The Company has property leases that are renewable on an annual basis, with one long term property lease as of December 31, 2018 through its subsidiary Red Rock Travel Group. This is a four-year lease expiring on May 31, 20122. PTD entered into a new three-year lease effective January 2019.

Edge View Properties, consists ofInc. holds 30 prime 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 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).

ITEM 3. LEGAL PROCEEDINGS.

We areCardiff filed a lawsuit on October 4, 2020 in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida seeking to nullify agreements with six individuals. In violation of the management agreement entered into by the Company and Ihsane (Jay) Jahid in connection with the Company’s acquisition of Red Rock Travel Group, LLC, the Company alleges that Mr. Jahid engaged in self-interested, self-serving conduct utilizing the Company’s goodwill to enter into certain Convertible Note agreements with Matt Kanuck, Rita Home & Investment, LLC, Taoufik Litefti, Khalid Ahroum, and Iham Taharraoui without the legal authority to bind the Company. The Company alleges that it did not a partyauthorize Mr. Jahid to any material legal proceedings, nor is our propertyenter into the subject agreements with the five other defendants, was not aware that Mr. Jahid had done so, Mr. Jahid was acting outside of the scope of his authority when he caused the Company to enter into the agreements, the five other defendants knew or should have known that Mr. Jahid did not have the authority to bind the Company to the obligations contemplated by the subject agreements, and any material legal proceeding.rights that the five other defendants claim under the agreements with Mr. Jahid are controverted by the management agreement that was in place between the Company and Mr. Jahid and therefore cannot form the basis for any breach of contract claims against the Company. The parties are currently engaged in settlement negotiations.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDERSHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Holders

As of December 31, 2018,March 24, 2021, there were 847853 record holders of our common stock, and there were 901,441,498 (pre-split)109,944,821 shares of our common stock outstanding.

Public Market for Common Stock

Our common stock, par value $.001 per share (the “Common Stock”), is currently quoted on the OTCQBOTC Pink Market, which is operated by OTC Markets Group Inc. under the symbol “CDIX”.“CDIX.” The OTC Pink Market is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter,over the counter, or the OTC,“OTC,” equity securities. An OTC equity security generally is any equity that is not listed or traded on a national securities exchange. The following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTC Pink Market quotation service. These bid prices (pre-split) represent prices quoted by broker-dealers on the OTC Pink quotation service. The quotations reflect inter- dealer prices, without retail mark-up, mark- down or commissions, and may not represent actual transactions. The prices presented have not been adjusted to reflect the impact of a one for ten thousand (1:10.000) reverse stock split of the Company’s common stock effected on April 4, 2020.

The market price of our common stock will be subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market, and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well as general economic, business, and political conditions, may adversely affect the market for our common stock, regardless of our actual or projected performance.

The Securities Enforcement and Penny Stock Reform Act of 1990

The Securities and Exchange CommissionSEC has also adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).

A purchaser is purchasing penny stock which limits the ability to sell the stock. The shares offered by this prospectusCompany’s common stock constitute penny stock under the SecuritiesExchange Act and Exchange Act.SEC regulations. The shares will remain penny stocks for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 ofpromulgated under the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker- dealers will refuse to attempt to sell penny stock.

The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the Commission, which:

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer:

In addition, the SEC’s penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker- dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our common stock because it will be subject to these penny stock rules. Therefore, stockholdersshareholders may have difficulty selling their securities.

Dividend Policy

We have not previously declared or paid any dividends on our common stock and do not anticipate declaring any dividends in the foreseeable future. The payment of dividends on our common stock is within the discretion of our board of directors. We intend to retain any earnings for use in our operations and the expansion of our business. Payment of dividends in the future will depend on our future earnings, future capital needs and our operating and financial condition, among other factors that our board of directors may deem relevant. We are not under any contractual restriction as to our present or future ability to pay dividends.

Recent Sales of Unregistered Securities

On January 7, 2020, Cardiff issued the following securities for services rendered to the Company’s chief operating officer, Dr. Rollan Roberts: one share of Series C preferred stock valued at $4,000 and 21,000 shares of Series B preferred stock value at $84,000. In addition, during 2020 the Company agreed to issue 96,000 shares of Series B preferred stock valued at $222,000 to Dr. Roberts.

On February 20, 2020, a preferred stockholder exchanged 1,447,157 shares of Series K-1 preferred stock for 3,500 shares of common stock and 25,000 warrants to purchase common stock.

On June 1, 2020, in connection with the divestiture of Repicci’s, its founder was issued 119,101 shares of Series H preferred stock valued at $476,404.

On August 29, 2020, in connection with service agreement 163,814 common shares were issued.

On November 5, 2020, in connection with service agreement 18,000 common shares were issued

On November 20, 2020, in with services performed by previous Chief Financial Officer, 10,000 Series I and 1 Series C preferred stock were issued valued at $14.

On December 15, 2020, in with services performed by previous Chief Financial Officer, 10,000 Series B preferred stock were issued valued at $40,000.

See footnote Nos. 33 through 37-3 to the Company’s consolidated financial statements appearing elsewhere in this report for information on convertible notes payable issued during 2020.

The Company relied upon the exemption from registration provided by Section 4(a)(2) of the Securities Act for transactions not involving any public offering for each issuance of securities during 2020.

ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis or PlanFinancial Condition and Results of Operation contains forward-looking statements that involve future events, our future performance and our expected future operations and actions. In some cases, you can identify forward-looking statements by the use of words such as “may”, “will”, “should”, “anticipate”, “believe”, “expect”, “plan”, “future”, “intend”, “could”, “estimate”, “predict”, “hope”, “potential”, “continue”, or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerous assumptions, risks, and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including, but not limited to, the matters discussed in this report under the caption “Risk Factors”. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. We undertake no obligation to publicly update any forward looking-statements,forward-looking statements, whether as a result of new information, future events or otherwise.

The following discussion of our consolidated financial condition and consolidated results of operations should be read in conjunction with our consolidated financial statements and the related notes included in this report.

The following table provides segment reporting for selected financial data about usthe Company as of and for the fiscal years ended December 31, 20182020 and December 31, 2017.2019. For detailed financial information, see the audited Financial Statementsconsolidated financial statements included in this report.

Segment reporting for the years ended December 31, 2018 and 2017 were as follows:

Results of Operations

Revenues.Revenues. We had revenues in the amount of $2,373,938$3,453,058 and $1,625,768$3,707,360 for the years ended December 31, 20182020 and 2017,2019, respectively. The increasedecrease in revenue was primarily associated withdue to the disposition of our new acquisitionsfood services sector businesses mid-year and the effect of Platinum Tax and Red Rock Travel.the COVID 19 Pandemic to ongoing operations. We expect revenue to increase during 2019,2021, as our financial services sector holdings rebound from the Covid-19 Pandemic. Further, we will realize a full operating cyclecontinue our e continuous effort for our current operating subsidiaries and planned expansion.new acquisitions.

Cost of Goods Sold. We had costs of sales in the amount of $1,627,698$1,668,146 and $1,431,909$1,665,486 for the years ended December 31, 20182020 and 2017,2019, respectively. The increase in cost of sales were alsowas primarily attributabledue to the addition of our new subsidiaries in August 2018.Tax Service businesses which incurred increasing labor costs.

Operating Expenses. Operating expenses consistedconsist of depreciation, amortizationimpairments, and general and administrative expenses. We had operating expenses of $4,953,408$3,589,063 and $3,186,399$3,313,142 for the years ended December 31, 20182020 and 2017,2019, respectively. The operatingdecrease is primarily due to reduced selling and administrative expenses in 2018 were primarily attributableas a result of closures due to the issuance of 250,000,002 shares of preferred stock and 3,886,9330 shares of (pre- split) common stock, resulting in non-cash stock based compensation of $287,471 during the year ended December 31, 2018. Additionally, our expense related to salary and wages increased to $1,351,678 and professional fees were $391,136 for year ended December 31, 2018, compared to $741,261 and $80,000 for December 31, 2017, respectively. We had a loss due to impairment of goodwill of $932,529 and loss on disposal of assets of $38,584  from our Romeo’s Pizza stores , Other operating expenses remained relatively fixed for the year, for the years ended December 31, 2018 and 2017, respectively. During the year ended December 31, 2018, we recorded an asset impairment of $300,000 and goodwill impairments of $1,459,725, related to our acquisitions of Red Rock Travel Group and Platinum Tax Defenders.COVID-19 Pandemic.

Non-employee stock compensation. During the years ended December 31, 2018 and 2017, we issued a total of 3,886,930 and 1,306,907   shares of (pre-split) common stock (2,592 and 872 post-split shares), respectively, and 250,000,002 and -0- shares of preferred stock. The fair value of the stock issuance was determined by the fair value of the Company’s common stock on the grant date, at prices ranging from $0.0008-$0.02995  per share ($1.20 - $44.93 post split). Accordingly, we recognized stock based compensation of $287,471  and $285,623  for the years ended December 31, 2018 and 2017, respectively, in connection with these issuances.

Change in value of derivative liability. During the years ended December 31, 20182020 and 20172019 the change in value of derivative liability amounted to $(629,176)$(434,714) and $(36,469),$3,035,271, respectively. Please refer Note 2 for further explanation. In 2018,2020, we issued 10nine convertible promissory notes totaling $1,565,120,$865,500, all of which were convertible into shares of the Company’s common stock at discount to the market. As a result, we had change in value of derivative liability amounted to $(629,176)of $(751,856). We remeasured the fair value of the beneficial conversion derivative through the date of conversion (with a change to earnings), with the $1,870,625$262,959 derivative liability reclassified to paid-in capital at conversion.

Amortization of debt discounts.discounts. We had amortization of debt discount of $950,736$1,192,044 and $573,605$648,468 for years ended December 31, 20182020 and 2017,2019, respectively. Amortization of debt discount is related to our convertible debt.

Interest ExpenseExpense. duringDuring the years end December 31, 20182020 and 2017,2019, interest expense amounted to $360,331$332,704 and $111,682,$489,294, respectively. The increasedecrease in interest was a result of new borrowingsconversions in 2018.2020.

Net Loss.Loss. As a result of the foregoing, we had a net loss of $6,168,401$2,836,893 for the December 31, 2018,2020, which is compared to the net loss for the December 31, 20172019 of $3,651,995.$7,179,906.

Our activities have a focus on growing revenue.revenue and cash flow. We plan to continue this strategy into 2019.2021.

To try to operate at a break-even level based upon our current level of proposed business activity, we believe that we must generate approximately $20,000,000 in revenue per year. Each dollar of revenue is not directly tied to increasing costs. We believe that we can become profitable without incurring additional costs under our current operating cost structure. However, if our forecasts are inaccurate, we will need to raise additional funds. If we need additional capital, our directors have informally agreed to loanborrow such funds as may be necessary through December 31, 20192021 for working capital purposes, although they have no obligation to do so.

On the other hand, if we decide that we cannot operate at a profit in our current configuration, we may choose to scale back our operations to operate at break-even with a smaller level of business activity, while adjusting our overhead to meet the revenue from current operations. In such event, we will probably continue to not be profitable. In addition, we expect that we will need to raise additional funds if we decide to pursue more rapid expansion, the development of new or enhanced services or products, appropriate responses to competitive pressures, or the acquisition of complementary businesses or technologies, or if we must respond to unanticipated events that require us to make additional investments. We cannot assure that additional financing will be available when needed on favorable terms, or at all.

We expect to incur operating losses in future periods because we will be incurring expenses and not generating sufficient revenues. We expect approximately $600,000$6,400,000 in operating costs over the next twelve months. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover these operating costs. Failure to generate sufficient revenues or additional financing when needed could cause us to go out of business.

Liquidity and Capital Resources

As of December 31, 2018,2020, we had cash of $118,307$279,311 and a working capital deficit of $6,858,115.$13,107,015. As of December 31, 2017,2019, we had cash of $68,986$76,902 and a working capital deficit of $4,558,777.$10,561,264.

Net cash used forin operating activities was $(1,234,099)$903,416 for the December 31, 2018,2020, representing a $658,411$743,957 increase in the net cash used in operating activities of $(614,904) for the year ended December 31, 2017.2019. The increase in the amount of net cash used in operating activities in 20182020 compared to last year was primarily attributable to a $26 million increase in net loss, offset by a greater amountthe recognition of non-cash items in 2018 compared to 2017 such as common stock issued for services, accrued expenses and loss on impairmentdeferred revenue of Goodwill.$222,428.

Net cash used in investing activities was $760,153$0 for the December 31, 20182020 compared with cash used inprovided by investing activities was $12,800,of $32,448, during the December 31, 2017. The cash flows used in investing activities in 2018 was primarily attributable to the purchase of fixed assets related to the acquisition of Platinum Tax Defenders, offset by cash received from disposal of fixed assets.2019.

Cash flows provided by financing activities were $1,842,153$1,150,423 for the December 31, 2018,2020, which compares to cash flows provided by financing activities of $633,742$717,859 for the December 31, 2017. These cash flows were related to sales of stock in the amounts of $40,000 during the years ended December 31, 2017. During 2018, we received $1,783,656 in proceeds from issuances of convertible notes payable, offset by repayment of $40,000 in convertible notes. During 2017, we received $687,200 in proceeds from issuances of convertible notes payable, which were partially offset by repayments of $78,684.2019.

There can be no assurance that we will be able to obtain sufficient capital from debt or equity transactions or from operations in the necessary time frame or on terms acceptable to us. Should we be unable to raise sufficient funds, we may be required to curtail our operating plans and possibly relinquish rights to portions of our technology or products. In addition, increases in expenses or delays in product development 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, development of our products, and implementation of our business plan, we need additional financing. We are currently attempting to obtain additional working capital in a term loan transaction. The Company entered into a Security Purchase Agreement dated November 20, 2019 to sell preferred series R shares. Stated value $1,200 per share. These shares shall have a $0.001 par value and shall be non-dilutable stock with voting rights – votes with the Common at 1 vote per share. Conversion rights – converts to Common stock at a ratio of 1 share preferred to 1:25 shares of Common. All newly issued Stock are subject to a lock-up/leak-out agreement. Liquidation limited to 25% in 6 months and one day and subsequently 25% per year.

During 2020 and 2021 both the Platinum Tax Subsidiary and the Key Tax Subsidiary secured PPP Funding to sustain their respective payrolls.

The Company’s current funding is now concentrated with 3 primary lenders and the Company is currently in discussions with each to convert those outstanding notes to equity to include lockup and leakout agreements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements with any party.

Plan of Operation

At Cardiff Lexington, we acquire or merge with middle market companies in the financial services and healthcare sectors by providing them the ability to have an infusion of equity into their business or providing them the ability to exit equity out of their company. Our focus is not industry or geographic-specific, but rather provenmanagement, market, and margin - we are opportunity oriented.

We target acquisitions of mature, high growth, niche companies. Our target companies' proven management maintains full operational control, meaning our acquisitions become standalone autonomous subsidiaries that gain the advantages of a public company without losing their operational independence. For investors, our goal is to provide a diversified lower risk platform to protect and safely enhance yourtheir investment by continually adding assets and holdings. By employing a merge or acquire and hold strategy, we expect to maximize the value and potential of private, often family run, enterprises while providing diversification and risk mitigation for all shareholders. Our portfolio is comprised of mature, high growth and niche companies with great management, in an identifiable market, which they have penetrated through a significant advantage, and have acceptable margins.

Recent Developments

During 2018 we acquired, Red Rock Travel Group located in Orlando, FL and Platinum Tax Defenders located in Simi Valley, California.

Current Business Operations

Cardiff Lexington Corp (formerly Cardiff International, Inc.), is currently structured as a company with holdings of various companies.

The following milestones are estimates only. The working capital requirements and the projected milestones are approximations only and subject to adjustment based on sales, costs and needs.

CARDIFF LEXINGTON CORP (FORMERLY CARDIFF INTERNATIONAL, INC.)is a public Holdingpublicly-traded holding company utilizing a new form of Collaborative Governance.collaborative governance. Cardiff Lexington targets acquisitions of undervalued, niche companies with high growth potential, income-producing businesses, including commercial real estate properties all of which offer high returns for our investors. Our goal is to provide a form of governance enabling businesses to take advantage of the powerpotential access to capital markets of a publicpublicly-traded company without losing management control. Cardiff providesLexington seeks to provide companies the ability to raise money and investors a low risklow-risk environment that protects their investment.

MISSION TUITION (www.missiontuition.com): Cardiff through Mission Tuition has built one of the largest merchant shopping networks in America consisting of all the top name merchants; offering in-store savings and coupon savings with local, regional and national merchants throughout America. With each purchase members earn rebates which goes directly into their educational savings account. Our Tax-Free educational savings program provides a platform for families to start an “educational savings” program that encourages regular and daily use of the program. The Mission Tuition program helps families save for college. Mission Tuition encourages members to contribute to their educational savings with contribution from work, family members or just rebates generated by online and in- store purchases. The Mission Tuition program leverages the two biggest economic forces in society –– consumer spent and the cost of education –– to create the most unique value-added rewards program in decades. Cardiff’smissiontuition.com helps solve a real need for America’s families – saving for your child’s college education.

We have currently placed Mission Tuition on hold until the Company can hire the appropriate management team.

WE THREE, LLC (D/B/A AFFORDABLE HOUSING INITIATIVE) (“AHI”): AHI was acquired on May 15, 2014 is located in Maryville, Tennessee. AHI acquires both mobile homes and mobile home parks offering an alternative to traditional housing. Theirhousing and sells them or rents the homes or properties to individual families. The acquisition of mobile homes and mobile home businessparks 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. If bad credit is an issue preventing people from purchasing a traditional house, AHI will provide a financial leasing option with “O” interest on the lease providing a “lease to own” option for their family home. Most homes are 3 bedroom/2bath homes making the dream of owning a home possible.

ROMEO’S NY PIZZA, INC.:Romeo’s NY Pizza – Established in Paterson, New Jersey in 1945. Romeo’s NY Pizza makes authentic NY pizza, making their dough in-house, using the finest cheese and ingredients available. No soggy crust or watered down pizza sauce, only the best. They also serve Chicken Wings, Philly Steak Subs, Calzones and Salads.

EDGE VIEW PROPERTIES LLC: Edge View Properties consists ofwas acquired on July 16, 2014, is a real estate company that owns 30 prime 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 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). Edgeview’s plan is to enter into a joint venture agreement with a planned concept developer to develop the land.

PLATINUM TAX DEFENDERS: Platinum tax was acquired on July 31, 2018 and is a full-service tax resolution firm located in Los Angeles, CA.  Since 2011, Platinum Tax has been assisting all types of taxpayers resolve any and all issues with IRS and applicable state tax agencies. Platinum 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 team 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.

REPICCI’S FRANCHISE GROUP: The Company sold Refreshment Concepts in 2018; and still operate both Repicci’s FranchiseJM ENTERPRISES 1, INC. (DBA) Key Tax Group and FDR Enterprises; Repicci’s Franchise Group offers franchisees for the operation of “Repicci’s Italian Ice” franchises. FDR(“Key Tax”), was acquired on May 13, 2019, is a Company owned franchisee. Repicci’s specializefull-service tax resolution firm located in Jacksonville, FL. Key Tax assists businesses and individuals around the nation with tax debt issues. Key Tax has a team of twelve members, including tax lawyers, enrolled agents, and support staff with an aggregate of more than 35 years of experience in the distributiontax industry, who are well versed in both the accounting portion of nonfat frozen confections.tax debt as well as the resolution side with substantial experienced in working successfully with revenue officers and collectors. Among other services, Key Tax offers Tax Audit Representation, IRS Installment Agreements, Sales Tax Representation, 940/941 Payroll Tax, Representation, Foreign Bank Account Report Filings, OIC/Fresh Start Program, Wage Garnishment, Bank Levies, Tax Lien Removal, State Tax Resolution, Audit Reconsideration, and Penalty Abatement.

The number of franchise agreements in force as of December 31, 2018 are 49, five of which are “mobile” unites.

The Company obligates itself to each franchisee to perform the following services:

The Company has developed a new “Mobile Franchise Opportunity”. The total investment for the new opportunity ranges from $155,600 to $165,000, as follows:

$125,000 for a new Mercedes Sprinter Van, customized for the franchisee, $25,000 for the franchise fee, the balance for product. The Company’s obligation is as above, except for Item #3, training is specific to the new opportunity.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. We base our estimates on experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources. On an on-going basis, we evaluate the appropriateness of our estimates and we maintain a thorough process to review the application of our accounting policies. Our actual results may differ from these estimates.

We consider our critical accounting estimates to be those that (1) involve significant judgments and uncertainties, (2) require estimates that are more difficult for management to determine, and (3) may produce materially different results when using different assumptions. We have discussed these critical accounting estimates, the basis for their underlying assumptions and estimates and the nature of our related disclosures herein with the audit committee of our Board of Directors. We believe our accounting policies specific to share-based compensation expense and estimation of the fair value of derivative liability involve our most significant judgments and estimates that are material to our consolidated financial statements. They are discussed further below.

Derivative Liability

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company useshistorically used the probability weighted average Lattice Binomial models to value the derivative instruments at inception and on subsequent valuation dates through the December 31, 2018 reporting date. Subsequently, the Company changed its estimate methodology to use the Black-Scholes Model in 2019 and 2020. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified as current liabilities as of December 31, 20182020 and December 31, 2017. 2019.

Share-based compensation expense

The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.

If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties),parties, or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of share options and similar instruments is estimated on the date of grant using a lattice-binomial option pricing valuation model. The ranges of assumptions for inputs are as follows:

Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest.

The expense resulting from share-based payments is recorded in general and administrative expense in the statements of operations.

Stock Based Compensation – Nonemployees

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Subtopic 505-50 of the FASB Accounting Standards Codification (“Subtopic 505-50”).

Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum, or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option pricing valuation model. The ranges of assumptions for inputs are as follows:

Pursuant to ASC paragraph 505-50-257, if fully vested, no forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether, whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra equity by the grantor of the equity instruments.

The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic.

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised.

Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

Inflation

We do not believe that inflation will negatively impact our business plans.

Seasonality.Seasonality

We do not expect our revenues to be impacted by seasonal demands for our services.  However Repicci’s is a seasonal business who has shown growth each year in total revenue.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See next page. Remainder of this page intentionally left blank.

INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors and
Stockholders of

Cardiff Lexington Corp.

(formerly Cardiff International, Inc.)Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheetsheets of Cardiff Lexington Corp (formerly Cardiff International, Inc.) and its subsidiaries (collectively, the “Company”) as ofCorporation (the Company) at December 31, 2017,2020 and 2019, and the related consolidated statements of operations, stockholders’ deficit,deficiency in shareholder’s equity, and cash flows for each of the year thenyears in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”)financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017,2020 and 2019, and the results of theirits operations and theirits cash flows for each of the year thenyears in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Going ConcernEmphasis of Matter

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Restatement

As discussed in Note 182, the accompanying consolidated financial statements have been restated for changes to previously issued financial statements that were issued erroneously by the Company.restated.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

June 29, 2018 

We have served as the Company's auditor since 2017.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Cardiff Lexington Corporation (formerly Cardiff International, Inc.)

Ft. Lauderdale, Florida

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Cardiff Lexington Corporation (formerly known as Cardiff International, Inc.) (the “Company”) at December 31, 2018, and the related consolidated statements of operations, changes in stockholders’ deficit (deficit), and cash flows for each of the year then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 to the consolidated financial statements, the Company has sustained net losses and has accumulated and working capital deficits, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our auditaudits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit,audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our auditaudits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our auditaudits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our auditaudits provide a reasonable basis for our opinion.

/s/ Daszkal Bolton LLP

We have served as the Company’s auditor since 2018.  

Ft. Lauderdale, Florida April 16, 2019

Critical Audit Matters

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER  31, 2018 AND DECEMBER 31, 2017

(Audited)