CDIX.OQXCardiff Lexington CORP
10-Q: Cardiff Lexington Q3 2025: Revenue Soars, Net Loss Narrows
Sentiment:
Quarterly Report
Cardiff Lexington Corporation reported significant revenue growth and a reduced net loss for Q3 2025, driven by its healthcare segment, despite ongoing liquidity concerns and an increased accumulated deficit.
Delay expectedThe planned underwritten public offering (the 'Offering') mentioned in the promissory note settlement agreement was not completed by August 15, 2024, triggering monthly payments of $25,000.
Capital raiseThe company is in continuous discussions with prospective investors to raise capital to fund cash flow shortfalls and pursue new acquisitions.Additional funds ranging from $5 million to $10 million are needed for continued operations and to execute the business plan, particularly for acquisitions.The company intends to raise capital for additional acquisitions primarily through equity and debt financings.The promissory note settlement agreement includes payment terms contingent on raising at least $5 million, $6 million, or $7 million in a planned underwritten public offering.The CEO's and Chairman's employment agreements include performance bonuses tied to a successful Nasdaq listing with a corresponding $4 million capital raise.A service agreement with Greentree Financial Group, Inc. was entered into for advisory services related to the company's planned uplisting to a national securities exchange, with compensation including common stock and warrants.
Worse than expectedCash balance significantly decreased by over 80% from year-end 2024.Total liabilities increased substantially, driven by a higher line of credit.The accumulated deficit continued to grow, indicating ongoing unprofitability.Net cash used in operating activities increased, showing a higher cash burn.The settlement realization rate for accounts receivable decreased, implying lower effective revenue collection.The company explicitly states 'substantial doubt about the Company's ability to continue as a going concern.'
Summary
- Revenue for the three months ended September 30, 2025, increased by 125.63% to $3,058,740 from $1,355,641 in the same period of 2024.
- Year-to-date (YTD) revenue for September 30, 2025, rose by 70.18% to $8,763,314 from $5,149,416 in the prior year.
- Gross profit for Q3 2025 surged by 437.85% to $1,909,579, with gross margin increasing from 26.19% to 62.43%.
- YTD gross profit increased by 126.17% to $5,445,371, with gross margin rising from 46.76% to 62.14%.
- Income from operations for Q3 2025 was $643,279, a significant improvement from a loss of $(585,160) in Q3 2024.
- YTD income from operations was $1,796,890, compared to a loss of $(525,651) in the prior year.
- Net loss for Q3 2025 decreased by 42.15% to $(1,144,299) from $(1,977,968) in Q3 2024.
- However, YTD net loss increased by 17.92% to $(2,821,471) from $(2,392,657) in the prior year, primarily due to significantly higher interest expense.
- Cash balance at September 30, 2025, was $232,033, a substantial decrease from $1,188,185 at December 31, 2024.
- Total liabilities increased to $22,596,065 at September 30, 2025, from $16,324,405 at December 31, 2024, largely due to an increased line of credit.
- The accumulated deficit grew to $(76,533,799) at September 30, 2025, from $(72,949,085) at December 31, 2024.
- The company's settlement realization rate for accounts receivable decreased to 42% as of September 30, 2025, from 44% in 2024, reflecting efforts to accelerate cash settlements by accepting lower amounts.
Sentiment
Score: 3
Explanation: While revenue and gross profit showed strong growth, the company's overall financial health deteriorated with a significant decrease in cash, increased liabilities, and a growing accumulated deficit. The explicit 'going concern' warning, ineffective internal controls, and declining accounts receivable settlement rate are major red flags, overshadowing operational improvements.
Positives
- Significant revenue growth for both the three and nine months ended September 30, 2025, driven by increased office visits and surgical procedures in the healthcare segment.
- Substantial improvement in gross profit and gross margin percentages, indicating better operational efficiency relative to revenue.
- Shift from operating loss to operating income for both the three and nine months ended September 30, 2025.
- Net loss for the three months ended September 30, 2025, decreased by 42.15% compared to the same period last year.
- Basic and diluted loss per share from continuing operations improved to $(0.07) for Q3 2025 and $(0.20) for YTD 2025, compared to $(0.16) and $(0.30) respectively in the prior year.
Negatives
- Cash balance significantly decreased to $232,033 at September 30, 2025, from $1,188,185 at December 31, 2024.
- Total liabilities increased substantially to $22,596,065 at September 30, 2025, from $16,324,405 at December 31, 2024, primarily due to a higher line of credit.
- The accumulated deficit continued to grow, reaching $(76,533,799) at September 30, 2025.
- Net cash used in operating activities increased to $(2,463,300) for the nine months ended September 30, 2025, from $(2,043,238) in the prior year.
- Net cash provided by financing activities decreased to $1,507,148 for the nine months ended September 30, 2025, from $3,014,583 in the prior year.
- Interest expense increased significantly to $(1,765,528) for Q3 2025 and $(4,594,714) for YTD 2025, primarily due to higher fees on the line of credit.
- The settlement realization rate for accounts receivable decreased to 42% as of September 30, 2025, from 44% in 2024 and a historical 49%, indicating lower recovery on gross billed charges.
- The company's disclosure controls and procedures were deemed not effective as of September 30, 2025, due to material weaknesses.
Risks
- Substantial doubt exists about the company's ability to continue as a going concern due to recurring operating losses and an accumulated deficit of $76,533,799.
- Dependence on additional cash infusions from prospective investors, with no assurance of obtaining sufficient capital from debt or equity transactions or operations.
- Risk of curtailing operating plans or implementing cost reductions if sufficient funds are not raised.
- No assurance of operating profitably on a consistent basis in the future, with potential cessation of operations if funds are insufficient.
- The company's disclosure controls and procedures were not effective as of September 30, 2025, due to material weaknesses, which could lead to misstatements in financial reporting.
- The company's strategy of accelerating cash settlement by accepting lower settlement amounts (42% realization rate) could negatively impact overall revenue recovery.
- The promissory note settlement agreement includes payment terms contingent on a planned underwritten public offering, which may not be completed or may raise less than anticipated, triggering monthly payments.
- Convertible notes 10-2 and 10-3 are in default and accrue interest at 20% per annum, posing a financial risk.
Future Outlook
Management believes that current working capital and expected additional financing should be sufficient to fund operations and satisfy obligations for at least one year. However, additional funds ranging from $5 million to $10 million are required for continued operations and to execute the business plan, particularly for new acquisitions. The company intends to raise this capital through equity and debt financings, but there is no assurance that sufficient capital will be obtained on acceptable terms.
Management Comments
- 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.
- 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.
- 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.
- 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.
- We will continue to evaluate our estimate of our settlement realization rates in the future, which will include a monthly review of historical settlement realization rates, along with estimates of current and pending settlements through ongoing discussions with attorneys, doctors and our third-party medical billing company in order to determine our variable consideration under ASC 606 and the net transaction price.
Industry Context
Cardiff Lexington operates as an acquisition holding company with a primary focus on the healthcare industry through its Nova Ortho and Spine subsidiary, and a secondary focus on real estate via Edge View Properties. The healthcare segment's growth in revenue from diagnostic and surgical services suggests a robust demand in its niche, potentially benefiting from the lien-based medical industry model. However, the declining settlement realization rate (from 49% to 42%) indicates increasing pressure on collections or a strategic shift towards faster, albeit lower, settlements, which could impact long-term profitability if not managed effectively. The real estate segment's planned housing development in Salmon, Idaho, positions it to capitalize on regional housing needs, but its current financial contribution is minimal.
Comparison to Industry Standards
- The company's 'going concern' warning and substantial accumulated deficit are significantly below the financial health standards for most publicly traded companies, especially those seeking to uplist to national exchanges. Healthy companies typically demonstrate consistent profitability and positive cash flow from operations.
- The reliance on a revolving line of credit with increasing outstanding balances and high interest expense, alongside a decreasing cash position, suggests a liquidity profile weaker than industry peers with stable operations and access to diverse, lower-cost financing.
- The declining accounts receivable settlement rate (from 49% historically to 42%) in its lien-based medical business model, while unique, indicates a potential erosion of asset quality or a strategic trade-off (faster cash for lower recovery) that would be scrutinized more heavily than typical healthcare providers' collection rates.
- The identified material weaknesses in internal controls over financial reporting are a critical deviation from best practices and regulatory expectations for public companies, which are expected to maintain robust financial reporting systems.
- The real estate segment's planned development in Salmon, Idaho, is a localized project. Without specific regional market data or comparable project performance metrics within the filing, a detailed comparison to industry-standard real estate development returns or timelines is not possible.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chief Financial Officer | NA | Matthew T. Shafer | 2024-01-02 | Entered into an employment agreement. |
| Chief Accounting Officer | Zia Choe | NA | 2024-01-31 | Former Chief Accounting Officer received compensation, implying departure prior to or around this date. |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Internal Control Weaknesses | Disclosure controls and procedures were not effective as of September 30, 2025, due to material weaknesses identified in the Annual Report on Form 10-K/A for the fiscal year ended December 31, 2024. | 2025-09-30 | Raises concerns about the reliability of financial reporting and the company's ability to accurately record, process, summarize, and report financial information. Remediation efforts are ongoing but success is not assured. |
| Equity Incentive Plan | Issued 15,000 shares of restricted common stock under the 2024 Equity Incentive Plan to three board members for 2024 annual retainer grants, vesting in full on grant date. | 2025-09-26 | Aligns board member incentives with shareholder value, but also contributes to share-based compensation expense. |
| Equity Incentive Plan | Issued 15,000 shares of restricted common stock under the 2024 Equity Incentive Plan to three board members for 2025 annual retainer grants, with 3,750 shares vesting on grant date and remaining vesting over three quarters commencing October 1, 2025. | 2025-09-26 | Provides ongoing incentive for board members, with staggered vesting to encourage continued service. |
Legal Proceedings
- Management is not currently aware of any legal proceedings or claims that it believes will have a material adverse effect on the company's business, financial condition, or operating results.
- Retired 59,248 shares of common stock on June 5, 2025, as part of a legal settlement.
- Issued 74,225 shares of common stock in September 2024 as part of a legal settlement related to the Red Rock settlement.
Related Party Transactions
- Amounts due from previous owners of Edge View (who are current managers) totaled $4,979 as of September 30, 2025, and December 31, 2024, which are due on demand and non-interest bearing.
- Repaid $120,997 in short-term advances from the Chairman of the Board (Daniel R. Thompson) during the nine months ended September 30, 2024.
- Accrued compensation for Alex Cunningham (CEO) totaled $2,215,500 as of September 30, 2025, with $82,854 interest accrued for the nine months ended September 30, 2025.
- Accrued compensation for Daniel Thompson (Chairman) totaled $2,320,500 as of September 30, 2025, with $86,780 interest accrued for the nine months ended September 30, 2025.
- A $5,000 convertible promissory note (Note 41) issued to the CEO on August 25, 2023, for operating expenses was paid in full in August 2024.
- Nova principals (three doctors) have management agreements with annual base salaries and performance-based bonuses (cash and Series J Preferred Stock) tied to EBITDA goals, which were not met for 2024 and the nine months ended September 30, 2025.
Stakeholder Impact
- Shareholders face significant dilution from ongoing issuance of common and preferred stock for conversions, services, and dividends. They also bear the risk associated with the 'going concern' warning and a growing accumulated deficit.
- Employees and Management, particularly the CEO and Chairman, have substantial accrued compensation and performance incentives tied to company milestones (e.g., Nasdaq uplisting, acquisitions), indicating alignment with growth but also a considerable liability for the company.
- Creditors, specifically DML HC Series, LLC, have seen the line of credit significantly increase and its maximum advance amount raised, indicating increased reliance on this financing source and potentially higher risk exposure.
- Preferred Stock Holders receive cumulative dividends, some paid in additional preferred stock, leading to increasing preferred share counts. Redeemable series offer a potential exit, while other series are convertible, impacting common stock dilution.
- Customers (Patients) in the healthcare segment continue to receive diagnostic and surgical services, with revenue growth suggesting ongoing service delivery.
Next Steps
- Continue efforts to raise additional capital through equity and debt financings to address liquidity shortfalls and fund acquisitions.
- Remediate identified material weaknesses in disclosure controls and procedures through strategic hiring, training, improved documentation, and enhanced oversight.
- Evaluate and potentially adjust the estimate of settlement realization rates for accounts receivable through monthly reviews and discussions with legal and billing partners.
- Pursue a planned underwritten public offering or other public offerings to meet capital raise targets and satisfy obligations under the promissory note settlement agreement.
- Enter into a joint venture agreement with a developer for the planned housing development in Salmon, Idaho.
- CEO's base salary to increase by a minimum of 10% starting January 1, 2026.
- CEO and Chairman eligible for performance bonuses upon successful Nasdaq listing with a corresponding $4 million capital raise and successful acquisitions.
- The remaining non-vested restricted stock awards will be charged to expense and amortized on a straight-line basis during Q4 2025, Q1 2026, and Q2 2026.
Key Dates
| Date | Description |
|---|---|
| 1986-09-03 | Cardiff International Inc. originally incorporated in Colorado. |
| 2005-11-10 | Merged with Legacy Card Company, LLC and changed name to Cardiff Lexington Corporation. |
| 2009-03-12 | Issued a debenture in the principal amount of $20,000. |
| 2009-09-12 | Maturity date of the $20,000 debenture. |
| 2014-07-16 | Acquired Edge View Properties, Inc. (real estate segment). |
| 2014-08-27 | Redomiciled to Florida. |
| 2016-09-12 | Issued convertible promissory note (Note 9) in the principal of $80,000. |
| 2017-01-24 | Issued convertible promissory note (Note 10) in the principal amount of $80,000. |
| 2017-09-12 | Maturity date of convertible promissory note (Note 9). |
| 2018-01-24 | Maturity date of convertible promissory note (Note 10). |
| 2018-07-10 | Issuance Date of Common Stock Purchase Warrant to Leonite Capital LLC. |
| 2019-05-01 | Red Rock Travel Group, LLC discontinued by the Company. |
| 2019-05-10 | Issued convertible promissory note (Note 29) in the principal amount of $150,000. |
| 2019-11-08 | Note 29 purchased by and assigned to an unrelated party, issued as Note 29-1 and Note 29-2. |
| 2020-06-02 | Obtained an SBA loan in the principal amount of $150,000. |
| 2020-07-15 | Employment agreement with Daniel Thompson, Chairman, effective. |
| 2020-09-03 | Issued convertible promissory note (Note 37) in the principal amount of $200,000, first tranche (Note 37-1) executed. |
| 2020-11-02 | Executed second tranche (Note 37-2) of convertible promissory note (Note 37). |
| 2020-12-29 | Executed third tranche (Note 37-3) of convertible promissory note (Note 37). |
| 2021-04-13 | Redomiciled to Nevada. |
| 2021-05-31 | Acquired Nova Ortho and Spine, LLC (healthcare segment). |
| 2021-06-30 | Maturity date of convertible promissory note (Note 37-1). |
| 2021-08-31 | Maturity date of convertible promissory note (Note 37-2). |
| 2021-09-30 | Maturity date of convertible promissory note (Note 37-3). |
| 2022-07-01 | Settlement reached with six previous owners of Red Rock Travel Group, LLC. |
| 2022-09-22 | Issued convertible promissory note (Note 40-1) in the principal amount of $2,600,000. |
| 2022-11-04 | Executed second tranche (Note 40-2) of convertible promissory note (Note 40). |
| 2022-11-28 | Executed third tranche (Note 40-3) of convertible promissory note (Note 40). |
| 2022-12-21 | Executed fourth tranche (Note 40-4) of convertible promissory note (Note 40). |
| 2023-01-24 | Executed fifth tranche (Note 40-5) of convertible promissory note (Note 40). |
| 2023-02-10 | Executed second tranche (Note 10-1) of convertible promissory note (Note 10). |
| 2023-03-21 | Executed sixth tranche (Note 40-6) of convertible promissory note (Note 40). |
| 2023-03-30 | Executed third tranche (Note 10-2) of convertible promissory note (Note 10). |
| 2023-04-01 | Ceased factoring of accounts receivable. |
| 2023-06-05 | Executed seventh tranche (Note 40-7) of convertible promissory note (Note 40). |
| 2023-06-13 | Executed eighth tranche (Note 40-8) of convertible promissory note (Note 40). |
| 2023-07-19 | Executed ninth tranche (Note 40-9) of convertible promissory note (Note 40). |
| 2023-07-24 | Executed tenth tranche (Note 40-10) of convertible promissory note (Note 40). |
| 2023-08-11 | Executed fourth tranche (Note 10-3) of convertible promissory note (Note 10). |
| 2023-08-25 | Issued twelve-month convertible promissory note (Note 41) in the principal amount of $5,000 to the CEO. |
| 2023-09-22 | Maturity date of Note 40 tranches 40-1 through 40-10 (one year from issuance). |
| 2023-09-29 | Entered into a two-year revolving purchase and security agreement with DML HC Series, LLC. |
| 2023-11-01 | Sold Platinum Tax Defenders. |
| 2023-12-01 | Executed an amendment on Notes series 40 to extend due date of tranches 40-1 through 40-5 to September 20, 2024. |
| 2024-01-01 | Employment agreement with Matthew T. Shafer, CFO, effective. |
| 2024-01-09 | Effected a 1-for-75,000 reverse stock split. |
| 2024-01-19 | Issued 62,500 shares of Series I preferred stock to Daniel R. Thompson and Alex Cunningham for 2023 bonus compensation. |
| 2024-01-31 | Issued 5,000 shares of Series I preferred stock to Matthew Shafer and 2,500 shares to Zia Choe (former Chief Accounting Officer) for 2023 compensation. |
| 2024-02-04 | Issued 37,104 shares of common stock as part of the Red Rock settlement. |
| 2024-03-05 | Issued 7,500 shares of common stock to an investor relation service provider. |
| 2024-03-26 | Issued 30,000 shares of common stock to three board members. |
| 2024-04-11 | Issued 938,908 shares of Series Y senior convertible preferred stock in exchange for settlement of Notes 40-1 to 40-10. |
| 2024-04-24 | Entered into amendment No. 1 with DML, increasing line of credit maximum advance to $8,000,000. |
| 2024-05-01 | Paid in full $58,846 total outstanding principal and interest on Note 9. |
| 2024-05-01 | Paid in full $63,513 total outstanding principal and interest on Note 10-1. |
| 2024-06-11 | Entered into a settlement agreement and release of claims with holder of Series R preferred stock and certain convertible promissory notes, exchanging for a new $535,000 promissory note. |
| 2024-06-11 | Entered into amendment No. 2 with DML, increasing line of credit maximum advance to $11,000,000. |
| 2024-08-01 | Paid in full $5,501 remaining principal and interest on Note 41. |
| 2024-08-15 | Deadline for completion of planned underwritten public offering to avoid $25,000 monthly payments on settlement promissory note. |
| 2024-09-20 | Extended due date for Notes 40-1 through 40-5. |
| 2024-09-25 | Issued 16,206 shares of Series Y senior convertible preferred stock as payment of accrued dividends. |
| 2024-12-27 | Entered into amendment No. 3 with DML, increasing line of credit maximum advance to $15,000,000. |
| 2025-01-01 | Employment agreements with Alex Cunningham (CEO) and Daniel Thompson (Chairman) amended, and Matthew T. Shafer's (CFO) base salary increased. |
| 2025-06-02 | Maturity date of SBA loan. |
| 2025-06-05 | Retired 59,248 shares of common stock as part of a legal settlement. |
| 2025-06-30 | Issued 15,000 shares of common stock to an investor relation service provider. |
| 2025-07-04 | The One Big Beautiful Bill Act (OBBBA) enacted. |
| 2025-07-31 | Issued 2,500 shares of common stock to an employee for services rendered. |
| 2025-08-26 | Converted $154,049 in principal and accrued interest on Note 10 into 192,495 shares of common stock. |
| 2025-09-02 | Issued 192,495 shares of common stock upon conversion of a convertible note. |
| 2025-09-15 | Issued 29,560 shares of Series N and 10,435 shares of Series X senior convertible preferred stock as payment of dividends. |
| 2025-09-26 | Issued 15,000 shares of restricted common stock to three board members for 2024 annual retainer grants (vested). |
| 2025-09-26 | Issued 15,000 shares of restricted common stock to three board members for 2025 annual retainer grants (partially vested). |
| 2025-09-29 | Revolving purchase and security agreement with DML automatically renewed for one year. |
| 2025-09-30 | End of the quarterly period covered by the report. |
| 2025-10-01 | Amendment No. 4 to the purchase and security agreement with DML increased maximum advance amount to $23,000,000. |
| 2025-10-31 | Entered into a service agreement with Greentree Financial Group, Inc. for uplisting advisory services and issued a 3-year warrant to purchase 100,000 common shares. |
| 2025-11-03 | Issued 50,000 shares of common stock to Greentree Financial Group, Inc. |
| 2025-11-12 | Date of signing of the Form 10-Q. |
| 2026-01-01 | CEO's base salary to increase by a minimum of 10%. |
| 2026-09-29 | Maturity date of the revolving purchase and security agreement with DML. |
| 2026-12-15 | Effective date for annual reporting periods for ASU 2024-03 (Expense Disaggregation). |
| 2027-12-15 | Effective date for interim reporting periods for ASU 2024-03 (Expense Disaggregation). |
| 2028-10-31 | Expiration Date of Common Stock Purchase Warrant issued to Greentree Financial Group, Inc. |
| 2050-06-02 | Maturity date of SBA loan. |
Recommendation
strong sellDespite strong revenue and gross profit growth in the healthcare segment, the company faces severe financial distress. The cash balance has plummeted, total liabilities have surged, and the accumulated deficit continues to expand. The explicit 'going concern' warning, coupled with increasing cash burn from operations and a declining accounts receivable settlement rate, indicates a highly precarious financial position. Material weaknesses in internal controls further erode confidence. While management is seeking capital, the uncertainty of securing sufficient funds on acceptable terms, combined with significant existing debt and accrued related-party compensation, presents an extremely high risk profile. The operational improvements are insufficient to offset the fundamental liquidity and solvency issues, making the stock a strong sell for risk-averse investors.
Keywords
Cardiff Lexington Corporation, CDIF, Healthcare, Real Estate, Quarterly Report, SEC Filing, Financial Results, Revenue Growth, Net Loss, Operating Income, Liquidity, Going Concern, Accounts Receivable, Line of Credit, Preferred Stock, Convertible Notes, Corporate Governance, Internal Controls, Acquisition Holding Company
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