ended March 31, 2025 to 59.31% for the three months ended March 31, 2026.
Previous 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.
Current wording
Depreciation expense. Our depreciation expense was $593, or 0.03% of revenue, for the three months ended March 31, 2026, as compared to $3,365, or 0.12% of revenue, for the three months ended March 31, 2025.
Previous 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.
Current wording
Loss on disposal of fixed assets. For the three months ended March 31, 2025, we recognized a loss on disposal of fixed assets of $12,593, which resulted from the identification of certain medical equipment that was no longer functional in our medical facilities.
Previous 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.
Current wording
Share based compensation expense. Share based compensation expense was $664,196 and $0 for the three months March 31, 2026 and 2025, respectively. Share based compensation expense in 2026 consisted of expense related to the issuance of common stock to our board of directors, officers and employees, our investor relations firm and other consultants for services provided.
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 $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.
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 and bonuses plus related payroll taxes, advertising expenses, professional advisor fees, credit losses, rent expense, insurance and other expenses incurred in connection with general operations. Our selling, general and administrative expenses decreased by $116,216, or 9.07%, to $1,164,425 for the three months ended March 31, 2026 from $1,280,641 for the three months ended March 31, 2025. As a percentage of revenue, our selling, general and administrative expenses were 52.40% and 43.92% for the three months ended March 31, 2026 and 2025, respectively. The decrease in selling, general and administrative expenses was primarily attributable to lower billing costs, rent expense and travel expenses. Additional there were no credit losses recorded for the three months ended March 31, 2026. These decreases were partially offset by an increase in professional fees.
Previous 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.
Current wording
Total other (expense) income. We had $2,580,915 in total other expense, net, for the three months ended March 31, 2026, as compared to $994,711 in total other expense, net, for the three months ended March 31, 2025. Total other expense, net, for the three months ended March 31, 2026 consisted of interest expense of $1,910,737, a $668,821 loss from issuance or change in fair value of the derivative liability, and amortization of debt discounts of $11,438. These expenses were offset slightly by other income of $10,081 from the return of funds related to a fraudulent bank transaction. Other expense, net, for the three months ended March 31, 2025 consisted of interest expense of $993,114 and other expense of $1,597. 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. We recorded a loss on issuance of derivative liability of $1,192,640 related to the bifurcation of conversion options in several convertible notes issued during the first quarter of 2026. This was offset by a $523,819 gain on the revaluation of the derivative liability as of March 31, 2026 for the change in fair value of the derivative liability. The derivative liability is remeasured at fair value each reporting period using a Monte Carlo simulation model. Changes in assumptions, as well as changes in our stock price during the period, resulted in a decrease in the estimated fair value of the derivative liability and the corresponding loss.
Previous 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%.
Current wording
Net loss. As a result of the cumulative effect of the factors described above, our net loss was $3,092,074 for the three months ended March 31, 2026, as compared to $450,777 for the three months ended March 31, 2025, an increase in loss of $2,641,297, or 585.94%.
Previous 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.
Current wording
As of March 31, 2026, we had $683,507 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 nine months ended September 30, 2025 and 2024.
Current wording
The following table provides detailed information about our net cash flow for the three months ended March 31, 2026 and 2025.
Previous 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.
Current wording
Our net cash used in operating activities from continuing operations was $16,730 for the three months ended March 31, 2026, as compared to $491,420 for the three months ended March 31, 2025. The primary drivers of our net cash used in operating activities for the three months ended March 31, 2026 are our net loss of $3,092,074 and an increase of $819,945 in accounts receivable, offset by an increase of $1,955,970 in interest expense from the line of credit, the loss on issuance or change in value of the derivative liability of $668,821, stock compensation expense or shares issued for services rendered of $664,196, and increase of $224,261 in accounts payable and other accrued expenses, and an increase in accrued related parties compensation expense of $410,629. For the three months ended March 31, 2025, the primary drivers of our net cash used in operating activities was our net loss of $450,777 and an increase of $1,680,291 in accounts receivable, offset by increases of $1,137,308 in interest expense from the line of credit, $230,608 in accounts payable and other accrued expenses and $101,773 in accrued interest.
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 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.
Current wording
We monitor outstanding patient 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 12 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
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.
Current wording
We periodically evaluate our estimated settlement realization rate at which revenue is recorded in accordance with ASC 606. This includes a monthly review of historical data and settlement realization rates, along with estimates of current and pending settlements through ongoing discussions with attorneys, doctors and third-party medical billing company in order to determine the variable consideration under ASC 606 and the net transaction price. For the three months ended March 31, 2026 and 2025, we realized a 41% and 44% average settlement rate of its gross billed charges, respectively.
Previous 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.
Current wording
Our net cash provided by financing activities was $381,702 for the three months ended March 31, 2026, as compared to $299,993 for the three months ended March 31, 2025. Net cash provided by financing activities for the three months ended March 31, 2026 consisted of proceeds from the issuance of convertible notes totaling $845,000, offset by net payments on the line of credit of $243,705, payments of debt issuance costs of $142,400, payment of note payable of $75,000 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, 2025 consisted of proceeds from line of credit of $427,186, 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.
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, 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.
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, 2026 and the accrued interest was $10,513. We assigned all our receivables from consumer activations of the rewards program as collateral on this debenture.
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, 2025 was $144,404 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, 2026 was $142,690 and $0, respectively.
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/A for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission, or the SEC, on August 19, 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 the Form 10-K.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
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%.