Cardiff Lexington Corp

Previous wording

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 wording

Revenue. For the three months ended September 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 $1,146,561, or 37.48%, to $1,912,179 for the three months ended September 30, 2026 from $3,058,740 for the three months ended September 30, 2025. The decline in revenue was mainly attributable to the decrease in the realization rate on patient case claim settlements as well as a decrease in procedures from the third quarter of 2025. The realization rate decreased to 40% as of the third quarter of 2026, compared with 42% as of the third quarter of 2025.

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 $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.

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 $273,741, or 23.82%, to $875,420 for the three months ended September 30, 2026 from $1,149,161 for the three months ended September 30, 2025. As a percentage of revenue, cost of sales increased from 37.57% for the three months ended September 30, 2025 to 45.78% for the three months ended September 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 $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.

Current wording

Gross profit. As a result of the foregoing, our total gross profit decreased by $872,820, or 45.71%, to $1,036,759 for the three months ended September 30, 2026 from $1,909,579 for the three months ended September 30, 2025. Our total gross margin (as a percentage of revenue) decreased from 62.43% for the three months ended September 30, 2025 to 54.22% for the three months ended September 30, 2026.

Previous 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.

Current wording

Depreciation expense. Our depreciation expense was $233, or 0.01% of revenue, for the three months ended September 30, 2026, as compared to $762, or 0.02% of revenue, for the three months ended September 30, 2025.

Previous 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.

Current wording

Share-based compensation expense. Share-based compensation expense was $369,981 and $41,188 for the three months ended September 30, 2026 and 2025, respectively. Share-based compensation expense in both 2026 and 2025 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 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.

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, 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 $21,139, or 1.73%, to $1,203,211 for the three months ended September 30, 2026 from $1,224,350 for the three months ended September 30, 2025. As a percentage of revenue, our selling, general and administrative expenses were 62.92% and 40.03% for the three months ended September 30, 2026 and 2025, respectively. The decrease in selling, general and administrative expenses was primarily attributable to decreases in professional fees, rent and general administration and office costs, offset by increases in the allowance for credit loss, billing costs and payroll related costs.

Previous wording

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 wording

Total other (expense) income. We had $2,669,885 in total other expense, net, for the three months ended September 30, 2026, as compared to $1,787,578 in total other expense, net, for the three months ended September 30, 2025. Total other expense, net, for the three months ended September 30, 2026 consisted of interest expense of $2,468,536, a $106,593 loss on deferred offering costs expensed during the quarter, a $50,242 loss on issuance or change in value of the derivative liability, a $16,498 loss on the settlement of debt, amortization of debt discounts of $22,516 and $5,500 in conversion costs. Other expense, net, for the three months ended September 30, 2025 consisted of interest expense of $1,765,528, other expense of $20,550 and penalties and fees of $1,500. 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 outstanding as described below. The convertible notes derivative liabilities are remeasured at fair value each reporting period using a Monte Carlo simulation model. The commitment shares derivative liability was remeasured at settlement 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 loss.

Previous 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%.

Current wording

Net loss. As a result of the cumulative effect of the factors described above, our net loss was $3,206,551 for the three months ended September 30, 2026, as compared to $1,144,299 for the three months ended September 30, 2025, an increase in loss of $2,062,252, or 180.22%.

Previous wording

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 wording

The following table sets forth key components of our results of operations during the nine months ended September 30, 2026 and 2025, both in dollars and as a percentage of our revenue.

Previous 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.

Current wording

Revenue. For the nine months ended September 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 $2,469,298, or 28.18%, to $6,294,016 for the nine months ended September 30, 2026 from $8,763,314 for the nine months ended September 30, 2025. The decrease in revenue is mainly attributable to a decrease in procedures in the nine months of 2026 from the first nine months of 2025 as well as a lower implicit realization rate on patient case claim settlements. The realization rate declined from 44% at the beginning of 2025 to 42% during the first nine months of 2025, and further decreased to 40% as of September 30, 2026.

Previous wording

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 wording

Cost of sales. Our total cost of sales decreased by $561,056, or 16.91%, to $2,756,887 for the nine months ended September 30, 2026 from $3,317,943 for the nine months ended September 30, 2025. As a percentage of revenue, cost of sales increased from 37.86% for the nine months ended September 30, 2025 to 43.80% for the nine months ended September 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 $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 wording

Gross profit. As a result of the foregoing, our total gross profit decreased by $1,908,242, or 35.04%, to $3,537,129 for the nine months ended September 30, 2026 from $5,445,371 for the nine months ended September 30, 2025. Our total gross margin (as a percentage of revenue) decreased from 62.14% for the nine months ended September 30, 2025 to 56.20% for the nine months ended September 30, 2026.

Previous wording

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 wording

Depreciation expense. Our depreciation expense was $1,079, or 0.02% of revenue, for the nine months ended September 30, 2026, as compared to $4,890, or 0.06% of revenue, for the nine months ended September 30, 2025.

Previous 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.

Current wording

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

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 wording

Share-based compensation expense. Share-based compensation expense was $1,401,116 and $138,688 for the nine months ended September 30, 2026 and 2025, respectively. Share-based compensation expense in both 2026 and 2025 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 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 wording

Selling, general and administrative expenses. Our selling, general and administrative expenses increased by $235,092, or 6.73%, to $3,727,402 for the nine months ended September 30, 2026 from $3,492,310 for the nine months ended September 30, 2025. As a percentage of revenue, our selling, general and administrative expenses were 59.22% and 39.85% for the nine months ended September 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.

Previous 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.

Current wording

Total other (expense) income. We had $7,185,063 in total other expense, net, for the nine months ended September 30, 2026, as compared to $4,618,361 in total other expense, net, for the nine months ended September 30, 2025. Total other expense, net, for the nine months ended September 30, 2026 consisted of interest expense of $6,516,692, a $493,014 loss from issuance or change in fair value of the derivative liability, other expense of $96,512, amortization of debt discounts of $56,847, a loss on the settlement of debt of $16,498 and conversion costs of $5,500. Other expense, net, for the nine months ended September 30, 2025 consisted of interest expense of $4,594,714, other expense of $22,147 and penalties and fees of $1,500. 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

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 wording

Net loss. As a result of the cumulative effect of the factors described above, our net loss was $8,777,531 for the nine months ended September 30, 2026, as compared to $2,821,471 for the nine months ended September 30, 2025, an increase in loss of $5,956,060, or 211.10%.

Previous 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.

Current wording

As of September 30, 2026, we had $584,319 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 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.

Current wording

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 $89,117,673 as of September 30, 2026 and have a negative cash flow from operations of $235,975 for the nine months ended September 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.

Previous wording

The following table provides detailed information about our net cash flow for the six months ended June 30, 2026 and 2025.

Current wording

The following table provides detailed information about our net cash flow for the nine months ended September 30, 2026 and 2025.

Previous 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.

Current wording

Our net cash used in operating activities was $235,975 for the nine months ended September 30, 2026, as compared to $2,463,300 for the nine months ended September 30, 2025. The primary drivers of our net cash used in operating activities for the nine months ended September 30, 2026 are our net loss of $8,777,531 and an increase of $1,409,255 in accounts receivable, offset by an increase of $6,524,189 in interest expense included in the line of credit, the loss on issuance or change in value of the derivative liability of $493,014, stock compensation expense or shares issued for services rendered of $1,401,116, an increase of $207,097 in accounts payable and other accrued expenses, an increase in accrued interest of $273,494, and an increase in accrued related parties compensation expense of $939,729. For the nine months ended September 30, 2025, the primary drivers of our net cash used in operating activities were 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 included in the line of credit balance.

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 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.

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 nine months ended September 30, 2026 and 2025, we realized a 40% and 42% average settlement rate of our gross billed charges, respectively.

Previous wording

We had no investing activities for the six months ended June 30, 2026 and 2025.

Current wording

We had no investing activities for the nine months ended September 30, 2026 and 2025.

Previous 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.

Current wording

Our net cash provided by financing activities was $501,759 for the nine months ended September 30, 2026, as compared to $1,507,148 for the nine months ended September 30, 2025. Net cash provided by financing activities for the nine months ended September 30, 2026 consisted of proceeds from the issuance of convertible notes totaling $1,113,889 and proceeds from sales of common stock under our equity line of credit of $30,000, offset by net payments on the line of credit of $294,605, payments of debt issuance costs of $195,089, payment of note payable of $110,000, payment of a convertible note of $35,357, repayments of the Small Business Administration loan described below of $6,579, and a payment of $500 to a related party. 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.

Previous 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.

Current wording

As of September 30, 2026, we had convertible debt outstanding, at carrying value, of $240,205. During the nine months ended September 30, 2026, we received $918,800 in net proceeds from convertible notes, issued an aggregate of 1,487,768 shares of our common stock upon conversion of $341,388 in principal and interest and $5,500 in conversion cost on various convertible notes, and settled accrued interest totaling $22,916 in 12,006 shares of our common stock. Debt discounts associated with the convertible debt at September 30, 2026 were $873,327. 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 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.

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, 2026 and the accrued interest was $11,174. 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 June 30, 2026 was $141,843 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, 2026 was $140,988 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 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.

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. Although the credit agreement currently provides for a maximum advance amount of $23,000,000, the lender has agreed to waive this maximum advance limit while the parties negotiate an amendment to the facility. 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 September 30, 2026, we had an outstanding balance of $23,439,491 against the revolving receivable line of credit and accrued interest of $730,107.

Previous wording

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.

Current wording

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. For the nine months ended September 30, 2026, we paid $4,387 in cash interest payments and as of September 30, 2026, had an outstanding balance of $233,333 on this note and accrued interest of $0.

Previous 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.

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. For the nine months ended September 30, 2026, we paid $6,553 in cash interest payments and as of September 30, 2026, had an outstanding balance of $116,667 on this note and accrued interest of $0.

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 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.

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. For the nine months ended September 30, 2026, we paid $16,445 in cash interest payments against these notes. As of September 30, 2026, these loans are in default, had an outstanding balance of $1,085,703 and accrued interest of $47,864.