Cardiff Lexington Corp 10-Q

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 lack of operating history and ability to attain profitability; · the competitive environment in which our businesses operate; · trends in the industries in which our businesses operate; · the regulatory environment in which our businesses operate under; · changes in general economic or business conditions or economic or demographic trends in the United States, including changes in interest rates and inflation; · our ability to service and comply with the terms of indebtedness; · our ability to retain or replace qualified employees of our businesses; · labor disputes, strikes or other employee disputes or grievances; · casualties, condemnation or catastrophic failures with respect to any of our business’ facilities; · costs and effects of legal and administrative proceedings, settlements, investigations and claims; and · extraordinary or force majeure events affecting the business or operations of our businesses. 32 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, 2022. 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). All of our operations are conducted through, and our income derived from, our various subsidiaries. We operate the following businesses through our wholly owned subsidiaries. · Healthcare Business . Nova Ortho and Spine, PLLC, or Nova, which we acquired May 31, 2021, 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. · Financial Services (Tax Resolution) Business . Platinum Tax Defenders, or Platinum Tax, which we acquired on July 31, 2018, is a full-service tax resolution firm located in Los Angeles, California. Since 2011, we have been assisting all types of taxpayers resolve any and all issues with the IRS and applicable state tax agencies. We provide fee-based tax resolution services to individuals and companies that have federal and state tax liabilities by assisting clients to settle outstanding tax debts. · Real Estate Business . Edge View Properties, Inc., or Edge View, which we acquired on July 16, 2014, is 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. Salmon is known as Idaho’s premier whitewater destination as well as one of the easier accesses to the Frank Church Wilderness Area - the largest wilderness in the lower 48 states. Salmon’s airport has service to Boise, Idaho and serves as a hub to access whitewater rafting start points and wilderness landing strips. 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. 33 We previously owned We Three , LLC dba Affordable Housing Initiative, or AHI, which was acquired on May 15, 2014 and sold on October 31, 2022. AHI leased and sold mobile homes and also provided a “lease to own” option. Segments During the three months March 31, 2023 and 2022, we had four 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) Financial Services (Platinum Tax) (2) Healthcare (Nova) (3) 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 financial services segment provides tax resolution services to individuals and companies that have federal and state tax liabilities. It collects fees based on efforts to negotiate and assist in the settlement of outstanding tax debts. 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. Discontinued Operations We and the managers of AHI entered into a resignation, release and buyback agreement and addendum, effective October 31, 2022, pursuant to which the managers purchased AHI in exchange for returning 175,045 shares of series F preferred stock. There was a loss on disposal in the amount of $217,769 on October 31, 2022, which represented net assets and liabilities at the time of sale back. We had no net liabilities of discontinued operations at March 31, 2023 and December 31, 2022. We had $0 and $19,215 of loss from discontinued operations for the three months ended March 31, 2023 and 2022, respectively. 34 Results of Operations Comparison of Three Months Ended March 31, 2023 and 2022 The following table sets forth key components of our results of operations during the three months ended March 31, 2023 and 2022, both in dollars and as a percentage of our revenue. March 31, 2023 March 31, 2022 Amount % of Revenue Amount % of Revenue Revenue Financial services $ 154,399 5.40% $ 464,843 16.04% Healthcare 2,706,399 94.60% 2,432,307 83.96% Total revenue 2,860,798 100.00% 2,897,150 100.00% Cost of sales Financial services 26,829 0.94% 212,446 7.33% Healthcare 956,295 33.43% 903,782 31.20% Total cost of sales 983,124 34.37% 1,116,228 38.53% Gross profit 1,877,674 65.63% 1,780,922 61.47% Operating expenses Depreciation expense 4,635 0.16% 5,783 0.20% Selling, general and administrative 1,159,478 40.53% 1,053,656 36.37% Total operating expenses 1,164,113 40.69% 1,059,439 36.57% Income from operations 713,561 24.94% 721,483 24.90% Other income (expense) Other income 205 0.01% – – Gain on forgiveness of debt 390 0.01 – – Penalties and fees (15,000 ) (0.52 )% – – Interest expense and finance charge (695,164 ) (24.30 )% (2,220,176 ) (76.63 )% Conversion cost penalty and reimbursement (2,000 ) (0.07 )% – – Amortization of debt discounts (17,983 ) (0.63 )% (44,546 ) (1.54 )% Total other income (expense) (729,552 ) (25.50 )% (2,264,722 ) (78.17 )% Net loss before discontinued operations (15,991 ) (0.56 )% (1,543,239 ) (53.27 )% Loss from discontinued operations – – (19,215 ) (0.66 )% Net loss $ (15,991 ) (0.56 )% $ (1,562,454 ) (53.93 )% Deemed dividends on preferred stock (336,811 ) (11.77 )% – – Net loss attributable to common shareholders $ (352,802 ) (12.33 )% – – 35 Revenue . Our total revenue decreased by $36,352, or 1.25%, to $2,860,798 for the three months ended March 31, 2023 from $2,897,150 for the three months ended March 31, 2022. Such decrease was primarily due to decreases in revenue from the financial services, offset by an increase in revenue from the healthcare segment. The financial services segment generates revenue through the provision of tax resolution services to individuals and business owners. Revenue from the financial services segment decreased by $310,444, or 66.78%, to $154,399 for the three months ended March 31, 2023 from $464,843 for the three months ended March 31, 2022. Such decrease was primarily due to the loss of leads from the discontinued service with Optima Tax Relief, which affected the significant revenue reduction in the tax resolution business. The healthcare segment generates revenue through a full range of diagnostic and surgical services. Revenue from the healthcare services segment increased by $274,092, or 11.27%, to $2,706,399 for the three months ended March 31, 2023 from $2,432,307 for the three months ended March 31, 2022. Such increase was primarily due to increased Personal Injury Protection (PIP) services. Cost of sales . Our total cost of sales decreased by $133,104, or 11.92%, to $983,124 for the three months ended March 31, 2023 from $1,116,228 for the three months ended March 31, 2022. Such decrease was primarily due a decrease from the financial service segment, offset by an increase from the healthcare segment. As a percentage of revenue, our total cost of sales was 34.37% and 38.53% for the three months ended March 31, 2023 and 2022, respectively. Cost of sales for the financial services segment consists of advertising, contract labor and merchant fees. Cost of sales for the financial services segment decreased by $185,617, or 87.37%, to $26,829 for the three months ended March 31, 2023 from $212,446 for the three months ended March 31, 2022. As a percentage of financial services revenue, cost of sales was 17.38% and 45.70% for the three months ended March 31, 2023 and 2022, respectively. Such decrease was generally in line with the decrease in revenue from this segment. Cost of sales for the healthcare segment consists of surgical center fees, physician and professional fees, salaries and wages and medical supplies. Cost of sales from the healthcare services segment increased by $52,513, or 5.81%, to $956,295 for the three months ended March 31, 2023 from $903,782 for the three months ended March 31, 2022. As a percentage of healthcare revenue, cost of sales was 35.33% and 37.16% for the three months ended March 31, 2023 and 2022, respectively. This slight increase was primarily due to increased labor costs. Gross profit . As a result of the foregoing, our total gross profit increased by $96,752, or 5.43%, to $1,877,674 for the three months ended March 31, 2023 from $1,780,922 for three months ended March 31, 2022. Our total gross margin (percent of revenue) was 65.63% and 61.47% for three months ended March 31, 2023 and 2022, respectively. Gross profit for the financial services segment decreased by $124,827, or 49.46%, to $127,570 for the three months ended March 31, 2023 from $252,397 for the three months ended March 31, 2022. Gross margin (percent of revenue) for the financial services segment was 82.62% and 54.30% for the three months ended March 31, 2023 and 2022, respectively. Gross profit for the healthcare services segment increased by $221,579, or 14.5%, to $1,750,104 for the three months ended March 31, 2023 from $1,528,525 for the three months ended March 31, 2022. Gross margin (percent of revenue) for the healthcare segment was 64.67% and 62.84% for the for the three months ended March 31, 2023 and 2022, respectively. Depreciation expense . Our depreciation expense was $4,635, or 0.16% of revenue, for the three months ended March 31, 2023, as compared to $5,783, or 0.20% of revenue, for the three months ended March 31, 2022. Selling, general and administrative expenses . Our selling, general and administrative expenses consist primarily of accounting, auditing, legal and public reporting expenses, personnel expenses, including employee salaries and bonuses plus related payroll taxes, advertising expenses, professional advisor fees, bad debts, rent expense, insurance and other expenses incurred in connection with general operations. Our selling, general and administrative expenses increased by $105,822, or 10.04%, to $1,159,478 for the three months ended March 31, 2023 from $1,053,656 for the three months ended March 31, 2022. As a percentage of revenue, our selling, general and administrative expenses were 40.69% and 36.37% for the three months ended March 31, 2023 and 2022, respectively. Such increase was primarily due to the bad debt expense for allowances for doubtful accounts relating to our healthcare services business. 36 Total other income (expense) . We had $729,552 in total other expense, net, for the three months ended March 31, 2023, as compared to other expense, net, of $2,264,722 for the three months ended March 31, 2022. Other expense, net, for the three months ended March 31, 2023 consisted of interest expense and finance charges of $695,164, amortization of debt discounts of $17,983, financing penalties and fees of $15,000 and conversion cost penalty and reimbursement related to convertible note of $2,000, offset by other income of $595. Other expense, net, for the three months ended March 31, 2022 consisted of interest expense and finance charges of $2,220,176 and amortization of debt discounts of $44,546. Discontinued operations . For the three months ended March 31, 2023 and 2022, we recorded a loss from discontinued operations of $0 and $19,215, respectively. Net loss . As a result of the cumulative effect of the factors described above, our net loss was $15,991 for the three months ended March 31, 2023, as compared to net loss of $1,562,454 for the three months ended March 31, 2022, an increase of $1,546,463, or 98.98%. Liquidity and Capital Resources As of March 31, 2023, we had $350,329 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 $5 million to $7 million. If, and to the extent, that sellers are unwilling to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan could be as much as $10 million. We intend to raise capital for additional acquisitions primarily through equity and debt financings. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. There is no guarantee that we will be able to acquire additional businesses under the terms outlined above. Summary of Cash Flow The following table provides detailed information about our net cash flow for the three months ended March 31, 2023 and 2022. Three Months Ended March 31, 2023 2022 Net cash used in operating activities from continuing operations $ (189,507 ) $ (376,453 ) Net cash from discontinued operations – 19,215 Net cash provided by financing activities 313,034 300,307 Net change in cash 123,527 (56,931 ) Cash and cash equivalents at beginning of period 226,802 595,987 Cash and cash equivalents at end of period $ 350,329 $ 539,056 37 Our net cash used in operating activities from continuing operations was $189,507 for the three months ended March 31, 2023, as compared to $376,453 for the three months ended March 31, 2022. For the three months ended March 31, 2023, our net loss of $15,991, an increase in bad debt expense of $270,000, fair value settled upon conversion of $123,566, accounts payable and accrued expenses of $241,945, an increase in accrued officer’s compensation of $154,000 and an increase in accrued interest of $123,074, offset by an in accounts receivable of $1,111,636, were the primary drivers for the cash used in operations. For the three months ended March 31, 2022, our net loss of $1,562,454 and a increase in accounts receivable of $343,840, offset by increased accounts payable and accrued expense of $569,508 and an increase in accrued officers’ compensation of $120,000, were the primary drivers for the cash used in operations. We had no investing activities for the three months ended March 31, 2023 and 2022. Our net cash provided by financing activities was $313,034 for the three months ended March 31, 2023, as compared to $300,307 for the three months ended March 31, 2023. Net cash provided by operating activities for the three months ended March 31, 2023 consisted of proceeds from convertible notes payable of $240,000, proceeds from related party notes payable of $54,000 and proceeds from line of credit of $37,000, offset by repayments of line of credit of $16,381, payment of related party notes payable of $835 and payment of the SBA loan described below of $750. Net cash provided by financing activities for the three months ended March 31, 2022 consisted of proceeds from convertible notes payable of $405,730 and proceeds from related party notes payable of $4,803, offset by preferred stock dividends of $102,746, repayment of convertible notes payable of $5,908, payment of related party notes payable of $816 and payment of the SBA loan described below of $756. Convertible Notes As of March 31, 2023, we had convertible debt outstanding net of amortized debt discount of $3,717,936. During the three months ended March 31, 2023, we received net proceeds of $240,000 from convertible notes and converted $58,800 of convertible debt, $5,873 in accrued interest and $1,390 in penalties and fees into 118,682,378 shares of common stock. The Company recognized $123,566 of interest expense and additional paid-in capital to adjust fair value for the debt settlement during the three months ended March 31, 2023. For the three months ended March 31, 2023 and 2022, we recorded amortization of debt discounts of $17,983 and $44,546, respectively. The following is a schedule of convertible notes payable outstanding as of March 31, 2023: Note # Issuance Date Maturity Date Principal Balance Accrued Interest Unamortized Debt Discount 9 09/12/2016 09/12/2017 50,080 16,627 – 10 01/24/2017 1/24/2018 55,000 72,588 – 10-1 02/10/2023 02/10/2024 50,000 1,007 – 10-2 03/30/2023 03/30/2024 25,000 10 29-2 11/08/2019 11/08/2020 36,604 22,326 – 31 08/28/2019 08/28/2020 – 8,385 – 37-1 09/03/2020 06/30/2021 113,666 38,801 – 37-2 11/02/2020 08/31/2021 113,167 37,533 – 37-3 12/29/2020 09/30/2021 113,167 36,497 – 38 02/09/2021 02/09/2022 47,200 31,260 – 39 04/26/2021 04/26/2022 168,866 48,844 – 40-1 09/22/2022 09/22/2023 2,600,000 131,342 – 40-2 11/04/2022 11/04/2023 68,666 2,765 10,253 40-3 11/28/2022 11/28/2023 68,667 2,313 11,382 40-4 12/21/2022 12/21/2023 68,667 1,880 12,464 40-5 01/24/2023 01/24/2024 90,166 1,630 19,387 40-6 03/21/2023 03/21/2024 138,167 379 35,661 $ 3,807,083 $ 454,578 $ 89,147 38 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 interest at a default interest rate of 20% per annum. Notes 10, 10-1 and 10-2 . 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). Notes 10-1 and 10-2 accrue 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 $5,917.81, which was issued as Note 29-1, plus a new convertible promissory note in the principal amount of $62,367.12, 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. Note 31 . On August 28, 2019, we issued a convertible promissory note in the principal amount of $120,000, which matured on August 28, 2020. Note 31 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, we 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, we 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, we 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, we 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. Note 38 . On February 9, 2021, we issued a convertible promissory note in the principal amount $103,500, which matured on February 9, 2022. Note 38 is currently in default and accrues interest at a default interest rate of 22% per annum. Note 39 . On April 26, 2021, we issued a convertible promissory note in the principal amount $153,500, which matured on May 10, 2022. Note 39 is currently in default and accrues interest at a default interest rate of 22% per annum. Notes 40-1, 40-2, 40-3, 40-4, 40-5 and 40-6 . 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 November 28, 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 $88,667, 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). 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. Line of Credit In February 2018, we entered into a revolving line of credit with a financial institution for $92,500 which was personally guaranteed by the manager of Platinum Tax. The loan accrues interest at 11.20% as of March 31, 2023. As of March 31, 2023, the outstanding balance was $20,619. 39 Small Business Administration Loan On June 2, 2020, we obtained a loan from the U.S. Small Business Administration, or SBA, in the principal amount of $150,000 with an interest rate of 3.75% and a maturity date of June 2, 2050. We reclassified $5,723 of accrued interest to the principal amount for the three months ended March 31, 2023. The principal balance and accrued interest at March 31, 2023 was $149,633 and $0, respectively. Debenture On March 12, 2009, we issued a debenture in the principal amount of $20,000. The debenture bears interest at 12% per annum and matured on September 12, 2009. The balance of the debenture was $10,989 at March 31, 2023 and the accrued interest was $6,554. We assigned all of our receivables from consumer activations of our rewards program as collateral on this debenture. Related Party Loans From time to time, the previous owner and current manager of Platinum Tax loaned funds to Platinum Tax to cover short term operating needs. The amount owed as of March 31, 2023 was $90,189. 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, 2023. 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, 2023, we owed the Chairman $123,192. 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, 2022 filed with the Securities and Exchange Commission, or the SEC, on June 6, 2023. Off Balance Sheet Arrangements As of March 31, 2023, we had no off-balance sheet arrangements. 40 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable.