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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: March 31, 2024

 

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: 000-49709

 

CARDIFF LEXINGTON CORPORATION
(Exact name of registrant as specified in its charter)

 

Nevada   84-1044583
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

 

3753 Howard Hughes Parkway, Suite 200, Las Vegas, NV   89169
(Address of principal executive offices)   (Zip Code)

 

844-628-2100
(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. Yes ☒      No

 

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). Yes ☒      No

 

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
Non-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 8, 2024, there were 13,019,963 shares of common stock of the registrant issued and outstanding.

 

 

 

   

 

 

EXPLANATORY NOTE

 

Cardiff Lexington Corporation (the “Company”) is filing this Amendment No 1 on Form 10-Q (“Amendment”) to amend its Quarterly Report on Form 10-Q for the three months ended March 31, 2024, which was originally filed with the Securities and Exchange Commission on May 10, 2024 (the “Form 10-Q”).

 

This Amendment is being filed to correct an error in the Form 10-Q as a result of a change in classification of credit loss expense to net revenue. Additionally, the Company filed this Amendment to respond to certain comments received from the staff of the Securities and Exchange Commission. The Form 10-Q, as amended by this Amendment, continues to be as of May 10, 2024 and does not reflect events occurring after May 10, 2024.

 

 

 

 

 

 

 

 

 

 

   

 

 

CARDIFF LEXINGTON CORPORATION

 

Quarterly Report on Form 10-Q

Period Ended March 31, 2024

 

 

TABLE OF CONTENTS

 

PART I
FINANCIAL INFORMATION
   
Item 1. Financial Statements 2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 44
Item 3. Quantitative and Qualitative Disclosures about Market Risk 52
Item 4. Controls and Procedures 52
PART II
OTHER INFORMATION
 
Item 1. Legal Proceedings 54
Item 1A. Risk Factors 54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 54
Item 3. Defaults Upon Senior Securities 54
Item 4. Mine Safety Disclosures 54
Item 5. Other Information 54
Item 6. Exhibits 54

 

 

 

 

 

 

 

 

 

 

   

 

 

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, 2024 and December 31, 2023 (Unaudited and restated)   4
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (Unaudited and restated)   5
Condensed Consolidated Statements of Stockholders’ Equity (Deficiency) for the Three Months Ended March 31, 2024 and 2023 (Unaudited and restated)   6
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (Unaudited)   7
Notes to Condensed Consolidated Financial Statements (Unaudited)   8

 

 

 

 

 

 

 

 

 

 

 

 

 3 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2024 AND DECEMBER 31, 2023

(UNAUDITED)

 

 

         
   March 31, 2024
 
   December 31, 2023
(Restated)
 
ASSETS          
Current assets          
Cash  $1,253,552   $866,943 
Accounts receivable-net   14,649,930    13,305,254 
Prepaid and other current assets   7,100    5,000 
Total current assets   15,910,582    14,177,197 
           
Property and equipment, net   31,296    34,661 
Land   540,000    540,000 
Goodwill   5,666,608    5,666,608 
Right of use - assets   416,441    289,062 
Due from related party   4,979    4,979 
Other assets   35,404    33,304 
Total assets  $22,605,310   $20,745,811 
           
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY          
Current liabilities          
Accounts payable and accrued expense  $2,104,109   $2,047,131 
Accrued expenses - related parties   4,323,057    4,733,057 
Accrued interest   668,729    620,963 
Right of use - liabilities   195,934    157,669 
Due to director and officer   45,844    120,997 
Notes payable   3,599,345    2,136,077 
Convertible notes payable, net of debt discounts of $11,305 and $24,820, respectively   3,820,545    3,807,030 
Net liabilities of discontinued operations   237,643    237,643 
Total current liabilities   14,995,206    13,860,567 
           
Notes payable   144,511    144,666 
Operating lease liability – long term   213,958    119,056 
Total liabilities   15,353,675    14,124,289 
           
Mezzanine equity          
Redeemable Series N Senior Convertible Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $4.00, 868,056 shares issued and outstanding at March 31, 2024 and December 31, 2023   3,996,462    3,891,439 
Redeemable Series R Senior Convertible Preferred Stock - 5,000 shares authorized, $0.001 par value, stated value of $1,200, 165 shares issued and outstanding at March 31, 2024 and December 31, 2023   317,194    307,980 
Redeemable Series X Senior Convertible Preferred Stock - 5,000,000 shares authorized, $0.001 par value, stated value of $4.00 par value; 375,000 shares issued and outstanding at March 31, 2024 and December 31, 2023   1,728,082    1,690,685 
Total Mezzanine Equity   6,041,738    5,890,104 
           
Stockholders' equity          
Series B Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value of $4.00, 1,360,679 and 2,139,478 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively   5,442,716    8,557,912 
Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value of $4.00, 99 and 123 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively   396    492 
Series E Preferred Stock - 1,000,000 shares authorized, $0.001 par value, stated value $4.00, 155,750 shares issued and outstanding at March 31, 2024 and December 31, 2023   623,000    623,000 
Series F-1 Preferred Stock - 50,000 shares authorized, $0.001 par value, stated value $4.00, 35,752 shares issued and outstanding at March 31, 2024 and December 31, 2023   143,008    143,008 
Series I Preferred Stock - 15,000,000 shares authorized, $0.001 par value, stated value $4.00, 12,089,000 and 14,885,000 issued and outstanding at March 31, 2024 and December 31, 2023, respectively   48,356,000    59,540,000 
Series J Preferred Stock - 2,000,000 shares authorized, $0.001 par value, stated value $4.00, 171,359 and 1,713,584 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively   685,436    6,854,336 
Series L Preferred Stock - 400,000 shares authorized, $0.001 par value, stated value $4.00, 319,493 shares issued and outstanding at March 31, 2024 and December 31, 2023   1,277,972    1,277,972 
Common Stock; 300,000,000 shares authorized, $0.001 par value; 10,819,995 and 25,121 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively   10,820    25 
Additional paid-in capital   13,789,402    (7,581,212)
Accumulated deficit   (69,118,853)   (68,684,115)
Total stockholders’ equity   1,209,897    731,418 
Total liabilities, mezzanine equity and stockholders’ equity  $22,605,310   $20,745,811 

 

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, 2024 AND 2023

(UNAUDITED)

 

 

           
   Three Months Ended March 31, 
   2024
(Restated)
   2023
(Restated)
 
REVENUE  $2,322,132   $2,706,399 
COST OF SALES   948,154    956,295 
GROSS PROFIT   1,373,978    1,750,104 
           
OPERATING EXPENSES          
Depreciation expense   3,365    4,635 
Share based compensation   300,225     
Selling, general and administrative   851,396    987,921 
Total operating expenses   1,154,986    992,556 
           
INCOME FROM CONTINUING OPERATIONS   218,992    757,548 
           
OTHER INCOME (EXPENSE)          
Other income       205 
Gain on debt refinance and forgiveness       390 
Penalties and fees   (1,000)   (17,000)
Interest expense   (376,269)   (693,661)
Amortization of debt discounts   (13,515)   (17,983)
Total other expenses   (390,784)   (728,049)
           
NET (LOSS) INCOME BEFORE DISCONTINUED OPERATIONS   (171,792)   29,499 
LOSS FROM DISCONTINUED OPERATIONS   (111,312)   (45,490)
NET LOSS FOR THE PERIOD  $(283,104)  $(15,991)
           
PREFERRED STOCK DIVIDENDS   (151,634)   (344,947)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS  $(434,738)  $(360,938)
           
BASIC LOSS PER SHARE          
CONTINUING OPERATIONS  $(0.11)  $(31.04)
DISCONTINUED OPERATIONS  $(0.03)  $(3.91)
           
DILUTED LOSS PER SHARE          
CONTINUING OPERATIONS  $(0.11)  $(30.34)
DISCONTINUED OPERATIONS  $(0.03)  $(3.91)
           
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC   3,818,218    11,627 
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED   3,818,218    11,627 

 

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 (DEFICIENCY)

THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

                                                        
  

Preferred Stock Series

A and I

  

Preferred Stock Series

B, E, F-1, J 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, 2022 (Restated)   14,885,001   $59,540,000    4,350,907   $17,403,628    123   $492    12,053   $12   $(10,004,808)  $(68,684,115)  $(1,744,791)
Conversion of convertible notes payable                           1,583    2    190,236        190,237 
Preferred stock Dividends                                       (344,947)   (344,947)
Net loss                                       (15,991)   (15,991)
Balance, March 31, 2023 (Restated)   14,885,001   $59,540,000    4,350,907   $17,403,628    123   $492    13,636   $14   $(9,814,572)  $(69,045,053)  $(1,915,491)

 

 

  

Preferred Stock Series

A and I

  

Preferred Stock Series

B, E, F-1, J 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, 2023 (Restated)   14,885,002   $59,540,000    4,364,057   $17,456,228    123   $492    25,121   $25   $(7,581,212)  $(68,684,115)  $731,418 
Conversion of convertible notes payable                           1,222    1    1,679        1,680 
Conversion of series B preferred stock           (778,799)   (3,115,196)           1,557,598    1,558    3,113,638         
Conversion of series C preferred stock                   (22)   (88)   220,000    220    (132)        
Conversion of series I preferred stock   (2,928,500)   (11,714,000)                   5,857,000    5,857    11,708,143         
Conversion of series J preferred stock           (1,542,225)   (6,168,900)           3,084,450    3,084    6,165,816         
Issuance of series I preferred stock to officers   132,500    530,000                            63,600        593,600 
Cancellation of series C preferred stock                   (2)   (8)           8         
Common stock issued for services                           7,500    8    11,617        11,625 
Common stock issued to board members                           30,000    30    194,970        195,000 
Common stock issued in Red Rock settlement                           37,104    37    111,275        111,312 
Preferred stock Dividends                                       (151,634)   (151,634)
Net loss                                       (283,104)   (283,104)
Balance, March 31, 2024   12,089,002   $48,356,000    2,043,033   $8,172,132    99   $396    10,819,995   $10,820   $13,789,402   $(69,118,853)  $1,209,897 

 

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, 2024 AND 2023

(UNAUDITED)

 

 

           
   Three Months Ended March 31, 
   2024
(Restated)
   2023 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss from continuing operations  $(283,104)  $(15,991)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   3,365    4,635 
Amortization of debt discount   13,515    17,983 
Bad debt       270,000 
Conversion and note issuance cost   1,000    5,000 
Share issuance for compensations to directors and officers   788,600     
Share issuance for service rendered   11,625     
Fair value settled upon conversion       123,566 
Gain on forgiveness of debt       (390)
(Increase) decrease in:          
Accounts receivable   (1,344,676)   (1,111,317)
Right of use - assets   59,259    29,300 
Prepaids and other current assets   (4,200)    
Increase (decrease) in:          
Accounts payable and accrued expense   56,978    270,710 
Due to related party   (75,153)    
Accrued officers compensation   (410,000)   154,000 
Accrued interest   48,446    122,508 
Right of use - liabilities   (53,471)   (30,993)
Net cash used in operating activities   (1,187,816)   (160,989)
           
Net cash provided by (used in) Discontinued Operations – Operating   111,312    (28,294)
           
FINANCING ACTIVITIES          
Proceeds from convertible notes payable       240,000 
Repayment of SBA loans   (160)   (750)
Proceeds from line of credit   1,463,273     
Net cash provided by financing activities   1,463,113    239,250 
           
Net cash provided by Discontinued Operations – Financing       73,784 
           
NET INCREASE IN CASH AND CASH EQUIVALENTS   386,609    123,751 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   866,943    219,085 
CASH AND CASH EQUIVALENTS, END OF PERIOD  $1,253,552   $342,836 
           
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION          
Cash paid during the year for Interest  $50,000   $1,503 
           
NON-CASH INVESTING AND FINANCING ACTIVITIES:          
Common stock issued upon conversion of notes payable  $1,680   $66,673 
Right of use assets acquired  $186,638   $ 

 

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

MARCH 31, 2024 AND 2023

(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 conducted through, and its income derived from, its various subsidiaries, which includes:

 

·Edge View Properties, Inc. (“Edge View”), which was acquired on July 16, 2014;
   
·Platinum Tax Defenders (“Platinum Tax”), which was acquired on July 31, 2018 and sold on November 10, 2023; and
   
·Nova Ortho and Spine, LLC (“Nova”), which was acquired on May 31, 2021.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Cardiff and its wholly owned subsidiaries, Edge View, Platinum Tax and Nova (collectively, the “Company”). Subsidiaries shown as discontinued operations include Platinum Tax. All significant intercompany accounts and transactions are eliminated in consolidation. Subsidiaries discontinued are shown as discontinued operations.

 

Reverse Stock Split

 

On January 9, 2024, the Company effected a 1-for-75,000 reverse split of its outstanding common stock. All outstanding shares of common stock and warrant to purchase common stock were adjusted to reflect the 1-for-75,000 reverse split, with respective exercise prices of the warrants proportionately increased. The conversion prices of the outstanding convertible notes and certain series of preferred stock were adjusted to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion.

 

All share and per share data throughout these consolidated financial statements have been retroactively adjusted to reflect the reverse stock split. The total number of authorized shares of common stock did not change. As a result of the reverse stock split, an amount equal to the decreased value of the common stock was reclassified from “common stock” to “additional paid-in capital.”

 

 

 

 8 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Use of Estimates

 

The preparation of financial statements in conformity with United States generally accepted accounting principles (“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.

 

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 and insures payment in full from insurance settlements. Accounts receivable consists of amounts due from attorneys and insurance providers for services provided to patients under the letter of protection. The 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. 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% 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 0.5% to 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 regular basis and updating its estimates of credit losses to adjust for changes in loss data. The Company typically collects on its accounts receivable between eighteen 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, 2024 and December 31, 2023, the Company’s allowance for credit losses was $122,190. The Company recognized $270,000 of credit loss expense during the three months ended March 31, 2023, which is included in selling, general and administrative expenses in the condensed consolidated statement of operations. The Company did not recognize any credit loss expense during the three months ended March 31, 2024.

 

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: 

 
Classification Useful Life
Equipment, furniture, and fixtures 5 - 7 years
Medical equipment 10 years
Leasehold improvements 10 years or lease term, if shorter

 

 

 

 

 9 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Goodwill and Other Intangible Assets

 

Goodwill and indefinite-lived assets are not amortized but are evaluated for impairment annually or when indicators of a potential impairment are present. The Company’s impairment testing of goodwill is performed separately from its impairment testing of indefinite-lived intangibles. 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 as such to determine whether it is more likely than not the fair value is less than the carry amount, including goodwill. The annual evaluation for impairment of indefinite-lived intangibles and, if then needed after the first step, Goodwill, 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, 2024 and 2023, the Company did not recognize any goodwill impairment. The Company based this decision on impairment testing of the underlying assets, expected cash flows, decreased asset value and other factors.

 

Valuation of Long-lived Assets

 

In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 360-10-5, “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 contact
     
  · Determination of the transaction price
     
  · Allocation of the transaction price to the separate performance obligations
     
  · Recognition of revenue when performance obligations are satisfied.

 

The Company applies the five-step model when it is probable that the Company will settle the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and 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.

 

 

 

 

 

 10 

 

  

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

The Company’s contracts for both its contract and service fees each 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. Revenue is recognized when obligations under the terms of the contract with the Company’s patients are satisfied; generally, at the time of patient care.

 

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 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 is based on a historical 12-month 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, which handles settlement claims and negotiations. Settlement amounts are presented to the Company’s third party medical billing company. Settlement rates of 49% or higher based on gross billed amounts are typically accepted without further negotiation. Proposed settlement rates below 49% are negotiated 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-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.

 

 

 

 11 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

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.

 

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.

 

Prior to its fiscal year 2024, the Company has historically had a 49% settlement realization rate from its total gross billed charges. Accordingly, the Company has historically recognized net healthcare service revenue as 49% of gross billed charges. However, during the three months ended March 31, 2024, the Company underwent efforts to accelerate cash settlements by accepting lower settlement realization rates in order to settle outstanding accounts receivable more quickly. As a result of the new effort, during the three months ended March 31, 2024 the Company realized a 42.9% average settlement rate of its gross billed charges during this time frame, which were historically recorded in accounts receivable and revenue at 49% of gross billings. As a result of this reduced settlement realization percentage, the Company recorded a reduction to net revenue of $339,834 for the three months ended March 31, 2024.

 

The Company will continue to reassess its settlement realization rate in the future and incorporate changes in settlement realization in its estimate of variable consideration due under its contracts. See additional disclosure in Note 17. Subsequent Events regarding the Company’s review of its settlement realization percentage subsequent to the quarter ended March 31, 2024. 

 

Contract Fees (Non-PIP)

 

The Company has contract fees for amounts earned from its Non-Personal Injury Protection (“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 us 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 eighteen 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. For the three months ended March 31, 2023, the Company factored a total of $544,196 of its accounts receivable in exchange for cash of $253,750. 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 and changes in stockholders’ equity. The Company recognized advertising and marketing expense of $82,051 and $83,223 for the three months ended March 31, 2024 and 2023, respectively.

 

 

 

 12 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

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). 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.

 

Distinguishing Liabilities from Equity

 

The Company accounts for its series N senior convertible preferred stock, series R convertible preferred stock, and 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.

 

Stock-Based Compensation

 

The Company accounts for its stock-based compensation in which the Company obtains 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 the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.

 

Generally, all forms of share-based payments, including stock option grants, warrants and 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 expense resulting from share-based payments is recorded in the consolidated statements of operations.

 

 

 

 13 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

 

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.

 

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.

 

As of March 31, 2024 and 2023, the Company did not have any interest and penalties associated with tax positions and did not have any significant unrecognized uncertain tax positions.

 

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. 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 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 recurring operating losses since its inception and has an accumulated deficit of $69,118,853 as of March 31, 2024. These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might result if the Company is unable to continue as a going concern.

 

 

 

 

 14 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

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 is in continuous discussions with 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.

 

Recent Accounting Standards

 

The FASB issued ASU 2023-07 on November 27, 2023. The amendments “improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.” In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable “investors to better understand an entity’s overall performance” and assess “potential future cash flows.” The Management is evaluating the impact of ASU 2023-07 on the consolidated financial statements and does not expect there to be any changes or impact to the financial statements.

 

2.RESTATEMENT OF FINANCIAL STATEMENTS

 

The Company restated its financial statements for the three months ended March 31, 2024 as a result of a change in classification of credit loss expense to net revenue. Subsequent to the preparation of the financial statements for the three month ended March 31, 2024, the Company identified and corrected its accounting for its credit loss expense of $339,834, which was reclassified to net revenue as variable consideration accounted for under ASC 606.

 

The following tables summarize the impact of the corrections on the Company’s condensed consolidated statement of operations for the three months ended March 31, 2024. These adjustments has no effect on the Company’s condensed consolidated balance sheet, reported (loss) income from operations, net loss or cash used in operating activities for the periods adjusted.

 

Restatement of financial statements  Impact of correction of error 
   As previously reported   Adjustments   As restated 
For the three months ended March 31, 2024 (unaudited)            
Revenue  $2,661,966   $(339,834)  $2,322,132 
Selling, general and administrative  $1,191,230   $(339,834)  $851,396 

 

During the preparation of the year ended December 31, 2023 financial statements, the Company identified and corrected its classification and accounting treatment for its series R convertible preferred stock and the related dividend accrual. Pursuant to ASC 250, “Accounting changes and error corrections” issued by FASB and SAB 99 “Materiality” issued by Securities and Exchange Commission, the Company determined the impact of the error was immaterial. The impact of the error correction is reflected in a $274,982 increase to the mezzanine equity and offsetting decrease to the series R convertible preferred stock and subject to possible redemption mezzanine equity line item on the consolidated balance sheet as of March 31, 2023. In addition, the impact of the unpaid dividend accrual is reflected in $8,136 increase to mezzanine equity and offsetting decrease to the accumulated deficits as of March 31, 2023. The impact of the error correction is also reflected $1 decrease of earnings (loss) per share on the consolidated statement of operations for the three months ended March 31, 2023.

 

During the preparation of the three months ended March 31, 2024 financial statements, the Company identified and corrected its classification for its all outstanding common stock amount per par value of $0.001 with additional paid-in-capital related with a 1-for-75,000 reverse split executed on January 9, 2024. The impact of this adjustment decreased $1,804,774 to common stock and offsetting increase to additional paid-in-capital as of December 31, 2023.

 

 

 

 15 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

On November 10, 2023, the Company sold Platinum Tax, which was a full-service tax resolution firm located in Los Angeles, California. The Company presented in prior periods operating loss as loss from discontinued operations in the amount of $45,490 on the consolidated statement of operations for the three months ended March 31, 2023.

 

The following table summarizes the impact of the corrections on the Company’s condensed consolidated statement of operations for the three months ended March 31, 2023:

 

i. Balance sheet 

            
   Impact of correction of error 
March 31, 2023 (Unaudited)  As previously reported   Adjustments   As restated 
             
Total assets  $14,284,585   $(8,673)  $14,275,912 
                
Total liabilities   10,745,097    (8,673)   10,736,424 
                
Mezzanine equity   5,171,861    283,118    5,454,979 
                
Total stockholders' equity  $(1,632,373)  $(283,118)  $(1,915,491)

 

ii. Statement of operations

 

   Impact of correction of error 
Three months ended March 31, 2023 (Unaudited)  As previously reported   Adjustments   As restated 
             
Revenue  $2,860,798   $(154,399)  $2,706,399 
Cost of sales   983,124    (26,829)   956,295 
Gross profit   1,877,674    (127,570)   1,750,104 
Operating expense   1,164,113    (171,557)   992,556 
Income from operations  $713,561   $43,987   $757,548 
Other income (expense), net   (729,552)   1,503    (728,049)
Net loss before discontinued operations   (15,991)   45,490    29,499 
Loss from discontinued operations       (45,490)   (45,490)
Net loss for the period  $(15,991)  $   $(15,991)
Preferred stock dividends  $(336,811)  $(8,136)  $(344,947)
Net loss attributable to common shareholders  $(352,802)  $(8,136)  $(360,938)
Basic and diluted earnings (loss) per share for continuing operations  $(30)  $(1)  $(31)

 

 

 

 16 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

3.ACCOUNTS PAYABLE AND ACCRUED EXPENSES

        
   March 31, 2024   December 31, 2023 
Accounts payable  $632,045   $720,774 
Accrued credit cards   9,884    26,645 
Accrued liability for settlements of previously factored receivables   1,385,084    1,247,772 
Accrued property taxes   5,346    5,346 
Accrued professional fees   29,122    29,122 
Accrued payroll   42,628    17,472 
Total  $2,104,109   $2,047,131 

 

The Company is delinquent paying certain property taxes. As of March 31, 2024 and December 31, 2023, the balance for these property taxes, was $5,346.

 

4.PLANT AND EQUIPMENT, NET

 

Property and equipment as of March 31, 2024 and December 31, 2023 is as follows: 

        
   March 31, 2024   December 31, 2023 
Medical equipment  $96,532   $96,532 
Computer Equipment   9,189    9,189 
Furniture, fixtures and equipment   15,079    15,079 
Leasehold Improvement   15,950    15,950 
Total   136,750    136,750 
Less: accumulated depreciation   (105,454)   (102,089)
Property and equipment, net  $31,296   $34,661 

 

For the three months ended March 31, 2024 and 2023, depreciation expense was $3,365 and $4,635, respectively.

 

5.LAND

 

As of March 31, 2024 and December 31, 2023, the Company had 27 acres of land of approximately $540,000. The land is currently vacant and is expected to be developed into a residential community.

 

6.RELATED PARTY TRANSACTIONS

 

In connection with the acquisition of Edge View on July 16, 2014, the Company assumed amounts due to previous owners who are current managers of Edge View. These amounts are due on demand and do not bear interest. The balance of these amounts are $4,979 due from the previous owners as of March 31, 2024 and December 31, 2023.

 

 

 

 17 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

The Company obtained short-term advances from the Chairman of the Board that are non-interest bearing and due on demand. As of March 31, 2024 and December 31, 2023, the Company owed the Chairman $45,844 and $120,997, respectively. During the three months ended March 31, 2024, the Company paid $75,153 to the Chairman.

 

See also Note 8 and the disclosure regarding Note payable 41.

 

See also Note 13 for compensation paid to employees of the Company.

 

7.NOTES AND LOANS PAYABLE

 

Notes payable at March 31, 2024 and December 31, 2023 are summarized as follows: 

        
   March 31, 2024   December 31, 2023 
Notes and loans payable  $3,743,856   $2,280,743 
Less current portion   (3,599,345)   (2,136,077)
Long-term portion  $144,511   $144,666 

 

Long-term debt matures as follows: 

    
   Amount 
2024 (remainder of year)  $3,599,345 
2025   4,983 
2026   4,983 
2027   4,983 
2028   4,983 
Thereafter   124,579 
Total  $3,743,856 

 

Loans and Notes Payable – Unrelated Party

 

On March 12, 2009, the Company 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, 2024 and December 31, 2023. The accrued interest of the debenture was $7,876 and $7,547 at March 31, 2024 and December 31, 2023, respectively. The Company assigned all of its receivables from consumer activations of the rewards program as collateral on this debenture.

 

 

 

 18 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Small Business Administration (“SBA”) Loans

 

On June 2, 2020, the Company obtained an SBA loan in the principal amount of $150,000 with an interest rate of 3.75% and a maturity date of June 2, 2050. The principal balance and accrued interest at March 31, 2024 was $149,494 and $0, respectively, and principal and accrued interest at December 31, 2023 was $149,655 and $956, respectively.

 

Line of Credit

 

On September 29, 2023, the Company and Nova entered into a two-year revolving purchase and security agreement with DML HC Series, LLC to sell, with recourse, Nova’s accounts receivables for a revolving financing up to a maximum advance amount of $4.5 million. As of March 31, 2024 and December 31, 2023, the Company had $3,583,373 and $2,120,100, respectively, outstanding balance against the revolving receivable line of credit. The revolving purchase and security agreement includes discounts recorded as interest expense on each funding and matures on September 29, 2025.

 

8.CONVERTIBLE NOTES PAYABLE

 

As of March 31, 2024 and December 31, 2023, the Company had convertible debt outstanding net of amortized debt discount of $3,820,545 and $3,807,030, respectively. During the three months ended March 31, 2024, the Company did not receive any proceeds from convertible notes and repaid $50,000 of accrued interest to convertible noteholder. During the three months ended March 31, 2023, the Company received net proceeds of $240,000 from convertible notes. There are debt discounts associated with the convertible debt of $11,305 and $24,820 at March 31, 2024 and December 31, 2023, respectively. For the three months ended March 31, 2024 and 2023, the Company recorded amortization of debt discounts of $13,515 and $17,983, respectively.

 

During the three months ended March 31, 2024, the Company converted $680 in accrued interest and $1,000 in conversion cost into 1,222 shares of common stock. The Company recognized $1,679 of additional paid-in capital to adjust fair value for the debt settlement during the three months ended March 31, 2024. During the three months ended March 31, 2023, the Company converted $58,800 of convertible debt, $5,873 in accrued interest and $2,000 in penalties and fees into 1,583 shares of common stock.

 

Convertible notes as of March 31, 2024 and December 31, 2023 are summarized as follows: 

        
   March 31, 2024   December 31, 2023 
Convertible notes payable  $3,831,850   $3,831,850 
Discounts on convertible notes payable   (11,305)   (24,820)
Total convertible debt less debt discount   3,820,545    3,807,030 
Current portion   3,820,545    3,807,030 
Long-term portion  $   $ 

 

 

 

 19 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

The following is a schedule of convertible notes payable as of and for the three months ended March 31, 2024. 

                                              
Note #  Issuance  Maturity  Principal Balance 12/31/23   New Loan   Principal Conversions  

Cash Paydown

   Shares Issued Upon Conversion   Principal Balance 03/31/24   Accrued Interest on Convertible Debt at 12/31/23   Interest Expense On Convertible Debt For the Period Ended 03/31/24   Accrued Interest on Convertible Debt at 03/31/24   Unamortized Debt Discount At 03/31/24 
9  09/12/2016  09/12/2017  $50,080                1,222   $50,080   $5,581   $2,496    7,399     
10  01/24/2017  01/24/2018   55,000                    55,000    80,875    2,742    83,618     
10-1  02/10/2023  02/10/2024   50,000                    50,000    6,658    1,870    8,527     
10-2  03/30/2023  03/30/2024   25,000                    25,000    2,836    935    3,771     
10-3  08/11/2023  08/11/2024   25,000                    25,000    1,469    935    2,404     
29-2  11/08/2019  11/08/2020   36,604                    36,604    10,109    2,190    12,299     
31  08/28/2019  08/28/2020                           8,385             
37-1  09/03/2020  06/30/2021   113,667                    113,667    64,929    5,101    70,030     
37-2  11/02/2020  08/31/2021   113,167                    113,167    63,594    5,079    68,673     
37-3  12/29/2020  09/30/2021   113,166                    113,166    62,558    5,079    67,637     
40-1  09/22/2022  09/22/2024   2,600,000                    2,600,000    252,665    64,821    267,488     
40-2  11/04/2022  09/22/2024   68,667                    68,667    7,939    1,712    9,651     
40-3  11/28/2022  09/22/2024   68,667                    68,667    7,506    1,712    9,217     
40-4  12/21/2022  09/22/2024   68,667                    68,667    7,054    1,712    8,766     
40-5  01/24/2023  03/21/2024   90,166                    90,166    8,284    2,248    10,531     
40-6  03/21/2023  09/22/2024   139,166                    139,166    10,671    3,470    14,141     
40-7  06/05/2023  06/05/2024   139,166                    139,166    7,826    3,470    11,295    6,530 
40-8  06/13/2023  06/13/2024   21,167                    21,167    1,127    528    1,654    1,032 
40-9  07/19/2023  07/19/2024   35,500                    35,500    1,605    885    2,490    2,650 
40-10  07/24/2023  07/24/2024   14,000                    14,000    614    349    963    1,093 
41  08/25/2023  08/25/2024   5,000                    5,000    175    125    300      
         $3,831,850   $   $   $    1,222   $3,831,850   $612,460   $107,459   $660,854   $11,305 

 

Note 9

 

On September 12, 2016, the Company issued a convertible promissory note in the principal of $80,000 for services rendered, which matured on September 12, 2017. Note 9 is currently in default and accrues at a default interest rate of 20% per annum.

 

 

 

 20 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Note 10, 10-1, 10-2 and 10-3

 

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. Note 10 is currently in default and accrues interest at a default interest rate of 20% per annum. On February 10, 2023, the Company executed a second tranche under this note in the principal amount of $50,000 (Note 10-1). On March 30, 2023, the Company executed a third tranche under this note in the principal amount of $25,000 (Note 10-2). On August 11, 2023, the Company executed a fourth tranche under this note in the principal amount of $25,000 (Note 10-3). Notes 10-1 and 10-2 are currently in default and accrue interest at a default interest rate of 20% per annum. Note 10-3 accrues interest at a rate of 15% per annum.

 

Note 29-2

 

On May 10, 2019, the Company issued a convertible promissory note in the principal amount of $150,000. On November 8, 2019, this note (Note 29) was purchased by and assigned to an unrelated party. The amount assigned was the existing principal amount of $150,000 and accrued interest of $5,918, which was issued as Note 29-1, plus a new convertible promissory note in the principal amount of $62,367, which was issued as Note 29-2. Note 29-2 is currently in default and accrues interest at a default interest rate of 24% per annum.

 

Notes 37-1, 37-2 and 37-3

 

On September 3, 2020, the Company issued a convertible promissory note in the principal amount of $200,000, with an original issue discount of $50,000, which could be drawn in several tranches. On September 3, 2020, the Company executed the first tranche in the principal amount of $67,000, less an original issue discount of $17,000, which matured on June 30, 2021 (Note 37-1). On November 2, 2020, the Company executed the second tranche in the principal amount of $66,500, less an original issue discount of $16,500, which matured on August 31, 2021 (Note 37-2). On December 29, 2020, the Company executed the third tranche in the principal amount of $66,500, less an original issue discount of $16,500, which matured on September 30, 2021 (Note 37-3). Notes 37-1, 37-2 and 27-3 are currently in default and accrue interest at a default interest rate of 18% per annum.

 

Notes 40-1, 40-2, 40-3, 40-4, 40-5, 40-6, 40-7, 40-8, 40-9 and 40-10

 

On September 22, 2022, the Company issued a convertible promissory note in the principal amount of $2,600,000 in exchange for total of $4,791,099 of defaulted promissory notes balances (Note 40-1). On November 4, 2022, the Company executed a second tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-2). On November 28, 2022, the Company executed the third tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-3). On December 21, 2022, the Company executed a fourth tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-4). On January 24, 2023, the Company executed a fifth tranche under this note in the principal amount of $90,166, less an original issue discount and fee of $25,166 (Note 40-5). On March 21, 2023, the Company executed a sixth tranche under this note in the principal amount of $136,666, less an original issue discount and fee of $39,166 (Note 40-6). On June 5, 2023, the Company executed a seventh tranche under this note in the principal amount of $136,667, less original issue discount and fee of $39,167 (Note 40-7). On June 13, 2023, the Company executed an eighth tranche under this note in the principal amount of $21,167, less original issue discount and fee of $5,167 (Note 40-8). On July 19, 2023, the Company executed a ninth tranche under this note in the principal amount of $35,500, less an original issue discount and fee of $8,875 (Note 40-9). On July 24, 2023, the Company executed a tenth tranche under this note in the principal amount of $14,000, less an original issue discount and fee of $3,500 (Note 40-10). On December 1, 2023, the Company executed amendment on Notes series 40 consolidated senior secured convertible promissory note to extend the expired tranche note 40-1 through 40-5’ due date to September 20, 2024. All of the Note 40 tranches mature in one year from the note issuance date and accrue interest at a rate of 10% per annum.

 

 

 

 21 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Note 41

 

On August 25, 2023, the Company issued a twelve-month convertible promissory note in the principal amount of $5,000 to the Company’s CEO for the Company’s operating expenses. The rate of interest is 10% per annum.

 

9.CAPITAL STOCK

 

Preferred Stock

 

The Company has designated multiple series of preferred stock, including 2 shares of series A preferred stock, 3,000,000 shares of series B preferred stock, 500 shares of series C preferred stock, 1,000,000 shares of series E preferred stock, 50,000 shares of series F-1 preferred stock, 15,000,000 shares of series I preferred stock, 2,000,000 shares of series J preferred stock, 400,000 shares of series L preferred stock, 3,000,000 shares of series N senior convertible preferred stock, 5,000 shares of series R convertible preferred stock and 5,000,000 shares of series X senior convertible preferred stock.

 

The following is a description of the rights and preferences of each series of preferred stock.

 

Redeemable Preferred Stock

 

The Company recognized the series N senior convertible preferred stock, series R convertible preferred stock and series X senior convertible preferred stock as mezzanine equity in accordance with ASC 480, “Distinguishing Liabilities from Equity”.

 

Series N Senior Convertible Preferred Stock

 

Ranking. The series N senior convertible preferred stock ranks, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common stock and each other class or series that is not expressly made senior to or on parity with the series N senior convertible preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series N senior convertible preferred stock; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each class or series that is expressly made senior to the series N senior convertible preferred stock.

 

Dividend Rights. Holders of series N senior convertible preferred stock are entitled to dividends at a rate per annum of 12.0% of the stated value ($4.00 per share); provided that upon an event of default (as defined in the certificate of designation for the series N senior convertible preferred stock), such rate shall increase by 8% per annum. Dividends shall accrue from day to day, whether or not declared, and shall be cumulative. Dividends shall be payable quarterly in arrears on each dividend payment date in cash or common stock at the Company’s discretion. Dividends payable in common stock shall be calculated based on a price equal to eighty percent (80%) of the volume weighted average price for the common stock on the Company’s principal trading market (the “VWAP”) during the five (5) trading days immediately prior to the applicable dividend payment date. At March 31, 2024 and December 31, 2023, cumulative dividends on Series N Preferred Stock were $871,462 and $766,437, respectively.

 

 

 

 22 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Liquidation Rights. Subject to the rights of creditors and the holders of any senior securities or parity securities (in each case, as defined in the certificate of designation), upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of junior securities (as defined in the certificate of designation), including the common stock, each holder of outstanding series N senior convertible preferred stock shall be entitled to receive an amount of cash equal to 115% of the stated value of $4.00 per share, plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether or not declared) to, but not including the date of final distribution to such holders.

 

Voting Rights. Holders of series N senior convertible preferred stock do not have any voting rights; provided that, so long as any shares of series N senior convertible preferred stock are outstanding, the affirmative vote of holders of a majority of the series N senior convertible preferred stock, which majority must include SILAC Insurance Company so long as it holds any shares of series N senior convertible preferred stock, voting as a separate class, shall be necessary for approving, effecting or validating any amendment, alteration or repeal of any of the provisions of the certificate of designation or prior to the Company’s (or Nova’s) creation or issuance of any parity securities or new indebtedness (as defined in the certificate of designation); provided that the foregoing shall not apply to any financing transaction the use of proceeds of which will be used to redeem the series N senior convertible preferred stock and the warrants issued in connection therewith. In addition, the affirmative vote of holders of 66% of the series N senior convertible preferred stock, voting as a separate class, is required prior to the Company’s (or Nova’s) creation or issuance of any senior securities.

 

Conversion Rights. Each shares of series N senior convertible preferred stock, plus all accrued and unpaid dividends thereon, shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of common stock determined by dividing the stated value ($4.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price of $900 per share (subject to standard adjustments in the event of any stock splits, stock combinations, stock reclassifications, dividends paid in common stock, sales of substantially all assets, mergers, consolidations or similar transactions); provided that in no event shall the holder of any series N senior convertible preferred stock be entitled to convert any number of shares that upon conversion the sum of (i) the number of shares of common stock beneficially owned by the holder and its affiliates and (ii) the number of shares of common stock issuable upon the conversion of the series N senior convertible preferred stock with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the then outstanding common stock. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.

 

Redemption Rights. The Company may redeem the series N senior convertible preferred stock at any time by paying in cash therefore a sum equal to 115% of the stated value of $4.00 per share, plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the certificate of designation. In addition, any holder may require the Company to redeem some or all of its shares of series N senior convertible preferred stock on the same terms after a period of twelve months from the date of issuance; provided, however, that such redemption right shall only be exercisable if the Company raises at least $5,000,000 or the common stock is trading on the Nasdaq Stock Market or the New York Stock Exchange.

 

Series R Convertible Preferred Stock

 

Ranking. The series R convertible preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock, series B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series I preferred stock, series J preferred stock, series L preferred stock and to each other class or series that is not expressly made senior to or on parity with the series R convertible preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series R convertible preferred stock; and (iii) junior to the series N senior convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series R convertible preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

 

 

 23 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Dividend Rights. The holders of series R convertible preferred stock are entitled to receive cumulative dividends in the amount of twelve percent (12%) per annum, payable quarterly. In addition, holders of series R convertible preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. Any dividends that are not paid when due shall continue to accrue and shall entail a late fee, which must be paid in cash, at the rate of 18% per annum or the lesser rate permitted by applicable law which shall accrue and compound daily from the missed payment date through and including the date of actual payment in full. At March 31, 2024 and December 31, 2023, cumulative dividends on Series R Preferred Stock were $119,194 and $109,980, respectively.

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series R convertible preferred stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the stated value ($1,200), plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing, for each share of series R convertible preferred stock before any distribution or payment shall be made to the holders of any junior securities.

 

Voting Rights. The holders of series R convertible preferred stock will vote together with the common stock on an as-converted basis. However, as long as any shares of series R convertible preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the series R convertible preferred stock, directly and/or indirectly (i) alter or change adversely the powers, preferences or rights given to the series R convertible preferred stock or alter or amend the certificate of designation, (ii) authorize or create any class of stock ranking as to redemption or distribution of assets upon a liquidation senior to, or otherwise pari passu with, the series R convertible preferred stock, or authorize or create any class of stock ranking as to dividends senior to, or otherwise pari passu with, the series R convertible preferred stock, (iii) amend its articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of the series R convertible preferred stock, (iv) increase the number of authorized shares of series R convertible preferred stock, or (v) enter into any agreement with respect to any of the foregoing.

 

Conversion Rights. Each shares of series R convertible preferred stock shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of common stock determined by dividing the stated value ($1,200 per share) by a conversion price equal to the lower of (i) $75.0 and (ii) the lowest daily VWAP during the twenty (20) trading days immediately prior to the applicable conversion date. Notwithstanding the foregoing, the Company shall not effect any conversion of the series R convertible preferred stock, and a holder shall not have the right to convert any portion of the series R convertible preferred stock, to the extent that, after giving effect to the conversion, such holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own in excess of 4.99% of the then outstanding common stock. The conversion price is subject to adjustment for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the common stock, as well as for mergers, business combinations and certain other fundamental transactions. In addition, subject to certain exceptions, upon any issuance by the Company or any of its subsidiaries of common stock or common stock equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), the holder may elect, in its sole discretion, to exchange (in lieu of conversion), if applicable, all or some of the shares of series R convertible preferred stock then held for any securities or units issued in a Subsequent Financing on a $1.00 for $1.00 basis.

 

Participation Rights. Subject to certain exceptions, upon a Subsequent Financing, a holder of at least 100 shares of series R convertible preferred stock shall have the right to participate in up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing on the same terms, conditions and price provided for in the Subsequent Financing.

 

 

 

 24 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Company Redemption Rights. The Company has the right to redeem all (but not less than all), shares of the series R convertible preferred stock issued and outstanding at any time upon three (3) business days’ notice, at a redemption price per share equal to the product of (i) the Premium Rate multiplied by (ii) the sum of (x) the stated value ($1,200), (y) all accrued but unpaid dividends, and (z) all other amounts due to the holder. “Premium Rate” means (a) 1.1 if all of the series R convertible preferred stock is redeemed within ninety (90) calendar days from the issuance date thereof; (b) 1.2 if all of the series R convertible preferred stock is redeemed after ninety (90) calendar days and within one hundred twenty (120) calendar days from the issuance date thereof; (c) 1.3 if all of the series R convertible preferred stock is redeemed after one hundred twenty (120) calendar days and within one hundred eighty (180) calendar days from the issuance date thereof; and (iv) 1.0 if all of the series R convertible preferred stock is redeemed after one hundred eighty (180) calendar days.

 

Redemption Upon Triggering Events. Upon the occurrence of a Triggering Event (as defined below), each holder of series R convertible preferred stock shall (in addition to all other rights it may have) have the right, exercisable at the sole option of such holder, to require the Company to (A) redeem all of the series R convertible preferred stock then held by such holder for a redemption price, in cash, equal to the Triggering Redemption Amount (as defined below), or (B) at the option of each holder either (i) redeem all of the series R convertible preferred stock then held by such holder though the issuance to such holder of such number of shares of common stock equal to the quotient of (x) the Triggering Redemption Amount, divided by (y) the lowest of (1) the conversion price, and (2) 75% of the average of the 10 VWAPs immediately prior to the date of election, or (ii) increase the dividend rate on all of the outstanding series R convertible preferred stock held by such holder retroactively to the initial issuance date to 18% per annum thereafter. “Triggering Redemption Amount” means, for each share of series R convertible preferred stock, the sum of (a) the greater of (i) 130% of the stated value and (ii) the product of (y) the VWAP on the trading day immediately preceding the date of the Triggering Event, multiplied by (z) the stated value divided by the then applicable conversion price, (b) all accrued but unpaid dividends thereon and (c) all liquidated damages, late fees and other costs, expenses or amounts due in respect of the series R convertible preferred stock including, but not limited to legal fees and expenses of legal counsel to the holder in connection with, related to and/or arising out of a Triggering Event. A “Triggering Event” means any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

·the Company shall fail to deliver the shares of common stock issuable upon a conversion prior to the fifth (5th) trading day after such shares are required to be delivered, or the Company shall provide written notice to any holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversion of any shares of series R convertible preferred stock in accordance with the terms of the certificate of designation;

 

·the Company shall fail for any reason to pay in full the amount of cash due pursuant to a Buy-In (as defined in the certificate of designation) within five (5) trading days after notice therefor is delivered;

 

·the Company shall fail to have available a sufficient number of authorized and unreserved shares of common stock to issue to such holder upon a conversion;

 

·unless specifically addressed elsewhere in the certificate of designation as a Triggering Event, the Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of the Transaction Documents (as defined in the certificate of designation), and such failure or breach shall not, if subject to the possibility of a cure by the Company, have been cured within five (5) calendar days after the date on which written notice of such failure or breach shall have been delivered;

 

 

 

 25 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

·the Company shall redeem junior securities or pari passu securities;

 

·the Company shall be party to a Change of Control Transaction (as defined in the certificate of designation);

 

·there shall have occurred a Bankruptcy Event (as defined in the certificate of designation);

 

·any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than $50,000 (provided that amounts covered by the Company’s insurance policies are not counted toward this $50,000 threshold), and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of thirty (30) trading days;

 

·the electronic transfer by the Company of shares of common stock through the Depository Trust Company or another established clearing corporation once established subsequent to the date of the certificate of designation is no longer available or is subject to a ‘freeze” and/or “chill;” or

 

·any “Event of Default,” as defined in the Purchase Agreement (as defined in the certificate of designation).

 

Series X Senior Convertible Preferred Stock

 

Ranking. The series X senior convertible preferred stock ranks, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common stock and each other class or series that is not expressly made senior to or on parity with the series X senior convertible preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series X senior convertible preferred stock; and (iii) junior to the series N senior convertible preferred stock, all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each class or series that is expressly made senior to the series X senior convertible preferred stock.

 

Dividend Rights. Holders of series X senior convertible preferred stock are entitled to dividends at a rate per annum of 10.0% of the stated value ($4.00 per share); provided that upon an event of default (as defined in the certificate of designation for the series X senior convertible preferred stock), such rate shall increase by 5% per annum. Dividends shall accrue from day to day, whether or not declared, and shall be cumulative. Dividends shall be payable quarterly in arrears on each dividend payment date. At March 31, 2024 and December 31, 2023, cumulative dividends on Series X Preferred Stock were $228,082 and $190,685, respectively.

 

Liquidation Rights. Subject to the rights of creditors and the holders of any senior securities, including the series N senior convertible preferred stock, or parity securities (in each case, as defined in the certificate of designation), upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of junior securities (as defined in the certificate of designation), including the common stock, each holder of outstanding series N senior convertible preferred stock shall be entitled to receive an amount of cash equal to 100% of the stated value of $4.00 per share, plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether or not declared) to, but not including the date of final distribution to such holders.

 

 

 

 26 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Voting Rights. Holders of series X senior convertible preferred stock do not have any voting rights; provided that, so long as any shares of series X senior convertible preferred stock are outstanding, the affirmative vote of holders of a majority of the series X senior convertible preferred stock, which majority must include Leonite Capital LLC so long as it holds any shares of series X senior convertible preferred stock, voting as a separate class, shall be necessary for approving, effecting or validating any amendment, alteration or repeal of any of the provisions of the certificate of designation or prior to the creation or issuance of any parity securities or new indebtedness (as defined in the certificate of designation); provided that the foregoing shall not apply to any financing transaction the use of proceeds of which will be used to redeem the series X senior convertible preferred stock and the warrants issued in connection therewith. In addition, the affirmative vote of holders of 66% of the series X senior convertible preferred stock, voting as a separate class, is required prior to the creation or issuance of any senior securities.

 

Conversion Rights. Each shares of series X senior convertible preferred stock, plus all accrued and unpaid dividends thereon, shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of common stock determined by dividing the stated value ($4.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price equal to the lower of (i) the lowest VWAP during the five (5) trading days immediately prior to the applicable conversion date and (ii) the price per share paid in any subsequent financing (the “Fixed Price”). The Fixed Price is subject to standard adjustments in the event of any stock splits, stock combinations, stock reclassifications, dividends paid in common stock, sales of substantially all assets, mergers, consolidations or similar transactions, as well as a price based antidilution adjustment, pursuant to which, subject to certain exceptions, if the Company issues common stock at a price lower than the Fixed Price, the Fixed Price shall decrease to such lower price. Notwithstanding the foregoing, in no event shall the holder of any series X senior convertible preferred stock be entitled to convert any number of shares that upon conversion the sum of (i) the number of shares of common stock beneficially owned by the holder and its affiliates and (ii) the number of shares of common stock issuable upon the conversion of the series X senior convertible preferred stock with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the then outstanding common stock. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.

 

Redemption Rights. Commencing on September 22, 2023, any holder may require the Company to redeem its shares by the payment in cash therefore of a sum equal to 100% of the stated value of $4.00 per share, plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the certificate of designation; provided however, that in the event that the Company completes a public offering prior to the redemption date, then any holder may only cause the Company to redeem any outstanding series X senior convertible preferred stock by paying such redemption price in twelve (12) equal monthly installments with the first such payment due on the date that is six (6) months following the date that the Company completes such public offering.

 

Non-redeemable Preferred Stock

 

Series A Preferred Stock

 

Ranking. The series A preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock and each other class or series that is not expressly made senior to or on parity with the series A preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series A preferred stock; and (iii) junior to the series B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series I preferred stock, series J preferred stock, series L preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and each other series of preferred stock and each class or series that is expressly made senior to the series A preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

 

 

 27 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Dividend Rights. The series A preferred stock is not entitled to participate in any distributions or payments to the holders of common stock or any other class of stock and shall have no economic interest in the Company.

 

Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, a merger or consolidation of the Company wherein the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company, the holders of each share of series A preferred stock shall be entitled to receive from any distribution of any of the assets or surplus funds of the Company, before and in preference of any holder of shares of common stock, an amount equal to the stated value of $250. Once the holders receive the foregoing from any such liquidation, dissolution or winding up, the holders shall not participate with the common stock or any other class of stock.

 

Voting Rights. Each share of series A preferred stock shall have a number of votes at any time equal to (i) 25% of the number of votes then held or entitled to be made by all other equity securities of the Company, including, without limitation, the common stock, plus (ii) one (1). The series A preferred stock shall vote on any matter submitted to the holders of the common stock, or any other class of voting securities, for a vote, and shall vote together with the common stock, or any class of voting securities, as applicable, on such matter for as long as the shares of series A preferred stock are issued and outstanding. Notwithstanding the foregoing, the series A preferred stock shall not have the right to vote on any matter as to which solely another series of preferred stock is entitled to vote pursuant to the Company’s amended and restated articles of incorporation or a certificate of designation of such other series of preferred stock.

 

Transfer. Upon transfer of any share of series A preferred stock, except for a transfer by the holder to an affiliate, whether such transfer is voluntary or involuntary, such share of series A preferred stock shall automatically, and without any action being required by the Company or the holder, be converted into one (1) share of common stock.

 

Other Rights. Holders of series A preferred stock do not have any conversion (except as set forth above) or redemption rights.

 

Series B Preferred Stock

 

Ranking. The series B preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series B preferred stock; (ii) on parity with the series C preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other class or series that is not expressly subordinated or made senior to the series B preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series B preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series B preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series B preferred stock.

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series B preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series B preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series B preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

 

 

 28 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series B preferred stock shall be entitled to cast one (1) vote per share of series B preferred stock held. Except as provided by law, the holders of series B preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series B preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series B preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series B preferred stock or alter or amend the certificate of designation for the series B preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series B preferred stock.

 

Conversion Rights. Each share of series B preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series B preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series B preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series B preferred stock, voting together as a single class, each share of series B preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. Holders of series B preferred stock do not have any redemption rights.

 

Series C Preferred Stock

 

Ranking. The series C preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series C preferred stock; (ii) on parity with the series B preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other class or series that is not expressly subordinated or made senior to the series C preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series C preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series C preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series C preferred stock.

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series C preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series C preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series C preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

 

 

 29 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series C preferred stock shall be entitled to cast one (1) vote per share of series C preferred stock held. Except as provided by law, the holders of series C preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series C preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series C preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series C preferred stock or alter or amend the certificate of designation for the series C preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series C preferred stock.

 

Conversion Rights. Each share of series C preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined by dividing the stated value ($4.00 per share) by a conversion price of $0.00004. In addition, on the date on which the shares of common stock are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier) (a “Listing Event”), all outstanding shares of series C preferred stock shall be automatically converted into such number of shares of common stock as is determined by dividing $50,000 by the highest traded or closing price on such date, which such shares of common stock shall be issued pro rata among the holders of the outstanding series C preferred stock. Finally, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the common stock) in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series C preferred stock, voting together as a single class, each share of series C preferred stock shall be automatically converted into such number of shares of common stock as is determined by dividing the stated value ($4.00 per share) by a conversion price of $0.00004. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. If there is a Listing Event, the Company shall have the right (but not the obligation) to redeem shares of series C preferred stock at a price per share of $50,000.

 

Series E Preferred Stock

 

Ranking. The series E preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series E preferred stock; (ii) on parity with the series B preferred stock, series C preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other class or series that is not expressly subordinated or made senior to the series E preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series E preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series E preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series E preferred stock.

 

 

 

 30 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series E preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series E preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series E preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series E preferred stock shall be entitled to cast one (1) vote per share of series E preferred stock held. Except as provided by law, the holders of series E preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series E preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series E preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series E preferred stock or alter or amend the certificate of designation for the series E preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series E preferred stock.

 

Conversion Rights. Each share of series E preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series E preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series E preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series E preferred stock, voting together as a single class, each share of series E preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Series F-1 Preferred Stock

 

Ranking. The series F-1 preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series F-1 preferred stock; (ii) on parity with the series B preferred stock, series C preferred stock, series E preferred stock, series J preferred stock, series L preferred stock and each other class or series that is not expressly subordinated or made senior to the series F-1 preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series F-1 preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series F-1 preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series F-1 preferred stock.

 

 

 

 31 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series F-1 preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series F-1 preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series F-1 preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. Except as provided by law, the holders of series F-1 preferred stock shall have no voting rights. However, as long as any shares of series F-1 preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series F-1 preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series F-1 preferred stock or alter or amend the certificate of designation for the series F-1 preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series F-1 preferred stock.

 

Conversion Rights. Each share of series F-1 preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series F-1 preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series F-1 preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series F-1 preferred stock, voting together as a single class, each share of series F-1 preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. Holders of series F-1 preferred stock do not have any redemption rights.

 

Series I Preferred Stock

 

Ranking. The series I preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock, series B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and to each other class or series that is not expressly made senior to or on parity with the series I preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series I preferred stock; and (iii) junior to the series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series I preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series I preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series I preferred stock.

 

 

 

 32 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series I preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series I preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series I preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series I preferred stock shall be entitled to cast five (5) votes per share of series I preferred stock held. Except as provided by law, the holders of series I preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series I preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series I preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series I preferred stock or alter or amend the certificate of designation for the series I preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series I preferred stock.

 

Conversion Rights. Each share of series I preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series I preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series I preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $10,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series I preferred stock, voting together as a single class, each share of series I preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. Holders of series I preferred stock do not have any redemption rights.

 

Series J Preferred Stock

 

Ranking. The series J preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series J preferred stock; (ii) on parity with the series B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series L preferred stock and each other class or series that is not expressly subordinated or made senior to the series J preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series J preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series J preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series J preferred stock.

 

 

 

 33 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series J preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series J preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series J preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series J preferred stock shall be entitled to cast one (1) vote per share of series J preferred stock held. Except as provided by law, the holders of series J preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series J preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series J preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series J preferred stock or alter or amend the certificate of designation for the series J preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series J preferred stock.

 

Conversion Rights. Each share of series J preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series J preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series J preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series J preferred stock, voting together as a single class, each share of series J preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. Holders of series J preferred stock do not have any redemption rights.

 

Series L Preferred Stock

 

Ranking. The series L preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series L preferred stock; (ii) on parity with the series B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock and each other class or series that is not expressly subordinated or made senior to the series L preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series L preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series L preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series L preferred stock.

 

 

 

 34 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series L preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series L preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series L preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series L preferred stock shall be entitled to cast one (1) vote per share of series L preferred stock held. Except as provided by law, the holders of series L preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series L preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series L preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series J preferred stock or alter or amend the certificate of designation for the series L preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series L preferred stock.

 

Conversion Rights. Each share of series L preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series L preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series L preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series L preferred stock, voting together as a single class, each share of series L preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. Holders of series L preferred stock do not have any redemption rights.

 

Preferred Stock Transactions

 

During the three months ended March 31, 2024, the Company executed the following transactions:

 

·On January 19, 2024, the Company issued 62,500 shares of series I preferred stock to each of Daniel R. Thompson, the Chairman of the Board, and Alex Cunningham, the Company’s Chief Executive Officer, for $250,000 bonus compensation for the fiscal year of 2023, at the fair value of $4.48 per share.
   
·On January 31, 2024, the Company issued 5,000 shares of series I preferred stock to Matthrew Shafer, the Company’s Chief Financial Officer, for $20,000, at the fair value of $4.48 per share.
   
·On January 31, 2024, the Company issued 2,500 shares of series I preferred stock to Zia Choe, the Company’s Chief Accounting Officer, for $10,000, at the fair value of $4.48 per share.

 

 

 35 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

In connection with these aforementioned shares issuances on January 19, 2024 and January 31, 2024, the Company engaged a valuation specialist to perform a business valuation monte carlo simulation for the series I preferred stock resulting in those indicated fair values.

 

·During the three months ended March 31, 2024, an aggregate of 778,799 shares of series B preferred stock were converted into an aggregate of 1,557,598 shares of common stock.

 

·During the three months ended March 31, 2024, an aggregate of 22 shares of series C preferred stock were converted into an aggregate of 220,000 shares of common stock.

 

·During the three months ended March 31, 2024, an aggregate of 2,928,500 shares of series I preferred stock were converted into an aggregate of 5,857,000 shares of common stock.

 

·During the three months ended March 31, 2024, an aggregate of 1,542,225 shares of series J preferred stock were converted into an aggregate of 3,084,450 shares of common stock.

 

·During the three months ended March 31, 2024, 2 shares of series C preferred stock were cancelled, which were issued erroneously.

 

The Company had no preferred stock transactions during the three months ended March 31, 2023.

 

Common Stock

 

During the three months ended March 31, 2024, the Company executed the following transactions:

 

·During the three months ended March 31, 2023, the Company issued 1,222 shares of common stock upon conversion of certain convertible notes.

 

·During the three months ended March 31, 2024, the Company issued an aggregate of 1,557,598 shares of common stock upon the conversion of an aggregate of 778,799 shares of series B preferred stock.

 

·During the three months ended March 31, 2024, the Company issued an aggregate of 220,000 shares of common stock upon the conversion of an aggregate of 22 shares of series C preferred stock.

 

·During the three months ended March 31, 2024, the Company issued an aggregate of 5,857,000 shares of common stock upon the conversion of an aggregate of 2,928,500 shares of series I preferred stock.

 

·During the three months ended March 31, 2024, the Company issued an aggregate of 3,084,450 shares of common stock upon the conversion of an aggregate of 1,542,225 shares of series J preferred stock.

 

 

 

 36 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

·On March 5, 2024, the Company issued 7,500 shares of common stock to an investor relation service provider. The Company recognized the fair value for the issuance of the 7,500 shares at $1.55 per share on the closing market price of March 5, 2024 and recorded selling, general and administrative expense of $11,617 in the consolidated statement of operations.

 

·On March 26, 2024, the Company issued an aggregate of 30,000 shares of common stock to three board members. The Company recognized the fair value for the issuance of 30,500 shares at $6.50 per share on the closing market price of March 26, 2024 and recorded share based compensation expense of $195,000 in the consolidated statement of operations.

 

·In February 2024, as part of the Red Rock settlement executed in July 2022, the Company issued an aggregate of 37,104 shares of common stock to six previous owners. The Company recognized the fair value for the issuance of 37,104 shares at $3 per share on the closing market price of February 4 through February 6, 2024, and recorded share loss from discontinued operations of $111,312 in the consolidated statement of operations.

 

·During the three months ended March 31, 2023, the Company issued 1,583 shares of common stock upon conversion of certain convertible notes.

 

10.WARRANTS

 

The table below sets forth warrant activity during the three months ended March 31, 2024 and 2023:  

           
   Number of
Warrants
   Weighted
Average
Exercise
Price
 
Balance at January 1, 2024   3,140   $0.015 
Granted        
Exercised        
Expired        
Balance at March 31, 2024   3,140    0.015 
Warrants Exercisable at March 31, 2024   3,140   $0.015 

 

   Number of
Warrants
   Weighted
Average
Exercise
Price
 
Balance at January 1, 2023   3,141   $0.015 
Granted        
Exercised        
Expired   (1)    
Balance at March 31, 2023   3,140    0.015 
Warrants Exercisable at March 31, 2023   3,140   $0.015 

 

 

 

 37 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

11.DISCONTINUED OPERATIONS

 

On November 10, 2023, the Company sold Platinum Tax, which was a full-service tax resolution firm located in Los Angeles, California. Through this subsidiary the Company provided fee-based tax resolution services to individuals and companies that have federal and state tax liabilities by assisting clients to settle outstanding tax debts. As part of the Asset Purchase Agreement between the Company and the purchaser, the assets that were purchased included substantially all assets, rights, interests, and licenses except for banks accounts in place prior to the sale for the purchase consideration of 15% of cash collected by the purchaser within one year following the sale date.

 

In February 2024, as part of the Red Rock settlement executed in July 2022, the Company issued an aggregate of 37,104 shares of common stock to six previous owners. The Company recognized the fair value for the issuance of 37,104 shares at $3 per share on the closing market price of February 4 through February 6, 2024, and recorded share loss from discontinued operations of $111,312 in the consolidated statement of operations. 

          
Net liabilities of discontinued operations  March 31, 2024   December 31, 2023 
Cash  $342   $342 
Accounts receivable   300    300 
Accounts payable and accrued expenses   238,285    238,285 
Net liabilities of discontinued operations  $(237,643)  $(237,643)

 

 

           
   Three Months Ended March 31, 
Gain (Loss) from discontinued operations  2024   2023 
Revenue  $   $154,399 
Cost of sales       (26,829)
Selling, general and administrative expenses       (171,557)
Interest expense       (1,503)
Settlement loss   (111,312)    
Loss from discontinued operations  $(111,312)  $(45,490)

 

 

12.GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET

 

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, 2024 and 2023, the Company determined there to be no impairment.

 

 

 

 38 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

13.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. In transaction, lessees and lessors are required to recognize and measure leases at either the effective date (the “effective date method”) or the beginning of the earliest period presented (the “comparative method”) using a modified retrospective approach. Under the effective date method, the Company’s comparative period reporting is unchanged. In contrast, under the comparative method, the Company’s date of initial application is the beginning of the earliest comparative period presented, and the Topic 842 transition guidance is then applied to all comparative periods presented. Further, under either transition method, the standard includes certain practical expedients intended to ease the burden of adoption. 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, 2024. The Company recorded operating lease expenses of $100,362 and $77,852 for the three months ended March 31, 2024 and 2023, respectively. 

 

The Company has operating leases with future commitments as follows:  

     
   Amount 
2024 (remainder of year)  $195,934 
2025   153,096 
2026   60,862 
Total  $409,892 

 

 

 

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CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

The following table summarizes supplemental information about the Company’s leases: 

     
Weighted-average remaining lease term     2.2 years
Weighted-average discount rate     4.49 %

 

Employees

 

The Company agreed to pay $360,000 per year and $200,000 of targeted annual incentives to the Chief Executive Officer based on his employment agreement since July 1, 2020, of which currently 50% is paid in cash and 50% is accrued. The total outstanding accrued compensation as of March 31, 2024 and December 31, 2023 was $2,365,500.

 

The Company agreed to pay $360,000 per year and $200,000 of targeted annual incentives to the Chairman of the Board based on his employment agreement since July 1, 2020, of which currently 50% is paid in cash and 50% is accrued. The total outstanding accrued compensation as of March 31, 2024 and December 31, 2023 was $2,440,500 and $2,350,500, respectively.

 

The Company agreed to pay $228,000 per year to the Chief Finance Officer based on his employment agreement effective as of January 2, 2024. There was no outstanding accrued compensation as of March 31, 2024.

 

The Company agreed to pay $210,000 per year to the Chief Accounting Officer based on her employment agreement effective as of January 2, 2024. There was no outstanding accrued compensation as of March 31, 2024.

 

The Company agreed to pay $156,000 per year to the previous Chief Financial Officer based on his amended employment agreement executed on May 15, 2021. The total outstanding accrued compensation as of March 31, 2024 and December 31, 2023 was $17,057.

 

The Company entered into a management agreement effective May 31, 2021 for compensation to the principals of Nova in the form of an annual base salaries of $372,000 to one of the three doctors, $450,000 to the second, and $372,000 to the third doctor. Collectively, as a group, such principals will receive an annual cash bonus and stock equity set forth below, which will be conditioned upon the Company achieving 100% of the annual objectives of financial performance goals as set forth below.

 

     
Year Minimum Annual Nova EBITDA Cash Annual Bonus Series J Preferred Stock
2021 $2.0M $120,000 120,000 Shares
2022 $2.4M $150,000 135,000 Shares
2023 $3.7M $210,000 150,000 Shares
2024 $5.5M $300,000 180,000 Shares
2025 $8.0M $420,000 210,000 Shares

 

 

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CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

14.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. Management is not currently aware of any such legal proceedings or claims that it believes will have a material adverse effect on the Company’s business, financial condition, or operating results.

 

15.INCOME TAXES

 

At March 31, 2024, the Company had federal and state net operating loss carry forwards of approximately $24 million that expire in various years through the year 2039. Due to carryforwards of past net operating losses, there is no provision for current federal or state income taxes for the three months ended March 31, 2024 and 2023.

 

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.

  

16.SEGMENT REPORTING

 

As of March 31, 2024, 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. Corporate administration costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated to the three operating segments. Other revenue consists of nonrecurring items.

 

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.

 

 

 

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CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

Management uses numerous tools and methods to evaluate and measure of its subsidiaries’ success. To help succeed, management retains the prior owners of the subsidiaries and allow them to do what they do best is run the business. Additionally, management monitors key metrics primarily revenues and net income from operations. 

          
Asset:  March 31, 2024   December 31, 2023 
Healthcare  $20,227,446   $18,955,991 
Real Estate   586,582    587,456 
Others   1,791,282    1,202,364 
Consolidated assets  $22,605,310   $20,745,811 

 

   Three Months Ended March 31, 
   2024
(Restated)
   2023 
Revenues:          
Healthcare  $2,322,132   $2,706,399 
Real Estate        
Consolidated revenues  $2,322,132   $2,706,399 
           
Cost of sales:          
Healthcare  $948,154   $956,295 
Real Estate        
Consolidated cost of sales  $948,154   $956,295 
           
Income from operations from subsidiaries          
Healthcare  $1,151,284   $1,278,239 
Real Estate   (874)   (97)
Income from operations from subsidiaries  $1,150,410   $1,278,142 
           
Loss from operations from Cardiff Lexington  $(931,418)  $(520,594)
Total income from operations  $218,992   $757,548 
           
Income before taxes          
Healthcare  $1,151,284   $817,098 
Real Estate   (874)   (97)
Corporate, administration and other non-operating expenses   (1,322,202)   (787,502)
Consolidated income (loss) before taxes  $(171,792)  $29,499 

 

 

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CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(UNAUDITED)

 

 

17.SUBSEQUENT EVENTS

 

The Company has evaluated its operations subsequent to March 31, 2024 to the date these consolidated financial statements were available to be issued and determined the following subsequent events and transactions required disclosure in these consolidated financial statements.

 

On May 8, 2024, the Company filed the amendment of Articles of Incorporation. The total amended authorized shares are 350,000,000 shares of capital stock, consisting of 300,000,000 shares of common stock, $0.001 par value and 50,000,000 shares of preferred stock, $0.001 par value per share.

 

Subsequent to March 31, 2024, an aggregate of 264,750 shares of series B preferred stock were converted into an aggregate of 529,500 shares of common stock.

 

Subsequent to March 31, 2024, an aggregate of 29 shares of series C preferred stock were converted into an aggregate of 290,000 shares of common stock.

 

Subsequent to March 31, 2024, an aggregate of 80,375 shares of series E preferred stock were converted into an aggregate of 160,750 shares of common stock.

 

Subsequent to March 31, 2024, an aggregate of 438,500 shares of series I preferred stock were converted into an aggregate of 877,000 shares of common stock.

 

Subsequent to March 31, 2024, an aggregate of 171,359 shares of series J preferred stock were converted into an aggregate of 342,718 shares of common stock.

 

Subsequent to June 30, 2024, the Company identified a reduction in the settlement realization rate of its gross contractual billings as a result of increasing its lookback period and refreshing its data obtained from its third party billing company. The Company completed a thorough review of its third party billing data, including reviewing historical reports and new reporting methods as a part of its updated analysis. Based on the new data analysis of its historical settlement realization rates, using a 24-month lookback analysis the Company determined its estimate of its settlement realization rate was reduced from 49% to 44.2%. The Company applied this reduced settlement realization rate against its accounts receivable balance resulting in a $1.7 million reduction in its accounts receivable and revenue in the third quarter 2024. The Company will continue to evaluate its estimate of its settlement realization rates in the future, which will include a monthly review of the Company’s trailing 24-month historical settlement realization rate, along with estimates of current and pending settlements through ongoing discussions with attorneys, doctors and the Company’s third party medical billing company in order to determine its variable consideration under ASC 606 and the net transaction price.

 

 

 

  

 

 

 

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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;

 

 

 

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·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, 2023. 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.

 

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

 

We are an acquisition holding company focused on locating undervalued and undercapitalized companies, primarily in the healthcare industry, and providing them capitalization and leadership to maximize the value and potential of their private enterprises while also providing diversification and risk mitigation for our stockholders. Specifically, we have and will continue to look at a diverse variety of acquisitions in the healthcare sector in terms of growth stages and capital structures and we intend to focus our portfolio of subsidiaries approximately as follows: 80% will be targeted to established profitable niche small to mid-sized healthcare companies and 20% will be targeted to second stage startups in healthcare and related financial services (emerging businesses with a strong organic growth plan that is materially cash generative).

 

On May 31, 2021, we acquired Nova Ortho and Spine, LLC, or Nova, which operates a group of regional primary specialty and ancillary care facilities throughout Florida that provide traumatic injury victims with primary care evaluations, interventional pain management, and specialty consultation services. We focus on plaintiff related care are and a highly efficient provider of emergency medical condition, or EMC, assessments. We provide a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments, and nerves. From sports injuries, to sprains, strains, and fractures, our doctors are dedicated to helping patients return to active lifestyles.

 

 

 

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We also own a real estate company, Edge View Properties, Inc., or Edge View, which we acquired on July 16, 2014. Edge View owns five (5) acres zoned medium density residential (MDR) with 12 lots already platted, six (6) acres zoned high-density residential (HDR) that can be platted in various configurations to meet current housing needs, and twelve (12) acres zoned in Lemhi County as Agriculture that is available for further annexation into the City of Salmon for development, as well as a common area for landowners to view wildlife, provide access to the Salmon River and fishing in a two (2) acre pond.  Management has invested years working to develop a new and exciting housing development in Salmon, Idaho and plans to enter into a joint venture agreement with a developer for this planned concept development.

 

All of our operations are conducted through, and our income derived from, our two subsidiaries.

 

Segments

 

As of March 31, 2024, 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 three operating segments. Other revenue consists of nonrecurring items.

 

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 numerous tools and methods to evaluate and measure our subsidiaries’ success. To help succeed, management retains the prior owners of the subsidiaries and allows them to do what they do best is run the business. Additionally, management monitors key metrics primarily revenues and net income from operations.

 

Discontinued Operations

 

On November 10, 2023, we sold our financial services (tax resolution) business, Platinum Tax Defenders, or Platinum Tax, that we acquired on July 31, 2018, which was a full-service tax resolution firm located in Los Angeles, California. As part of the asset purchase agreement between us and the purchaser, the assets that were purchased included substantially all assets, rights, interests, and licenses, except for bank accounts in place prior to the sale, for the purchase consideration of 15% of cash collected by the purchaser within one year following the sale date.

 

 

 

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Results of Operations

 

Comparison of Three Months Ended March 31, 2024 and 2023

 

The following table sets forth key components of our results of operations during the three months ended March 31, 2024 and 2023, both in dollars and as a percentage of our revenue.

 

   March 31, 2024   March 31, 2023 
   Amount  

% of

Revenue

   Amount  

% of

Revenue

 
Total revenue  $2,322,132    100.00%   $2,706,399    100.00% 
Total cost of sales   948,154    40.83%    956,295    35.33% 
Gross profit   1,373,978    59.17%    1,750,104    64.67% 
Operating expenses                    
Depreciation expense   3,365    0.14%    4,635    0.17% 
Share based compensations   300,225    12.93%         
Selling, general and administrative   851,396    36.66%    987,921    36.50% 
Total operating expenses   1,154,986    49.74%    992,556    36.67% 
Income from continuing operations   218,992    9.43%    757,548    27.99% 
Other income (expense)                    
Other income (expense)           205    0.01% 
Gain on debt refinance and forgiveness           390    0.01% 
Penalties and fees   (1,000)   (0.04)%    (17,000)   (0.63)% 
Interest expense   (376,269)   (16.20)%    (693,661)   (25.63)% 
Amortization of debt discounts   (13,515)   (0.58)%    (17,983)   (0.66)% 
Total other (expense)   (390,784)   (16.83)%    (728,049)   (26.90)% 
Net income (loss) before discontinued operations   (171,792)   (7.40)%    29,499    1.09% 
Loss from discontinued operations   (111,312)   (4.79)%    (45,490)   (1.68)% 
Net (loss)  $(283,104)   (12.19)%   $(15,991)   (0.59)% 

 

Revenue. For the three months ended March 31, 2024 and 2023, all of 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 $384,267, or 14.20%, to $2,322,132 for the three months ended March 31, 2024 from $2,706,399 for the three months ended March 31, 2023. The decrease in revenue is primarily attributable to the mix of services provided during the quarter with less higher revenue surgical procedures performed and an increase in the lower revenue pain management treatments being performed for approximately the same number of patient visits in the current three month period as compared to the same three month period in the prior year. Additionally, we underwent efforts to accelerate cash settlements of our accounts receivable throughout 2024 in order to generate cash flow for operating purposes. We did this by shortening our settlement negotiations with insurance companies and accepting lower settlement realization rates. As a result of the new effort, during the three months ended March 31, 2024 we realized a 42.9% average settlement rate of our gross billed charges during this time frame, which were historically recorded in accounts receivable and revenue at 49% of gross billings. As a result of this reduced settlement realization percentage, we recorded a reduction to net revenue of $339,834 for the three months ended March 31, 2024.

 

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 $8,141, or 0.85%, to $948,154 for the three months ended March 31, 2024 from $956,295 for the three months ended March 31, 2023. Such decrease was primarily due to a decrease in surgical contracted services and laboratory fees.

 

Gross profit. As a result of the foregoing, our total gross profit decreased by $376,126, or 21.49%, to $1,373,978 for the three months ended March 31, 2024 from $1,750,104 for the three months ended March 31, 2023. Our total gross margin (percent of revenue) decreased from 64.67% for the three months ended March 31, 2023 to 59.17% for the three months ended March 31, 2024.

 

 

 

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Depreciation expense. Our depreciation expense was $3,365, or 0.14% of revenue, for the three months ended March 31, 2024, as compared to $4,635, or 0.17% of revenue, for the three months ended March 31, 2023. The decrease in depreciation expense was due to certain assets becoming fully depreciated.

 

Share based compensation expense. Our share-based compensation expense was $300,225, or 12.93% of revenue, for the three months ended March 31, 2024, as compared to $0 for the three months ended March 31, 2023. The increase was due to stock issuances to an investor relation services to outside consultant, stock issued to board members and stock issued as compensation for new employment bonuses to management.

 

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, bonuses plus related payroll taxes and stock compensation expense, advertising expenses, professional advisor fees, rent expense, insurance and other expenses incurred in connection with general operations. Our selling, general and administrative expenses decreased by $136,525, or 13.82%, to $851,396 for the three months ended March 31, 2024 from $987,921 for the three months ended March 31, 2023. As a percentage of revenue, our selling, general and administrative expenses were 36.66% and 36.50% for the three months ended March 31, 2024 and 2023, respectively. Decreases were primarily attributable to decreased professional fees.

 

Total other expense. We had $390,784 in total other expense, net, for the three months ended March 31, 2024, as compared to other expense, net, of $728,049 for the three months ended March 31, 2023. Other expense, net, for the three months ended March 31, 2024 consisted of interest expense of $376,269, amortization of debt discounts of $13,515 and penalties and fees of $1,000. Other expense, net, for the three months ended March 31, 2023 consisted of interest expense of $693,661, amortization of debt discounts of $17,983 and financing penalties and fees of $17,000, offset by a gain on debt refinance of forgiveness of $390 and other income of $205.

 

Discontinued operations. For the three months ended March 31, 2024 and 2023, we recorded a loss from discontinued operations of $111,312 and $45,490, respectively.

 

Net loss. As a result of the cumulative effect of the factors described above, our net loss was $283,104 for the three months ended March 31, 2024, as compared to $15,991 for the three months ended March 31, 2023, an increase of $267,113.

 

Liquidity and Capital Resources

 

As of March 31, 2024, we had $1,253,552 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 ranges 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 $4 million to $8 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.

 

 

 

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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.

 

Summary of Cash Flow

 

The following table provides detailed information about our net cash flow for the three months ended March 31, 2024 and 2023.

 

   Three Months Ended March 31, 
   2024   2023 
Net cash used in operating activities from continuing operations  $(1,187,816)  $(160,989)
Net cash provided by financing activities   1,463,113    239,250 
Net change in cash   386,609    123,751 
Cash and cash equivalents at beginning of period   866,943    219,085 
Cash and cash equivalents at end of period  $1,253,552   $342,836 

 

Our net cash used in operating activities from continuing operations was $1,187,816 for the three months ended March 31, 2024, as compared to $160,989 for the three months ended March 31, 2023. For the three months ended March 31, 2024, our net loss of $283,104, an decrease in accounts receivable of $1,344,676 and an decrease in accrued officer’s compensation of $410,000, offset by increase in share based compensation of $788,600 were the primary drivers of our net cash used in operating activities. For the three months ended March 31, 2023, our net loss of $15,991 and an increase in accounts receivable of $1,111,317, offset by an increase in accounts payable and accrued expenses of $270,710, bad debt of $270,000, an increase in accrued officer’s compensation of $154,000, and an increase in accrued interest of $122,508, were the primary drivers for the cash used in operations.

 

We monitor outstanding cases as they develop through ongoing discussions with attorneys, doctors and our third party medical billing company and additionally monitor our settlement realization rates over time. We have two primary methods of accelerating our cash settlement of our revenue and related accounts receivable. The first is through factoring our receivables, which was done in 2023, but ended prior to April 2023. The second method is 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 timeframe will typically result in a lower settlement realization rate, but will accelerate the cash settlement of the outstanding accounts receivable. We began employing this second method in 2024, which reduced our settlement realization rate as described below. We have employed both methods from time to time to accelerate our cash settlement and may employ one or both in the future.

 

Prior to April 2023, we factored (sold) the vast majority of our accounts receivable to third party(s) to generate working capital to fund ongoing business operations and growth. For the three months ended March 31, 2023, we factored a total of $544,196 of our accounts receivable in exchange for cash of $253,750. We ceased factoring of accounts receivable in the first quarter of 2023. The most recent average realization time for accounts receivable was approximately eighteen to twenty four 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.

 

Prior to fiscal year 2024, we historically realized a 49% settlement rate from total gross billed charges. Accordingly, we had historically recognized net healthcare service revenue as 49% of gross billed amounts. However, during the three months ended March 31, 2024, we underwent efforts to accelerate cash settlement of our accounts receivable throughout 2024 in order to generate cash flow for operations. We did this by shortening our settlement negotiations with insurance companies and accepting lower settlement amounts. As a result of the new effort, during the three months ended March 31, 2024, we realized a 42.9% average settlement rate of our gross billed charges during this time frame, which were historically recorded in accounts receivable and revenue at 49% of gross billed charges. As a result of this reduced settlement realization rate, we recorded a reduction to net revenue of $339,834 million for the three months ended March 31, 2024. We expect this trend to continue in the short term as we work to settle our accounts receivables more quickly to generate cash flow for operations.

 

We had no investing activities for the three months ended March 31, 2024 and 2023.

 

Our net cash provided by financing activities was 1,463,113 for the three months ended March 31, 2024, as compared to $239,250 for the three months ended March 31, 2023. Net cash provided by financing activities for the three months ended March 31, 2024 consisted of the proceeds of $1,463,273 from line of credit, offset by the repayment of a loan of $160. Net cash provided by financing activities for the three months ended March 31, 2023 consisted of the proceeds of $240,000 from convertible notes, offset by the repayment of a loan of $750.

 

 

 

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Convertible Notes

 

As of March 31, 2024, we had convertible debt outstanding net of amortized debt discount of $3,820,545. During the three months ended March 31, 2024, we did not receive any proceeds from convertible notes and repaid $50,000 of accrued interest to a convertible noteholder.

 

The following is a schedule of convertible notes payable outstanding as of March 31, 2024:

 

Note # 

Issuance

Date

 

Maturity

Date

 

Principal

Balance

  

Accrued

Interest

  

Unamortized Debt

Discount

 
9  09/12/2016  09/12/2017  $50,080   $7,399   $ 
10  01/24/2017  01/24/2018   55,000    83,618     
10-1  02/10/2023  02/10/2024   50,000    8,527     
10-2  03/30/2023  03/30/2024   25,000    3,771     
10-3  08/11/2023  08/11/2024   25,000    2,404     
29-2  11/08/2019  11/08/2020   36,604    12,299     
37-1  09/03/2020  06/30/2021   113,667    70,030     
37-2  11/02/2020  08/31/2021   113,167    68,673     
37-3  12/29/2020  09/30/2021   113,166    67,637     
40-1  09/22/2022  09/22/2024   2,600,000    267,488     
40-2  11/04/2022  09/22/2024   68,667    9,651     
40-3  11/28/2022  09/22/2024   68,667    9,217     
40-4  12/21/2022  09/22/2024   68,667    8,766     
40-5  01/24/2023  09/22/2024   90,166    10,531     
40-6  03/21/2023  03/21/2024   139,166    14,141     
40-7  06/05/2023  06/05/2024   139,166    11,295    6,530 
40-8  06/13/2023  06/13/2024   21,167    1,654    1,032 
40-9  07/19/2023  07/19/2024   35,500    2,490    2,650 
40-10  07/24/2023  07/24/2024   14,000    963    1,093 
41  08/25/2023  08/25/2024   5,000    300     
         $3,831,850   $660,854   $11,305 

 

Note 9. On September 12, 2016, we issued a convertible promissory note in the principal amount of $80,000 for services rendered, which matured on September 12, 2017. Note 9 is currently in default and accrues at a default interest rate of 20% per annum.

 

Note 10, 10-1, 10-2 and 10-3. On January 24, 2017, we issued a convertible promissory note in the principal amount of $80,000 for services rendered, which matured on January 24, 2018. Note 10 is currently in default and accrues interest at a default interest rate of 20% per annum. On February 10, 2023, we executed a second tranche under this note in the principal amount of $50,000 (Note 10-1). On March 30, 2023, we executed a third tranche under this note in the principal amount of $25,000 (Note 10-2). On August 11, 2023, we executed a fourth tranche under this note in the principal amount of $25,000 (Note 10-3). Notes 10-1 and 10-2 are currently in default and accrue interest at a default interest rate of 20% per annum. Note 10-3 accrues interest at a rate of 15% per annum.

 

Note 29-2. On May 10, 2019, we issued a convertible promissory note in the principal amount of $150,000. On November 8, 2019, this note (Note 29) was purchased by and assigned to an unrelated party. The amount assigned was the existing principal amount of $150,000 and accrued interest of $5,918, which was issued as Note 29-1, plus a new convertible promissory note in the principal amount of $62,367, which was issued as Note 29-2. Note 29-2 is currently in default and accrues interest at a default interest rate of 24% per annum.

 

 

 

 50 

 

 

Notes 37-1, 37-2 and 37-3. On September 3, 2020, we issued a convertible promissory note in the principal amount of $200,000, with original issue discount of $50,000, which could be drawn in several tranches. On September 3, 2020, we executed the first tranche in the principal amount of $67,000, less original issue discount of $17,000, which matured on June 30, 2021 (Note 37-1). On November 2, 2020, we executed the second tranche in the principal amount of $66,500, less original issue discount of $16,500, which matured on August 31, 2021 (Note 37-2). On December 29, 2020, we executed the third tranche in the principal amount of $66,500, less original issue discount of $16,500, which matured on September 30, 2021 (Note 37-3). Notes 37-1, 37-2 and 27-3 are currently in default and accrue interest at a default interest rate of 18% per annum.

 

Notes 40-1, 40-2, 40-3, 40-4, 40-5, 40-6, 40-7, 40-8, 40-9 and 40-10. On September 22, 2022, we issued a convertible promissory note in the principal amount of $2,600,000 in exchange for total of $4,791,099 of defaulted promissory notes balances (Note 40-1). On November 4, 2022, we executed a second tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-2). On November 28, 2022, we executed the third tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-3). On December 21, 2022, we executed a fourth tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-4). On January 24, 2023, we executed a fifth tranche under this note in the principal amount of $90,166, less an original issue discount and fee of $25,166 (Note 40-5). On March 21, 2023, we executed a sixth tranche under this note in the principal amount of $136,666, less an original issue discount and fee of $39,166 (Note 40-6). On June 5, 2023, we executed a seventh tranche under this note in the principal amount of $136,667, less original issue discount and fee of $39,167 (Note 40-7). On June 13, 2023, we executed an eighth tranche under this note in the principal amount of $21,167, less original issue discount and fee of $5,167 (Note 40-8). On July 19, 2023, we executed a ninth tranche under this note in the principal amount of $35,500, less an original issue discount and fee of $8,875 (Note 40-9). On July 24, 2023, we executed a tenth tranche under this note in the principal amount of $14,000, less an original issue discount and fee of $3,500 (Note 40-10). On December 1, 2023, we executed amendment on Notes series 40 consolidated senior secured convertible promissory note to extend the expired tranche note 40-1 through 40-5 due date to September 20, 2024. All of the Note 40 tranches mature in one year from the note issuance date and accrue interest at a rate of 10% per annum.

 

Note 41. On August 25, 2023, we issued a twelve-month convertible promissory note in the principal amount of $5,000 to our Chief Executive Officer for our operating expenses. The rate of interest is 10% per annum.

 

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, 2024 was $149,494 and $0, respectively.

 

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, 2024 and the accrued interest was $7,876. We assigned all of our receivables from consumer activations of the rewards program as collateral on this debenture.

 

Line of Credit

 

On September 29, 2023, our company and Nova entered into a two-year revolving purchase and security agreement with DML HC Series, LLC to sell, with recourse, Nova’s accounts receivables for a revolving financing up to a maximum advance amount of $4.5 million. As of March 31, 2024, we had $3,583,373 outstanding balance against the revolving receivable line of credit. The revolving purchase and security agreement includes discounts recorded as interest expense on each funding and matures on September 29, 2025.

 

 

 

 51 

 

 

Related Party Loans

 

In connection with the acquisition of Edge View on July 16, 2014, we assumed amounts due to previous owners who are current managers of Edge View. These amounts are due on demand and do not bear interest. The balance of these amounts are $4,979 as of March 31, 2024.

 

We have obtained short-term advances from the Chairman of the Board that are non-interest bearing and due on demand. As of March 31, 2024, we owed the Chairman $45,844.

 

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.

 

For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission, or the SEC, on March 27, 2024.

 

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.

 

 

 

 52 

 

 

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, 2024. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that, because of the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which we are still in the process of remediating as of March 31, 2024, along with the error identified in our Quarterly Report on Form 10-Q for the three months ended March 31, 2024, our disclosure controls and procedures were not effective. Investors are directed to Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for the description of these weaknesses.

 

Remediation of Material Weaknesses in Internal Control Over Financial Reporting

 

We have evaluated the material weakness described above and our management and board of directors are committed to the design and successful implementation of internal control over financial reporting as promptly as possible. We currently plan to evaluate our updated internal controls design and determine whether the controls have operated effectively during 2024 in order to fully remediate the aforementioned material weakness in our internal control over financial reporting.

 

As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, our management has identified the steps necessary to address the material weaknesses, and in the first quarter of 2024, we continued to implement the following remedial procedures:

 

·We are making necessary changes by providing training to our financial team and our other relevant personnel on the GAAP accounting guidelines applicable to financial reporting requirements.

 

·We plan to implement proper documentation procedures for key functional areas, control objectives and our workflows.

 

·We plan to reinforce effective compensating controls can improve the design of the current process with limited human resources.
   
 ·We have hired external consultants to assist with our assessment and accounting for variable consideration as accounted for under ASC 606 and our credit loss expense as accounted for under ASC 326.

 

We intend to complete the remediation of the material weaknesses discussed above as soon as practicable, but we can give no assurance that we will be able to do so. Designing and implementing an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our reporting obligations. The remedial measures that we have taken and intend to take may not fully address the material weaknesses that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.

 

Changes in Internal Control Over Financial Reporting

 

Other than in connection with the implementation of the remedial measures described above, there were no changes in our internal controls over financial reporting during the first quarter of 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 53 

 

 

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. 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.

 

ITEM 1A.RISK FACTORS.

 

Not applicable.

 

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

We have not sold any equity securities during the three months ended March 31, 2024 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter.

 

We did not repurchase any shares of our common stock during the three months ended March 31, 2024.

 

ITEM 3.DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4.MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5.OTHER INFORMATION.

 

None.

 

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 Form 10-Q filed on May 10, 2024)
3.3    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)
3.4    Certificate of Designation of Series B Preferred Stock of 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 August 3, 2023)

 

 

 54 

 

 

3.5    Certificate of Correction of Certificate of Designation of Series B Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.4 to the Annual Report on Form 10-K filed on March 27, 2024)
3.6    Certificate of Designation of Series C Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.4 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023)
3.7    Certificate of Correction of Certificate of Designation of Series C Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.6 to the Annual Report on Form 10-K filed on March 27, 2024)
3.8    Certificate of Designation of Series E Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.5 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023)
3.9    Certificate of Correction of Certificate of Designation of Series E Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.8 to the Annual Report on Form 10-K filed on March 27, 2024)
3.10    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)
3.11    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 the Annual Report on Form 10-K filed on March 27, 2024)
3.12    Certificate of Designation of Series I Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.7 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023)
3.13    Certificate of Correction of Certificate of Designation of Series I Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.12 to the Annual Report on Form 10-K filed on March 27, 2024)
3.14    Certificate of Designation of Series J Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.8 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023)
3.15    Certificate of Correction of Certificate of Designation of Series J Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.14 to the Annual Report on Form 10-K filed on March 27, 2024)
3.16    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)
3.17    Certificate of Correction of Certificate of Designation of Series L Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.16 to the Annual Report on Form 10-K filed on March 27, 2024)
3.18    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)
3.19    Amended and Restated Certificate of Designation of Series R Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.18 to the Annual Report on Form 10-K filed on March 27, 2024)
3.20    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)
3.21    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)
4.2   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)
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.INS   XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Extension Schema Document
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

______________ 

*Filed herewith

** Furnished herewith

 

 

 55 

 

 

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: October 17, 2024 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 56 

Exhibit 31.1

CERTIFICATIONS

 

I, Alex Cunningham, certify that:

 

  1.   I have reviewed this quarterly report on Form 10-Q/A of Cardiff Lexington Corporation;

 

  2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: October 17, 2024

 

 

/s/ Alex Cunningham

  Alex Cunningham
 

Chief Executive Officer

(Principal Executive Officer)

 

 

 

Exhibit 31.2

CERTIFICATIONS

 

I, Matthew Shafer, certify that:

 

  1.   I have reviewed this quarterly report on Form 10-Q/A of Cardiff Lexington Corporation;

 

  2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: October 17, 2024

 

 

/s/ Matthew Shafer

  Matthew Shafer
 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned Chief Executive Officer of Cardiff Lexington Corporation (the “Company”), DOES HEREBY CERTIFY that:

 

1.       The Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2024 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.       Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

IN WITNESS WHEREOF, the undersigned has executed this statement on October 17, 2024.

 

 

/s/ Alex Cunningham

  Alex Cunningham
 

Chief Executive Officer

(Principal Executive Officer)

 

 

A signed original of this written statement required by Section 906 has been provided to Cardiff Lexington Corporation and will be retained by Cardiff Lexington Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

 

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned Chief Financial Officer of Cardiff Lexington Corporation (the “Company”), DOES HEREBY CERTIFY that:

 

1.       The Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2024 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.       Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

IN WITNESS WHEREOF, the undersigned has executed this statement on October 17, 2024.

 

 

/s/ Matthew Shafer

  Matthew Shafer
 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

A signed original of this written statement required by Section 906 has been provided to Cardiff Lexington Corporation and will be retained by Cardiff Lexington Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

 

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

v3.24.3
Cover - shares
3 Months Ended
Mar. 31, 2024
May 08, 2024
Cover [Abstract]    
Document Type 10-Q/A  
Amendment Flag true  
Amendment Description revised financials  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Mar. 31, 2024  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --12-31  
Entity File Number 000-49709  
Entity Registrant Name CARDIFF LEXINGTON CORPORATION  
Entity Central Index Key 0000811222  
Entity Tax Identification Number 84-1044583  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 3753 Howard Hughes Parkway  
Entity Address, Address Line Two Suite 200  
Entity Address, City or Town Las Vegas  
Entity Address, State or Province NV  
Entity Address, Postal Zip Code 89169  
City Area Code 844  
Local Phone Number 628-2100  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   13,019,963
v3.24.3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Current assets    
Cash $ 1,253,552 $ 866,943
Accounts receivable-net 14,649,930 13,305,254
Prepaid and other current assets 7,100 5,000
Total current assets 15,910,582 14,177,197
Property and equipment, net 31,296 34,661
Land 540,000 540,000
Goodwill 5,666,608 5,666,608
Right of use - assets 416,441 289,062
Due from related party 4,979 4,979
Other assets 35,404 33,304
Total assets 22,605,310 20,745,811
Current liabilities    
Accounts payable and accrued expense 2,104,109 2,047,131
Accrued expenses - related parties 4,323,057 4,733,057
Accrued interest 668,729 620,963
Right of use - liabilities 195,934 157,669
Due to director and officer 45,844 120,997
Notes payable 3,599,345 2,136,077
Convertible notes payable, net of debt discounts of $11,305 and $24,820, respectively 3,820,545 3,807,030
Net liabilities of discontinued operations 237,643 237,643
Total current liabilities 14,995,206 13,860,567
Notes payable 144,511 144,666
Operating lease liability – long term 213,958 119,056
Total liabilities 15,353,675 14,124,289
Mezzanine equity    
Total Mezzanine Equity 6,041,738 5,890,104
Stockholders' equity    
Common Stock; 300,000,000 shares authorized, $0.001 par value; 10,819,995 and 25,121 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively 10,820 25
Additional paid-in capital 13,789,402 (7,581,212)
Accumulated deficit (69,118,853) (68,684,115)
Total stockholders’ equity 1,209,897 731,418
Total liabilities, mezzanine equity and stockholders’ equity 22,605,310 20,745,811
Redeemable Series N Senior Convertible Preferred Stock [Member]    
Mezzanine equity    
Preferred stock value 3,996,462 3,891,439
Redeemable Series R Senior Convertible Preferred Stock [Member]    
Mezzanine equity    
Preferred stock value 317,194 307,980
Redeemable Series X Senior Convertible Preferred Stock [Member]    
Mezzanine equity    
Preferred stock value 1,728,082 1,690,685
Series B Preferred Stock [Member]    
Stockholders' equity    
Preferred stock value 5,442,716 8,557,912
Series C Preferred Stock [Member]    
Stockholders' equity    
Preferred stock value 396 492
Series E Preferred Stock [Member]    
Stockholders' equity    
Preferred stock value 623,000 623,000
Series F-1 Preferred Stock [Member]    
Stockholders' equity    
Preferred stock value 143,008 143,008
Series I Preferred Stock [Member]    
Stockholders' equity    
Preferred stock value 48,356,000 59,540,000
Series J Preferred Stock [Member]    
Stockholders' equity    
Preferred stock value 685,436 6,854,336
Series L Preferred Stock [Member]    
Stockholders' equity    
Preferred stock value $ 1,277,972 $ 1,277,972
v3.24.3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Debt Instrument, Unamortized Discount $ 11,305 $ 24,820
Common Stock, Shares Authorized   300,000,000
Common Stock, Par or Stated Value Per Share   $ 0.001
Common Stock, Shares, Outstanding 10,819,995 25,121
Redeemable Series N Senior Convertible Preferred Stock [Member]    
Preferred Stock, Shares Authorized   3,000,000
Preferred Stock, Par or Stated Value Per Share   $ 4.00
Preferred Stock, Shares Outstanding   868,056
Redeemable Series R Senior Convertible Preferred Stock [Member]    
Preferred Stock, Shares Authorized   5,000
Preferred Stock, Par or Stated Value Per Share   $ 1,200
Preferred Stock, Shares Outstanding   165
Redeemable Series X Senior Convertible Preferred Stock [Member]    
Preferred Stock, Shares Authorized   5,000,000
Preferred Stock, Par or Stated Value Per Share   $ 4.00
Preferred Stock, Shares Outstanding   375,000
Series B Preferred Stock [Member]    
Preferred Stock, Shares Authorized 3,000,000 3,000,000
Preferred Stock, Par or Stated Value Per Share   $ 4.00
Preferred Stock, Shares Outstanding 1,360,679 2,139,478
Series C Preferred Stock [Member]    
Preferred Stock, Shares Authorized 500 500
Preferred Stock, Par or Stated Value Per Share   $ 4.00
Preferred Stock, Shares Outstanding 99 123
Series E Preferred Stock [Member]    
Preferred Stock, Shares Authorized 1,000,000 1,000,000
Preferred Stock, Par or Stated Value Per Share   $ 4.00
Preferred Stock, Shares Outstanding   155,750
Series F-1 Preferred Stock [Member]    
Preferred Stock, Shares Authorized 50,000 50,000
Preferred Stock, Par or Stated Value Per Share   $ 4.00
Preferred Stock, Shares Outstanding   35,752
Series I Preferred Stock [Member]    
Preferred Stock, Shares Authorized 15,000,000 15,000,000
Preferred Stock, Par or Stated Value Per Share   $ 4.00
Preferred Stock, Shares Outstanding 12,089,000 14,885,000
Series J Preferred Stock [Member]    
Preferred Stock, Shares Authorized 2,000,000 2,000,000
Preferred Stock, Par or Stated Value Per Share   $ 4.00
Preferred Stock, Shares Outstanding 171,359 1,713,584
Series L Preferred Stock [Member]    
Preferred Stock, Shares Authorized 400,000 400,000
Preferred Stock, Par or Stated Value Per Share   $ 4.00
Preferred Stock, Shares Outstanding   319,493
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Income Statement [Abstract]    
REVENUE $ 2,322,132 $ 2,706,399
COST OF SALES 948,154 956,295
GROSS PROFIT 1,373,978 1,750,104
OPERATING EXPENSES    
Depreciation expense 3,365 4,635
Share based compensation 300,225 0
Selling, general and administrative 851,396 987,921
Total operating expenses 1,154,986 992,556
INCOME FROM CONTINUING OPERATIONS 218,992 757,548
OTHER INCOME (EXPENSE)    
Other income 0 205
Gain on debt refinance and forgiveness 0 390
Penalties and fees (1,000) (17,000)
Interest expense (376,269) (693,661)
Amortization of debt discounts (13,515) (17,983)
Total other expenses (390,784) (728,049)
NET (LOSS) INCOME BEFORE DISCONTINUED OPERATIONS (171,792) 29,499
LOSS FROM DISCONTINUED OPERATIONS (111,312) (45,490)
NET LOSS FOR THE PERIOD (283,104) (15,991)
PREFERRED STOCK DIVIDENDS (151,634) (344,947)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (434,738) $ (360,938)
BASIC LOSS PER SHARE    
CONTINUING OPERATIONS $ (0.11) $ (31.04)
DISCONTINUED OPERATIONS (0.03) (3.91)
DILUTED LOSS PER SHARE    
CONTINUING OPERATIONS (0.11) (30.34)
DISCONTINUED OPERATIONS $ (0.03) $ (3.91)
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC 3,818,218 11,627
WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED 3,818,218 11,627
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (UNAUDITED) - USD ($)
Preferred Stock Series A I [Member]
Preferred Stock Series B E F 1 J And L [Member]
Preferred Stock Series C [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Balance, December 31, 2023 (Restated) at Dec. 31, 2022 $ 59,540,000 $ 17,403,628 $ 492 $ 12 $ (10,004,808) $ (68,684,115) $ (1,744,791)
Beginning balance, shares at Dec. 31, 2022 14,885,001 4,350,907 123 12,053      
Conversion of convertible notes payable $ 2 190,236 190,237
Conversion of convertible notes payable, shares       1,583      
Preferred stock Dividends (344,947) (344,947)
Net loss (15,991) (15,991)
Ending balance, value at Mar. 31, 2023 $ 59,540,000 $ 17,403,628 $ 492 $ 14 (9,814,572) (69,045,053) (1,915,491)
Ending balance, shares at Mar. 31, 2023 14,885,001 4,350,907 123 13,636      
Balance, December 31, 2023 (Restated) at Dec. 31, 2023 $ 59,540,000 $ 17,456,228 $ 492 $ 25 (7,581,212) (68,684,115) 731,418
Beginning balance, shares at Dec. 31, 2023 14,885,002 4,364,057 123 25,121      
Conversion of convertible notes payable $ 1 1,679 1,680
Conversion of convertible notes payable, shares       1,222      
Conversion of series B preferred stock $ (3,115,196) $ 1,558 3,113,638
Conversion of series B preferred stock, shares   (778,799)   1,557,598      
Conversion of series C preferred stock $ (88) $ 220 (132)
Conversion of series C preferred stock, shares     (22) 220,000      
Conversion of series I preferred stock $ (11,714,000) $ 5,857 11,708,143
Conversion of series I preferred stock, shares (2,928,500)     5,857,000      
Conversion of series J preferred stock $ (6,168,900) $ 3,084 6,165,816
Conversion of series J preferred stock, shares   (1,542,225)   3,084,450      
Issuance of series I preferred stock to officers $ 530,000 63,600 593,600
Issuance of series I preferred stock to officers, shares 132,500            
Cancellation of series C preferred stock $ (8) 8
Cancellation of series C preferred stock, shares     (2)        
Common stock issued for services $ 8 11,617 11,625
Common stock issued for services, shares       7,500      
Common stock issued to board members $ 30 194,970 195,000
Common stock issued to board members, shares       30,000      
Common stock issued in Red Rock settlement $ 37 111,275 111,312
Common stock issued in Red Rock settlement, shares       37,104      
Preferred stock Dividends (151,634) (151,634)
Net loss (283,104) (283,104)
Ending balance, value at Mar. 31, 2024 $ 48,356,000 $ 8,172,132 $ 396 $ 10,820 $ 13,789,402 $ (69,118,853) $ 1,209,897
Ending balance, shares at Mar. 31, 2024 12,089,002 2,043,033 99 10,819,995      
v3.24.3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss from continuing operations $ (283,104) $ (15,991)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation 3,365 4,635
Amortization of debt discount 13,515 17,983
Bad debt 0 270,000
Conversion and note issuance cost 1,000 5,000
Share issuance for compensations to directors and officers 788,600 0
Share issuance for service rendered 11,625 0
Fair value settled upon conversion 0 123,566
Gain on forgiveness of debt 0 (390)
(Increase) decrease in:    
Accounts receivable (1,344,676) (1,111,317)
Right of use - assets 59,259 29,300
Prepaids and other current assets (4,200) 0
Increase (decrease) in:    
Accounts payable and accrued expense 56,978 270,710
Due to related party (75,153) 0
Accrued officers compensation (410,000) 154,000
Accrued interest 48,446 122,508
Right of use - liabilities (53,471) (30,993)
Net cash used in operating activities (1,187,816) (160,989)
Net cash provided by (used in) Discontinued Operations – Operating 111,312 (28,294)
FINANCING ACTIVITIES    
Proceeds from convertible notes payable 0 240,000
Repayment of SBA loans (160) (750)
Proceeds from line of credit 1,463,273 0
Net cash provided by financing activities 1,463,113 239,250
Net cash provided by Discontinued Operations – Financing 0 73,784
NET INCREASE IN CASH AND CASH EQUIVALENTS 386,609 123,751
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 866,943 219,085
CASH AND CASH EQUIVALENTS, END OF PERIOD 1,253,552 342,836
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION    
Cash paid during the year for Interest 50,000 1,503
NON-CASH INVESTING AND FINANCING ACTIVITIES:    
Common stock issued upon conversion of notes payable 1,680 66,673
Right of use assets acquired $ 186,638 $ 0
v3.24.3
Pay vs Performance Disclosure - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Pay vs Performance Disclosure [Table]    
Net Income (Loss) $ (283,104) $ (15,991)
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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 conducted through, and its income derived from, its various subsidiaries, which includes:

 

·Edge View Properties, Inc. (“Edge View”), which was acquired on July 16, 2014;
   
·Platinum Tax Defenders (“Platinum Tax”), which was acquired on July 31, 2018 and sold on November 10, 2023; and
   
·Nova Ortho and Spine, LLC (“Nova”), which was acquired on May 31, 2021.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Cardiff and its wholly owned subsidiaries, Edge View, Platinum Tax and Nova (collectively, the “Company”). Subsidiaries shown as discontinued operations include Platinum Tax. All significant intercompany accounts and transactions are eliminated in consolidation. Subsidiaries discontinued are shown as discontinued operations.

 

Reverse Stock Split

 

On January 9, 2024, the Company effected a 1-for-75,000 reverse split of its outstanding common stock. All outstanding shares of common stock and warrant to purchase common stock were adjusted to reflect the 1-for-75,000 reverse split, with respective exercise prices of the warrants proportionately increased. The conversion prices of the outstanding convertible notes and certain series of preferred stock were adjusted to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion.

 

All share and per share data throughout these consolidated financial statements have been retroactively adjusted to reflect the reverse stock split. The total number of authorized shares of common stock did not change. As a result of the reverse stock split, an amount equal to the decreased value of the common stock was reclassified from “common stock” to “additional paid-in capital.”

 

Use of Estimates

 

The preparation of financial statements in conformity with United States generally accepted accounting principles (“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.

 

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 and insures payment in full from insurance settlements. Accounts receivable consists of amounts due from attorneys and insurance providers for services provided to patients under the letter of protection. The 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. 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% 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 0.5% to 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 regular basis and updating its estimates of credit losses to adjust for changes in loss data. The Company typically collects on its accounts receivable between eighteen 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, 2024 and December 31, 2023, the Company’s allowance for credit losses was $122,190. The Company recognized $270,000 of credit loss expense during the three months ended March 31, 2023, which is included in selling, general and administrative expenses in the condensed consolidated statement of operations. The Company did not recognize any credit loss expense during the three months ended March 31, 2024.

 

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: 

 
Classification Useful Life
Equipment, furniture, and fixtures 5 - 7 years
Medical equipment 10 years
Leasehold improvements 10 years or lease term, if shorter

 

Goodwill and Other Intangible Assets

 

Goodwill and indefinite-lived assets are not amortized but are evaluated for impairment annually or when indicators of a potential impairment are present. The Company’s impairment testing of goodwill is performed separately from its impairment testing of indefinite-lived intangibles. 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 as such to determine whether it is more likely than not the fair value is less than the carry amount, including goodwill. The annual evaluation for impairment of indefinite-lived intangibles and, if then needed after the first step, Goodwill, 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, 2024 and 2023, the Company did not recognize any goodwill impairment. The Company based this decision on impairment testing of the underlying assets, expected cash flows, decreased asset value and other factors.

 

Valuation of Long-lived Assets

 

In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 360-10-5, “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 contact
     
  · Determination of the transaction price
     
  · Allocation of the transaction price to the separate performance obligations
     
  · Recognition of revenue when performance obligations are satisfied.

 

The Company applies the five-step model when it is probable that the Company will settle the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and 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 for both its contract and service fees each 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. Revenue is recognized when obligations under the terms of the contract with the Company’s patients are satisfied; generally, at the time of patient care.

 

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 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 is based on a historical 12-month 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, which handles settlement claims and negotiations. Settlement amounts are presented to the Company’s third party medical billing company. Settlement rates of 49% or higher based on gross billed amounts are typically accepted without further negotiation. Proposed settlement rates below 49% are negotiated 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-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.

 

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.

 

Prior to its fiscal year 2024, the Company has historically had a 49% settlement realization rate from its total gross billed charges. Accordingly, the Company has historically recognized net healthcare service revenue as 49% of gross billed charges. However, during the three months ended March 31, 2024, the Company underwent efforts to accelerate cash settlements by accepting lower settlement realization rates in order to settle outstanding accounts receivable more quickly. As a result of the new effort, during the three months ended March 31, 2024 the Company realized a 42.9% average settlement rate of its gross billed charges during this time frame, which were historically recorded in accounts receivable and revenue at 49% of gross billings. As a result of this reduced settlement realization percentage, the Company recorded a reduction to net revenue of $339,834 for the three months ended March 31, 2024.

 

The Company will continue to reassess its settlement realization rate in the future and incorporate changes in settlement realization in its estimate of variable consideration due under its contracts. See additional disclosure in Note 17. Subsequent Events regarding the Company’s review of its settlement realization percentage subsequent to the quarter ended March 31, 2024. 

 

Contract Fees (Non-PIP)

 

The Company has contract fees for amounts earned from its Non-Personal Injury Protection (“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 us 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 eighteen 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. For the three months ended March 31, 2023, the Company factored a total of $544,196 of its accounts receivable in exchange for cash of $253,750. 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 and changes in stockholders’ equity. The Company recognized advertising and marketing expense of $82,051 and $83,223 for the three months ended March 31, 2024 and 2023, respectively.

 

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). 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.

 

Distinguishing Liabilities from Equity

 

The Company accounts for its series N senior convertible preferred stock, series R convertible preferred stock, and 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.

 

Stock-Based Compensation

 

The Company accounts for its stock-based compensation in which the Company obtains 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 the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.

 

Generally, all forms of share-based payments, including stock option grants, warrants and 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 expense resulting from share-based payments is recorded 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.

 

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.

 

As of March 31, 2024 and 2023, the Company did not have any interest and penalties associated with tax positions and did not have any significant unrecognized uncertain tax positions.

 

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. 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 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 recurring operating losses since its inception and has an accumulated deficit of $69,118,853 as of March 31, 2024. These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might result if the Company is unable to continue as a going concern.

 

 

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 is in continuous discussions with 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.

 

Recent Accounting Standards

 

The FASB issued ASU 2023-07 on November 27, 2023. The amendments “improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.” In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable “investors to better understand an entity’s overall performance” and assess “potential future cash flows.” The Management is evaluating the impact of ASU 2023-07 on the consolidated financial statements and does not expect there to be any changes or impact to the financial statements.

v3.24.3
RESTATEMENT OF FINANCIAL STATEMENTS
3 Months Ended
Mar. 31, 2024
Accounting Changes and Error Corrections [Abstract]  
RESTATEMENT OF FINANCIAL STATEMENTS

 

2.RESTATEMENT OF FINANCIAL STATEMENTS

 

The Company restated its financial statements for the three months ended March 31, 2024 as a result of a change in classification of credit loss expense to net revenue. Subsequent to the preparation of the financial statements for the three month ended March 31, 2024, the Company identified and corrected its accounting for its credit loss expense of $339,834, which was reclassified to net revenue as variable consideration accounted for under ASC 606.

 

The following tables summarize the impact of the corrections on the Company’s condensed consolidated statement of operations for the three months ended March 31, 2024. These adjustments has no effect on the Company’s condensed consolidated balance sheet, reported (loss) income from operations, net loss or cash used in operating activities for the periods adjusted.

 

Restatement of financial statements  Impact of correction of error 
   As previously reported   Adjustments   As restated 
For the three months ended March 31, 2024 (unaudited)            
Revenue  $2,661,966   $(339,834)  $2,322,132 
Selling, general and administrative  $1,191,230   $(339,834)  $851,396 

 

During the preparation of the year ended December 31, 2023 financial statements, the Company identified and corrected its classification and accounting treatment for its series R convertible preferred stock and the related dividend accrual. Pursuant to ASC 250, “Accounting changes and error corrections” issued by FASB and SAB 99 “Materiality” issued by Securities and Exchange Commission, the Company determined the impact of the error was immaterial. The impact of the error correction is reflected in a $274,982 increase to the mezzanine equity and offsetting decrease to the series R convertible preferred stock and subject to possible redemption mezzanine equity line item on the consolidated balance sheet as of March 31, 2023. In addition, the impact of the unpaid dividend accrual is reflected in $8,136 increase to mezzanine equity and offsetting decrease to the accumulated deficits as of March 31, 2023. The impact of the error correction is also reflected $1 decrease of earnings (loss) per share on the consolidated statement of operations for the three months ended March 31, 2023.

 

During the preparation of the three months ended March 31, 2024 financial statements, the Company identified and corrected its classification for its all outstanding common stock amount per par value of $0.001 with additional paid-in-capital related with a 1-for-75,000 reverse split executed on January 9, 2024. The impact of this adjustment decreased $1,804,774 to common stock and offsetting increase to additional paid-in-capital as of December 31, 2023.

 

On November 10, 2023, the Company sold Platinum Tax, which was a full-service tax resolution firm located in Los Angeles, California. The Company presented in prior periods operating loss as loss from discontinued operations in the amount of $45,490 on the consolidated statement of operations for the three months ended March 31, 2023.

 

The following table summarizes the impact of the corrections on the Company’s condensed consolidated statement of operations for the three months ended March 31, 2023:

 

i. Balance sheet 

            
   Impact of correction of error 
March 31, 2023 (Unaudited)  As previously reported   Adjustments   As restated 
             
Total assets  $14,284,585   $(8,673)  $14,275,912 
                
Total liabilities   10,745,097    (8,673)   10,736,424 
                
Mezzanine equity   5,171,861    283,118    5,454,979 
                
Total stockholders' equity  $(1,632,373)  $(283,118)  $(1,915,491)

 

ii. Statement of operations

 

   Impact of correction of error 
Three months ended March 31, 2023 (Unaudited)  As previously reported   Adjustments   As restated 
             
Revenue  $2,860,798   $(154,399)  $2,706,399 
Cost of sales   983,124    (26,829)   956,295 
Gross profit   1,877,674    (127,570)   1,750,104 
Operating expense   1,164,113    (171,557)   992,556 
Income from operations  $713,561   $43,987   $757,548 
Other income (expense), net   (729,552)   1,503    (728,049)
Net loss before discontinued operations   (15,991)   45,490    29,499 
Loss from discontinued operations       (45,490)   (45,490)
Net loss for the period  $(15,991)  $   $(15,991)
Preferred stock dividends  $(336,811)  $(8,136)  $(344,947)
Net loss attributable to common shareholders  $(352,802)  $(8,136)  $(360,938)
Basic and diluted earnings (loss) per share for continuing operations  $(30)  $(1)  $(31)

 

v3.24.3
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
3 Months Ended
Mar. 31, 2024
Payables and Accruals [Abstract]  
ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

3.ACCOUNTS PAYABLE AND ACCRUED EXPENSES

        
   March 31, 2024   December 31, 2023 
Accounts payable  $632,045   $720,774 
Accrued credit cards   9,884    26,645 
Accrued liability for settlements of previously factored receivables   1,385,084    1,247,772 
Accrued property taxes   5,346    5,346 
Accrued professional fees   29,122    29,122 
Accrued payroll   42,628    17,472 
Total  $2,104,109   $2,047,131 

 

The Company is delinquent paying certain property taxes. As of March 31, 2024 and December 31, 2023, the balance for these property taxes, was $5,346.

v3.24.3
PLANT AND EQUIPMENT, NET
3 Months Ended
Mar. 31, 2024
Property, Plant and Equipment [Abstract]  
PLANT AND EQUIPMENT, NET

 

4.PLANT AND EQUIPMENT, NET

 

Property and equipment as of March 31, 2024 and December 31, 2023 is as follows: 

        
   March 31, 2024   December 31, 2023 
Medical equipment  $96,532   $96,532 
Computer Equipment   9,189    9,189 
Furniture, fixtures and equipment   15,079    15,079 
Leasehold Improvement   15,950    15,950 
Total   136,750    136,750 
Less: accumulated depreciation   (105,454)   (102,089)
Property and equipment, net  $31,296   $34,661 

 

For the three months ended March 31, 2024 and 2023, depreciation expense was $3,365 and $4,635, respectively.

v3.24.3
LAND
3 Months Ended
Mar. 31, 2024
Real Estate [Abstract]  
LAND

 

5.LAND

 

As of March 31, 2024 and December 31, 2023, the Company had 27 acres of land of approximately $540,000. The land is currently vacant and is expected to be developed into a residential community.

v3.24.3
RELATED PARTY TRANSACTIONS
3 Months Ended
Mar. 31, 2024
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

 

6.RELATED PARTY TRANSACTIONS

 

In connection with the acquisition of Edge View on July 16, 2014, the Company assumed amounts due to previous owners who are current managers of Edge View. These amounts are due on demand and do not bear interest. The balance of these amounts are $4,979 due from the previous owners as of March 31, 2024 and December 31, 2023.

 

The Company obtained short-term advances from the Chairman of the Board that are non-interest bearing and due on demand. As of March 31, 2024 and December 31, 2023, the Company owed the Chairman $45,844 and $120,997, respectively. During the three months ended March 31, 2024, the Company paid $75,153 to the Chairman.

 

See also Note 8 and the disclosure regarding Note payable 41.

 

See also Note 13 for compensation paid to employees of the Company.

v3.24.3
NOTES AND LOANS PAYABLE
3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
NOTES AND LOANS PAYABLE

 

7.NOTES AND LOANS PAYABLE

 

Notes payable at March 31, 2024 and December 31, 2023 are summarized as follows: 

        
   March 31, 2024   December 31, 2023 
Notes and loans payable  $3,743,856   $2,280,743 
Less current portion   (3,599,345)   (2,136,077)
Long-term portion  $144,511   $144,666 

 

Long-term debt matures as follows: 

    
   Amount 
2024 (remainder of year)  $3,599,345 
2025   4,983 
2026   4,983 
2027   4,983 
2028   4,983 
Thereafter   124,579 
Total  $3,743,856 

 

Loans and Notes Payable – Unrelated Party

 

On March 12, 2009, the Company 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, 2024 and December 31, 2023. The accrued interest of the debenture was $7,876 and $7,547 at March 31, 2024 and December 31, 2023, respectively. The Company assigned all of its receivables from consumer activations of the rewards program as collateral on this debenture.

 

Small Business Administration (“SBA”) Loans

 

On June 2, 2020, the Company obtained an SBA loan in the principal amount of $150,000 with an interest rate of 3.75% and a maturity date of June 2, 2050. The principal balance and accrued interest at March 31, 2024 was $149,494 and $0, respectively, and principal and accrued interest at December 31, 2023 was $149,655 and $956, respectively.

 

Line of Credit

 

On September 29, 2023, the Company and Nova entered into a two-year revolving purchase and security agreement with DML HC Series, LLC to sell, with recourse, Nova’s accounts receivables for a revolving financing up to a maximum advance amount of $4.5 million. As of March 31, 2024 and December 31, 2023, the Company had $3,583,373 and $2,120,100, respectively, outstanding balance against the revolving receivable line of credit. The revolving purchase and security agreement includes discounts recorded as interest expense on each funding and matures on September 29, 2025.

v3.24.3
CONVERTIBLE NOTES PAYABLE
3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES PAYABLE

 

8.CONVERTIBLE NOTES PAYABLE

 

As of March 31, 2024 and December 31, 2023, the Company had convertible debt outstanding net of amortized debt discount of $3,820,545 and $3,807,030, respectively. During the three months ended March 31, 2024, the Company did not receive any proceeds from convertible notes and repaid $50,000 of accrued interest to convertible noteholder. During the three months ended March 31, 2023, the Company received net proceeds of $240,000 from convertible notes. There are debt discounts associated with the convertible debt of $11,305 and $24,820 at March 31, 2024 and December 31, 2023, respectively. For the three months ended March 31, 2024 and 2023, the Company recorded amortization of debt discounts of $13,515 and $17,983, respectively.

 

During the three months ended March 31, 2024, the Company converted $680 in accrued interest and $1,000 in conversion cost into 1,222 shares of common stock. The Company recognized $1,679 of additional paid-in capital to adjust fair value for the debt settlement during the three months ended March 31, 2024. During the three months ended March 31, 2023, the Company converted $58,800 of convertible debt, $5,873 in accrued interest and $2,000 in penalties and fees into 1,583 shares of common stock.

 

Convertible notes as of March 31, 2024 and December 31, 2023 are summarized as follows: 

        
   March 31, 2024   December 31, 2023 
Convertible notes payable  $3,831,850   $3,831,850 
Discounts on convertible notes payable   (11,305)   (24,820)
Total convertible debt less debt discount   3,820,545    3,807,030 
Current portion   3,820,545    3,807,030 
Long-term portion  $   $ 

 

The following is a schedule of convertible notes payable as of and for the three months ended March 31, 2024. 

                                              
Note #  Issuance  Maturity  Principal Balance 12/31/23   New Loan   Principal Conversions  

Cash Paydown

   Shares Issued Upon Conversion   Principal Balance 03/31/24   Accrued Interest on Convertible Debt at 12/31/23   Interest Expense On Convertible Debt For the Period Ended 03/31/24   Accrued Interest on Convertible Debt at 03/31/24   Unamortized Debt Discount At 03/31/24 
9  09/12/2016  09/12/2017  $50,080                1,222   $50,080   $5,581   $2,496    7,399     
10  01/24/2017  01/24/2018   55,000                    55,000    80,875    2,742    83,618     
10-1  02/10/2023  02/10/2024   50,000                    50,000    6,658    1,870    8,527     
10-2  03/30/2023  03/30/2024   25,000                    25,000    2,836    935    3,771     
10-3  08/11/2023  08/11/2024   25,000                    25,000    1,469    935    2,404     
29-2  11/08/2019  11/08/2020   36,604                    36,604    10,109    2,190    12,299     
31  08/28/2019  08/28/2020                           8,385             
37-1  09/03/2020  06/30/2021   113,667                    113,667    64,929    5,101    70,030     
37-2  11/02/2020  08/31/2021   113,167                    113,167    63,594    5,079    68,673     
37-3  12/29/2020  09/30/2021   113,166                    113,166    62,558    5,079    67,637     
40-1  09/22/2022  09/22/2024   2,600,000                    2,600,000    252,665    64,821    267,488     
40-2  11/04/2022  09/22/2024   68,667                    68,667    7,939    1,712    9,651     
40-3  11/28/2022  09/22/2024   68,667                    68,667    7,506    1,712    9,217     
40-4  12/21/2022  09/22/2024   68,667                    68,667    7,054    1,712    8,766     
40-5  01/24/2023  03/21/2024   90,166                    90,166    8,284    2,248    10,531     
40-6  03/21/2023  09/22/2024   139,166                    139,166    10,671    3,470    14,141     
40-7  06/05/2023  06/05/2024   139,166                    139,166    7,826    3,470    11,295    6,530 
40-8  06/13/2023  06/13/2024   21,167                    21,167    1,127    528    1,654    1,032 
40-9  07/19/2023  07/19/2024   35,500                    35,500    1,605    885    2,490    2,650 
40-10  07/24/2023  07/24/2024   14,000                    14,000    614    349    963    1,093 
41  08/25/2023  08/25/2024   5,000                    5,000    175    125    300      
         $3,831,850   $   $   $    1,222   $3,831,850   $612,460   $107,459   $660,854   $11,305 

 

Note 9

 

On September 12, 2016, the Company issued a convertible promissory note in the principal of $80,000 for services rendered, which matured on September 12, 2017. Note 9 is currently in default and accrues at a default interest rate of 20% per annum.

 

Note 10, 10-1, 10-2 and 10-3

 

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. Note 10 is currently in default and accrues interest at a default interest rate of 20% per annum. On February 10, 2023, the Company executed a second tranche under this note in the principal amount of $50,000 (Note 10-1). On March 30, 2023, the Company executed a third tranche under this note in the principal amount of $25,000 (Note 10-2). On August 11, 2023, the Company executed a fourth tranche under this note in the principal amount of $25,000 (Note 10-3). Notes 10-1 and 10-2 are currently in default and accrue interest at a default interest rate of 20% per annum. Note 10-3 accrues interest at a rate of 15% per annum.

 

Note 29-2

 

On May 10, 2019, the Company issued a convertible promissory note in the principal amount of $150,000. On November 8, 2019, this note (Note 29) was purchased by and assigned to an unrelated party. The amount assigned was the existing principal amount of $150,000 and accrued interest of $5,918, which was issued as Note 29-1, plus a new convertible promissory note in the principal amount of $62,367, which was issued as Note 29-2. Note 29-2 is currently in default and accrues interest at a default interest rate of 24% per annum.

 

Notes 37-1, 37-2 and 37-3

 

On September 3, 2020, the Company issued a convertible promissory note in the principal amount of $200,000, with an original issue discount of $50,000, which could be drawn in several tranches. On September 3, 2020, the Company executed the first tranche in the principal amount of $67,000, less an original issue discount of $17,000, which matured on June 30, 2021 (Note 37-1). On November 2, 2020, the Company executed the second tranche in the principal amount of $66,500, less an original issue discount of $16,500, which matured on August 31, 2021 (Note 37-2). On December 29, 2020, the Company executed the third tranche in the principal amount of $66,500, less an original issue discount of $16,500, which matured on September 30, 2021 (Note 37-3). Notes 37-1, 37-2 and 27-3 are currently in default and accrue interest at a default interest rate of 18% per annum.

 

Notes 40-1, 40-2, 40-3, 40-4, 40-5, 40-6, 40-7, 40-8, 40-9 and 40-10

 

On September 22, 2022, the Company issued a convertible promissory note in the principal amount of $2,600,000 in exchange for total of $4,791,099 of defaulted promissory notes balances (Note 40-1). On November 4, 2022, the Company executed a second tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-2). On November 28, 2022, the Company executed the third tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-3). On December 21, 2022, the Company executed a fourth tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-4). On January 24, 2023, the Company executed a fifth tranche under this note in the principal amount of $90,166, less an original issue discount and fee of $25,166 (Note 40-5). On March 21, 2023, the Company executed a sixth tranche under this note in the principal amount of $136,666, less an original issue discount and fee of $39,166 (Note 40-6). On June 5, 2023, the Company executed a seventh tranche under this note in the principal amount of $136,667, less original issue discount and fee of $39,167 (Note 40-7). On June 13, 2023, the Company executed an eighth tranche under this note in the principal amount of $21,167, less original issue discount and fee of $5,167 (Note 40-8). On July 19, 2023, the Company executed a ninth tranche under this note in the principal amount of $35,500, less an original issue discount and fee of $8,875 (Note 40-9). On July 24, 2023, the Company executed a tenth tranche under this note in the principal amount of $14,000, less an original issue discount and fee of $3,500 (Note 40-10). On December 1, 2023, the Company executed amendment on Notes series 40 consolidated senior secured convertible promissory note to extend the expired tranche note 40-1 through 40-5’ due date to September 20, 2024. All of the Note 40 tranches mature in one year from the note issuance date and accrue interest at a rate of 10% per annum.

 

Note 41

 

On August 25, 2023, the Company issued a twelve-month convertible promissory note in the principal amount of $5,000 to the Company’s CEO for the Company’s operating expenses. The rate of interest is 10% per annum.

v3.24.3
CAPITAL STOCK
3 Months Ended
Mar. 31, 2024
Equity [Abstract]  
CAPITAL STOCK

 

9.CAPITAL STOCK

 

Preferred Stock

 

The Company has designated multiple series of preferred stock, including 2 shares of series A preferred stock, 3,000,000 shares of series B preferred stock, 500 shares of series C preferred stock, 1,000,000 shares of series E preferred stock, 50,000 shares of series F-1 preferred stock, 15,000,000 shares of series I preferred stock, 2,000,000 shares of series J preferred stock, 400,000 shares of series L preferred stock, 3,000,000 shares of series N senior convertible preferred stock, 5,000 shares of series R convertible preferred stock and 5,000,000 shares of series X senior convertible preferred stock.

 

The following is a description of the rights and preferences of each series of preferred stock.

 

Redeemable Preferred Stock

 

The Company recognized the series N senior convertible preferred stock, series R convertible preferred stock and series X senior convertible preferred stock as mezzanine equity in accordance with ASC 480, “Distinguishing Liabilities from Equity”.

 

Series N Senior Convertible Preferred Stock

 

Ranking. The series N senior convertible preferred stock ranks, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common stock and each other class or series that is not expressly made senior to or on parity with the series N senior convertible preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series N senior convertible preferred stock; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each class or series that is expressly made senior to the series N senior convertible preferred stock.

 

Dividend Rights. Holders of series N senior convertible preferred stock are entitled to dividends at a rate per annum of 12.0% of the stated value ($4.00 per share); provided that upon an event of default (as defined in the certificate of designation for the series N senior convertible preferred stock), such rate shall increase by 8% per annum. Dividends shall accrue from day to day, whether or not declared, and shall be cumulative. Dividends shall be payable quarterly in arrears on each dividend payment date in cash or common stock at the Company’s discretion. Dividends payable in common stock shall be calculated based on a price equal to eighty percent (80%) of the volume weighted average price for the common stock on the Company’s principal trading market (the “VWAP”) during the five (5) trading days immediately prior to the applicable dividend payment date. At March 31, 2024 and December 31, 2023, cumulative dividends on Series N Preferred Stock were $871,462 and $766,437, respectively.

 

Liquidation Rights. Subject to the rights of creditors and the holders of any senior securities or parity securities (in each case, as defined in the certificate of designation), upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of junior securities (as defined in the certificate of designation), including the common stock, each holder of outstanding series N senior convertible preferred stock shall be entitled to receive an amount of cash equal to 115% of the stated value of $4.00 per share, plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether or not declared) to, but not including the date of final distribution to such holders.

 

Voting Rights. Holders of series N senior convertible preferred stock do not have any voting rights; provided that, so long as any shares of series N senior convertible preferred stock are outstanding, the affirmative vote of holders of a majority of the series N senior convertible preferred stock, which majority must include SILAC Insurance Company so long as it holds any shares of series N senior convertible preferred stock, voting as a separate class, shall be necessary for approving, effecting or validating any amendment, alteration or repeal of any of the provisions of the certificate of designation or prior to the Company’s (or Nova’s) creation or issuance of any parity securities or new indebtedness (as defined in the certificate of designation); provided that the foregoing shall not apply to any financing transaction the use of proceeds of which will be used to redeem the series N senior convertible preferred stock and the warrants issued in connection therewith. In addition, the affirmative vote of holders of 66% of the series N senior convertible preferred stock, voting as a separate class, is required prior to the Company’s (or Nova’s) creation or issuance of any senior securities.

 

Conversion Rights. Each shares of series N senior convertible preferred stock, plus all accrued and unpaid dividends thereon, shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of common stock determined by dividing the stated value ($4.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price of $900 per share (subject to standard adjustments in the event of any stock splits, stock combinations, stock reclassifications, dividends paid in common stock, sales of substantially all assets, mergers, consolidations or similar transactions); provided that in no event shall the holder of any series N senior convertible preferred stock be entitled to convert any number of shares that upon conversion the sum of (i) the number of shares of common stock beneficially owned by the holder and its affiliates and (ii) the number of shares of common stock issuable upon the conversion of the series N senior convertible preferred stock with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the then outstanding common stock. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.

 

Redemption Rights. The Company may redeem the series N senior convertible preferred stock at any time by paying in cash therefore a sum equal to 115% of the stated value of $4.00 per share, plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the certificate of designation. In addition, any holder may require the Company to redeem some or all of its shares of series N senior convertible preferred stock on the same terms after a period of twelve months from the date of issuance; provided, however, that such redemption right shall only be exercisable if the Company raises at least $5,000,000 or the common stock is trading on the Nasdaq Stock Market or the New York Stock Exchange.

 

Series R Convertible Preferred Stock

 

Ranking. The series R convertible preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock, series B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series I preferred stock, series J preferred stock, series L preferred stock and to each other class or series that is not expressly made senior to or on parity with the series R convertible preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series R convertible preferred stock; and (iii) junior to the series N senior convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series R convertible preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series R convertible preferred stock are entitled to receive cumulative dividends in the amount of twelve percent (12%) per annum, payable quarterly. In addition, holders of series R convertible preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. Any dividends that are not paid when due shall continue to accrue and shall entail a late fee, which must be paid in cash, at the rate of 18% per annum or the lesser rate permitted by applicable law which shall accrue and compound daily from the missed payment date through and including the date of actual payment in full. At March 31, 2024 and December 31, 2023, cumulative dividends on Series R Preferred Stock were $119,194 and $109,980, respectively.

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series R convertible preferred stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the stated value ($1,200), plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing, for each share of series R convertible preferred stock before any distribution or payment shall be made to the holders of any junior securities.

 

Voting Rights. The holders of series R convertible preferred stock will vote together with the common stock on an as-converted basis. However, as long as any shares of series R convertible preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the series R convertible preferred stock, directly and/or indirectly (i) alter or change adversely the powers, preferences or rights given to the series R convertible preferred stock or alter or amend the certificate of designation, (ii) authorize or create any class of stock ranking as to redemption or distribution of assets upon a liquidation senior to, or otherwise pari passu with, the series R convertible preferred stock, or authorize or create any class of stock ranking as to dividends senior to, or otherwise pari passu with, the series R convertible preferred stock, (iii) amend its articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of the series R convertible preferred stock, (iv) increase the number of authorized shares of series R convertible preferred stock, or (v) enter into any agreement with respect to any of the foregoing.

 

Conversion Rights. Each shares of series R convertible preferred stock shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of common stock determined by dividing the stated value ($1,200 per share) by a conversion price equal to the lower of (i) $75.0 and (ii) the lowest daily VWAP during the twenty (20) trading days immediately prior to the applicable conversion date. Notwithstanding the foregoing, the Company shall not effect any conversion of the series R convertible preferred stock, and a holder shall not have the right to convert any portion of the series R convertible preferred stock, to the extent that, after giving effect to the conversion, such holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own in excess of 4.99% of the then outstanding common stock. The conversion price is subject to adjustment for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the common stock, as well as for mergers, business combinations and certain other fundamental transactions. In addition, subject to certain exceptions, upon any issuance by the Company or any of its subsidiaries of common stock or common stock equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), the holder may elect, in its sole discretion, to exchange (in lieu of conversion), if applicable, all or some of the shares of series R convertible preferred stock then held for any securities or units issued in a Subsequent Financing on a $1.00 for $1.00 basis.

 

Participation Rights. Subject to certain exceptions, upon a Subsequent Financing, a holder of at least 100 shares of series R convertible preferred stock shall have the right to participate in up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing on the same terms, conditions and price provided for in the Subsequent Financing.

 

Company Redemption Rights. The Company has the right to redeem all (but not less than all), shares of the series R convertible preferred stock issued and outstanding at any time upon three (3) business days’ notice, at a redemption price per share equal to the product of (i) the Premium Rate multiplied by (ii) the sum of (x) the stated value ($1,200), (y) all accrued but unpaid dividends, and (z) all other amounts due to the holder. “Premium Rate” means (a) 1.1 if all of the series R convertible preferred stock is redeemed within ninety (90) calendar days from the issuance date thereof; (b) 1.2 if all of the series R convertible preferred stock is redeemed after ninety (90) calendar days and within one hundred twenty (120) calendar days from the issuance date thereof; (c) 1.3 if all of the series R convertible preferred stock is redeemed after one hundred twenty (120) calendar days and within one hundred eighty (180) calendar days from the issuance date thereof; and (iv) 1.0 if all of the series R convertible preferred stock is redeemed after one hundred eighty (180) calendar days.

 

Redemption Upon Triggering Events. Upon the occurrence of a Triggering Event (as defined below), each holder of series R convertible preferred stock shall (in addition to all other rights it may have) have the right, exercisable at the sole option of such holder, to require the Company to (A) redeem all of the series R convertible preferred stock then held by such holder for a redemption price, in cash, equal to the Triggering Redemption Amount (as defined below), or (B) at the option of each holder either (i) redeem all of the series R convertible preferred stock then held by such holder though the issuance to such holder of such number of shares of common stock equal to the quotient of (x) the Triggering Redemption Amount, divided by (y) the lowest of (1) the conversion price, and (2) 75% of the average of the 10 VWAPs immediately prior to the date of election, or (ii) increase the dividend rate on all of the outstanding series R convertible preferred stock held by such holder retroactively to the initial issuance date to 18% per annum thereafter. “Triggering Redemption Amount” means, for each share of series R convertible preferred stock, the sum of (a) the greater of (i) 130% of the stated value and (ii) the product of (y) the VWAP on the trading day immediately preceding the date of the Triggering Event, multiplied by (z) the stated value divided by the then applicable conversion price, (b) all accrued but unpaid dividends thereon and (c) all liquidated damages, late fees and other costs, expenses or amounts due in respect of the series R convertible preferred stock including, but not limited to legal fees and expenses of legal counsel to the holder in connection with, related to and/or arising out of a Triggering Event. A “Triggering Event” means any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

·the Company shall fail to deliver the shares of common stock issuable upon a conversion prior to the fifth (5th) trading day after such shares are required to be delivered, or the Company shall provide written notice to any holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversion of any shares of series R convertible preferred stock in accordance with the terms of the certificate of designation;

 

·the Company shall fail for any reason to pay in full the amount of cash due pursuant to a Buy-In (as defined in the certificate of designation) within five (5) trading days after notice therefor is delivered;

 

·the Company shall fail to have available a sufficient number of authorized and unreserved shares of common stock to issue to such holder upon a conversion;

 

·unless specifically addressed elsewhere in the certificate of designation as a Triggering Event, the Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of the Transaction Documents (as defined in the certificate of designation), and such failure or breach shall not, if subject to the possibility of a cure by the Company, have been cured within five (5) calendar days after the date on which written notice of such failure or breach shall have been delivered;

 

·the Company shall redeem junior securities or pari passu securities;

 

·the Company shall be party to a Change of Control Transaction (as defined in the certificate of designation);

 

·there shall have occurred a Bankruptcy Event (as defined in the certificate of designation);

 

·any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than $50,000 (provided that amounts covered by the Company’s insurance policies are not counted toward this $50,000 threshold), and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of thirty (30) trading days;

 

·the electronic transfer by the Company of shares of common stock through the Depository Trust Company or another established clearing corporation once established subsequent to the date of the certificate of designation is no longer available or is subject to a ‘freeze” and/or “chill;” or

 

·any “Event of Default,” as defined in the Purchase Agreement (as defined in the certificate of designation).

 

Series X Senior Convertible Preferred Stock

 

Ranking. The series X senior convertible preferred stock ranks, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common stock and each other class or series that is not expressly made senior to or on parity with the series X senior convertible preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series X senior convertible preferred stock; and (iii) junior to the series N senior convertible preferred stock, all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each class or series that is expressly made senior to the series X senior convertible preferred stock.

 

Dividend Rights. Holders of series X senior convertible preferred stock are entitled to dividends at a rate per annum of 10.0% of the stated value ($4.00 per share); provided that upon an event of default (as defined in the certificate of designation for the series X senior convertible preferred stock), such rate shall increase by 5% per annum. Dividends shall accrue from day to day, whether or not declared, and shall be cumulative. Dividends shall be payable quarterly in arrears on each dividend payment date. At March 31, 2024 and December 31, 2023, cumulative dividends on Series X Preferred Stock were $228,082 and $190,685, respectively.

 

Liquidation Rights. Subject to the rights of creditors and the holders of any senior securities, including the series N senior convertible preferred stock, or parity securities (in each case, as defined in the certificate of designation), upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of junior securities (as defined in the certificate of designation), including the common stock, each holder of outstanding series N senior convertible preferred stock shall be entitled to receive an amount of cash equal to 100% of the stated value of $4.00 per share, plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether or not declared) to, but not including the date of final distribution to such holders.

 

Voting Rights. Holders of series X senior convertible preferred stock do not have any voting rights; provided that, so long as any shares of series X senior convertible preferred stock are outstanding, the affirmative vote of holders of a majority of the series X senior convertible preferred stock, which majority must include Leonite Capital LLC so long as it holds any shares of series X senior convertible preferred stock, voting as a separate class, shall be necessary for approving, effecting or validating any amendment, alteration or repeal of any of the provisions of the certificate of designation or prior to the creation or issuance of any parity securities or new indebtedness (as defined in the certificate of designation); provided that the foregoing shall not apply to any financing transaction the use of proceeds of which will be used to redeem the series X senior convertible preferred stock and the warrants issued in connection therewith. In addition, the affirmative vote of holders of 66% of the series X senior convertible preferred stock, voting as a separate class, is required prior to the creation or issuance of any senior securities.

 

Conversion Rights. Each shares of series X senior convertible preferred stock, plus all accrued and unpaid dividends thereon, shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of common stock determined by dividing the stated value ($4.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price equal to the lower of (i) the lowest VWAP during the five (5) trading days immediately prior to the applicable conversion date and (ii) the price per share paid in any subsequent financing (the “Fixed Price”). The Fixed Price is subject to standard adjustments in the event of any stock splits, stock combinations, stock reclassifications, dividends paid in common stock, sales of substantially all assets, mergers, consolidations or similar transactions, as well as a price based antidilution adjustment, pursuant to which, subject to certain exceptions, if the Company issues common stock at a price lower than the Fixed Price, the Fixed Price shall decrease to such lower price. Notwithstanding the foregoing, in no event shall the holder of any series X senior convertible preferred stock be entitled to convert any number of shares that upon conversion the sum of (i) the number of shares of common stock beneficially owned by the holder and its affiliates and (ii) the number of shares of common stock issuable upon the conversion of the series X senior convertible preferred stock with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the then outstanding common stock. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.

 

Redemption Rights. Commencing on September 22, 2023, any holder may require the Company to redeem its shares by the payment in cash therefore of a sum equal to 100% of the stated value of $4.00 per share, plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the certificate of designation; provided however, that in the event that the Company completes a public offering prior to the redemption date, then any holder may only cause the Company to redeem any outstanding series X senior convertible preferred stock by paying such redemption price in twelve (12) equal monthly installments with the first such payment due on the date that is six (6) months following the date that the Company completes such public offering.

 

Non-redeemable Preferred Stock

 

Series A Preferred Stock

 

Ranking. The series A preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock and each other class or series that is not expressly made senior to or on parity with the series A preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series A preferred stock; and (iii) junior to the series B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series I preferred stock, series J preferred stock, series L preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and each other series of preferred stock and each class or series that is expressly made senior to the series A preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The series A preferred stock is not entitled to participate in any distributions or payments to the holders of common stock or any other class of stock and shall have no economic interest in the Company.

 

Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, a merger or consolidation of the Company wherein the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company, the holders of each share of series A preferred stock shall be entitled to receive from any distribution of any of the assets or surplus funds of the Company, before and in preference of any holder of shares of common stock, an amount equal to the stated value of $250. Once the holders receive the foregoing from any such liquidation, dissolution or winding up, the holders shall not participate with the common stock or any other class of stock.

 

Voting Rights. Each share of series A preferred stock shall have a number of votes at any time equal to (i) 25% of the number of votes then held or entitled to be made by all other equity securities of the Company, including, without limitation, the common stock, plus (ii) one (1). The series A preferred stock shall vote on any matter submitted to the holders of the common stock, or any other class of voting securities, for a vote, and shall vote together with the common stock, or any class of voting securities, as applicable, on such matter for as long as the shares of series A preferred stock are issued and outstanding. Notwithstanding the foregoing, the series A preferred stock shall not have the right to vote on any matter as to which solely another series of preferred stock is entitled to vote pursuant to the Company’s amended and restated articles of incorporation or a certificate of designation of such other series of preferred stock.

 

Transfer. Upon transfer of any share of series A preferred stock, except for a transfer by the holder to an affiliate, whether such transfer is voluntary or involuntary, such share of series A preferred stock shall automatically, and without any action being required by the Company or the holder, be converted into one (1) share of common stock.

 

Other Rights. Holders of series A preferred stock do not have any conversion (except as set forth above) or redemption rights.

 

Series B Preferred Stock

 

Ranking. The series B preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series B preferred stock; (ii) on parity with the series C preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other class or series that is not expressly subordinated or made senior to the series B preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series B preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series B preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series B preferred stock.

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series B preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series B preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series B preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series B preferred stock shall be entitled to cast one (1) vote per share of series B preferred stock held. Except as provided by law, the holders of series B preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series B preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series B preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series B preferred stock or alter or amend the certificate of designation for the series B preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series B preferred stock.

 

Conversion Rights. Each share of series B preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series B preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series B preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series B preferred stock, voting together as a single class, each share of series B preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. Holders of series B preferred stock do not have any redemption rights.

 

Series C Preferred Stock

 

Ranking. The series C preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series C preferred stock; (ii) on parity with the series B preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other class or series that is not expressly subordinated or made senior to the series C preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series C preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series C preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series C preferred stock.

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series C preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series C preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series C preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series C preferred stock shall be entitled to cast one (1) vote per share of series C preferred stock held. Except as provided by law, the holders of series C preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series C preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series C preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series C preferred stock or alter or amend the certificate of designation for the series C preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series C preferred stock.

 

Conversion Rights. Each share of series C preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined by dividing the stated value ($4.00 per share) by a conversion price of $0.00004. In addition, on the date on which the shares of common stock are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier) (a “Listing Event”), all outstanding shares of series C preferred stock shall be automatically converted into such number of shares of common stock as is determined by dividing $50,000 by the highest traded or closing price on such date, which such shares of common stock shall be issued pro rata among the holders of the outstanding series C preferred stock. Finally, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the common stock) in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series C preferred stock, voting together as a single class, each share of series C preferred stock shall be automatically converted into such number of shares of common stock as is determined by dividing the stated value ($4.00 per share) by a conversion price of $0.00004. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. If there is a Listing Event, the Company shall have the right (but not the obligation) to redeem shares of series C preferred stock at a price per share of $50,000.

 

Series E Preferred Stock

 

Ranking. The series E preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series E preferred stock; (ii) on parity with the series B preferred stock, series C preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other class or series that is not expressly subordinated or made senior to the series E preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series E preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series E preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series E preferred stock.

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series E preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series E preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series E preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series E preferred stock shall be entitled to cast one (1) vote per share of series E preferred stock held. Except as provided by law, the holders of series E preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series E preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series E preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series E preferred stock or alter or amend the certificate of designation for the series E preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series E preferred stock.

 

Conversion Rights. Each share of series E preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series E preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series E preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series E preferred stock, voting together as a single class, each share of series E preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Series F-1 Preferred Stock

 

Ranking. The series F-1 preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series F-1 preferred stock; (ii) on parity with the series B preferred stock, series C preferred stock, series E preferred stock, series J preferred stock, series L preferred stock and each other class or series that is not expressly subordinated or made senior to the series F-1 preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series F-1 preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series F-1 preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series F-1 preferred stock.

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series F-1 preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series F-1 preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series F-1 preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. Except as provided by law, the holders of series F-1 preferred stock shall have no voting rights. However, as long as any shares of series F-1 preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series F-1 preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series F-1 preferred stock or alter or amend the certificate of designation for the series F-1 preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series F-1 preferred stock.

 

Conversion Rights. Each share of series F-1 preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series F-1 preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series F-1 preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series F-1 preferred stock, voting together as a single class, each share of series F-1 preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. Holders of series F-1 preferred stock do not have any redemption rights.

 

Series I Preferred Stock

 

Ranking. The series I preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock, series B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and to each other class or series that is not expressly made senior to or on parity with the series I preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series I preferred stock; and (iii) junior to the series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series I preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series I preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series I preferred stock.

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series I preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series I preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series I preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series I preferred stock shall be entitled to cast five (5) votes per share of series I preferred stock held. Except as provided by law, the holders of series I preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series I preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series I preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series I preferred stock or alter or amend the certificate of designation for the series I preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series I preferred stock.

 

Conversion Rights. Each share of series I preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series I preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series I preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $10,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series I preferred stock, voting together as a single class, each share of series I preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. Holders of series I preferred stock do not have any redemption rights.

 

Series J Preferred Stock

 

Ranking. The series J preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series J preferred stock; (ii) on parity with the series B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series L preferred stock and each other class or series that is not expressly subordinated or made senior to the series J preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series J preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series J preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series J preferred stock.

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series J preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series J preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series J preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series J preferred stock shall be entitled to cast one (1) vote per share of series J preferred stock held. Except as provided by law, the holders of series J preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series J preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series J preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series J preferred stock or alter or amend the certificate of designation for the series J preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series J preferred stock.

 

Conversion Rights. Each share of series J preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series J preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series J preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series J preferred stock, voting together as a single class, each share of series J preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. Holders of series J preferred stock do not have any redemption rights.

 

Series L Preferred Stock

 

Ranking. The series L preferred stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other class or series that is not expressly made senior to or on parity with the series L preferred stock; (ii) on parity with the series B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock and each other class or series that is not expressly subordinated or made senior to the series L preferred stock; and (iii) junior to the series I preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series L preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 

Dividend Rights. The holders of series L preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be paid on shares of series L preferred stock.

 

Liquidation Rights. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series L preferred stock shall be entitled to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series L preferred stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series L preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 

Voting Rights. On any matter presented to stockholders for their action or consideration, each holder of series L preferred stock shall be entitled to cast one (1) vote per share of series L preferred stock held. Except as provided by law, the holders of series L preferred stock shall vote together with the holders of shares of common stock as a single class. However, as long as any shares of series L preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series L preferred stock, (a) alter or change adversely the powers, preferences or rights given to the series J preferred stock or alter or amend the certificate of designation for the series L preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of series L preferred stock.

 

Conversion Rights. Each share of series L preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which the common stock is then traded or quoted is less than $4.00 per share, then each share of series L preferred stock shall be convertible into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series L preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company, (b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series L preferred stock, voting together as a single class, each share of series L preferred stock shall be automatically converted into such number of shares of common stock as is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

 

Redemption Rights. Holders of series L preferred stock do not have any redemption rights.

 

Preferred Stock Transactions

 

During the three months ended March 31, 2024, the Company executed the following transactions:

 

·On January 19, 2024, the Company issued 62,500 shares of series I preferred stock to each of Daniel R. Thompson, the Chairman of the Board, and Alex Cunningham, the Company’s Chief Executive Officer, for $250,000 bonus compensation for the fiscal year of 2023, at the fair value of $4.48 per share.
   
·On January 31, 2024, the Company issued 5,000 shares of series I preferred stock to Matthrew Shafer, the Company’s Chief Financial Officer, for $20,000, at the fair value of $4.48 per share.
   
·On January 31, 2024, the Company issued 2,500 shares of series I preferred stock to Zia Choe, the Company’s Chief Accounting Officer, for $10,000, at the fair value of $4.48 per share.

In connection with these aforementioned shares issuances on January 19, 2024 and January 31, 2024, the Company engaged a valuation specialist to perform a business valuation monte carlo simulation for the series I preferred stock resulting in those indicated fair values.

 

·During the three months ended March 31, 2024, an aggregate of 778,799 shares of series B preferred stock were converted into an aggregate of 1,557,598 shares of common stock.

 

·During the three months ended March 31, 2024, an aggregate of 22 shares of series C preferred stock were converted into an aggregate of 220,000 shares of common stock.

 

·During the three months ended March 31, 2024, an aggregate of 2,928,500 shares of series I preferred stock were converted into an aggregate of 5,857,000 shares of common stock.

 

·During the three months ended March 31, 2024, an aggregate of 1,542,225 shares of series J preferred stock were converted into an aggregate of 3,084,450 shares of common stock.

 

·During the three months ended March 31, 2024, 2 shares of series C preferred stock were cancelled, which were issued erroneously.

 

The Company had no preferred stock transactions during the three months ended March 31, 2023.

 

Common Stock

 

During the three months ended March 31, 2024, the Company executed the following transactions:

 

·During the three months ended March 31, 2023, the Company issued 1,222 shares of common stock upon conversion of certain convertible notes.

 

·During the three months ended March 31, 2024, the Company issued an aggregate of 1,557,598 shares of common stock upon the conversion of an aggregate of 778,799 shares of series B preferred stock.

 

·During the three months ended March 31, 2024, the Company issued an aggregate of 220,000 shares of common stock upon the conversion of an aggregate of 22 shares of series C preferred stock.

 

·During the three months ended March 31, 2024, the Company issued an aggregate of 5,857,000 shares of common stock upon the conversion of an aggregate of 2,928,500 shares of series I preferred stock.

 

·During the three months ended March 31, 2024, the Company issued an aggregate of 3,084,450 shares of common stock upon the conversion of an aggregate of 1,542,225 shares of series J preferred stock.

 

·On March 5, 2024, the Company issued 7,500 shares of common stock to an investor relation service provider. The Company recognized the fair value for the issuance of the 7,500 shares at $1.55 per share on the closing market price of March 5, 2024 and recorded selling, general and administrative expense of $11,617 in the consolidated statement of operations.

 

·On March 26, 2024, the Company issued an aggregate of 30,000 shares of common stock to three board members. The Company recognized the fair value for the issuance of 30,500 shares at $6.50 per share on the closing market price of March 26, 2024 and recorded share based compensation expense of $195,000 in the consolidated statement of operations.

 

·In February 2024, as part of the Red Rock settlement executed in July 2022, the Company issued an aggregate of 37,104 shares of common stock to six previous owners. The Company recognized the fair value for the issuance of 37,104 shares at $3 per share on the closing market price of February 4 through February 6, 2024, and recorded share loss from discontinued operations of $111,312 in the consolidated statement of operations.

 

·During the three months ended March 31, 2023, the Company issued 1,583 shares of common stock upon conversion of certain convertible notes.
v3.24.3
WARRANTS
3 Months Ended
Mar. 31, 2024
Warrants  
WARRANTS

 

10.WARRANTS

 

The table below sets forth warrant activity during the three months ended March 31, 2024 and 2023:  

           
   Number of
Warrants
   Weighted
Average
Exercise
Price
 
Balance at January 1, 2024   3,140   $0.015 
Granted        
Exercised        
Expired        
Balance at March 31, 2024   3,140    0.015 
Warrants Exercisable at March 31, 2024   3,140   $0.015 

 

   Number of
Warrants
   Weighted
Average
Exercise
Price
 
Balance at January 1, 2023   3,141   $0.015 
Granted        
Exercised        
Expired   (1)    
Balance at March 31, 2023   3,140    0.015 
Warrants Exercisable at March 31, 2023   3,140   $0.015 

 

v3.24.3
DISCONTINUED OPERATIONS
3 Months Ended
Mar. 31, 2024
Discontinued Operations and Disposal Groups [Abstract]  
DISCONTINUED OPERATIONS

 

11.DISCONTINUED OPERATIONS

 

On November 10, 2023, the Company sold Platinum Tax, which was a full-service tax resolution firm located in Los Angeles, California. Through this subsidiary the Company provided fee-based tax resolution services to individuals and companies that have federal and state tax liabilities by assisting clients to settle outstanding tax debts. As part of the Asset Purchase Agreement between the Company and the purchaser, the assets that were purchased included substantially all assets, rights, interests, and licenses except for banks accounts in place prior to the sale for the purchase consideration of 15% of cash collected by the purchaser within one year following the sale date.

 

In February 2024, as part of the Red Rock settlement executed in July 2022, the Company issued an aggregate of 37,104 shares of common stock to six previous owners. The Company recognized the fair value for the issuance of 37,104 shares at $3 per share on the closing market price of February 4 through February 6, 2024, and recorded share loss from discontinued operations of $111,312 in the consolidated statement of operations. 

          
Net liabilities of discontinued operations  March 31, 2024   December 31, 2023 
Cash  $342   $342 
Accounts receivable   300    300 
Accounts payable and accrued expenses   238,285    238,285 
Net liabilities of discontinued operations  $(237,643)  $(237,643)

 

 

           
   Three Months Ended March 31, 
Gain (Loss) from discontinued operations  2024   2023 
Revenue  $   $154,399 
Cost of sales       (26,829)
Selling, general and administrative expenses       (171,557)
Interest expense       (1,503)
Settlement loss   (111,312)    
Loss from discontinued operations  $(111,312)  $(45,490)

 

v3.24.3
GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET
3 Months Ended
Mar. 31, 2024
Goodwill And Identifiable Intangible Assets Net  
GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET

 

12.GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET

 

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, 2024 and 2023, the Company determined there to be no impairment.

 

v3.24.3
COMMITMENTS AND CONTINGENCIES
3 Months Ended
Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

 

13.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. In transaction, lessees and lessors are required to recognize and measure leases at either the effective date (the “effective date method”) or the beginning of the earliest period presented (the “comparative method”) using a modified retrospective approach. Under the effective date method, the Company’s comparative period reporting is unchanged. In contrast, under the comparative method, the Company’s date of initial application is the beginning of the earliest comparative period presented, and the Topic 842 transition guidance is then applied to all comparative periods presented. Further, under either transition method, the standard includes certain practical expedients intended to ease the burden of adoption. 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, 2024. The Company recorded operating lease expenses of $100,362 and $77,852 for the three months ended March 31, 2024 and 2023, respectively. 

 

The Company has operating leases with future commitments as follows:  

     
   Amount 
2024 (remainder of year)  $195,934 
2025   153,096 
2026   60,862 
Total  $409,892 

 

The following table summarizes supplemental information about the Company’s leases: 

     
Weighted-average remaining lease term     2.2 years
Weighted-average discount rate     4.49 %

 

Employees

 

The Company agreed to pay $360,000 per year and $200,000 of targeted annual incentives to the Chief Executive Officer based on his employment agreement since July 1, 2020, of which currently 50% is paid in cash and 50% is accrued. The total outstanding accrued compensation as of March 31, 2024 and December 31, 2023 was $2,365,500.

 

The Company agreed to pay $360,000 per year and $200,000 of targeted annual incentives to the Chairman of the Board based on his employment agreement since July 1, 2020, of which currently 50% is paid in cash and 50% is accrued. The total outstanding accrued compensation as of March 31, 2024 and December 31, 2023 was $2,440,500 and $2,350,500, respectively.

 

The Company agreed to pay $228,000 per year to the Chief Finance Officer based on his employment agreement effective as of January 2, 2024. There was no outstanding accrued compensation as of March 31, 2024.

 

The Company agreed to pay $210,000 per year to the Chief Accounting Officer based on her employment agreement effective as of January 2, 2024. There was no outstanding accrued compensation as of March 31, 2024.

 

The Company agreed to pay $156,000 per year to the previous Chief Financial Officer based on his amended employment agreement executed on May 15, 2021. The total outstanding accrued compensation as of March 31, 2024 and December 31, 2023 was $17,057.

 

The Company entered into a management agreement effective May 31, 2021 for compensation to the principals of Nova in the form of an annual base salaries of $372,000 to one of the three doctors, $450,000 to the second, and $372,000 to the third doctor. Collectively, as a group, such principals will receive an annual cash bonus and stock equity set forth below, which will be conditioned upon the Company achieving 100% of the annual objectives of financial performance goals as set forth below.

 

     
Year Minimum Annual Nova EBITDA Cash Annual Bonus Series J Preferred Stock
2021 $2.0M $120,000 120,000 Shares
2022 $2.4M $150,000 135,000 Shares
2023 $3.7M $210,000 150,000 Shares
2024 $5.5M $300,000 180,000 Shares
2025 $8.0M $420,000 210,000 Shares

 

v3.24.3
LEGAL PROCEEDINGS
3 Months Ended
Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract]  
LEGAL PROCEEDINGS

 

14.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. Management is not currently aware of any such legal proceedings or claims that it believes will have a material adverse effect on the Company’s business, financial condition, or operating results.

v3.24.3
INCOME TAXES
3 Months Ended
Mar. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES

 

15.INCOME TAXES

 

At March 31, 2024, the Company had federal and state net operating loss carry forwards of approximately $24 million that expire in various years through the year 2039. Due to carryforwards of past net operating losses, there is no provision for current federal or state income taxes for the three months ended March 31, 2024 and 2023.

 

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.

v3.24.3
SEGMENT REPORTING
3 Months Ended
Mar. 31, 2024
Segment Reporting [Abstract]  
SEGMENT REPORTING

  

16.SEGMENT REPORTING

 

As of March 31, 2024, 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. Corporate administration costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated to the three operating segments. Other revenue consists of nonrecurring items.

 

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 numerous tools and methods to evaluate and measure of its subsidiaries’ success. To help succeed, management retains the prior owners of the subsidiaries and allow them to do what they do best is run the business. Additionally, management monitors key metrics primarily revenues and net income from operations. 

          
Asset:  March 31, 2024   December 31, 2023 
Healthcare  $20,227,446   $18,955,991 
Real Estate   586,582    587,456 
Others   1,791,282    1,202,364 
Consolidated assets  $22,605,310   $20,745,811 

 

   Three Months Ended March 31, 
   2024
(Restated)
   2023 
Revenues:          
Healthcare  $2,322,132   $2,706,399 
Real Estate        
Consolidated revenues  $2,322,132   $2,706,399 
           
Cost of sales:          
Healthcare  $948,154   $956,295 
Real Estate        
Consolidated cost of sales  $948,154   $956,295 
           
Income from operations from subsidiaries          
Healthcare  $1,151,284   $1,278,239 
Real Estate   (874)   (97)
Income from operations from subsidiaries  $1,150,410   $1,278,142 
           
Loss from operations from Cardiff Lexington  $(931,418)  $(520,594)
Total income from operations  $218,992   $757,548 
           
Income before taxes          
Healthcare  $1,151,284   $817,098 
Real Estate   (874)   (97)
Corporate, administration and other non-operating expenses   (1,322,202)   (787,502)
Consolidated income (loss) before taxes  $(171,792)  $29,499 

 

v3.24.3
SUBSEQUENT EVENTS
3 Months Ended
Mar. 31, 2024
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

 

17.SUBSEQUENT EVENTS

 

The Company has evaluated its operations subsequent to March 31, 2024 to the date these consolidated financial statements were available to be issued and determined the following subsequent events and transactions required disclosure in these consolidated financial statements.

 

On May 8, 2024, the Company filed the amendment of Articles of Incorporation. The total amended authorized shares are 350,000,000 shares of capital stock, consisting of 300,000,000 shares of common stock, $0.001 par value and 50,000,000 shares of preferred stock, $0.001 par value per share.

 

Subsequent to March 31, 2024, an aggregate of 264,750 shares of series B preferred stock were converted into an aggregate of 529,500 shares of common stock.

 

Subsequent to March 31, 2024, an aggregate of 29 shares of series C preferred stock were converted into an aggregate of 290,000 shares of common stock.

 

Subsequent to March 31, 2024, an aggregate of 80,375 shares of series E preferred stock were converted into an aggregate of 160,750 shares of common stock.

 

Subsequent to March 31, 2024, an aggregate of 438,500 shares of series I preferred stock were converted into an aggregate of 877,000 shares of common stock.

 

Subsequent to March 31, 2024, an aggregate of 171,359 shares of series J preferred stock were converted into an aggregate of 342,718 shares of common stock.

 

Subsequent to June 30, 2024, the Company identified a reduction in the settlement realization rate of its gross contractual billings as a result of increasing its lookback period and refreshing its data obtained from its third party billing company. The Company completed a thorough review of its third party billing data, including reviewing historical reports and new reporting methods as a part of its updated analysis. Based on the new data analysis of its historical settlement realization rates, using a 24-month lookback analysis the Company determined its estimate of its settlement realization rate was reduced from 49% to 44.2%. The Company applied this reduced settlement realization rate against its accounts receivable balance resulting in a $1.7 million reduction in its accounts receivable and revenue in the third quarter 2024. The Company will continue to evaluate its estimate of its settlement realization rates in the future, which will include a monthly review of the Company’s trailing 24-month historical settlement realization rate, along with estimates of current and pending settlements through ongoing discussions with attorneys, doctors and the Company’s third party medical billing company in order to determine its variable consideration under ASC 606 and the net transaction price.

 

v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Organization and Nature of Operations

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 conducted through, and its income derived from, its various subsidiaries, which includes:

 

·Edge View Properties, Inc. (“Edge View”), which was acquired on July 16, 2014;
   
·Platinum Tax Defenders (“Platinum Tax”), which was acquired on July 31, 2018 and sold on November 10, 2023; and
   
·Nova Ortho and Spine, LLC (“Nova”), which was acquired on May 31, 2021.

 

Principles of Consolidation

Principles of Consolidation

 

The consolidated financial statements include the accounts of Cardiff and its wholly owned subsidiaries, Edge View, Platinum Tax and Nova (collectively, the “Company”). Subsidiaries shown as discontinued operations include Platinum Tax. All significant intercompany accounts and transactions are eliminated in consolidation. Subsidiaries discontinued are shown as discontinued operations.

 

Reverse Stock Split

Reverse Stock Split

 

On January 9, 2024, the Company effected a 1-for-75,000 reverse split of its outstanding common stock. All outstanding shares of common stock and warrant to purchase common stock were adjusted to reflect the 1-for-75,000 reverse split, with respective exercise prices of the warrants proportionately increased. The conversion prices of the outstanding convertible notes and certain series of preferred stock were adjusted to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion.

 

All share and per share data throughout these consolidated financial statements have been retroactively adjusted to reflect the reverse stock split. The total number of authorized shares of common stock did not change. As a result of the reverse stock split, an amount equal to the decreased value of the common stock was reclassified from “common stock” to “additional paid-in capital.”

 

Use of Estimates

Use of Estimates

 

The preparation of financial statements in conformity with United States generally accepted accounting principles (“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.

 

Accounts Receivable

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 and insures payment in full from insurance settlements. Accounts receivable consists of amounts due from attorneys and insurance providers for services provided to patients under the letter of protection. The 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. 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% 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 0.5% to 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 regular basis and updating its estimates of credit losses to adjust for changes in loss data. The Company typically collects on its accounts receivable between eighteen 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, 2024 and December 31, 2023, the Company’s allowance for credit losses was $122,190. The Company recognized $270,000 of credit loss expense during the three months ended March 31, 2023, which is included in selling, general and administrative expenses in the condensed consolidated statement of operations. The Company did not recognize any credit loss expense during the three months ended March 31, 2024.

 

Property and Equipment

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: 

 
Classification Useful Life
Equipment, furniture, and fixtures 5 - 7 years
Medical equipment 10 years
Leasehold improvements 10 years or lease term, if shorter

 

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

 

Goodwill and indefinite-lived assets are not amortized but are evaluated for impairment annually or when indicators of a potential impairment are present. The Company’s impairment testing of goodwill is performed separately from its impairment testing of indefinite-lived intangibles. 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 as such to determine whether it is more likely than not the fair value is less than the carry amount, including goodwill. The annual evaluation for impairment of indefinite-lived intangibles and, if then needed after the first step, Goodwill, 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, 2024 and 2023, the Company did not recognize any goodwill impairment. The Company based this decision on impairment testing of the underlying assets, expected cash flows, decreased asset value and other factors.

 

Valuation of Long-lived Assets

Valuation of Long-lived Assets

 

In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 360-10-5, “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

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 contact
     
  · Determination of the transaction price
     
  · Allocation of the transaction price to the separate performance obligations
     
  · Recognition of revenue when performance obligations are satisfied.

 

The Company applies the five-step model when it is probable that the Company will settle the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and 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 for both its contract and service fees each 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. Revenue is recognized when obligations under the terms of the contract with the Company’s patients are satisfied; generally, at the time of patient care.

 

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 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 is based on a historical 12-month 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, which handles settlement claims and negotiations. Settlement amounts are presented to the Company’s third party medical billing company. Settlement rates of 49% or higher based on gross billed amounts are typically accepted without further negotiation. Proposed settlement rates below 49% are negotiated 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-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.

 

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.

 

Prior to its fiscal year 2024, the Company has historically had a 49% settlement realization rate from its total gross billed charges. Accordingly, the Company has historically recognized net healthcare service revenue as 49% of gross billed charges. However, during the three months ended March 31, 2024, the Company underwent efforts to accelerate cash settlements by accepting lower settlement realization rates in order to settle outstanding accounts receivable more quickly. As a result of the new effort, during the three months ended March 31, 2024 the Company realized a 42.9% average settlement rate of its gross billed charges during this time frame, which were historically recorded in accounts receivable and revenue at 49% of gross billings. As a result of this reduced settlement realization percentage, the Company recorded a reduction to net revenue of $339,834 for the three months ended March 31, 2024.

 

The Company will continue to reassess its settlement realization rate in the future and incorporate changes in settlement realization in its estimate of variable consideration due under its contracts. See additional disclosure in Note 17. Subsequent Events regarding the Company’s review of its settlement realization percentage subsequent to the quarter ended March 31, 2024. 

 

Contract Fees (Non-PIP)

 

The Company has contract fees for amounts earned from its Non-Personal Injury Protection (“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 us 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 eighteen 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. For the three months ended March 31, 2023, the Company factored a total of $544,196 of its accounts receivable in exchange for cash of $253,750. The Company ceased factoring of accounts receivable in the first quarter of 2023.

 

Advertising Costs

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 and changes in stockholders’ equity. The Company recognized advertising and marketing expense of $82,051 and $83,223 for the three months ended March 31, 2024 and 2023, respectively.

 

Fair Value Measurements

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). 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.

 

Distinguishing Liabilities from Equity

Distinguishing Liabilities from Equity

 

The Company accounts for its series N senior convertible preferred stock, series R convertible preferred stock, and 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.

 

Stock-Based Compensation

Stock-Based Compensation

 

The Company accounts for its stock-based compensation in which the Company obtains 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 the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.

 

Generally, all forms of share-based payments, including stock option grants, warrants and 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 expense resulting from share-based payments is recorded in the consolidated statements of operations.

 

 

Income Taxes

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.

 

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.

 

As of March 31, 2024 and 2023, the Company did not have any interest and penalties associated with tax positions and did not have any significant unrecognized uncertain tax positions.

 

Income (Loss) per Share

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. 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

Going Concern

 

The accompanying 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 recurring operating losses since its inception and has an accumulated deficit of $69,118,853 as of March 31, 2024. These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might result if the Company is unable to continue as a going concern.

 

 

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 is in continuous discussions with 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.

 

Recent Accounting Standards

Recent Accounting Standards

 

The FASB issued ASU 2023-07 on November 27, 2023. The amendments “improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.” In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable “investors to better understand an entity’s overall performance” and assess “potential future cash flows.” The Management is evaluating the impact of ASU 2023-07 on the consolidated financial statements and does not expect there to be any changes or impact to the financial statements.

v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]  
Schedule of estimated useful lives
 
Classification Useful Life
Equipment, furniture, and fixtures 5 - 7 years
Medical equipment 10 years
Leasehold improvements 10 years or lease term, if shorter
v3.24.3
RESTATEMENT OF FINANCIAL STATEMENTS (Tables)
3 Months Ended
Mar. 31, 2024
Accounting Changes and Error Corrections [Abstract]  
Restatement of financial statements
Restatement of financial statements  Impact of correction of error 
   As previously reported   Adjustments   As restated 
For the three months ended March 31, 2024 (unaudited)            
Revenue  $2,661,966   $(339,834)  $2,322,132 
Selling, general and administrative  $1,191,230   $(339,834)  $851,396 
Schedule of restated financial information
            
   Impact of correction of error 
March 31, 2023 (Unaudited)  As previously reported   Adjustments   As restated 
             
Total assets  $14,284,585   $(8,673)  $14,275,912 
                
Total liabilities   10,745,097    (8,673)   10,736,424 
                
Mezzanine equity   5,171,861    283,118    5,454,979 
                
Total stockholders' equity  $(1,632,373)  $(283,118)  $(1,915,491)

 

ii. Statement of operations

 

   Impact of correction of error 
Three months ended March 31, 2023 (Unaudited)  As previously reported   Adjustments   As restated 
             
Revenue  $2,860,798   $(154,399)  $2,706,399 
Cost of sales   983,124    (26,829)   956,295 
Gross profit   1,877,674    (127,570)   1,750,104 
Operating expense   1,164,113    (171,557)   992,556 
Income from operations  $713,561   $43,987   $757,548 
Other income (expense), net   (729,552)   1,503    (728,049)
Net loss before discontinued operations   (15,991)   45,490    29,499 
Loss from discontinued operations       (45,490)   (45,490)
Net loss for the period  $(15,991)  $   $(15,991)
Preferred stock dividends  $(336,811)  $(8,136)  $(344,947)
Net loss attributable to common shareholders  $(352,802)  $(8,136)  $(360,938)
Basic and diluted earnings (loss) per share for continuing operations  $(30)  $(1)  $(31)
v3.24.3
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)
3 Months Ended
Mar. 31, 2024
Payables and Accruals [Abstract]  
Schedule of accounts payable and accrued expenses
        
   March 31, 2024   December 31, 2023 
Accounts payable  $632,045   $720,774 
Accrued credit cards   9,884    26,645 
Accrued liability for settlements of previously factored receivables   1,385,084    1,247,772 
Accrued property taxes   5,346    5,346 
Accrued professional fees   29,122    29,122 
Accrued payroll   42,628    17,472 
Total  $2,104,109   $2,047,131 
v3.24.3
PLANT AND EQUIPMENT, NET (Tables)
3 Months Ended
Mar. 31, 2024
Property, Plant and Equipment [Abstract]  
Schedule of property and equipment
        
   March 31, 2024   December 31, 2023 
Medical equipment  $96,532   $96,532 
Computer Equipment   9,189    9,189 
Furniture, fixtures and equipment   15,079    15,079 
Leasehold Improvement   15,950    15,950 
Total   136,750    136,750 
Less: accumulated depreciation   (105,454)   (102,089)
Property and equipment, net  $31,296   $34,661 
v3.24.3
NOTES AND LOANS PAYABLE (Tables)
3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
Schedule of notes payable
        
   March 31, 2024   December 31, 2023 
Notes and loans payable  $3,743,856   $2,280,743 
Less current portion   (3,599,345)   (2,136,077)
Long-term portion  $144,511   $144,666 
Schedule of maturities of long-term debt
    
   Amount 
2024 (remainder of year)  $3,599,345 
2025   4,983 
2026   4,983 
2027   4,983 
2028   4,983 
Thereafter   124,579 
Total  $3,743,856 
v3.24.3
CONVERTIBLE NOTES PAYABLE (Tables)
3 Months Ended
Mar. 31, 2024
Debt Disclosure [Abstract]  
Schedule of convertible notes
        
   March 31, 2024   December 31, 2023 
Convertible notes payable  $3,831,850   $3,831,850 
Discounts on convertible notes payable   (11,305)   (24,820)
Total convertible debt less debt discount   3,820,545    3,807,030 
Current portion   3,820,545    3,807,030 
Long-term portion  $   $ 
Schedule of convertible notes payable
                                              
Note #  Issuance  Maturity  Principal Balance 12/31/23   New Loan   Principal Conversions  

Cash Paydown

   Shares Issued Upon Conversion   Principal Balance 03/31/24   Accrued Interest on Convertible Debt at 12/31/23   Interest Expense On Convertible Debt For the Period Ended 03/31/24   Accrued Interest on Convertible Debt at 03/31/24   Unamortized Debt Discount At 03/31/24 
9  09/12/2016  09/12/2017  $50,080                1,222   $50,080   $5,581   $2,496    7,399     
10  01/24/2017  01/24/2018   55,000                    55,000    80,875    2,742    83,618     
10-1  02/10/2023  02/10/2024   50,000                    50,000    6,658    1,870    8,527     
10-2  03/30/2023  03/30/2024   25,000                    25,000    2,836    935    3,771     
10-3  08/11/2023  08/11/2024   25,000                    25,000    1,469    935    2,404     
29-2  11/08/2019  11/08/2020   36,604                    36,604    10,109    2,190    12,299     
31  08/28/2019  08/28/2020                           8,385             
37-1  09/03/2020  06/30/2021   113,667                    113,667    64,929    5,101    70,030     
37-2  11/02/2020  08/31/2021   113,167                    113,167    63,594    5,079    68,673     
37-3  12/29/2020  09/30/2021   113,166                    113,166    62,558    5,079    67,637     
40-1  09/22/2022  09/22/2024   2,600,000                    2,600,000    252,665    64,821    267,488     
40-2  11/04/2022  09/22/2024   68,667                    68,667    7,939    1,712    9,651     
40-3  11/28/2022  09/22/2024   68,667                    68,667    7,506    1,712    9,217     
40-4  12/21/2022  09/22/2024   68,667                    68,667    7,054    1,712    8,766     
40-5  01/24/2023  03/21/2024   90,166                    90,166    8,284    2,248    10,531     
40-6  03/21/2023  09/22/2024   139,166                    139,166    10,671    3,470    14,141     
40-7  06/05/2023  06/05/2024   139,166                    139,166    7,826    3,470    11,295    6,530 
40-8  06/13/2023  06/13/2024   21,167                    21,167    1,127    528    1,654    1,032 
40-9  07/19/2023  07/19/2024   35,500                    35,500    1,605    885    2,490    2,650 
40-10  07/24/2023  07/24/2024   14,000                    14,000    614    349    963    1,093 
41  08/25/2023  08/25/2024   5,000                    5,000    175    125    300      
         $3,831,850   $   $   $    1,222   $3,831,850   $612,460   $107,459   $660,854   $11,305 
v3.24.3
WARRANTS (Tables)
3 Months Ended
Mar. 31, 2024
Warrants  
Schedule of warrant activity
           
   Number of
Warrants
   Weighted
Average
Exercise
Price
 
Balance at January 1, 2024   3,140   $0.015 
Granted        
Exercised        
Expired        
Balance at March 31, 2024   3,140    0.015 
Warrants Exercisable at March 31, 2024   3,140   $0.015 

 

   Number of
Warrants
   Weighted
Average
Exercise
Price
 
Balance at January 1, 2023   3,141   $0.015 
Granted        
Exercised        
Expired   (1)    
Balance at March 31, 2023   3,140    0.015 
Warrants Exercisable at March 31, 2023   3,140   $0.015 
v3.24.3
DISCONTINUED OPERATIONS (Tables)
3 Months Ended
Mar. 31, 2024
Discontinued Operations and Disposal Groups [Abstract]  
Schedule of discontinued operations
          
Net liabilities of discontinued operations  March 31, 2024   December 31, 2023 
Cash  $342   $342 
Accounts receivable   300    300 
Accounts payable and accrued expenses   238,285    238,285 
Net liabilities of discontinued operations  $(237,643)  $(237,643)

 

 

           
   Three Months Ended March 31, 
Gain (Loss) from discontinued operations  2024   2023 
Revenue  $   $154,399 
Cost of sales       (26,829)
Selling, general and administrative expenses       (171,557)
Interest expense       (1,503)
Settlement loss   (111,312)    
Loss from discontinued operations  $(111,312)  $(45,490)
v3.24.3
COMMITMENTS AND CONTINGENCIES (Tables)
3 Months Ended
Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract]  
Schedule of operating leases
     
   Amount 
2024 (remainder of year)  $195,934 
2025   153,096 
2026   60,862 
Total  $409,892 
Schedule of supplemental information about leases
     
Weighted-average remaining lease term     2.2 years
Weighted-average discount rate     4.49 %
Schedule of annual objectives of financial performance
     
Year Minimum Annual Nova EBITDA Cash Annual Bonus Series J Preferred Stock
2021 $2.0M $120,000 120,000 Shares
2022 $2.4M $150,000 135,000 Shares
2023 $3.7M $210,000 150,000 Shares
2024 $5.5M $300,000 180,000 Shares
2025 $8.0M $420,000 210,000 Shares
v3.24.3
SEGMENT REPORTING (Tables)
3 Months Ended
Mar. 31, 2024
Segment Reporting [Abstract]  
Schedule of revenues and net income from operations
          
Asset:  March 31, 2024   December 31, 2023 
Healthcare  $20,227,446   $18,955,991 
Real Estate   586,582    587,456 
Others   1,791,282    1,202,364 
Consolidated assets  $22,605,310   $20,745,811 

 

   Three Months Ended March 31, 
   2024
(Restated)
   2023 
Revenues:          
Healthcare  $2,322,132   $2,706,399 
Real Estate        
Consolidated revenues  $2,322,132   $2,706,399 
           
Cost of sales:          
Healthcare  $948,154   $956,295 
Real Estate        
Consolidated cost of sales  $948,154   $956,295 
           
Income from operations from subsidiaries          
Healthcare  $1,151,284   $1,278,239 
Real Estate   (874)   (97)
Income from operations from subsidiaries  $1,150,410   $1,278,142 
           
Loss from operations from Cardiff Lexington  $(931,418)  $(520,594)
Total income from operations  $218,992   $757,548 
           
Income before taxes          
Healthcare  $1,151,284   $817,098 
Real Estate   (874)   (97)
Corporate, administration and other non-operating expenses   (1,322,202)   (787,502)
Consolidated income (loss) before taxes  $(171,792)  $29,499 
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Estimated useful lives)
3 Months Ended
Mar. 31, 2024
Equipment [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, useful live 5 - 7 years
Medical Equipment [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, useful live 10 years
Leasehold Improvements [Member]  
Property, Plant and Equipment [Line Items]  
Property and equipment, useful live 10 years or lease term, if shorter
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
3 Months Ended
Jan. 09, 2024
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Product Information [Line Items]        
Reverse stock split 1-for-75,000 reverse split      
Accounts Receivable, Allowance for Credit Loss   $ 122,190   $ 270,000
Goodwill impairment amount   0 $ 0  
Marketing and Advertising Expense   82,051 83,223  
Uncertain tax positions   0   0
Accumulated deficit   69,118,853   $ 68,684,115
Service Fees [Member]        
Product Information [Line Items]        
Increase (decrease) in revenue   $ 339,834    
Contract Fees [Member]        
Product Information [Line Items]        
Accounts receivable factored     544,196  
Cash received from accounts receivable factored     $ 253,750  
v3.24.3
RESTATEMENT OF FINANCIAL STATEMENTS (Details - March 2024) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
New Accounting Pronouncements or Change in Accounting Principle [Line Items]    
Revenues $ 2,322,132 $ 2,706,399
Selling, general and administrative expenses 851,396 987,921
Previously Reported [Member]    
New Accounting Pronouncements or Change in Accounting Principle [Line Items]    
Revenues 2,661,966 2,860,798
Selling, general and administrative expenses 1,191,230  
Revision of Prior Period, Adjustment [Member]    
New Accounting Pronouncements or Change in Accounting Principle [Line Items]    
Revenues (339,834) $ (154,399)
Selling, general and administrative expenses $ (339,834)  
v3.24.3
Schedule of restated financial information (Details) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Dec. 31, 2022
New Accounting Pronouncements or Change in Accounting Principle [Line Items]        
Total assets $ 22,605,310   $ 20,745,811  
Total Liabilities 15,353,675   14,124,289  
Total shareholders' equity 1,209,897 $ (1,915,491) $ 731,418 $ (1,744,791)
Revenue 2,322,132 2,706,399    
Cost of sales 948,154 956,295    
Gross margin 1,373,978 1,750,104    
Operating expense 1,154,986 992,556    
Income from operations 218,992 757,548    
Other income (expense), net (390,784) (728,049)    
Net loss before discontinued operations (171,792) 29,499    
Loss from discontinued operations   (45,490)    
Net loss for the period (283,104) (15,991)    
Net loss attributable to common shareholders (434,738) (360,938)    
Previously Reported [Member]        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]        
Total assets   14,284,585    
Total Liabilities   10,745,097    
Mezzanine equity   5,171,861    
Total shareholders' equity   (1,632,373)    
Revenue 2,661,966 2,860,798    
Cost of sales   983,124    
Gross margin   1,877,674    
Operating expense   1,164,113    
Income from operations   713,561    
Other income (expense), net   (729,552)    
Net loss before discontinued operations   (15,991)    
Loss from discontinued operations   0    
Net loss for the period   (15,991)    
Preferred stock dividends   (336,811)    
Net loss attributable to common shareholders   $ (352,802)    
Basic earnings (loss) per share for continuing operations   $ (30)    
Diluted earnings (loss) per share for continuing operations   $ (30)    
Revision of Prior Period, Adjustment [Member]        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]        
Total assets   $ (8,673)    
Total Liabilities   (8,673)    
Mezzanine equity   283,118    
Total shareholders' equity   (283,118)    
Revenue $ (339,834) (154,399)    
Cost of sales   (26,829)    
Gross margin   (127,570)    
Operating expense   (171,557)    
Income from operations   43,987    
Other income (expense), net   1,503    
Net loss before discontinued operations   45,490    
Loss from discontinued operations   (45,490)    
Net loss for the period   0    
Preferred stock dividends   (8,136)    
Net loss attributable to common shareholders   $ (8,136)    
Basic earnings (loss) per share for continuing operations   $ (1)    
Diluted earnings (loss) per share for continuing operations   $ (1)    
Restated [Member]        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]        
Total assets   $ 14,275,912    
Total Liabilities   10,736,424    
Mezzanine equity   5,454,979    
Total shareholders' equity   (1,915,491)    
Revenue   2,706,399    
Cost of sales   956,295    
Gross margin   1,750,104    
Operating expense   992,556    
Income from operations   757,548    
Other income (expense), net   (728,049)    
Net loss before discontinued operations   29,499    
Loss from discontinued operations   (45,490)    
Net loss for the period   (15,991)    
Preferred stock dividends   (344,947)    
Net loss attributable to common shareholders   $ (360,938)    
Basic earnings (loss) per share for continuing operations   $ (31)    
Diluted earnings (loss) per share for continuing operations   $ (31)    
v3.24.3
RESTATEMENT OF FINANCIAL STATEMENTS (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Accounting Changes and Error Corrections [Abstract]    
Reclassification adjustment $ 1,804,774  
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest   $ 45,490
v3.24.3
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Payables and Accruals [Abstract]    
Accounts payable $ 632,045 $ 720,774
Accrued credit cards 9,884 26,645
Accrued liability for settlements of previously factored receivables 1,385,084 1,247,772
Accrued property taxes 5,346 5,346
Accrued professional fees 29,122 29,122
Accrued payroll 42,628 17,472
Total $ 2,104,109 $ 2,047,131
v3.24.3
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details Narrative) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Payables and Accruals [Abstract]    
Accrued taxes, penalties and interest $ 5,346 $ 5,346
v3.24.3
PLANT AND EQUIPMENT, NET (Details) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Property, Plant and Equipment [Abstract]    
Medical equipment $ 96,532 $ 96,532
Computer Equipment 9,189 9,189
Furniture, fixtures and equipment 15,079 15,079
Leasehold Improvement 15,950 15,950
Total 136,750 136,750
Less: accumulated depreciation (105,454) (102,089)
Property and equipment, net $ 31,296 $ 34,661
v3.24.3
PLANT AND EQUIPMENT, NET (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Property, Plant and Equipment [Abstract]    
Depreciation expense $ 3,365 $ 4,635
v3.24.3
LAND (Details Narrative) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Real Estate [Abstract]    
Land value $ 540,000 $ 540,000
v3.24.3
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2024
Dec. 31, 2023
Previous Owners Of Edge View [Member]    
Related Party Transaction [Line Items]    
Due from related party $ 4,979 $ 4,979
Chairman [Member]    
Related Party Transaction [Line Items]    
Short term debt 45,844 $ 120,997
Payment made to chairman $ 75,153  
v3.24.3
NOTES AND LOANS PAYABLE (Details - Notes payable) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Debt Disclosure [Abstract]    
Notes and loans payable $ 3,743,856 $ 2,280,743
Less current portion (3,599,345) (2,136,077)
Long-term portion $ 144,511 $ 144,666
v3.24.3
NOTES AND LOANS PAYABLE (Details - Long term debt maturity)
Mar. 31, 2024
USD ($)
Debt Disclosure [Abstract]  
2024 (remainder of year) $ 3,599,345
2025 4,983
2026 4,983
2027 4,983
2028 4,983
Thereafter 124,579
Total $ 3,743,856
v3.24.3
NOTES AND LOANS PAYABLE (Details Narrative) - USD ($)
Sep. 29, 2023
Jun. 02, 2020
Mar. 31, 2024
Dec. 31, 2023
Debt Instrument [Line Items]        
Notes payable outstanding     $ 3,743,856 $ 2,280,743
Line of credit maximum borrowing capacity $ 4,500,000      
Line of credit outstanding balance     3,583,373 2,120,100
Line of credit maturity date Sep. 29, 2025      
Loans And Notes Payable [Member]        
Debt Instrument [Line Items]        
Notes payable outstanding     10,989 10,989
Accrued interest     7,876 7,547
SBA Loan [Member]        
Debt Instrument [Line Items]        
Accrued interest     0 956
Proceeds from loans   $ 150,000    
Interest rate   3.75%    
Principal balance     $ 149,494 $ 149,655
v3.24.3
CONVERTIBLE NOTES PAYABLE (Details - Convertible notes) - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Debt Instrument [Line Items]    
Discounts on convertible notes payable $ (11,305) $ (24,820)
Total convertible debt less debt discount 3,820,545 3,807,030
Current portion 3,820,545 3,807,030
Long-term portion 0 0
Convertible Notes Payables [Member]    
Debt Instrument [Line Items]    
Convertible notes payable $ 3,831,850 $ 3,831,850
v3.24.3
CONVERTIBLE NOTES PAYABLE (Details- Convertible debt instruments) - USD ($)
3 Months Ended
Mar. 31, 2024
Dec. 31, 2023
Debt Instrument [Line Items]    
Principal Balance $ 3,831,850 $ 3,831,850
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 1,222  
Accrued Interest on Convertible Debt $ 660,854 612,460
Interest Expense On Convertible Debt 107,459  
Unamortized Debt Discount $ 11,305 24,820
Convertible Note 9 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Sep. 12, 2016  
Debt Maturity date Sep. 12, 2017  
Principal Balance $ 50,080 50,080
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 1,222  
Accrued Interest on Convertible Debt $ 7,399 5,581
Interest Expense On Convertible Debt 2,496  
Unamortized Debt Discount $ 0  
Convertible Note 10 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Jan. 24, 2017  
Debt Maturity date Jan. 24, 2018  
Principal Balance $ 55,000 55,000
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 83,618 80,875
Interest Expense On Convertible Debt 2,742  
Unamortized Debt Discount $ 0  
Convertible Note 10-1 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Feb. 10, 2023  
Debt Maturity date Feb. 10, 2024  
Principal Balance $ 50,000 50,000
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 8,527 6,658
Interest Expense On Convertible Debt 1,870  
Unamortized Debt Discount $ 0  
Convertible Note 10-2 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Mar. 30, 2023  
Debt Maturity date Mar. 30, 2024  
Principal Balance $ 25,000 25,000
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 3,771 2,836
Interest Expense On Convertible Debt 935  
Unamortized Debt Discount $ 0  
Convertible Note 10-3 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Aug. 11, 2023  
Debt Maturity date Aug. 11, 2024  
Principal Balance $ 25,000 25,000
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 2,404 1,469
Interest Expense On Convertible Debt 935  
Unamortized Debt Discount $ 0  
Convertible Note 29-2 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Nov. 08, 2019  
Debt Maturity date Nov. 08, 2020  
Principal Balance $ 36,604 36,604
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 12,299 10,109
Interest Expense On Convertible Debt 2,190  
Unamortized Debt Discount $ 0  
Convertible Note 31 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Aug. 28, 2019  
Debt Maturity date Aug. 28, 2020  
Principal Balance $ 0 0
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 0 8,385
Interest Expense On Convertible Debt 0  
Unamortized Debt Discount $ 0  
Convertible Note 37-1 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Sep. 03, 2020  
Debt Maturity date Jun. 30, 2021  
Principal Balance $ 113,667 113,667
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 70,030 64,929
Interest Expense On Convertible Debt 5,101  
Unamortized Debt Discount $ 0  
Convertible Note 37-2 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Nov. 02, 2020  
Debt Maturity date Aug. 31, 2021  
Principal Balance $ 113,167 113,167
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 68,673 63,594
Interest Expense On Convertible Debt 5,079  
Unamortized Debt Discount $ 0  
Convertible Note 37-3 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Dec. 29, 2020  
Debt Maturity date Sep. 30, 2021  
Principal Balance $ 113,166 113,166
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 67,637 62,558
Interest Expense On Convertible Debt 5,079  
Unamortized Debt Discount $ 0  
Convertible Note 40-1 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Sep. 22, 2022  
Debt Maturity date Sep. 22, 2024  
Principal Balance $ 2,600,000 2,600,000
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 267,488 252,665
Interest Expense On Convertible Debt 64,821  
Unamortized Debt Discount $ 0  
Convertible Note 40-2 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Nov. 04, 2022  
Debt Maturity date Sep. 22, 2024  
Principal Balance $ 68,667 68,667
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 9,651 7,939
Interest Expense On Convertible Debt 1,712  
Unamortized Debt Discount $ 0  
Convertible Note 40-3 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Nov. 28, 2022  
Debt Maturity date Sep. 22, 2024  
Principal Balance $ 68,667 68,667
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 9,217 7,506
Interest Expense On Convertible Debt 1,712  
Unamortized Debt Discount $ 0  
Convertible Note 40-4 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Dec. 21, 2022  
Debt Maturity date Sep. 22, 2024  
Principal Balance $ 68,667 68,667
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 8,766 7,054
Interest Expense On Convertible Debt 1,712  
Unamortized Debt Discount $ 0  
Convertible Note 40-5 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Jan. 24, 2023  
Debt Maturity date Mar. 21, 2024  
Principal Balance $ 90,166 90,166
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 10,531 8,284
Interest Expense On Convertible Debt 2,248  
Unamortized Debt Discount $ 0  
Convertible Note 40-6 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Mar. 21, 2023  
Debt Maturity date Sep. 22, 2024  
Principal Balance $ 139,166 139,166
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 14,141 10,671
Interest Expense On Convertible Debt 3,470  
Unamortized Debt Discount $ 0  
Convertible Note 40-7 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Jun. 05, 2023  
Debt Maturity date Jun. 05, 2024  
Principal Balance $ 139,166 139,166
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 11,295 7,826
Interest Expense On Convertible Debt 3,470  
Unamortized Debt Discount $ 6,530  
Convertible Note 40-8 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Jun. 13, 2023  
Debt Maturity date Jun. 13, 2024  
Principal Balance $ 21,167 21,167
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 1,654 1,127
Interest Expense On Convertible Debt 528  
Unamortized Debt Discount $ 1,032  
Convertible Note 40-9 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Jul. 19, 2023  
Debt Maturity date Jul. 19, 2024  
Principal Balance $ 35,500 35,500
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 2,490 1,605
Interest Expense On Convertible Debt 885  
Unamortized Debt Discount $ 2,650  
Convertible Note 40-10 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Jul. 24, 2023  
Debt Maturity date Jul. 24, 2024  
Principal Balance $ 14,000 14,000
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 963 614
Interest Expense On Convertible Debt 349  
Unamortized Debt Discount $ 1,093  
Convertible Note 41 [Member]    
Debt Instrument [Line Items]    
Debt Issuance date Aug. 25, 2023  
Debt Maturity date Aug. 25, 2024  
Principal Balance $ 5,000 5,000
New Loans 0  
Principal Conversions 0  
Cash Paydown $ 0  
Shares Issued Upon Conversion 0  
Accrued Interest on Convertible Debt $ 300 $ 175
Interest Expense On Convertible Debt $ 125  
v3.24.3
CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Short-Term Debt [Line Items]      
Convertible debt outstanding $ 3,820,545   $ 3,807,030
Proceeds from convertible debt 0    
Debt discount 11,305   $ 24,820
Amortization of debt discount 13,515 $ 17,983  
Convertible Notes Payable [Member]      
Short-Term Debt [Line Items]      
Repayments of convertible debt 50,000    
Proceeds from convertible debt   240,000  
Debt converted, interest converted 680 5,873  
Debt converted, conversion cost converted $ 1,000 $ 2,000  
Debt converted, shares issued 1,222 1,583  
Adjustment to additional paid in capital $ 1,679    
Debt converted, amount converted   $ 58,800  
v3.24.3
CAPITAL STOCK (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Mar. 26, 2024
Mar. 05, 2024
Jan. 31, 2024
Jan. 19, 2024
Feb. 29, 2024
Mar. 31, 2024
Mar. 31, 2023
Dec. 31, 2023
Class of Stock [Line Items]                
Selling, general and administrative expense   $ 11,617            
Share based compensation expense $ 195,000              
Loss from discontinued operations           $ (111,312) $ (45,490)  
Red Rock Settlement [Member]                
Class of Stock [Line Items]                
Stock issued new, shares         37,104      
Fair value per share         $ 3      
Loss from discontinued operations         $ (111,312)      
Investor [Member]                
Class of Stock [Line Items]                
Stock issued new, shares   7,500            
Fair value per share   $ 1.55            
Convertible Notes Payable [Member]                
Class of Stock [Line Items]                
Stock issued for conversion of debt, shares issued             1,222  
Convertible Notes Payable 1 [Member]                
Class of Stock [Line Items]                
Stock issued for conversion of debt, shares issued             1,583  
Three Board [Member]                
Class of Stock [Line Items]                
Stock issued new, shares 30,000              
Fair value per share $ 6.50              
Six Previous Owners [Member] | Red Rock Settlement [Member]                
Class of Stock [Line Items]                
Stock issued new, shares         37,104      
Fair value per share         $ 3      
Loss from discontinued operations         $ 111,312      
Series A Preferred Stock [Member]                
Class of Stock [Line Items]                
Preferred stock, shares authorized           2    
Series B Preferred Stock [Member]                
Class of Stock [Line Items]                
Preferred stock, shares authorized           3,000,000   3,000,000
Conversion of stock, shares           778,799    
Stock issued for conversion of debt, shares issued           778,799    
Series B Preferred Stock [Member] | Common Stock [Member]                
Class of Stock [Line Items]                
Conversion of stock, shares           1,557,598    
Stock issued for conversion of debt, shares issued           1,557,598    
Series C Preferred Stock [Member]                
Class of Stock [Line Items]                
Preferred stock, shares authorized           500   500
Conversion of stock, shares           22    
Series C preferred stock cancelled           2    
Stock issued for conversion of debt, shares issued           22    
Series C Preferred Stock [Member] | Common Stock [Member]                
Class of Stock [Line Items]                
Conversion of stock, shares           220,000    
Stock issued for conversion of debt, shares issued           220,000    
Series E Preferred Stock [Member]                
Class of Stock [Line Items]                
Preferred stock, shares authorized           1,000,000   1,000,000
Series F-1 Preferred Stock [Member]                
Class of Stock [Line Items]                
Preferred stock, shares authorized           50,000   50,000
Series I Preferred Stock [Member]                
Class of Stock [Line Items]                
Preferred stock, shares authorized           15,000,000   15,000,000
Conversion of stock, shares           2,928,500    
Stock issued for conversion of debt, shares issued           2,928,500    
Series I Preferred Stock [Member] | Common Stock [Member]                
Class of Stock [Line Items]                
Conversion of stock, shares           5,857,000    
Stock issued for conversion of debt, shares issued           5,857,000    
Series I Preferred Stock [Member] | Board of Directors Chairman [Member]                
Class of Stock [Line Items]                
Stock issued for compensation, shares       62,500        
Stock issued for compensation, value       $ 250,000        
Series I Preferred Stock [Member] | Chief Executive Officer [Member]                
Class of Stock [Line Items]                
Stock issued for compensation, shares       62,500        
Stock issued for compensation, value       $ 250,000        
Series I Preferred Stock [Member] | Chief Financial Officer [Member]                
Class of Stock [Line Items]                
Stock issued new, shares     5,000          
Stock issued new, value     $ 20,000          
Series I Preferred Stock [Member] | Chief Accounting Officer [Member]                
Class of Stock [Line Items]                
Stock issued new, shares     2,500          
Stock issued new, value     $ 10,000          
Series J Preferred Stock [Member]                
Class of Stock [Line Items]                
Preferred stock, shares authorized           2,000,000   2,000,000
Conversion of stock, shares           1,542,225    
Stock issued for conversion of debt, shares issued           1,542,225    
Series J Preferred Stock [Member] | Common Stock [Member]                
Class of Stock [Line Items]                
Conversion of stock, shares           3,084,450    
Stock issued for conversion of debt, shares issued           3,084,450    
Series L Preferred Stock [Member]                
Class of Stock [Line Items]                
Preferred stock, shares authorized           400,000   400,000
Series N Senior Convertible Preferred Stock [Member]                
Class of Stock [Line Items]                
Preferred stock, shares authorized           3,000,000    
Dividends payment           $ 871,462   $ 766,437
Series R Preferred Stock [Member]                
Class of Stock [Line Items]                
Preferred stock, shares authorized           5,000    
Dividends payment           $ 119,194   109,980
Series X Preferred Stock [Member]                
Class of Stock [Line Items]                
Preferred stock, shares authorized           5,000,000    
Dividends payment           $ 228,082   $ 190,685
v3.24.3
WARRANTS (Details - Warrant outstanding) - Warrant [Member] - $ / shares
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Number of warrants, Beginning balance 3,140 3,141
Weighted average exercise price, Beginning balance $ 0.015 $ 0.015
Number of warrants, Granted 0 0
Weighted average exercise price, Granted $ 0 $ 0
Number of warrants, Exercised 0 0
Weighted average exercise price, Exercised $ 0 $ 0
Number of warrants, Expired 0 (1)
Weighted average exercise price, Expired $ 0 $ 0
Number of warrants, Ending balance 3,140 3,140
Weighted average exercise price, Ending balance $ 0.015 $ 0.015
Number of warrants, Exercisable 3,140 3,140
Weighted average exercise price, exercisable $ 0.015 $ 0.015
v3.24.3
DISCONTINUED OPERATIONS (Details) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Gain (Loss) from discontinued operations    
Revenue $ 2,322,132 $ 2,706,399
Cost of sales (948,154) (956,295)
Selling, general and administrative expenses (851,396) (987,921)
Loss from discontinued operations   (45,490)
Discontinued Operations [Member] | Red Rock [Member]    
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]    
Cash 342 342
Accounts receivable 300 300
Accounts payable and accrued expenses 238,285 238,285
Net liabilities of discontinued operations (237,643) (237,643)
Gain (Loss) from discontinued operations    
Revenue 0 154,399
Cost of sales 0 (26,829)
Selling, general and administrative expenses 0 (171,557)
Interest expense 0 (1,503)
Settlement loss (111,312) 0
Loss from discontinued operations $ (111,312) $ (45,490)
v3.24.3
DISCONTINUED OPERATIONS (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Feb. 29, 2024
Mar. 31, 2024
Mar. 31, 2023
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]      
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax   $ 111,312 $ 45,490
Red Rock Settlement [Member]      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]      
Stock Issued During Period, Shares, Other 37,104    
Share Price $ 3    
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax $ 111,312    
v3.24.3
GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Goodwill And Identifiable Intangible Assets Net    
Goodwill impairment $ 0 $ 0
v3.24.3
COMMITMENTS AND CONTINGENCIES (Details - Lease maturities)
Mar. 31, 2024
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
2024 (remainder of year) $ 195,934
2025 153,096
2026 60,862
Total $ 409,892
v3.24.3
COMMITMENTS AND CONTINGENCIES (Details - Supplemental information)
Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract]  
Weighted-average remaining lease term 2 years 2 months 12 days
Weighted-average discount rate 4.49%
v3.24.3
COMMITMENTS AND CONTINGENCIES (Details - Financial performance goals)
Mar. 31, 2024
USD ($)
shares
Year End 2021 [Member]  
Effect of Fourth Quarter Events [Line Items]  
Minimum Annual Nova EBITDA $ 2,000,000
Cash Annual Bonus $ 120,000
Year End 2021 [Member] | Series J Preferred Stock [Member]  
Effect of Fourth Quarter Events [Line Items]  
Stock to be issued, shares | shares 120,000
Year End 2022 [Member]  
Effect of Fourth Quarter Events [Line Items]  
Minimum Annual Nova EBITDA $ 2,400,000
Cash Annual Bonus $ 150,000
Year End 2022 [Member] | Series J Preferred Stock [Member]  
Effect of Fourth Quarter Events [Line Items]  
Stock to be issued, shares | shares 135,000
Year End 2023 [Member]  
Effect of Fourth Quarter Events [Line Items]  
Minimum Annual Nova EBITDA $ 3,700,000
Cash Annual Bonus $ 210,000
Year End 2023 [Member] | Series J Preferred Stock [Member]  
Effect of Fourth Quarter Events [Line Items]  
Stock to be issued, shares | shares 150,000
Year End 2024 [Member]  
Effect of Fourth Quarter Events [Line Items]  
Minimum Annual Nova EBITDA $ 5,500,000
Cash Annual Bonus $ 300,000
Year End 2024 [Member] | Series J Preferred Stock [Member]  
Effect of Fourth Quarter Events [Line Items]  
Stock to be issued, shares | shares 180,000
Year End 2025 [Member]  
Effect of Fourth Quarter Events [Line Items]  
Minimum Annual Nova EBITDA $ 8,000,000
Cash Annual Bonus $ 420,000
Year End 2025 [Member] | Series J Preferred Stock [Member]  
Effect of Fourth Quarter Events [Line Items]  
Stock to be issued, shares | shares 210,000
v3.24.3
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)
3 Months Ended
May 31, 2021
Mar. 31, 2024
Mar. 31, 2023
Jan. 02, 2024
Dec. 31, 2023
May 15, 2021
Operating lease expense   $ 100,362 $ 77,852      
First Doctor [Member]            
Annual base salaries $ 372,000          
Second Doctor [Member]            
Annual base salaries 450,000          
Third Doctor [Member]            
Annual base salaries $ 372,000          
Chief Executive Officer [Member]            
Accrued compensation   2,365,500     $ 2,365,500  
Board of Directors Chairman [Member]            
Accrued compensation   2,440,500     2,350,500  
Chief Financial Officer [Member]            
Accrued compensation   17,057     $ 17,057 $ 156,000
Chief Financial Officer [Member] | Employment Agreement [Member]            
Accrued compensation   0   $ 228,000    
Chief Accounting Officer [Member]            
Accrued compensation   $ 0   $ 210,000    
v3.24.3
SEGMENT REPORTING (Details) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Segment Reporting Information [Line Items]    
Consolidated assets $ 22,605,310 $ 20,745,811
REVENUE 2,322,132 2,706,399
Consolidated cost of sales 948,154 956,295
Income from operations from subsidiaries 218,992 757,548
Income (Loss) before taxes (171,792) 29,499
Healthcare Segment [Member]    
Segment Reporting Information [Line Items]    
Consolidated assets 20,227,446 18,955,991
REVENUE 2,322,132 2,706,399
Consolidated cost of sales 948,154 956,295
Income from operations from subsidiaries 1,151,284 1,278,239
Income (Loss) before taxes 1,151,284 817,098
Real Estates [Member]    
Segment Reporting Information [Line Items]    
Consolidated assets 586,582 587,456
REVENUE 0 0
Consolidated cost of sales 0 0
Income from operations from subsidiaries (874) (97)
Income (Loss) before taxes (874) (97)
Others [Member]    
Segment Reporting Information [Line Items]    
Consolidated assets 1,791,282 1,202,364
Subsidiary [Member]    
Segment Reporting Information [Line Items]    
Income from operations from subsidiaries 1,150,410 1,278,142
Cardiff Lexington [Member]    
Segment Reporting Information [Line Items]    
Income from operations from subsidiaries (931,418) (520,594)
Corporate Segment [Member]    
Segment Reporting Information [Line Items]    
Income (Loss) before taxes $ (1,322,202) $ (787,502)

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