Cardiff Lexington (CDIX) Q1 2026 loss deepens amid heavy debt load
Cardiff Lexington Corporation reported a larger loss for the three months ended March 31, 2026 while relying heavily on debt financing. Revenue was $2,222,280, down from $2,915,567 a year earlier, reducing gross profit to $1,318,055. Operating results swung to a loss of $511,159, primarily due to $664,196 of share-based compensation and ongoing selling, general and administrative costs.
The bottom line was driven by $1,910,737 of interest expense and a $668,821 loss on derivative liabilities, producing a net loss of $3,092,074 and a basic and diluted loss per share of $0.23. Operating cash use was modest at $16,730, but the company raised $381,702 from financing, including $845,000 of new convertible notes.
At March 31, 2026, Cardiff held $683,507 in cash and $22,890,899 of accounts receivable tied to lien-based medical services, funded in part by an $18,922,173 line of credit under a $23,000,000 facility and $1,095,000 of convertible notes. Total liabilities were $24,630,858 against stockholders’ equity of $3,876,456 and an accumulated deficit of $82,855,513. Management disclosed substantial doubt about the company’s ability to continue as a going concern without additional capital.
Positive
- None.
Negative
- Substantial going-concern doubt: Management highlighted recurring losses, an accumulated deficit of $82,855,513 and dependence on new capital, indicating substantial doubt about Cardiff Lexington’s ability to continue as a going concern.
- Margin pressure and higher losses: Revenue fell to $2,222,280 from $2,915,567 while net loss expanded to $3,092,074, driven by interest expense, derivative losses and higher operating costs including $664,196 of share-based compensation.
- High leverage and costly financing: A $18,922,173 balance on the DML line of credit and $1,095,000 of convertible notes, plus a $1,129,345 derivative liability, reflect heavy reliance on expensive, complex debt structures.
Insights
Higher losses, heavy leverage and going-concern doubt increase financial risk.
Cardiff Lexington’s Q1 2026 loss widened sharply to $3,092,074, with interest expense of $1,910,737 and a derivative liability loss of $668,821. These non-operating costs overshadowed gross profit of $1,318,055 on revenue of $2,222,280.
Funding relies on significant borrowing: the DML line of credit stood at $18,922,173 out of a $23,000,000 maximum, and convertible notes totaled $1,095,000 in principal as of March 31, 2026. A newly recognized derivative liability of $1,129,345 adds balance-sheet complexity and earnings volatility.
Despite modest operating cash use of $16,730, the accumulated deficit reached $82,855,513. Management explicitly noted substantial doubt about continuing as a going concern, contingent on securing additional debt or equity financing. Subsequent filings will show whether new capital or improved profitability mitigates this risk.
Key Figures
Key Terms
going concern financial
derivative liability financial
line of credit financial
reverse stock split financial
letter of protection financial
Monte Carlo simulation financial
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended:
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to _____________
Commission File Number:
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
| ( |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 12, 2026, there were
CARDIFF LEXINGTON CORPORATION
Quarterly Report on Form 10-Q
Period Ended March 31, 2026
TABLE OF CONTENTS
| PART I | ||
| FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 35 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 42 |
| Item 4. | Controls and Procedures | 42 |
| PART II | ||
| OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 43 |
| Item 1A. | Risk Factors | 43 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 43 |
| Item 3. | Defaults Upon Senior Securities | 44 |
| Item 4. | Mine Safety Disclosures | 44 |
| Item 5. | Other Information | 44 |
| Item 6. | Exhibits | 44 |
| 2 |
PART I
FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS. |
CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Page | ||
| Condensed Consolidated Balance Sheets as of March 31, 2026 (Unaudited) and December 31, 2025 | 4 | |
| Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2026 (Unaudited) and 2025 (Unaudited) | 5 | |
| Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2026 (Unaudited) and 2025 (Unaudited) | 6 | |
| Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 (Unaudited) and 2025 (Unaudited and Restated) | 7 | |
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 8 |
| 3 |
CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2026 (UNAUDITED) AND DECEMBER 31, 2025
| March 31, 2026 | December 31, 2025 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Land | ||||||||
| Goodwill | ||||||||
| Right of use – assets, net | ||||||||
| Due from related party | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' (DEFICIT)/EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expense | $ | $ | ||||||
| Accrued expenses – related parties | ||||||||
| Accrued interest | ||||||||
| Right of use – operating lease liabilities | ||||||||
| Notes payable – current portion | ||||||||
| Notes payable related parties – current portion | ||||||||
| Line of credit | ||||||||
| Convertible notes payable, net of debt discounts of $ | ||||||||
| Derivative liabilities – current portion | ||||||||
| Total current liabilities | ||||||||
| Other liabilities | ||||||||
| Operating lease liability – long term | ||||||||
| Notes payable | ||||||||
| Notes payable – related parties | ||||||||
| Total liabilities | ||||||||
| Mezzanine equity | ||||||||
| Redeemable Series N Senior Convertible Preferred Stock - | ||||||||
| Redeemable Series X Senior Convertible Preferred Stock - | ||||||||
| Total Mezzanine Equity | ||||||||
| Stockholders' equity/(deficit) | ||||||||
| Series F-1 Preferred Stock - | ||||||||
| Series L Preferred Stock - | ||||||||
| Series N Senior Convertible Preferred Stock - | ||||||||
| Series Y Senior Convertible Preferred Stock - | ||||||||
| Common Stock: | ||||||||
| Additional paid-in capital | ||||||||
| Unearned stock-based compensation | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity/(deficit) | ( | ) | ||||||
| Total liabilities, mezzanine equity and stockholders’ equity/(deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| 4 |
CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(UNAUDITED)
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| REVENUE | $ | $ | ||||||
| COST OF SALES | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Depreciation expense | ||||||||
| Loss on disposal of fixed assets | ||||||||
| Share based compensation | ||||||||
| Selling, general and administrative | ||||||||
| Total operating expenses | ||||||||
| (LOSS) / INCOME FROM OPERATIONS | ( | ) | ||||||
| OTHER (EXPENSE) INCOME | ||||||||
| Other income (expense) | ( | ) | ||||||
| Derivative liability loss on issuance and changes in fair value | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Amortization of debt discounts | ( | ) | ||||||
| Total other expense | ( | ) | ( | ) | ||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| PREFERRED STOCK DIVIDENDS | $ | ( | ) | $ | ( | ) | ||
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | ( | ) | $ | ( | ) | ||
| BASIC AND DILUTED LOSS PER SHARE | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED * | ||||||||
| * |
The accompanying notes are an integral part of these condensed consolidated financial statements
| 5 |
CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT) *
THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(UNAUDITED)
Three Months Ended March 31, 2026:
| Preferred Stock Series A, N & Y | Preferred Stock Series F-1 and L | Common Stock | Additional Paid-In | Unearned Stock-based | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Compensation | Deficit | (Deficit) | |||||||||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Issuance of common stock related to bridge loans | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Common stock issued for services | – | – | – | – | – | |||||||||||||||||||||||||||||||||||
| Cancellation of common stock for award forfeiture | – | – | – | – | ( | ) | ( | ) | ( | ) | – | – | ||||||||||||||||||||||||||||
| Conversion of deferred compensation to common stock | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Reclassification of series N preferred stock from mezzanine equity to permanent equity | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
| Issuance of series N preferred stock | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
| Issuance of series Y preferred stock | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
| Stock compensation expense | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
| Preferred stock dividends | – | – | – | – | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
Three Months Ended March 31, 2025:
| Preferred Stock Series A, I & Y | Preferred Stock Series B, E, F-1 and L | Preferred Stock Series C | Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ (Deficit) | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Conversion of series B preferred stock | – | – | ( | ) | ( | ) | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Conversion of series I preferred stock | ( | ) | ( | ) | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
| Issuance of series Y preferred stock | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||
| Preferred stock dividends | – | – | – | – | – | – | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net loss | – | – | – | – | – | – | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
*Shares outstanding have been restated for the 1-for-3 reverse stock split effective January 12, 2026. See Note 1. Summary of Significant Accounting Policies.
The accompanying notes are an integral part of these condensed consolidated financial statements
| 6 |
CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(UNAUDITED)
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 (Restated) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of debt discount | ||||||||
| Credit losses | ||||||||
| Loss on disposal of assets | ||||||||
| Loss on issuance / change in fair value of derivative liability | ||||||||
| Interest included in line of credit | ||||||||
| Share issuance and compensation expense | ||||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Right of use – assets | ||||||||
| Prepaids and other current assets | ( | ) | ( | ) | ||||
| Increase (decrease) in: | ||||||||
| Accounts payable and accrued expense | ||||||||
| Accrued related parties compensation | ||||||||
| Accrued interest | ||||||||
| Right of use – liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Repayment of SBA loans | ( | ) | ( | ) | ||||
| Net (payments) proceeds on line of credit | ( | ) | ||||||
| Proceeds from convertible notes payable | ||||||||
| Payments of debt issuance costs | ( | ) | ||||||
| Payments on note payable | ( | ) | ( | ) | ||||
| Payment of dividends on preferred stock | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the year for interest | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES*: | ||||||||
| Common stock issued upon conversion of preferred stock | $ | $ | ||||||
| Dividends on preferred stock, including accrued dividends on preferred stock | $ | $ | ||||||
| Common stock issued upon conversion of accrued salaries | $ | $ | ||||||
| Promissory notes payable issued in settlement of accrued salaries | $ | $ | ||||||
| Discount on convertible notes payable | $ | $ | ||||||
| Recognition of derivative liability upon issuance of convertible note | $ | $ | ||||||
| Change in fair value of derivative liability | $ | ( | ) | $ | ||||
*For the three months ended March 31, 2025, a lease modification recorded increased right of use assets and right of use liabilities by $83,669.
The accompanying notes are an integral part of these condensed consolidated financial statements
| 7 |
CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(UNAUDITED)
| 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Organization and Nature of Operations
Cardiff Lexington Corporation (“Cardiff”) was originally incorporated on September 3, 1986 in Colorado as Cardiff International Inc. On November 10, 2005, Cardiff merged with Legacy Card Company, LLC and changed its name to Cardiff Lexington Corporation. On August 27, 2014, Cardiff redomiciled and became a corporation under the laws of Florida. On April 13, 2021, Cardiff redomiciled and became a corporation under the laws of Nevada.
Cardiff is 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 stockholders. All of Cardiff’s operations are predominantly conducted through, and its income derived from, its Nova Ortho and Spine, LLC (“Nova”) subsidiary. Its subsidiaries include:
| · | Nova, which was acquired on May 31, 2021; and | |
| · | Edge View Properties, Inc. (“Edge View”), which was acquired on July 16, 2014. |
Basis of Presentation and Principles of Consolidation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Cardiff and its wholly owned subsidiaries, Nova and Edge View (collectively, the “Company”). All significant intercompany accounts and transactions are eliminated in consolidation.
Reverse Stock Split
On January 12, 2026, we implemented a
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Management uses its historical records and knowledge of its business in making estimates. Accordingly, actual results could differ from those estimates.
| 8 |
Accounts Receivable
In the normal course of business, the Company is in the lien based medical industry, providing orthopedic healthcare servicing an uninsured market insulated by a letter of protection which insulates the Company from, and insures payment in full of, insurance settlements. Accounts receivable consists of amounts due from attorneys and insurance providers for services provided to patients under the letter of protection. Accounts receivable are recorded at the expected settlement realization amount, which is less contractual adjustments and an allowance for credit losses. The Company recognizes an allowance for credit losses for its accounts receivable to present the net amount expected to be collected as of the balance sheet date. This allowance is determined based on the history of net settlements received, where the net settlement amount is not collected. No collection can happen if no settlement is reached with the defendant’s insurance company and the plaintiff (the patient) loses the case at trial, or the case is abandoned, then the Company will not be able to collect on its letter of protection and its receivable will not be collected. The Company monitors outstanding cases as they develop through ongoing discussions with attorneys, doctors and third-party medical billing company and additionally monitors settlement realization rates over time. Additionally, the Company considers economic factors and events or trends expected to affect future collections experience. The no collection history of the Company’s customers is considered in future assessments of collectability as these patterns are established over a longer period. The Company uses the term collection and collection rate in its disclosures to describe the historical less than 1.0% occurrence of not collecting under a contract, which aligns with the Company’s credit loss accounting under ASC 326.
The Company does not have a significant exposure
to credit losses as it has historically had a less than 1.0% loss rate where the Company received no settlement amount for its outstanding
accounts receivable. Although possible, claims resulting in zero collection upon settlement are rare based on the Company’s historical
experience and has historically been less than 1.0% of its outstanding accounts receivable, thereby resulting in a collection rate of
99%. The Company uses the loss rate method to record its allowance for credit losses. The Company applies the loss rate method by reviewing
its zero collection history on a quarterly basis and updating its estimates of credit losses to adjust for changes in loss data. The Company
typically collects on its accounts receivable between twelve and twenty-four months after recording. The Company does not record an allowance
for credit losses based on an aging of its accounts receivable as the aging of the Company’s receivables do not influence the credit
loss rate due to the nature of its business and the letter of protection. The Company does not adjust its receivables for the effects
of a significant financing component at contract inception as the timing of variable consideration is determined by the settlement, which
is outside of the Company’s control. As of March 31, 2026 and December 31, 2025, the Company’s allowance for credit losses
was $
The following table shows the allowance for credit losses activity:
| Schedule of allowance for credit losses activity | ||||||||
| 2026 | 2025 | |||||||
| Balance at January 1 | $ | ( | ) | $ | ( | ) | ||
| Current period provision | ( | ) | ||||||
| Write off charged against the allowance | ||||||||
| Balance at March 31 | $ | ( | ) | $ | ( | ) | ||
Property and Equipment
Property and equipment are carried at cost. Expenditures for renewals and betterments that extend the useful lives of property, equipment or leasehold improvements are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is calculated using the straight-line method for financial reporting purposes based on the following estimated useful lives:
| Schedule of estimated useful lives | ||
| Classification | Useful Life | |
| Equipment, furniture, and fixtures | ||
| Medical equipment | ||
| Leasehold improvements |
| 9 |
Goodwill
Goodwill is not amortized but is evaluated for
impairment annually or when indicators of a potential impairment are present. The Company reviews goodwill for impairment on a reporting
unit basis annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Goodwill
is tested first for impairment based on qualitative factors on an annual basis or in between if an event occurs or circumstances change
that indicate the fair value may be below its carrying amount, otherwise known as a ‘triggering event’. An assessment is made
of these qualitative factors to determine whether it is more likely than not the fair value is less than the carry amount, including goodwill.
The annual evaluation is based on valuation models that incorporate assumptions and internal projections of expected future cash flows
and operating plans. The Company believes such assumptions are also comparable to those that would be used by other marketplace participants.
During the three months ended March 31, 2026 and 2025, the Company did
Valuation of Long-lived Assets
In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 360-10-35, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and construction in progress held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.
Revenue Recognition
The Company’s primary source of revenue is its healthcare subsidiary, which records revenues from providing licensed and/or certified orthopedic procedures. Revenue is recognized at a point in time in accordance with ASC 606 and at an estimated net settlement realization rate based on gross billed charges. The Company’s healthcare subsidiary does not have contract liabilities or deferred revenue as there are no amounts prepaid for services. The Company applies the following five-step ASC 606 model to determine revenue recognition:
| · | Identification of a contract with a customer | |
| · | Identification of the performance obligations in the contract | |
| · | Determination of the transaction price | |
| · | Allocation of the transaction price to the separate performance obligations | |
| · | Recognition of revenue when performance obligations are satisfied. |
At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses services promised within each contract and determines those that are a performance obligation and assesses whether each promised service is distinct.
The Company’s contracts contain a single performance obligation (providing orthopedic services), as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, not distinct, as a result, the entire transaction price is allocated to this single performance obligation.
Accordingly, the Company recognizes net revenue when the patient receives orthopedic care services. The Company’s patient service contracts generally have performance obligations which are satisfied at a point in time. The performance obligation is for onsite or off-site care provided. Patient service contracts are generally fixed-price, and the transaction price is in the contract.
| 10 |
In determining net revenue to record under ASC 606, the Company must estimate the transaction price, including estimates of variable consideration in the contract at inception. In order to estimate variable consideration, the Company uses established billings rates (also described as “gross charges”) for the procedures being performed, however, the billing rates are not the same as actual amounts recovered for the Company’s healthcare subsidiary. They generally do not reflect what the Company is ultimately paid by the customer, insurance carriers and other payors, and therefore are not reported in the consolidated financial statements at that rate. The Company is typically paid amounts based on established charges per procedure with guidance from the annually updated Current Procedural Terminology (“CPT”) guidelines that designates relative value units and a suggested range of charges for each procedure which is then assigned a CPT code. This gross charge is discounted to reflect the percentage paid to the Company using a modifier recognized by each insurance carrier for services, less deductible, co-pay, and contractual adjustments which are deducted from the calculated fee. These adjustments are considered variable consideration under ASC 606 and are deducted from the calculated fee to arrive at the net transaction price. The Company also estimates changes in the contract price as a result of price concessions, changes to deductibles, co-pays and other contractual adjustments to determine the eventual settlement amount the Company expects to receive. The Company uses the term settlement realization in its disclosures to describe the amount of cash the Company expects to receive based on its estimate of the transaction price under the expected value method of ASC 606.
Where appropriate, the Company utilizes the expected value method to determine the appropriate amount for estimates of variable consideration, which has been based on a historical lookback of its actual settlement realization rates. The estimates of reserves established for variable consideration reflect current contractual requirements, the Company’s historical experience, specific known market events and trends, industry data and forecasted patient data and settlement patterns. Settlement realization patterns are assessed based on actual settlements and based on expected settlement realization trends obtained from discussions with attorneys, doctors and our third-party medical billing company. Settlement amounts are negotiated, and prolonged settlement negotiations are not indicative of a greater likelihood of reduced settlement realization or zero settlement.
The Company may accept a lower settlement realization rate in order to receive faster payment. The Company obtains information about expected settlement realization trends from discussions with doctors and attorneys and its third-party medical billing company vendor, which handles settlement claims and negotiations. Settlement amounts are presented to the Company’s third-party medical billing company vendor.
Settlement rates of 49% or higher based on gross billed amounts are typically accepted without further negotiation. Proposed settlement rates below 49% are negotiated when possible and longer negotiations typically result in higher settlement rates. If the Company accepts a lower settlement realization rate in order to receive payments more quickly, the Company considers that a price concession and estimates these concessions at contract inception. The various forms of variable consideration described above included in the transaction price may be constrained and are included in net revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. The Company has not constrained any of its estimates of variable consideration for any of the periods presented.
Service Fees – Net (PIP)
The Company generates services fees from performing various procedures on the date the services are performed. These services primarily include slip and falls as well as smaller nominal Non Personal Injury Protection (“PIP”) services. As described above, these revenues are based on established insurance billing rates, less allowances for contractual adjustments and uncollectible amounts. These contractual adjustments vary by insurance company and self-pay patients. The Company computes these contractual and other adjustments based on its historical settlement realization experience. Completing the paperwork for each case and preparing it for billing takes approximately ten business days after a procedure is performed. The majority of claims are then filed electronically except for those remaining insurance carriers requiring paper filing. An initial response is usually received within four weeks from electronic filing and up to six weeks from paper filing. Responses may be a payment, a denial, or a request for additional information. The Company’s healthcare revenues are generated from professional medical billings including facility and anesthesia services. With respect to facility and anesthesia services, the Company is the primary obligor as the facility and anesthesia services are considered part of one integrated performance obligation.
| 11 |
The Company satisfies performance obligations as services are performed and then billed to the patient. Payment in most cases is made by an attorney for such services to our patients which are due upon final settlement of patients’ claims. During the claims process, legal counsel warranties such claim through the letter of protection, which is sent to the Company, as a medical provider, on behalf of the client patient. This letter states that the attorney is responsible for paying the client’s medical bills when the case is fully developed and settles. The medical professional agrees to provide treatment to the injured person and refrain from attempting to collect payment as it is developing and until the case is resolved. Once the personal injury case is finalized with the insurance company, the attorney pays the outstanding medical bills from the settlement.
Settlement Rates
The Company periodically evaluates its 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, the Company realized a 41% and 44% average settlement rate of its gross billed charges, respectively.
Contract Fees (Non-PIP)
The Company has contract fees for amounts earned from its Non PIP related procedures, typically car accidents, and are settled on a contingency basis. Prior to April 2023, these cases were sold to a factor who bears the risk of economic benefit or loss. Generally, the sale of these cases to a third-party factor resulted in an approximate 54% reduction from the accounts receivables amounts. After selling patient cases to the factor, any additional funds settled by the Company were remitted to the factor. The Company evaluated the factored adjustments considering the actual factored amounts per patient on a quarterly interval, and the reductions from accounts receivable that were factored were recorded in finance charges as other expenses on the consolidated statement of operations. As a result of the Company’s twelve to twenty-four month settlement realization timeframe, the Company has an accrued liability resulting from the settlement of receivables sold to the third-party factors which fluctuates as settlements are made and remitted to those third-party factors. These accounts receivables sold to these third-party factors are not included in the Company’s financial statements accounts receivable balance once sold and therefore are not part of the assessment of the net realizable value of accounts receivable. The Company ceased factoring of accounts receivable in the first quarter of 2023.
Advertising Costs
Advertising costs are expensed as incurred. Advertising
costs are included as a component of cost of sales in the consolidated statements of operations. The Company recognized advertising and
marketing expense of $
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs), and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). See also Note 7. Fair Value Measurements. The three levels of the fair value hierarchy are described below:
| Level 1 | Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. | |
| Level 2 | Inputs, other than quoted prices included in Level 1, which are observable for the asset or liability through corroboration with market data at the measurement date. | |
| Level 3 | Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. |
| 12 |
Distinguishing Liabilities from Equity
The Company accounts for its series X senior convertible preferred stock subject to possible redemption in accordance with ASC 480, “Distinguishing Liabilities from Equity”. Conditionally redeemable preferred shares are classified as temporary equity within the Company’s consolidated balance sheet.
Share-Based Compensation
The Company accounts for its stock-based compensation in which the Company obtains employee/non-employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB ASC. Pursuant to paragraph 718-10-30-6 of the FASB ASC, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
The measurement date used to determine the fair value of equity-classified awards is the grant date, which is the date on which the Company and the grantee reach a mutual understanding of the award’s key terms and conditions. Generally, all forms of share-based payments, including stock option grants, warrants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest. The Company has elected to account for forfeitures as they occur and expense is recognized over the requisite service period.
The expense resulting from share-based payments is recorded in general and administrative expense in the consolidated statements of operations.
Income Taxes
Income taxes are determined in accordance with ASC Topic 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company evaluates both positive and negative evidence in assessing the realizability of its net deferred tax assets and records a valuation allowance when it is more likely than not that some or all of the deferred tax assets will not be realized. The One Big Beautiful Bill Act (the “OBBBA”), which was enacted on July 4, 2025, makes numerous tax changes. The tax provisions of the OBBBA did not have a material impact on the Company’s effective tax rate and it also did not impact the Company’s net deferred tax assets, as the Company continues to maintain a full valuation allowance against that balance.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
For the three months ended March 31, 2026 and
2025, the Company did
| 13 |
Income (Loss) per Share
FASB ASC Subtopic 260, Earnings Per Share, provides for the calculation of “Basic” and “Diluted” earnings per share. Basic earnings per common share is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Income available to common stockholders consists of net (loss) income less any preferred stock dividends. Potentially dilutive securities include outstanding stock options, warrants, and debts convertible into common stock. The dilutive effect of stock options and warrants are reflected in diluted earnings per common share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities. The diluted effect of debt convertibles is reflected utilizing the if converted method.
Going Concern
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. The Company had sustained operating losses since its inception
and has an accumulated deficit of $
The ability of the 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 the Company to fund its cash flow shortfalls and pursue new acquisitions. There can be no assurance that the Company 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 it. Should the Company be unable to raise sufficient funds, it may be required to curtail its operating plans. In addition, increases in expenses may require cost reductions. No assurance can be given that the Company will be able to operate profitably on a consistent basis, or at all, in the future. Should the Company not be able to raise sufficient funds, it may cause cessation of operations.
Recently Issued Accounting Standards
The FASB issued Accounting Standards Update (“ASU”) 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” in November 2024. The amendments are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The amendments require disclosure in the notes to financial statements of specified information about certain costs and expenses related to selling expenses and in annual reporting periods, an entity’s definition of selling expenses, among other qualitative descriptions of relevant expense captions that are not separately disaggregated quantitatively. The Company is analyzing the impact that ASU 2024-03 will have on the Company’s required disclosures but does not expect any material impacts.
The FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow Scope Improvements” in December 2025. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, for public business entities. The amendments can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The amendments in this update clarify interim disclosure requirements and the applicability of Topic 270 and result in a comprehensive list of interim disclosures that are required by GAAP. The amendments in this update also include a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The Company will review the clarifications in the update around the Topic 270 disclosures but do not expect this update to have a material impact on our financial statements.
| 14 |
| 2. | RESTATEMENT OF FINANCIAL STATEMENTS |
During the second quarter of 2025, as part of
the Company’s ongoing enhancements to internal controls over financial reporting, a detailed review of its interest expense-related
cash flow classification was performed. As a result, the Company restated certain amounts within the condensed consolidated statement
of cash flows for the three months ended March 31, 2025. This was reclassified to correct the presentation of $
The following table summarizes the impact of the correction on the Company’s condensed consolidated statement of cash flows for the period ending March 31, 2025.
| Schedule of restated financial information | ||||||||||||
| Impact of correction of error | ||||||||||||
| Three months ended March 31, 2025 (Unaudited) | As previously reported | Adjustments | As restated | |||||||||
| Net cash used in operating activities of continuing operations | $ | ( | ) | $ | $ | ( | ) | |||||
| Net cash provided by financing activities of continuing operations | $ | $ | ( | ) | $ | |||||||
| 3. | ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
| Schedule of accounts payable and accrued expenses | ||||||||
| March 31, 2026 | December 31, 2025 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued credit cards | ||||||||
| Accrued liability for settlements of previously factored receivables | ||||||||
| Accrued income and property taxes | ||||||||
| Accrued professional fees | ||||||||
| Accrued expense – dividend payable | ||||||||
| Accrued public company fees | ||||||||
| Accrued payroll and bonuses | ||||||||
| Accrued expense – other | ||||||||
| Total | $ | $ | ||||||
| 15 |
| 4. | PROPERTY AND EQUIPMENT, NET |
Property and equipment as of March 31, 2026 and December 31, 2025 is as follows:
| Schedule of property and equipment | ||||||||
| March 31, 2026 | December 31, 2025 | |||||||
| Medical equipment | $ | $ | ||||||
| Computer equipment | ||||||||
| Furniture, fixtures and equipment | ||||||||
| Leasehold improvement | ||||||||
| Total | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
For the three months ended March 31, 2026 and
2025, depreciation expense was $
| 5. | LAND |
As of March 31, 2026 and December 31, 2025, the
Company had 27 acres of land of approximately $
| 6. | RELATED PARTY TRANSACTIONS |
On March 6, 2026, the Company entered into a lock-up
and compensation resolution agreement with Daniel Thompson, the Company’s former Chairman of the Board and a significant stockholder,
to resolve outstanding accrued compensation obligations. Under the agreement, the Company issued an unsecured promissory note in the principal
amount of $
Also on March 6, 2026, the Company entered into
a conversion agreement with Daniel Thompson, pursuant to which deferred compensation in the amount of $
On January 29, 2026, the Company entered into
a conversion agreement with Alex Cunningham, the Company’s Chief Executive Officer, pursuant to which deferred compensation in the
amount of $
| 16 |
On December 21, 2025, in connection with bonuses
earned by certain employees, the Company issued promissory notes in the aggregate principal amount of $
In connection with the acquisition of Edge View
on July 16, 2014, the Company assumed amounts due from 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 $
See also Note 14. Commitments and Contingencies for compensation paid to employees of the Company.
| 7. | FAIR VALUE MEASUREMENTS |
The Company measures certain liabilities at fair value on a recurring basis. These liabilities consist primarily of derivative liabilities associated with convertible notes (See Note 9. Convertible Notes Payable). These instruments are valued using significant unobservable inputs and are classified within Level 3 of the fair value hierarchy.
Valuation Methodology
The derivative liabilities relate to embedded features within the Company’s convertible notes, including variable conversion pricing, look-back provisions, contingent conversion price resets, default and delinquency adjustments, DTC trading restrictions, and change-of-control redemption alternatives. Because these features are not considered indexed to the Company’s own stock and may require net-cash settlement, they are accounted for as derivative liabilities under ASC 815.
The Company engaged an independent valuation specialist to estimate the fair value of the derivative liabilities using a Monte Carlo simulation model, which incorporates assumptions regarding expected volatility, risk-free interest rates, expected term, and probability-weighted assessments of contingent events.
Fair Value Hierarchy
| Schedule of fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Derivative liability | $ | $ | $ | $ | ||||||||||||
Level 3 Roll-forward
| Schedule of fair value roll forward | ||||
| Amount | ||||
| Balance at beginning of period | $ | |||
| Initial recognition of derivative liability | ||||
| Change in fair value gain | ( | ) | ||
| Settlements / conversions | ||||
| Balance at end of period | $ | |||
| 17 |
Sensitivity Analysis
The fair value of the derivative liability is sensitive to changes in several unobservable inputs, most notably expected volatility, expected term, and probability-weighted assessments of default, delinquency, and other contingent events. In general, increases in expected volatility, decreases in stock price, or increases in the probability of default or delinquency would result in a higher fair value of the derivative liability. Conversely, decreases in volatility or increases in stock price would reduce the fair value. Because of the path-dependent nature of the conversion features, the impact of changes in these inputs may not be linear. See also Note 10. Derivative Liabilities.
| 8. | NOTES AND LOANS PAYABLE |
Notes payable and line of credit at March 31, 2026 and December 31, 2025 are summarized as follows:
| Schedule of notes payable | ||||||||
| March 31, 2026 | December 31, 2025 | |||||||
| Notes payable – unrelated parties | $ | $ | ||||||
| Notes payable – related parties | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Long-term portion | $ | $ | ||||||
Long-term debt matures as follows:
| Schedule of maturities of long-term debt | ||||
| Amount | ||||
| 2026 (remainder of year) | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
Promissory Note – Settlement Agreement
In June 2024, the Company issued a settlement
promissory note in the amount of $
Loans and Notes Payable
On March 12, 2009, the Company issued a debenture
in the principal amount of $
| 18 |
Loans and Notes Payable – Related Parties
As of March 31, 2026 and December 31, 2025, the
outstanding principal on the related party notes was $
Small Business Administration (“SBA”) Loans
On June 2, 2020, the Company obtained an SBA loan
in the principal amount of $
Line of Credit
The Company maintains a revolving purchase and
security agreement with DML HC Series, LLC (“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 $
Under the terms of the facility, collections
from these receivables are used to repay advances outstanding, which are recognized as secured borrowings totaling $
| 9. | CONVERTIBLE NOTES PAYABLE |
As of March 31, 2026 and December 31, 2025, the
Company had convertible debt outstanding, at carrying value, of $
During the three months ended March 31, 2026,
the Company received $
The carrying amount of the convertible notes as of March 31, 2026 and December 31, 2025 represents the principal amount less the unamortized debt discount allocated to the host debt, as shown below:
| Schedule of convertible notes | ||||||||
| March 31, 2026 | December 31, 2025 | |||||||
| Convertible notes payable | $ | $ | ||||||
| Discounts on convertible notes payable | ( | ) | ( | ) | ||||
| Total convertible debt less debt discount | ||||||||
| Current portion | ||||||||
| Long-term portion | $ | $ | ||||||
| 19 |
The following maturity table reflects the full expected principal amounts due as follows:
| Schedule of expected principal amounts | |||||
| Amount | |||||
| 2026 (remainder of year) | $ | 923,750 | |||
| 2027 | 171,250 | ||||
| Total | $ | 1,095,000 | |||
On January 24, 2017, the Company issued a convertible
promissory note in the principal amount of $80,000 for services rendered, which matured on January 24, 2018. On August 26, 2025, the total
outstanding principal and accrued interest of $154,049 of this tranche was converted into 64,165 shares of the Company’s common
stock. On February 10, 2023, the Company executed a second tranche under this note in the principal amount of $50,000. In May of 2024,
$
In December 2025, the Company entered into loan
agreements with two accredited investors, pursuant to which the Company issued to such investors (i) convertible promissory notes in the
aggregate principal amount of $
| 20 |
In December 2025 and January 2026, the Company
also entered into loan agreements with two additional accredited investors, pursuant to which the Company issued to such investors (i)
convertible promissory notes in the aggregate principal amount of $
| 21 |
In March 2026, the Company entered into securities
purchase agreements with two additional accredited investors, pursuant to which the Company issued to such investors convertible promissory
notes in the principal amount of $
Also in March 2026, the Company entered into a
securities purchase agreement with an additional accredited investor, pursuant to which the Company issued to such investor a convertible
promissory note in the principal amount of $
| 22 |
| 10. | DERIVATIVE LIABILITIES |
Several of the Company’s convertible notes contain embedded features that require bifurcation of the conversion option and derivative liability accounting under ASC 815 (see also Note 9. Convertible Notes Payable). These features include:
| Variable price conversion features: | ||
| · | Variable conversion pricing based on a discount to the lowest trading price over a look-back period. | |
| · | Six-month conversion price reset wherein the conversion price automatically resets to the lower of the fixed price or the Company’s common stock closing bid price on each reset date. | |
| · | DTC chill reset where the conversion discount increases and default reset where the conversion discount increases further. | |
| · | Interest payable in shares at a floating conversion price. | |
| · | Down-round protection wherein the conversion price adjusts downward to match any future issuance below the current conversion price. | |
| Variable settlement features: | ||
| · | Make-whole conversion feature where a make-whole amount equal to interest that would have accrued through maturity is added to the conversion amount which increases the number of shares issued upon conversion. | |
| · | Variable interest-in-shares feature in which interest is payable in shares at a deemed rate and the number of shares varies based on the conversion price in effect at that time. | |
| · | Interest payable in shares at a floating conversion price. | |
| · | Variable conversion pricing based on a discount to the lowest trading price over a look-back period. | |
| Contingent conversion features: | ||
| · | Change-in-control conversion feature where the conversion price becomes the lower of the then-current conversion price or a 25% discount to the acquisition price. | |
| · | Delinquency reset where the conversion price is reduced during the delinquency period. | |
| · | Default conversion feature where upon default, the holder may immediately convert the entire outstanding balance with the conversion price still subject to all the variable-price mechanics. | |
| · | Change-of-control (Sale Event) redemption or conversion alternatives. | |
| · | Successor-security conversion rights. | |
| · | Holder early-exercise rights. | |
| 23 |
Because these features are not considered indexed to the Company’s own stock and could require net-cash settlement, the embedded conversion options do not qualify for equity classification under ASC 815-40 and were bifurcated from the host debt instruments and recorded as derivative liabilities at fair value on the issuance date. The derivative liability is remeasured at fair value each reporting period, with changes recognized in earnings. Issuance costs, including original issue discounts, legal fees, and broker commissions, were allocated between the derivative liabilities and the host debt based on relative fair values. The portion allocated to the derivative liabilities reduced their initial carrying amount. Additional information regarding valuation techniques and fair value hierarchy classification is included in Note 7. Fair Value Measurements.
| 11. | CAPITAL STOCK |
The Company is authorized to issue
Preferred Stock
The Company has designated multiple series of
preferred stock, including
The Company’s Annual Report on Form 10-K for the year ended December 31, 2025 contains a description of the rights and preferences of each series of preferred stock.
Redeemable Preferred Stock
The Company recognizes the series X senior convertible preferred stock as mezzanine equity in accordance with ASC 480, “Distinguishing Liabilities from Equity”.
On January 29, 2026, the Company filed a certificate
of amendment to the certificate of designation for its series N senior convertible preferred stock with the Nevada Secretary of State’s
Office to amend the certificate of designation to remove the redemption provisions, which previously provided for an optional redemption
by the Company and a mandatory redemption at the option of the holder in certain circumstances. As a result of this modification, the
preferred stock no longer meets the criteria for classification outside of permanent equity. The $
Series X Senior Convertible Preferred Stock
As of March 31, 2026 and December 31, 2025, there
were
Non-redeemable Preferred Stock
Series A Preferred Stock
As of March 31, 2026 and December 31, 2025, there
were
| 24 |
Series B Preferred Stock
As of March 31, 2026 and December 31, 2025, there
were
Series C Preferred Stock
As of March 31, 2026 and December 31, 2025, there
were
Series E Preferred Stock
As of March 31, 2026 and December 31, 2025, there
were
Series F-1 Preferred Stock
As of March 31, 2026 and December 31, 2025, there
were
Series I Preferred Stock
As of March 31, 2026 and December 31, 2025, there
were
Series L Preferred Stock
As of March 31, 2026 and December 31, 2025, there
were
Series N Senior Convertible Preferred Stock
As of March 31, 2026 and December 31, 2025, there
were
Series Y Senior Convertible Preferred Stock
As of March 31, 2026 and December 31, 2025, there
were
| 25 |
Preferred Stock Transactions
During the three months ended March 31, 2026, the Company executed the following transactions:
| · | An aggregate of | |
| · | An aggregate of | |
| · | An aggregate of |
During the three months ended March 31, 2025, the Company executed the following transactions:
| · | An aggregate of | |
| · | An aggregate of | |
| · | An aggregate of | |
| · | An aggregate of | |
| · | An aggregate of |
Common Stock
During the three months ended March 31, 2026, in addition to the conversions of preferred stock noted above, the Company issued common stock as part of the following transactions:
| · | On January 6, 2026, the Company issued an aggregate of | |
| · | On January 13, 2026, in accordance with an agreement effective November 24, 2025, which included a provision that entitles a consultant service provider to receive additional common shares in the event of a reverse stock split, the Company issued |
| · | On January 13, 2026, the Company issued |
| 26 |
| · | On January 14, 2026, the Company issued | |
| · | On January 16, 2026, the Company issued an aggregate of | |
| · | On January 31, 2026, the Company cancelled | |
| · | On February 3, 2026, the Company issued | |
| · | On February 28, 2026, the Company cancelled | |
| · | On March 6, 2026, the Company issued | |
| · | On March 19, 2026, the Company issued |
During the three months ended March 31, 2025, there were no additional issuances of common stock except from the conversions of preferred stock noted above.
| 27 |
Share-based compensation
On January 31, 2024, the Company’s board
of directors and stockholders adopted the Cardiff Lexington Corporation 2024 Equity Incentive Plan (the “Plan”). Awards that
may be granted include incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance
share awards, and performance compensation awards. In accordance with the annual evergreen provision of the Plan, the number of shares
available for issuance increased on January 1, 2026 to
Share-based compensation expense is attributable
to restricted common stock awards, stock option awards and preferred stock granted to non-employee independent directors, employees and
service providers for services rendered. The Company recognizes expense using a straight-line amortization method as reflected in general
and administrative expense in the consolidated statement of operations. Share-based compensation expense for the three months ended March
31, 2026 and 2025, was $
Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants are measured at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. The Company has elected to account for forfeitures as they occur and expense is recognized over the requisite service period. Grant date fair value of restricted common stock and common stock awards is determined using the Company’s closing share price on the grant date and the grant date fair value of stock options awarded is determined using a Black-Scholes valuation model. Grant date fair value of any preferred stock awards is determined utilizing a third-party valuation.
Non-Vested Common Stock
Share-based compensation expense of $
Stock Options
On December 11, 2025, the Company granted stock options to purchase
| 12. | WARRANTS |
During the fourth quarter of 2025, the Company
issued a three-year warrant to purchase
| 28 |
In December 2025, the Company entered into a financing
arrangement pursuant to which it issued a twelve-month convertible promissory note with a principal amount of $
In December 2025, the Company entered into a financing
arrangement pursuant to which it issued a twelve-month convertible promissory note with a principal amount of $
Also, during December 2025, the Company issued
a three-year warrant to purchase
On January 14, 2026, the Company issued a three-year
warrant to purchase
The table below sets forth warrant activity during the three months ended March 31, 2026 and 2025:
| Schedule of warrant activity | ||||||||
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Balance at January 1, 2026 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ||||||||
| Balance at March 31, 2026 | ||||||||
| Warrants Exercisable at March 31, 2026 | $ | |||||||
| 29 |
| Number of Warrants |
Weighted Average Exercise Price |
|||||||
| Balance at January 1, 2025 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ||||||||
| Balance at March 31, 2025 | ||||||||
| Warrants Exercisable at March 31, 2025 | $ | |||||||
| 13. | GOODWILL |
The Company reviews goodwill for impairment on a reporting unit basis annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. During the three months ended March 31, 2026 and 2025, the Company determined there were no triggering events which may suggest impairment indicators were present.
| 14. | COMMITMENTS AND CONTINGENCIES |
Leases
ASC 842, “Leases”, requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. The Company adopted ASC 842, January 1, 2020, using the effective date method and elected certain practical expedients allowing the Company not to reassess:
| · | whether expired or existing contracts contain leases under the new definition of a lease; | |
| · | lease classification for expired or existing leases; and | |
| · | whether previously capitalized initial direct costs would qualify for capitalization under Topic 842. |
The Company also made the accounting policy decision not to recognize lease assets and liabilities for leases with a term of 12 months or less.
The Company leases eleven medical facilities and
one vehicle as operating leases as of March 31, 2026. The Company recorded operating lease expenses of $
| 30 |
The Company has operating leases with future commitments as follows:
| Schedule of operating leases with future commitments | ||||
| Amount | ||||
| April 2026 – March 2027 | $ | |||
| April 2027 – March 2028 | ||||
| Total Future Undiscounted Lease Payments | ||||
| Less imputed interest | ||||
| Total lease obligations | $ | |||
The following table summarizes supplemental information about the Company’s leases:
| Schedule of supplemental information | ||||
| Weighted-average remaining lease term | ||||
| Weighted-average discount rate | ||||
Employees
In connection with separate employment agreements
and related addendums with Alex Cunningham, the Company’s Chairman, President and Chief Executive Officer, and Daniel Thompson,
the Company’s former Chairman, from time to time the Company accrued each of their respective compensation elements at their election
rather than pay them in cash to Accrued expenses - related parties in the Company’s consolidated balance sheet. The total outstanding
accrued compensation as of March 31, 2026 and December 31, 2025 for Alex Cunningham was $
| 15. | LEGAL PROCEEDINGS |
From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. Please refer to Note 18. Subsequent Events, for further detail.
| 16. | INCOME TAXES |
At March 31, 2026, the Company had federal and
state net operating loss carry forwards of approximately $
The Company has not paid federal or state income
taxes as a result of its net losses and the availability of its net operating loss carryforwards. The State of Nevada, the Company's state
of incorporation, does not impose a corporate income tax. Florida, the state in which the Company's operating subsidiary conducts business,
imposes a corporate income tax at a rate of
| 31 |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes. The Company has a deferred tax asset that consists of net operating loss carry forwards calculated using federal and state effective tax rates. Because of the Company’s lack of past earnings history, the deferred tax asset has been fully offset by a valuation allowance. The OBBBA, which was enacted on July 4, 2025, makes numerous tax changes. The tax provisions of the OBBBA did not have a material impact on the Company’s effective tax rate and it also did not impact the Company’s net deferred tax assets, as the Company continues to maintain a full valuation allowance against that balance.
| 17. | SEGMENT REPORTING |
As of March 31, 2026, the Company had two reportable operating segments as determined by management using the “management approach” as defined by the authoritative guidance on Disclosures about Segments of an Enterprise and Related Information.
| (1) | Healthcare (Nova) | |
| (2) | Real Estate (Edge View) |
These segments are a result of differences in the nature of the products and services sold. Their operating results are regularly reviewed by the Company’s chief operating decision maker group, which consists of the Chairman of the Board, the Chief Executive Officer and the Chief Financial Officer. Corporate administration costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated to the two operating segments.
The healthcare segment provides 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.
The real estate segment consists of Edge View, a real estate company that 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.
The accounting policies of the segments are the same as those described in Note 1. Summary of Significant Accounting Policies. Management uses revenues, cost of sales, operating expenses, income (loss) from subsidiaries and income (loss) before taxes to evaluate and measure its subsidiaries’ success. To help the segments achieve optimal operating performance, management retains the prior owners of the subsidiaries and allows them to do what they do best, which is run the business. Additionally, management monitors key metrics primarily revenues and income from operations in order to allocate resources accordingly.
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| Schedule of revenues and net income from operations | ||||||||
| March 31, 2026 | December 31, 2025 | |||||||
| Asset: | ||||||||
| Healthcare | $ | $ | ||||||
| Real Estate | ||||||||
| Corporate, administration and other | ||||||||
| Consolidated assets | $ | $ | ||||||
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenues: | ||||||||
| Healthcare | $ | $ | ||||||
| Real Estate | ||||||||
| Consolidated revenues | $ | $ | ||||||
| Cost of sales: | ||||||||
| Healthcare | $ | $ | ||||||
| Real Estate | ||||||||
| Consolidated cost of sales | $ | $ | ||||||
| Operating Expenses: | ||||||||
| Healthcare | ||||||||
| Depreciation expense | $ | $ | ||||||
| Loss on disposal of fixed assets | ||||||||
| Selling, general and administrative | ||||||||
| Total Healthcare | ||||||||
| Real Estate | ||||||||
| Corporate, administration and other expenses (a) | ||||||||
| Consolidated operating expenses | $ | $ | ||||||
| (Loss) Income from operations from subsidiaries: | ||||||||
| Healthcare | $ | $ | ||||||
| Real Estate | ( | ) | ( | ) | ||||
| Income from operations from subsidiaries | ||||||||
| Loss from operations from Cardiff Lexington | ( | ) | ( | ) | ||||
| Total (loss) income from operations | $ | ( | ) | $ | ||||
| (Loss) Income before taxes | ||||||||
| Healthcare | $ | $ | ||||||
| Real Estate | ( | ) | ( | ) | ||||
| Corporate, administration and other non-operating expenses (b) | ( | ) | ( | ) | ||||
| Consolidated loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| (a) | |
| (b) |
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| 18. | SUBSEQUENT EVENTS |
The Company has evaluated its operations subsequent to March 31, 2026 to the date these consolidated financial statements were available to be issued and determined the following subsequent event and transaction required disclosure in these consolidated financial statements.
Convertible Promissory Note
On April 8, 2026, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company 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 the Company’s common stock the ten trading days prior to the conversion date. The note also contains an ownership limitation, which provides that the Company 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. In accordance with ASC 815, the Company will analyze the terms of the note to determine if there are any clauses that would require bifurcation of an embedded conversion option derivative. If deemed necessary, a Monte Carlo valuation will be obtained from valuation specialists to fair value the derivative liability.
Additional Stock Issuances
On April 1, 2026, the Company issued an aggregate of 4,175 shares of common stock in payment of accrued interest on convertible promissory notes outstanding as of March 31, 2026.
Also on April 1, 2026, the Company issued an aggregate of 15,000 shares of common stock for the annual Director’s share grant award. The award will vest in equal parts over the course of four (4) quarters (i.e., January 1, April 1, July 1 and October 1) commencing on July 1, 2026.
On April 17, 2026, in accordance with an extension of an agreement effective November 24, 2025, the Company issued 100,000 shares of common stock to the consulting service provider for services to be rendered.
Legal Proceeding
On May 1, 2026, Daniel R. Thompson, the Company’s former Chairman of the Board and a significant stockholder, commenced a lawsuit against the Company by filing a complaint against it in the Eighth Judicial District Court, Clark County, Nevada. In the complaint, Mr. Thompson alleges that he entered into an employment agreement and addendum thereto with the Company. He alleges that the Company failed to provide him with restricted preferred stock and separation compensation allegedly owed to him under those agreements, and he alleges that the Company has improperly continued to defer payment of accrued salary and other compensation he claims to be owed. The complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. Mr. Thompson alleges damages in an unspecified amount in excess of $15,000 under each of those claims. Mr. Thompson also seeks declaratory relief regarding compensation that he claims to be owed and regarding the validity of a conversion agreement between him and the Company. Pursuant to the conversion agreement, Mr. Thompson agreed to cancel $2,352,994 in deferred compensation owed to him in exchange for receiving 588,249 shares of common stock from the Company. Mr. Thompson contends in the complaint that he revoked the conversion agreement or that it is otherwise unenforceable and, in the alternative, seeks its reformation to provide that it was contingent on the successful uplisting of the Company’s stock to the Nasdaq Stock Market. The complaint also asserts a claim for accounting, seeking inspection of the Company’s books, records, and accounts. The complaint also seeks an award of attorneys’ fees and costs. The Company intends to vigorously defend against Mr. Thompson's claims. Although the Company believes it has meritorious defenses to those claims, the Company is unable to reasonably estimate the potential loss or range of loss, if any, that may result from this matter because the case is in its preliminary stages and the outcome of litigation is inherently uncertain. It is possible that an adverse outcome could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows, and prospects. As of March 31, 2026, the Company had accrued for all earned and undisputed obligations due to Mr. Thompson within its consolidated balance sheets.
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| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
The following management’s discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition. The following financial information is derived from our financial statements and should be read in conjunction with such financial statements and notes thereto set forth elsewhere herein.
Use of Terms
Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our” and “our company” are to Cardiff Lexington Corporation, a Nevada corporation, and its consolidated subsidiaries.
Special Note Regarding Forward-Looking Statements
This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
| · | our ability to successfully identify and acquire additional businesses; | |
| · | our ability to effectively integrate and operate the businesses that we acquire; | |
| · | our expectations around the performance of our current businesses; | |
| · | our ability to maintain our business model and improve our capital efficiency; | |
| · | our ability to effectively manage the growth of our business; | |
| · | our ability to maintain profitability; | |
| · | the competitive environment in which our businesses operate; | |
| · | trends in the industries in which our businesses operate; | |
| · | the regulatory environment in which our businesses operate under; | |
| · | changes in general economic or business conditions or economic or demographic trends in the United States, including changes in interest rates and inflation; | |
| · | our ability to service and comply with the terms of indebtedness; | |
| · | our ability to retain or replace qualified employees of our businesses; | |
| · | labor disputes, strikes or other employee disputes or grievances; | |
| · | casualties, condemnation or catastrophic failures with respect to any of our business’ facilities; | |
| · | costs and effects of legal and administrative proceedings, settlements, investigations and claims; and | |
| · | extraordinary or force majeure events affecting the business or operations of our businesses. |
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.
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In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
Overview
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.
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.
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.
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.
All of our operations are conducted through, and our income derived from, our two subsidiaries.
Recent Developments
Convertible Promissory Note
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.
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Segments
As of March 31, 2026, we had two reportable operating segments as determined by management using the “management approach” as defined by the authoritative guidance on Disclosures about Segments of an Enterprise and Related Information.
| (1) | Healthcare (Nova) | |
| (2) | Real Estate (Edge View) |
These segments are a result of differences in the nature of the products and services sold. Corporate administration costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated to the two operating segments.
The healthcare segment provides 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.
The real estate segment consists of Edge View, a real estate company that 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 uses revenues, cost of sales, operating expenses, and income (loss) before taxes to evaluate and measure its subsidiaries’ success. To help the segments achieve optimal operating performance, management retains the prior owners of the subsidiaries and allows them to do what they do best, which is run the business. Additionally, management monitors key metrics primarily revenues and income from operations in order to allocate resources accordingly.
Results of Operations
Comparison of Three Months Ended March 31, 2026 and 2025
The following table sets forth key components of our results of operations during the three months ended March 31, 2026 and 2025, both in dollars and as a percentage of our revenue.
| Three Months Ended March 31, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Amount | % of Revenue | Amount | % of Revenue | |||||||||||||
| Total revenue | $ | 2,222,280 | 100.00% | $ | 2,915,567 | 100.00% | ||||||||||
| Total cost of sales | 904,225 | 40.69% | 1,075,034 | 36.87% | ||||||||||||
| Gross profit | 1,318,055 | 59.31% | 1,840,533 | 63.13% | ||||||||||||
| Operating expenses | ||||||||||||||||
| Depreciation expense | 593 | 0.03% | 3,365 | 0.12% | ||||||||||||
| Loss on disposal of fixed assets | – | – | 12,593 | 0.43% | ||||||||||||
| Share based compensation | 664,196 | 29.89% | – | – | ||||||||||||
| Selling, general and administrative | 1,164,425 | 52.40% | 1,280,641 | 43.92% | ||||||||||||
| Total operating expenses | 1,829,214 | 82.31% | 1,296,599 | 44.47% | ||||||||||||
| (Loss) income from operations | (511,159 | ) | (23.00% | ) | 543,934 | 18.66% | ||||||||||
| Other (expense) income | ||||||||||||||||
| Other income (expense) | 10,081 | 0.45% | (1,597 | ) | (0.05% | ) | ||||||||||
| Derivative liability loss on issuance and changes in fair value | (668,821 | ) | (30.10% | ) | – | – | ||||||||||
| Interest expense | (1,910,737 | ) | (85.98% | ) | (993,114 | ) | (34.06% | ) | ||||||||
| Amortization of debt discounts | (11,438 | ) | (0.51% | ) | – | – | ||||||||||
| Total other expense | (2,580,915 | ) | (116.14% | ) | (994,711 | ) | (34.12% | ) | ||||||||
| Net loss | $ | (3,092,074 | ) | (139.14% | ) | $ | (450,777 | ) | (15.46% | ) | ||||||
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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.
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.
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.
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.
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.
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.
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.
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.
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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%.
Liquidity and Capital Resources
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.
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.
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.
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.
Summary of Cash Flow
The following table provides detailed information about our net cash flow for the three months ended March 31, 2026 and 2025.
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 (Restated) | |||||||
| Net cash used in operating activities | $ | (16,730 | ) | $ | (491,420 | ) | ||
| Net cash provided by financing activities | 381,702 | 299,993 | ||||||
| Net change in cash | 364,972 | (191,427 | ) | |||||
| Cash at beginning of period | 318,535 | 1,188,185 | ||||||
| Cash at end of period | $ | 683,507 | $ | 996,758 | ||||
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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.
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.
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.
We had no investing activities for the three months ended March 31, 2026 and 2025.
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.
Convertible Notes
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.
Promissory Note – Settlement Agreement
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.
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Debenture
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.
Small Business Administration Loans
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.
Line of Credit
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.
Related Party Loans
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.
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.
Contractual Obligations
Our principal commitments consist mostly of obligations under the loans described above.
Critical Accounting Policies
The preparation of our unaudited condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
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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.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Not applicable.
| ITEM 4. | CONTROLS AND PROCEDURES. |
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of March 31, 2026. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
There were no changes in our internal controls over financial reporting during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS. |
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. Except as set forth below, we are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
On May 1, 2026, Daniel R. Thompson, our former Chairman of the Board and a significant stockholder, commenced a lawsuit against our company by filing a complaint against it in the Eighth Judicial District Court, Clark County, Nevada. In the complaint, Mr. Thompson alleges that he entered into an employment agreement and addendum thereto with us. He alleges that we failed to provide him with restricted preferred stock and separation compensation allegedly owed to him under those agreements, and he alleges that we have improperly continued to defer payment of accrued salary and other compensation he claims to be owed. The complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. Mr. Thompson alleges damages in an unspecified amount in excess of $15,000 under each of those claims. Mr. Thompson also seeks declaratory relief regarding compensation that he claims to be owed and regarding the validity of a conversion agreement between him and our company. Pursuant to the conversion agreement, Mr. Thompson agreed to cancel $2,352,994 in deferred compensation owed to him in exchange for receiving 588,249 shares of common stock from us. Mr. Thompson contends in the complaint that he revoked the conversion agreement or that it is otherwise unenforceable and, in the alternative, seeks its reformation to provide that it was contingent on the successful uplisting of our stock to the Nasdaq Stock Market. The complaint also asserts a claim for accounting, seeking inspection of our books, records, and accounts. The complaint also seeks an award of attorneys’ fees and costs. We intends to vigorously defend against Mr. Thompson’s claims. Although we believe we have meritorious defenses to those claims, we are unable to reasonably estimate the potential loss or range of loss, if any, that may result from this matter because the case is in its preliminary stages and the outcome of litigation is inherently uncertain. It is possible that an adverse outcome could have a material adverse effect on our business, financial condition, results of operations, cash flows, and prospects.
| ITEM 1A. | RISK FACTORS. |
Not applicable.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
Except as set forth below, we have not sold any equity securities during the three months ended March 31, 2026 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter.
| · | On March 19, 2026, we issued 30,693 shares of series N senior convertible preferred stock, 10,729 shares of series X senior convertible preferred stock and 26,476 shares of series Y senior convertible preferred stock as payment of dividends. |
| · | On February 3, 2026, we issued 556,528 shares of common stock to Alex Cunningham, our Chief Executive Officer, in exchange for the cancellation of deferred compensation in the amount of $2,365,242. |
| · | On March 6, 2026, we issued 588,249 shares of common stock to Daniel Thompson, our former Chairman of the Board, in exchange for the cancellation of deferred compensation in the amount of $2,352,994. |
| · | During the three months ended March 31, 2026, we issued an aggregate of 233,375 shares of common stock to service providers. |
| · | During the three months ended March 31, 2026, we entered into financing transactions with certain accredited investors pursuant to which we issued (i) convertible promissory notes in the aggregate principal amount of $845,000, (ii) warrants to purchase an aggregate of 40,000 shares of common stock and (iii) an aggregate of 36,667 shares of common stock. |
We did not repurchase any shares of our common stock during the three months ended March 31, 2026.
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| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES. |
Not applicable.
| ITEM 5. | OTHER INFORMATION. |
We have no information to disclose that was required to be in a report on Form 8-K during the three months ended March 31, 2026, but was not reported.
There have been no material changes to the procedures by which stockholders may recommend nominees to our board of directors since such procedures were last disclosed.
None of our directors or executive officers
| ITEM 6. | EXHIBITS. |
| Exhibit No. | Description | |
| 3.1 | Amended and Restated Articles of Incorporation Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023) | |
| 3.2 | Certificate of Amendment to Amended and Restated Articles of Incorporation Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q filed on May 10, 2024) | |
| 3.3 | Certificate of Amendment to Amended and Restated Articles of Incorporation Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.3 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) | |
| 3.4 | Certificate of Designation of Series A Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023) | |
| 3.5 | Certificate of Designation of Series F-1 Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.6 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023) | |
| 3.6 | Certificate of Correction of Certificate of Designation of Series F-1 Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.10 to Annual Report on Form 10-K filed on March 27, 2024) | |
| 3.7 | Certificate of Designation of Series L Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.9 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023) | |
| 3.8 | Certificate of Correction of Certificate of Designation of Series L Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.16 to Annual Report on Form 10-K filed on March 27, 2024) | |
| 3.9 | Certificate of Designation of Series N Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K filed on June 6, 2023) | |
| 3.10 | Certificate of Amendment to Certificate of Designation of Series N Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on February 3, 2026) | |
| 3.11 | Certificate of Designation of Series X Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.12 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023) |
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| 3.12 | Certificate of Designation of Series Y Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on May 14, 2024) | |
| 3.13 | Certificate of Amendment to Certificate of Designation of Series Y Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.5 to Annual Report on Form 10-K filed on December 4, 2024) | |
| 3.14 | Certificate of Amendment to Certificate of Designation of Series Y Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.24 to Quarterly Report on Form 10-Q filed on November 12, 2025) | |
| 3.15 | Amended and Restated Bylaws of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed on June 6, 2023) | |
| 4.1 | Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to L&H, Inc. on January 14, 2026 (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) | |
| 4.2 | Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to Greentree Financial Group, Inc. on December 29, 2025 (incorporated by reference to Exhibit 4.3 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) | |
| 4.3 | Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to James F. Sullivan on December 23, 2025 (incorporated by reference to Exhibit 4.4 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) | |
| 4.4 | Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to Odile Viviane Kaye on December 22, 2025 (incorporated by reference to Exhibit 4.5 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) | |
| 4.5 | Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to Greentree Financial Group, Inc. on October 31, 2025 (incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q filed on November 12, 2025) | |
| 4.6 | Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to SILAC Insurance Company on May 21, 2021 (incorporated by reference to Exhibit 4.2 to the Annual Report on Form 10-K filed on June 6, 2023) | |
| 4.7 | Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to Leonite Capital LLC on July 10, 2018 (incorporated by reference to Exhibit 4.3 to Quarterly Report on Form 10-Q filed on November 12, 2025) | |
| 10.1* | Securities Purchase Agreement, dated March 27, 2026, between Cardiff Lexington Corporation and Labrys Fund II, L.P. | |
| 10.2* | Promissory Note issued by Cardiff Lexington Corporation to Labrys Fund II, L.P. on March 27, 2026 | |
| 10.3* | Securities Purchase Agreement, dated March 27, 2026, between Cardiff Lexington Corporation and Silvercrest Hybrid Capital LLC | |
| 10.4* | 10% Convertible Redeemable Note issued by Cardiff Lexington Corporation to Silvercrest Hybrid Capital LLC on March 27, 2026 | |
| 10.5* | Securities Purchase Agreement, dated March 26, 2026, between Cardiff Lexington Corporation and CFI Capital LLC | |
| 10.6* | 6% Convertible Redeemable Note issued by Cardiff Lexington Corporation to CFI Capital LLC on March 26, 2026 | |
| 10.7 | Lock-Up and Compensation Resolution Agreement, dated March 6, 2026, between Cardiff Lexington Corporation and Daniel Thompson (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K filed on March 10, 2026) | |
| 10.8 | Loan Agreement, dated January 14, 2026, between Cardiff Lexington Corporation and L&H, Inc. (incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) | |
| 10.9 | Convertible Promissory Note issued by Cardiff Lexington Corporation to L&H, Inc. on January 14, 2026 (incorporated by reference to Exhibit 10.3 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) | |
| 31.1* | Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certifications of Principal Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2** | Certifications of Principal Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101* | Inline XBRL Document Set for the consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q | |
| 104* | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set |
______________
*Filed herewith
** Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: May 13, 2026 | CARDIFF LEXINGTON CORPORATION |
| /s/ Alex Cunningham | |
| Name: Alex Cunningham | |
| Title: Chief Executive Officer | |
| (Principal Executive Officer) | |
| /s/ Matthew Shafer | |
| Name: Matthew Shafer | |
| Title: Chief Financial Officer | |
| (Principal Financial Officer) |
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