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Item 2. Management’s Discussion and Analysis

2024-10-17 compared with 2023-01-09 · 484 added, 235 removed, 8 unchanged (99% of the section changed)

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

The following discussion of our financial

condition and results of operations should be read in conjunction with our consolidated financial statements including the related notes,

and the other financial information included in this report.

For ease of reference, “the Company”, ‘Cardiff”,

“we,” “us” or “our” refers to Cardiff Lexington Corporation, unless otherwise stated.

Cautionary Statement Concerning Forward-Looking

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.

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 the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations,

business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products, plans and

objectives of management, markets for stock of Cardiff Lexington Corporation and other matters.

Statements in this report that are not

historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section

21E of the Exchange Act of 1934 and Section 27A of the Securities Act of 1933.

Such forward-looking statements, including, without limitation,

those relating to the future business prospects, revenue and income of Cardiff Lexington Corporation, wherever they occur, are necessarily

estimates reflecting the best judgment of the senior management of Cardiff Lexington Corporation on the date on which they were made,

or if no date is stated, as of the date of this report.

These forward-looking statements are subject to risks, uncertainties and assumptions,

including those described in the “Risk Factors” in Item 1A of Part I of our most recent Annual Report on Form 10-K, filed

with the Securities and Exchange Commission (“SEC”), that may affect the operations, performance, development and results

of our business.

Because the factors discussed in this report could cause actual results or outcomes to differ materially from those

expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any such forward-looking

New factors emerge from time to time, and it is not possible for us to predict which factors will arise.

In addition, we

cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual

results to differ materially from those contained in any forward-looking statements.

The Company assumes no obligation and does not intend

to update these forward-looking statements, except as required by law.

Cardiff Lexington Corporation is a holding company

with no stand-alone operations and no material assets other than its ownership interest in its subsidiaries.

All of the Company's operations

are conducted through, and its income derived from, its various subsidiaries, which are organized and operated according to the laws

of their jurisdiction of incorporation, and consolidated by the Company.

To date, Cardiff consists of the following wholly

owned subsidiaries:

We Three, LLC, d/b/a Affordable Housing Initiative

(“AHI”), which we acquired on May 15, 2014, is an affordable home acquirer located in Maryville, Tennessee, which acquirers’

mobile homes and mobile home parks and either sells them or rents the homes to individual families.

The acquisition of mobile homes

or mobile home parks allows AHI to provide an alternative to traditional housing, which is a popular option for a homeowner wishing to

avoid large down payments, expensive maintenance costs, monthly mortgage payments and high property taxes.

The typical arrangement with

potential buyers is a lease-to-own arrangement on an individual home.

The fundamentals of that arrangement obligate the tenant(s) to

the terms of the lease with AHI retaining ownership.

In addition, the tenant(s) pay non-refundable option monies prior to the start of

This option consideration enables them to purchase the home at the end of the lease if they choose.

A typical lease is 7 years.

We have found that most tenants move out before the end of that period and thus never satisfy the terms that would enable them to purchase

Edge View Properties, Inc.

(“Edge View”),

which we acquired on July 16, 2014, is a real estate company that owns 30 acres of land;

23.5 acres zoned MDR (Medium Density Residential)

with 12 lots already platted and 48 lots zoned HDR (High Density Residential), 4 acres of dedicated river front property zoned for recreation

on the Salmon River, Idaho’s premier whitewater river and 2.5 acres zoned for commercial use.

All the land is in the city limits

of Salmon and adjacent to the Frank church Wilderness Park (the largest wilderness park in the lower 48 states).

Edge View’s plan

is to enter into a joint venture agreement with a developer for construction of single-family homes on the property.

The Company has

yet to enter into a joint venture agreement for the development of single-family homes.

Platinum Tax Defenders, LLC (“Platinum

Tax”), which we acquired on July 31, 2018, is a full-service tax resolution firm located in Los Angeles, CA.

Platinum Tax has been assisting all types of taxpayers resolve any and all issues with IRS and applicable state tax agencies.

Tax provides fee-based tax resolution services to individuals and companies that have federal and state tax liabilities by assisting

its clients to settle outstanding tax debts.

Specifically, the Platinum Tax teams tax relief services include but are not limited to,

back taxes, offer in compromise, audit representation, amending tax returns, tax preparation, tax resolution, wage garnishment relief,

removal of bank levies and liens, bookkeeping, and other financial challenges.

Platinum Tax has a team of 28 which includes tax attorneys,

accountants, and enrolled agents that have an aggregate of more than 90 years of experience in the financial services industry and have

resolved tax issues for thousands of clients.

Nova Ortho and Spine, PLLC (“Nova Ortho”)

which we acquired on May 31, 2021 is a company in which doctors 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.

From sports injuries, to

sprains, strains, and fractures, our doctors are dedicated to helping you return to your active lifestyle.

Orthopedic and pain procedure

services include hip and knee replacement, shoulder reconstruction, fracture care and hand surgery, as well as spinal surgery in the

State of Florida.

Impact of COVID-19 Pandemic

The outbreak of a novel coronavirus throughout

the world, including the United States, since early calendar year 2020 through current, has caused widespread business and economic disruption

through mandated and voluntary business closings and restrictions on the movement and activities of people (“COVID-19 Pandemic”).

We are subject to risks and uncertainties as a result of the COVID-19 Pandemic.

See “Management’s Discussion and Analysis

of Financial Condition and Results of Operations” for discussion on results of operations for the year ended December 31, 2021.

The extent of the impact of the COVID-19 Pandemic on the Company's business is highly uncertain and difficult to predict, as the response

to the COVID-19 Pandemic is rapidly evolving in many countries, including the United States and other markets where the Company operates.

It is expected that the Company's customers and suppliers may well continue to be impacted which could materially and adversely affect

Our ability to obtain or deliver inventory or services, and our ability to collect accounts receivables as customers may

The financial services segments of the economy

was adversely affected by the COVID-19 Pandemic.

Due to the IRS prolonging individual tax filings, this affected our tax resolution businesses

and management decided to divest JM Enterprise 1, Inc.

(Key Tax Group).

The Company’s tax resolution business operations have been

hard hit by the economic pressure of the COVID-19 pandemic and the subsequent directives and responses to this crisis taken by the IRS,

federal, state, and local governments.

Management will continue to monitor its businesses and focus our growth primarily in the health

Affordable Housing Rentals

Financial Services

Consolidated assets

Affordable Housing Rentals

Financial Services

Total revenues

Cost of Sales:

Affordable Housing Rentals

Financial Services

within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities

Exchange Act of 1934, as amended, or the Exchange Act, that are based on our management’s beliefs and assumptions and on information

currently available to us.

All statements other than statements of historical facts are forward-looking statements.

These statements relate

to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may

cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of

activity, performance or achievements expressed or implied by these forward-looking statements.

Forward-looking statements include, but

are not limited to, statements about:

our ability to successfully identify and acquire additional businesses;

our ability to effectively integrate and operate the businesses that we acquire;

our expectations around the performance of our current businesses;

our ability to maintain our business model and improve our capital efficiency;

our ability to effectively manage the growth of our business;

our ability to maintain profitability;

the competitive environment in which our businesses operate;

trends in the industries in which our businesses operate;

the regulatory environment in which our businesses operate under;

changes in general economic or business conditions or economic or demographic trends in the United States, including changes in interest rates and inflation;

our ability to service and comply with the terms of indebtedness;

our ability to retain or replace qualified employees of our businesses;

labor disputes, strikes or other employee disputes or grievances;

casualties, condemnation or catastrophic failures with respect to any of our business’ facilities;

costs and effects of legal and administrative proceedings, settlements, investigations and claims;

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.

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

From sports injuries, to sprains, strains, and fractures, our doctors are dedicated to helping patients return to active lifestyles.

We also own a real estate company, Edge View Properties,

Inc., or Edge View, which we acquired on July 16, 2014.

Edge View owns five (5) acres zoned medium density residential (MDR) with 12 lots

already platted, six (6) acres zoned high-density residential (HDR) that can be platted in various configurations to meet current

housing needs, and twelve (12) acres zoned in Lemhi County as Agriculture that is available for further annexation into the City of Salmon

for development, as well as a common area for landowners to view wildlife, provide access to the Salmon River and fishing in a two (2)

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.

As of June 30, 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 .

Healthcare (Nova)

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,

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

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.

Results of Operations

Comparison of Three Months Ended June 30,

2024 and 2023

The following table sets forth key components

of our results of operations during the three months ended June 30, 2024 and 2023, both in dollars and as a percentage of our revenue.

Three Months Ended June 30,

Total revenue

Total cost of sales

Income (Loss) from Operations From Subsidiaries:

Affordable Housing Rentals

Financial Services

Total income from operations from subsidiaries

Loss From Operations from Cardiff Lexington

Total income from operations

Affordable Housing Rentals

Financial Services

Total revenues

Operating expenses

Depreciation expense

Selling, general and administrative

Total operating expenses

(Loss) income from continuing operations

Other income (expense)

Gain on debt refinance and forgiveness

Penalties and fees

Interest expense

Amortization of debt discounts

Total other income (expense)

Net (loss) income before discontinued operations

Loss from discontinued operations

Net (loss) income

For the three months ended

June 30, 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 $1,892,863, or 56.26%, to $1,471,643 for the three months ended June 30, 2024 from

$3,364,506 for the three months ended June 30, 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 these efforts, we experienced lower than normal settlements of our accounts

During the three months ended June 30, 2024, we realized a 41.8% average settlement realization rate on gross billed charges

settled during this time frame.

As a result of this reduced settlement realization rate, we recorded a cumulative catch up reduction to

net revenue of $859,321 for the three months ended June 30, 2024.

Cost of sales .

Affordable Housing Rentals

Financial Services

Our cost of sales

consists of surgical center and laboratory fees, physician and professional fees, salaries and wages and medical supplies.

Our total cost

of sales decreased by $288,679, or 26.69%, to $793,010 for the three months ended June 30, 2024 from $1,081,689 for the three months ended

June 30, 2023.

This decrease is mainly attributable to decreases in salaries and wages, surgical contracted services and laboratory fees.

Gross profit .

As a result of the

foregoing, our total gross profit decreased by $1,604,184, or 70.27%, to $678,633 for the three months ended June 30, 2024 from $2,282,817

for the three months ended June 30, 2023.

Our total gross margin (as a percent of revenue) decreased from 67.85% for the three months

ended June 30, 2023 to 46.11% for the three months ended June 30, 2024.

Depreciation expense .

Our depreciation

expense was $3,366, or 0.24% of revenue, for the three months ended June 30, 2024, as compared to $3,365, or 0.10% of revenue, for the

three months ended June 30, 2023.

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, bad debts, rent expense, insurance and other expenses incurred in connection with general operations.

Our selling, general

and administrative expenses increased by $304,737, or 57.50%, to $834,750 for the three months ended June 30, 2024 from $530,013 for the

three months ended June 30, 2023.

As a percentage of revenue, our selling, general and administrative expenses were 56.72% and 15.75%

for the three months ended June 30, 2024 and 2023, respectively.

Increases were primarily attributable to increases in salaries and wages

expense of $311,215, rent expense of $44,363, board fee expense of $30,919, general and administrative expenses of $19,646 and professional

fees of $28,605 offset by a decrease in management fees of $150,000.

Total other income (expense) .

had $27,898 in total other income, net, for the three months ended June 30, 2024, as compared to total other expense, net, of $889,551

for the three months ended June 30, 2023.

Other income, net, for the three months ended June 30, 2024 consisted of gain on debt refinance

and forgiveness of $78,834 and other income of $2,047, offset by interest expense of $41,347, amortization of debt discounts of $11,306

and penalties and fees of $330.

Other expense, net, for the three months ended June 30, 2023 consisted of interest expense of $843,918,

amortization of debt discounts of $30,633 and financing penalties and fees of $15,000.

The interest income for the three months ended

June 30, 2024 was mainly a result of the write-off of accrued interest as part of the settlement agreement described below.

Discontinued operations .

three months ended June 30, 2024 and 2023, we recorded a loss from discontinued operations of $0 and $43,810, respectively.

Net income (loss) .

of the cumulative effect of the factors described above, our net loss was $131,585 for the three months ended June 30, 2024, as compared

to net income of $816,078 for the three months ended June 30, 2023, a decrease of $947,663.

Comparison of Six Months Ended June 30,

2024 and 2023

The following table sets forth key components

of our results of operations during the six months ended June 30, 2024 and 2023, both in dollars and as a percentage of our revenue.

Six Months Ended June 30,

Total revenue

Total cost of sales

Income (Loss) from Operations From Subsidiaries:

Affordable Housing Rentals

Financial Services

Total income from operations from subsidiaries

Loss From Operations from Cardiff Lexington

$ (1,188,088 )

$ (3,831,975 )

Total income (loss) from operations

$ (1,665,830 )

Results of Operations

Three Months Ended September 30, 2022 and 2021

Revenues were $3,360,743 and $3,309,793 for the

three months ended September 30, 2022 and 2021 an increase of $50,950 or 1.5%, respectively.

The increase was primarily due to the acquisition

of Nova Ortho on May 31, 2021 which generated revenue of $3,103,409 for the three months ended September 30, 2022, offset by the decrease

in revenue from the sale of Key Tax and the reduction in revenues for Platinum Tax Defenders due to a reduction in business due to the

IRS prolonging individual tax filings which affected both tax resolution businesses.

Cost of sales were $1,155,280 and $1,082,719 for

the three months ended September 30, 2022 and 2021 an increase of $72,561 or 6.7%, respectively.

The increase was primarily due to the

acquisition of Nova Ortho on May 31, 2021 which incurred cost of sales of $1,094,794 for the three months ended September 30, 2022 offset

by the decrease in cost of sales from the sale of Key Tax and the reduction in cost of sales for Platinum Tax Defenders due to a reduction

in business due to the IRS prolonging individual tax filings which affected both tax resolution businesses.

Gross margins were $2,205,463 and $2,227,074 for

the three months ended September 30, 2022 and 2021 a decrease of $21,611 or 1.0%, respectively.

Operating expenses were $706,193 and $3,938,202

for the three months ended September 30, 2022 and 2021 a decrease of $3,232,009 or 82.1%, respectively.

The decrease was primarily due

to the transaction costs relating to the acquisition of Nova Ortho on May 31, 2021, the sale of Key Tax and the reduction in business

for Platinum Tax Defenders due to a reduction in business due to the IRS prolonging individual tax filings which affected both tax resolution

Net loss was $264,774 and $754,808 for the three

months ended September 30, 2022 and 2021 a decrease of $490,034 or 64.9%, respectively.

Nine Months Ended September 30, 2022 and 2021

Revenues were $9,432,481 and $6,424,587 for the

Nine months ended September 30, 2022 and 2021 an increase of $3,007,894 or 46.8%, respectively.

The increase was primarily due to the

acquisition of Nova Ortho May 31, 2021 which generated revenue of $8,154,934 for the Nine months ended September 30, 2022, offset by the

decrease in revenue from the sale of Key Tax and the reduction in revenues for Platinum Tax Defenders due to a reduction in business due

to the IRS prolonging individual tax filings which affected both tax resolution businesses.

Cost of sales were $3,406,214 and $2,202,547 for

the Nine months ended September 30, 2022 and 2021 an increase of $1,203,667 or 54.6%, respectively.

The increase was primarily due to

the acquisition of Nova Ortho May 31, 2021 which incurred cost of sales of $2,982,418 for the Nine months ended September 30, 2022 offset

by the decrease in cost of sales from the sale of Key Tax and the reduction in cost of sales for Platinum Tax Defenders due to a reduction

in business due to the IRS prolonging individual tax filings which affected both tax resolution businesses.

Gross margins were $6,026,267 and $4,222,040 for

the Nine months ended September 30, 2022 and 2021 an increase of $1,804,227 or 42.7%, respectively.

Operating expenses were $2,700,950 and $5,887,870

for the Nine months ended September 30, 2022 and 2021 a decrease of $3,186,920 or 54.1%, respectively.

The decrease was primarily due

to the transaction costs relating to the acquisition of Nova Ortho May 31, 2021, the sale of Key Tax and the reduction in business for

Platinum Tax Defenders due to a reduction in business due to the IRS prolonging individual tax filings which affected both tax resolution

Net loss was $813,054 and $2,810,930 for the Nine

months ended September 30, 2022 and 2021 a decrease of $1,997,876 or 71.1%, respectively.

The outbreak of the coronavirus throughout the

world, including the United States, during early calendar year 2020 has caused widespread business and economic disruption through mandated

and voluntary business closings and restrictions on the movement and activities of people (“COVID-19 Pandemic”).

IRS prolonging individual tax filings, this affected our tax resolution businesses in 2021 and management decided to divest JM Enterprise

(Key Tax Group).

The Company’s tax resolution business operations have been hard hit by the economic pressure of the COVID-19

pandemic and the subsequent directives and responses to this crisis taken by the IRS, federal, state, and local governments.

these circumstances arising from the COVID-19 pandemic, the Company, as a public reporting company, must evaluate what the Company should

and are obligated to do in order to protect shareholders.

The outbreak of a novel coronavirus throughout

the world, including the United States, since early calendar year 2020 through current, has caused widespread business and economic disruption

through mandated and voluntary business closings and restrictions on the movement and activities of people (“COVID-19 Pandemic”).

We are subject to risks and uncertainties as a result of the COVID-19 Pandemic.

See “Management’s Discussion and Analysis

of Financial Condition and Results of Operations” for discussion on results of operations for the year ended December 31, 2021.

The extent of the impact of the COVID-19 Pandemic on the Company's business is highly uncertain and difficult to predict, as the response

to the COVID-19 Pandemic is rapidly evolving in many countries, including the United States and other markets where the Company operates.

It is expected that the Company's customers and suppliers may well continue to be impacted which could materially and adversely affect

Our ability to obtain or deliver inventory or services, and our ability to collect accounts receivables as customers may

The financial services segments of the economy

was adversely affected by the COVID-19 Pandemic.

Management will continue to monitor its businesses and focus our growth primarily in

the health industry.

The Company raised $729,083 in convertible notes

during the Nine months ended September 30, 2022.

We do not believe that inflation will negatively

impact our business plans.

Operating expenses

Depreciation expense

Share based compensation

Selling, general and administrative

Total operating expenses

Income from continuing operations

Other income (expense)

Gain on debt refinance and forgiveness

Penalties and fees

Interest expense

Amortization of debt discounts

Total other expense

Net (loss) income before discontinued operations

Loss from discontinued operations

Net (loss) income

Our total revenue decreased

by $2,277,130, or 37.51%, to $3,793,775 for the six months ended June 30, 2024 from $6,070,905 for the six months ended June 30, 2023.

The decrease in revenue is primarily attributable to the mix of services provided during the first half of the year 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 six month period as compared to the same six month period in the prior year.

Additionally, we

underwent efforts to accelerate cash settlements of our accounts receivable throughout 2024 to generate cash for operating purposes.

did this by shortening our settlement negotiations with insurance companies and accepting lower settlement realization rates.

of these efforts, we experienced lower than normal settlements of our accounts receivable.

During the six months ended June 30, 2024,

we realized a 42.3% average settlement rate on gross billed charges settled during this time frame.

As a result of this reduced settlement

realization rate, we recorded a reduction to net revenue of $1,199,155 for the six months ended June 30, 2024.

Cost of sales .

Our total cost of

sales decreased by $296,820, or 14.56%, to $1,741,164 for the six months ended June 30, 2024 from $2,037,984 for the six months ended

June 30, 2023.

This decrease is mainly attributable to decreases in salaries and wages, surgical contracted services and laboratory fees.

Gross profit .

As a result of the

foregoing, our total gross profit decreased by $1,980,310, or 49.10%, to $2,052,611 for the six months ended June 30, 2024 from $4,032,921

for the six months ended June 30, 2023.

Our total gross margin (as a percent of revenue) decreased from 66.43% for the six months ended

June 30, 2023 to 54.10% for the six months ended June 30, 2024.

Depreciation expense .

Our depreciation

expense was $6,731, or 0.18% of revenue, for the six months ended June 30, 2024, as compared to $8,000, or 0.13% of revenue, for the six

months ended June 30, 2023.

Share based compensation expense .

Our share-based compensation expense $300,225, or 7.91% of revenue, for the six months ended June 30, 2024, as compared to $0 for the

six months ended June 30, 2023.

The increase is due to stock issuances for investor relation services, 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 increased by $168,213, or 11.08%, to $1,686,146 for the six months ended June 30, 2024

from $1,517,933 for the six months ended June 30, 2023.

As a percentage of revenue, our selling, general and administrative expenses were

44.45% and 25.00% for the six months ended June 30, 2024 and 2023, respectively.

Increases were primarily attributable to increases in

salaries and wages expense of $504,350 and stock compensation expense of $93,600, offset by decreases in professional fees of $21,826

and management fees of $45,000.

Total other expense .

We had $362,886

in total other expense, net, for the six months ended June 30, 2024, as compared to total other expense, net, of $1,617,601 for the six

months ended June 30, 2023.

Other expense, net, for the six months ended June 30, 2024 consisted of interest expense of $417,616, amortization

of debt discounts of $24,821 and penalties and fees of $1,330, offset by other income of $78,834 for the gain on debt refinance and forgiveness

and other income of $2,047.

Other expense, net, for the six months ended June 30, 2023 consisted of interest expense of $1,537,579, amortization

of debt discounts of $48,616 and financing penalties and fees of $32,000, offset by a gain on debt refinance and forgiveness of $390 and

other income of $204.

The decrease is primarily attributable to the decrease in interest expense due to the settlement agreement described

Discontinued operations .

six months ended June 30, 2024 and 2023, we recorded a loss from discontinued operations of $111,312 and $89,300, respectively.

Net income (loss) .

As a result of

the cumulative effect of the factors described above, our net loss for the six months ended June 30, 2024 was $414,689, as compared to

net income of $800,087 for the six months ended June 30, 2023, a decrease of $1,214,776.

Liquidity and Capital Resources

Since inception, the principal sources of cash

have been funds raised from (i) debenture convertible notes and conventional notes payable, (ii) the sale of common stock and pre ferred

stock, and (iii) advances from shareholders.

At September 30, 2022, we had $260,498 in cash, a working capital deficit of $2,539,506 and

total assets of $15,958,345 and total liabilities of $9,908,290.

Net cash used in operating activities was $414,252

for the nine months ended September 30, 2022.

The cash used in operating activities was primarily due to the net loss of $850,454, an

increase in accounts receivable of $1,858,494, offset by an increase in accounts payable and accrued expenses of $315,123.

cash flows for the nine months ended September 30, 2021 was due primarily to the loss of 2,810,930, an increase in accounts receivable

of $114,399, an increase in accounts payable and accrued expenses of $594,276 and an increase in accrued interest of 321,468.

Net cash used in investing activities was $-0-

for the nine months ended September 30, 2022.

The cash used in investing activities of $2,323,642 for the nine months ended September

30, 2021 was for the acquisition of Nova Ortho and Spine.

Net cash provided by financing activities was

$407,480 and $3,766,960 for the nine months ended September 30, 2022 and 2021, respectively.

The positive cash flows for the nine months

ended September 30, 2022 were primarily due to proceeds from convertible notes of $729,083, offset by the payment of dividends of $310,522.

The positive cash flows for the Nine months ended September 30, 2021 were primarily due to proceeds from the issuance of preferred stock

of $3,000,000 for the purchase of Nova Ortho and proceeds from SBA / PPP loans of $347,050.

There can be no assurance that we will be able

to obtain sufficient capital from debt or equity transactions or from operations in the necessary time frame or on terms acceptable to

Should we be unable to raise sufficient funds, we may be required to curtail our operating plans and possibly relinquish rights to

portions of our technology or services provided.

In addition, increases in expenses may adversely impact our cash position and may require

cost reductions.

No assurance can be given that we will be able to operate profitably on a consistent basis, or at all, in the future.

In order to continue our operations and implementation

of our business plan, we need additional financing.

We are currently attempting to obtain additional working capital in an equity transaction.

As of June 30, 2024, we had $3,196,795 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.

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.

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.

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 six months ended June 30, 2024 and 2023.

Six Months Ended June 30,

Net cash used in operating activities from continuing operations

$ (1,980,727 )

Net cash provided by financing activities from continuing operations

Net change in cash

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Our net cash used in operating activities from

continuing operations was $1,980,727 for the six months ended June 30, 2024, as compared to $260,466 for the six months ended June 30,

The primary drivers of our net cash used in operating activities for the six months ended June 30, 2024 are our net loss of $414,689,

decreases of $1,555,885 in accounts receivable, $367,400 in accounts payable and other accrued expenses and $380,001 in accrued officer’s

compensation, offset by share based compensation of $788,600.

For the six months ended June 30, 2023, our net income of $800,087, an increase

in accounts payable and accrued expenses of $738,353, an increase in accrued officer’s compensation of $334,000, bad debt expense

of $270,000 and an increase in accrued interest of $248,137, offset by a decrease in accounts receivable of $2,859,607, 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.

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

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.

the six months ended June 30, 2023, we factored a total of $544,196 of our accounts receivable in exchange for cash of $253,750.

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 six months ended June 30, 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 six months ended June 30, 2024

we realized a 42.3% 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 rate, we recorded a reduction to net

revenue of $1,199,155 for the six months ended June 30, 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 six months

ended June 30, 2024 and 2023.

Our net cash provided by financing activities

was $4,199,267 for the six months ended June 30, 2024, as compared to $360,470 for the six months ended June 30, 2023.

Net cash provided

by financing activities for the six months ended June 30, 2024 consisted of the proceeds of $4,522,695 from line of credit, offset by

the payment of $120,997 to a director, $100,079 paid on convertible notes payable, $100,000 in dividend payments and $2,352 in payments

on the SBA loan described below.

Net cash provided by financing activities for the six months ended June 30, 2023 consisted of proceeds

from convertible notes payable of $355,500 and proceeds from line of credit of $35,131, offset by repayments of line of credit of $30,161.

Convertible Notes

As of June 30, 2024, we had convertible debt outstanding

net of amortized debt discount of $110,000.

During the six months ended June 30, 2024, we made $100,080 in principal payments and paid

the total outstanding accrued interest on these notes in the amount of $22,279.

We also paid $100,000 of accrued interest to a convertible

On June 11, 2024, we entered into a settlement

agreement and release of claims with the holder certain notes.

Pursuant to the settlement agreement and release of claims, the holder

agreed to cancel such notes in exchange for the fixed amount settlement promissory note in the principal amount of $535,000 described

Additionally, during the six months ended June 30, 2024, we exchanged certain notes for the issuance of 938,908 shares of series

Y senior convertible preferred stock to the noteholder.

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.

This note is currently in

default and accrues interest at a default interest rate of 20% per annum.

On March 30, 2023, we executed an additional tranche under this

note in the principal amount of $25,000.

This note is currently in default and accrues interest at a default interest rate of 20% per

On August 11, 2023, we executed an additional tranche under this note in the principal amount of $25,000.

This note accrues interest

at a rate of 15% per annum.

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%

Promissory Note – Settlement Agreement

On June 11, 2024, we entered into a settlement

agreement and release of claims with the holder of 165 shares of series R convertible preferred stock and certain convertible promissory

Pursuant to the settlement agreement and release of claims, the holder agreed to cancel its shares of series R convertible preferred

stock and convertible promissory notes in exchange for a new fixed amount settlement promissory note in the principal amount of $535,000.

This transaction was accounted for as a debt extinguishment and a gain on settlement of $78,834 was recorded to the unaudited consolidated

statement of operations for the quarter ended June 30, 2024, in accordance with FASB Topic 470 Borrower’s Accounting for Debt

Modifications.

The note does not bear interest and requires fixed

payments as follows:

(i) if we raise at least $5 million but less than $6 million in our planned underwritten public offering, or the

Offering, then we must pay $250,000 on the closing date of the Offering, with payments of $125,000, $125,000 and $35,000 to follow on

the 90 th , 180 th , and 240 th days following the closing of the Offering, respectively;

raise at least $6 million but less than $7 million in the Offering, then we must pay $390,000 on the closing date of the Offering and

$145,000 on the 90 th day following the closing of the Offering;

and (iii) if we raise at least $7 million in the Offering,

then we must repay the entire principal amount on the closing date of the Offering.

If the Offering is not completed by August 15, 2024,

then we are required to pay $25,000 on such date and to continue making payments of $25,000 on each monthly anniversary thereof until

the entire principal amount is repaid in full.

If the Offering is completed after August 15, 2024, then we are required to make payments

as described in the schedule above.

Notwithstanding the foregoing, if we abandon the Offering and conduct a new public offering thereafter,

then we are required to make a payment of $100,000 on the closing date of such other public offering, a second payment of $100,000 on

the 90 th day following the closing of such offering and $35,000 each month thereafter until the entire principal amount

is repaid in full.

If any portion of the principal amount remains unpaid on the second (2 nd ) anniversary of the date of the

note, it shall become immediately due and payable on such date.

We may prepay the entire principal amount at any time without penalty.

The note is unsecured and contains customary events of default for a loan of this type.

Upon an event of default, interest would automatically

begin to accrue at a simple interest rate of ten percent 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 June 30, 2024 was $147,301 and $0, respectively.

On March 12, 2009, we issued a debenture in the

principal amount of $20,000.

The debenture bore interest at 12% per year and matured on September 12, 2009.

The balance of the debenture

was $10,989 at June 30, 2024 and the accrued interest was $8,205.

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, or DML, to sell, with recourse, Nova’s accounts

receivables for a revolving financing up to a maximum advance amount of $4.5 million.

A review is performed on a quarterly basis to assess

the adequacy of the maximum amount.

If mutually agreed upon by us and DML, the maximum amount may be increased.

On April 24, 2024, we

entered into amendment No.

1 with DML which increased the maximum advance amount to $8,000,000 and defined the discount fee equal to 2.25%

per purchase and claims balance forward on new purchases with a minimum fee to now be $10,000.

On June 11, 2024, we entered into amendment

2 with DML which further increased the maximum advance amount to $11,000,000.

As of June 30, 2024, we had an outstanding balance of

$6,675,746 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.

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 is $4,979 as of June 30, 2024.

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.

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

As of September 30, 2022, we had no 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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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What changed 10-Q/A

Item 2. Management’s Discussion and Analysis