Cardiff Lexington Corp
For the period ended Jun 30, 2026. Filed Aug 12, 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.
Jun 30, 2026 · Filed Aug 12, 2026
CDIXStored price and day change unavailable
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious 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 OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-12.
0001683168-26-006232
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 67 previous paragraphs and 75 current paragraphs.
38 unchanged; 23 reworded; 8 added; 5 removed; 1 previous and 6 current paragraphs rearranged.
Tables are not compared: 5 previous and 6 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 (8)
Current report
Common Stock Purchase Agreement
Current report
On July 13, 2026, the Company issued 166,667 shares of common stock for the Commitment Shares required under the Purchase Agreement described below. Additionally, on July 13, 2026, the Company completed a purchase under the Purchase Agreement and issued 20,619 shares of common stock for proceeds of $30,000.
Current report
Revenue. For the three months ended June 30, 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 $629,450, or 22.57%, to $2,159,557 for the three months ended June 30, 2026 from $2,789,007 for the three months ended June 30, 2025. The decline in revenue was mainly driven by a lower implicit realization rate on patient case claim settlements, slightly offset by gradually increasing overall patient visits volumes and billed procedures. The realization rate decreased to 41% for the second quarter of 2026 (unchanged from the prior quarter 2026), compared with 43% for the second quarter of 2025 (unchanged from the prior quarter 2025).
Current report
Comparison of Six Months Ended June 30, 2026 and 2025
Current report
Cost of sales. Our total cost of sales decreased by $287,315, or 13.25%, to $1,881,467 for the six months ended June 30, 2026 from $2,168,782 for the six months ended June 30, 2025. As a percentage of revenue, cost of sales increased from 38.02% for the six months ended June 30, 2025 to 42.94% for the six months ended June 30, 2026. The increase is attributable to a decrease in revenue as noted above, which more than offset decreases in personnel related expenses and laboratory fees.
Current report
Gross profit. As a result of the foregoing, our total gross profit decreased by $1,035,422, or 29.28%, to $2,500,370 for the six months ended June 30, 2026 from $3,535,792 for the six months ended June 30, 2025. Our total gross margin (as a percentage of revenue) decreased from 61.98% for the six months ended June 30, 2025 to 57.06% for the six months ended June 30, 2026.
Current report
Depreciation expense. Our depreciation expense was $846, or 0.02% of revenue, for the six months ended June 30, 2026, as compared to $4,128, or 0.07% of revenue, for the six months ended June 30, 2025.
Current report
The accompanying condensed consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. We have sustained operating losses since inception and have an accumulated deficit of $85,617,319 as of June 30, 2026 and have a negative cash flow from operations of $668,649 for the six months ended June 30, 2026. These factors raise a substantial doubt about our company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might result if we are unable to continue as a going concern.
Removed paragraphs (5)
Previous report
Convertible Promissory Note
Previous 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.
Previous report
We believe, based on our operating plan, that current working capital and current and expected additional financing should be sufficient to fund operations and satisfy our obligations as they come due for at least one year from the financial statement issuance date. However, additional funds from new financing and/or future equity raises are required for continued operations and to execute our business plan and our strategy of acquiring additional businesses. The funds required to sustain operations range between $600,000 to $1 million and additional funds execute our business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase price of a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one of our subsidiaries. Given these factors, we believe that the amount of outside additional capital necessary to execute our business plan on the low end (assuming target company sellers accept a significant portion of the purchase price in the form of seller notes or our equity or equity in one of our subsidiaries) ranges between $5 million to $10 million. If, and to the extent, that sellers are unwilling to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan could be as much as $10 million.
Previous report
Promissory Note – Settlement Agreement
Previous 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.
Reworded paragraphs (23)
Previous wording
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 wording
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 provide greater coverage for our patients, and diversification and risk mitigation for our stockholders.
Previous wording
Cost of sales. Our cost of sales consists of surgical center and laboratory fees, physician and professional fees, salaries and wages and medical supplies. Our total cost of sales decreased by $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.
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 $116,506, or 10.65%, to $977,242 for the three months ended June 30, 2026 from $1,093,748 for the three months ended June 30, 2025. As a percentage of revenue, cost of sales increased from 39.22% for the three months ended June 30, 2025 to 45.25% for the three months ended June 30, 2026. The increase is attributable to a decrease in revenue as noted above, which more than offset decreases in personnel related expenses and laboratory fees.
Previous 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.
Current wording
Gross profit. As a result of the foregoing, our total gross profit decreased by $512,944, or 30.26%, to $1,182,315 for the three months ended June 30, 2026 from $1,695,259 for the three months ended June 30, 2025. Our total gross margin (as a percentage of revenue) decreased from 60.78% for the three months ended June 30, 2025 to 54.75% for the three months ended June 30, 2026.
Previous 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.
Current wording
Depreciation expense. Our depreciation expense was $253, or 0.01% of revenue, for the three months ended June 30, 2026, as compared to $763, or 0.03% of revenue, for the three months ended June 30, 2025.
Previous 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.
Current wording
Share-based compensation expense. Share-based compensation expense was $366,939 and $97,500 for the three months ended June 30, 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. Share-based compensation expense in 2025 consisted of expense related to the issuance of common stock to our investor relations firm.
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 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.
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 increased by $372,447, or 37.72%, to $1,359,766 for the three months ended June 30, 2026 from $987,319 for the three months ended June 30, 2025. As a percentage of revenue, our selling, general and administrative expenses were 62.97% and 35.40% for the three months ended June 30, 2026 and 2025, respectively. The increase in selling, general and administrative expenses was primarily attributable to an increase in professional fees.
Previous 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%.
Current wording
Net loss. As a result of the cumulative effect of the factors described above, our net loss was $2,478,906 for the three months ended June 30, 2026, as compared to $1,226,395 for the three months ended June 30, 2025, an increase in loss of $1,252,511, or 102.13%.
Previous 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.
Current wording
Revenue. For the six months ended June 30, 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 $1,322,737, or 23.19%, to $4,381,837 for the six months ended June 30, 2026 from $5,704,574 for the six months ended June 30, 2025. The decrease in revenue is mainly attributable to a slight decrease in billed surgical procedure services in the first half of 2026 from the first half of 2025 as well as a lower implicit realization rate on patient case claim settlements. The realization rate decreased to 41% for the first half of 2026, compared with 43% for the first half of 2025.
Previous 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.
Current wording
Loss on disposal of fixed assets. For the six months ended June 30, 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
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.
Current wording
Total other (expense) income. We had $4,515,178 in total other expense, net, for the six months ended June 30, 2026, as compared to $2,830,783 in total other expense, net, for the six months ended June 30, 2025. Total other expense, net, for the six months ended June 30, 2026 consisted of interest expense of $4,048,156, a $442,772 loss from issuance or change in fair value of the derivative liability, and amortization of debt discounts of $34,331. 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 six months ended June 30, 2025 consisted of interest expense of $2,829,186 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. 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
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.
Current wording
As of June 30, 2026, we had $217,654 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 financial statements were prepared on a going concern basis and do not include any adjustment with respect to these uncertainties. Our ability to continue as a going concern and the appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusions. We have prospective investors and believe the raising of capital will allow us to fund our cash flow shortfalls and pursue new acquisitions. There can be no assurance that we will be able to obtain sufficient capital from debt or equity transactions or from operations in the necessary time frame or on terms acceptable to us. Should we be unable to raise sufficient funds, we may be required to curtail our operating plans. In addition, increases in expenses may require cost reductions. No assurance can be given that we will be able to operate profitably on a consistent basis, or at all, in the future. Should we not be able to raise sufficient funds, it may cause cessation of operations.
Current wording
The ability of our company to continue as a going concern and the appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusions. Management has prospective investors and believes the raising of capital will allow us to fund our cash flow shortfalls and pursue new acquisitions. However, there can be no assurance that we will be able to obtain sufficient capital from debt or equity transactions or from operations in the necessary time frame or on terms acceptable to us. Furthermore, the sale of additional equity securities could result in dilution to our stockholders and the incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Should we be unable to raise sufficient funds, we may be required to curtail our operating plans. In addition, increases in expenses may require cost reductions. No assurance can be given that we will be able to operate profitably on a consistent basis, or at all, in the future. Should we not be able to raise sufficient funds, it may cause cessation of operations.
Previous wording
The following table provides detailed information about our net cash flow for the three months ended March 31, 2026 and 2025.
Current wording
The following table provides detailed information about our net cash flow for the six months ended June 30, 2026 and 2025.
Previous 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.
Current wording
Our net cash used in operating activities from continuing operations was $668,649 for the six months ended June 30, 2026, as compared to $1,889,003 for the six months ended June 30, 2025. The primary drivers of our net cash used in operating activities for the six months ended June 30, 2026 are our net loss of $5,570,980 and an increase of $1,684,667 in accounts receivable, offset by an increase of $4,165,687 in interest expense from the line of credit, the loss on issuance or change in value of the derivative liability of $442,772, stock compensation expense or shares issued for services rendered of $1,031,135, an increase of $339,108 in accounts payable and other accrued expenses, and an increase in accrued related parties compensation expense of $626,247. For the six months ended June 30, 2025, the primary drivers of our net cash used in operating activities was 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 related parties compensation, and $137,211 in accrued interest.
Previous 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.
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 the Company’s third-party medical billing company in order to determine the variable consideration under ASC 606 and the net transaction price. For the six months ended June 30, 2026 and 2025, we realized a 41% and 43% average settlement rate of its gross billed charges, respectively.
Previous wording
We had no investing activities for the three months ended March 31, 2026 and 2025.
Current wording
We had no investing activities for the six months ended June 30, 2026 and 2025.
Previous 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.
Current wording
Our net cash provided by financing activities was $567,768 for the six months ended June 30, 2026, as compared to $1,260,533 for the six months ended June 30, 2025. Net cash provided by financing activities for the six months ended June 30, 2026 consisted of proceeds from the issuance of convertible notes totaling $1,113,889, offset by net payments on the line of credit of $236,646, payments of debt issuance costs of $195,089, payment of note payable of $110,000 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, 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.
Previous wording
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 wording
As of June 30, 2026, we had convertible debt outstanding, at carrying value, of $302,765. During the six months ended June 30, 2026, we received $918,800 in net proceeds from convertible notes and settled accrued interest totaling $10,784 in 4,175 shares of our common stock. Debt discounts associated with the convertible debt at June 30, 2026 were $1,061,124. Please see Note 8.Convertible Notes Payable to the accompanying unaudited condensed consolidated financial statements for a description of the terms of our convertible debt.
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, 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.
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, 2026 and the accrued interest was $10,842. 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 March 31, 2026 was $142,690 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, 2026 was $141,843 and $0, respectively.
Previous wording
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 wording
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 June 30, 2026, we had an outstanding balance of $21,138,949 against the revolving receivable line of credit and accrued interest of $653,551.
Previous wording
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 wording
On March 6, 2026, we entered into a lock-up and compensation resolution agreement with Daniel Thompson 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 June 30, 2026, we had an outstanding balance of $116,667 on this note and accrued interest of $22,071.
Previous wording
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.
Current wording
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 matured on June 30, 2026. As of June 30, 2026, these loans are in default, had an outstanding balance of $1,085,703 and accrued interest of $28,555.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Total other (expense) income. We had $1,934,263 in total other expense, net, for the three months ended June 30, 2026, as compared to $1,836,072 in total other expense, net, for the three months ended June 30, 2025. Total other expense, net, for the three months ended June 30, 2026 consisted of interest expense of $2,137,419 and amortization of debt discounts of $22,893, offset slightly by a $226,049 gain from the change in fair value of the derivative liability. Other expense, net, for the three months ended June 30, 2025 consisted entirely of interest expense. 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. The convertible notes derivative liabilities are remeasured at fair value each reporting period using a Monte Carlo simulation model and the commitment shares derivative liability using a Black-Scholes option-pricing 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 gain.
Current report — wording carried from elsewhere
The following table sets forth key components of our results of operations during the six months ended June 30, 2026 and 2025, both in dollars and as a percentage of our revenue.
Current report — wording carried from elsewhere
Share-based compensation expense. Share-based compensation expense was $1,031,135 and $97,500 for the six months June 30, 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. Share-based compensation expense in 2025 consisted of expense related to the issuance of common stock to our investor relations firm.
Current report — wording carried from elsewhere
Selling, general and administrative expenses. Our selling, general and administrative expenses increased by $256,231, or 11.30%, to $2,524,191 for the six months ended June 30, 2026 from $2,267,960 for the six months ended June 30, 2025. As a percentage of revenue, our selling, general and administrative expenses were 57.61% and 39.76% for the six months ended June 30, 2026 and 2025, respectively. The increase in selling, general and administrative expenses was primarily attributable to an increase in professional fees, offset slightly by lower rent expense and travel expenses as well as a lower credit loss expense recorded.
Current report — wording carried from elsewhere
Net loss. As a result of the cumulative effect of the factors described above, our net loss was $5,570,980 for the six months ended June 30, 2026, as compared to $1,677,172 for the six months ended June 30, 2025, an increase in loss of $3,893,808, or 232.17%.
Current report — wording carried from elsewhere
On June 30, 2026, we issued an unsecured promissory note in the principal amount of $233,333 to Daniel Thompson, our former Chairman of the Board and a significant stockholder, to resolve outstanding accrued compensation obligations. The note bears interest at 5% annually and matures on June 30, 2028. As of June 30, 2026, we had an outstanding balance of $233,333 on this note and accrued interest of $1,446.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We intend to raise capital for additional acquisitions primarily through equity and debt financings. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. There is no guarantee that we will be able to acquire additional businesses under the terms outlined above.