Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K10-K/A

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 4 OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31 2020, 2021

or

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

For the transition period from _____ to _______

Commission File Number 000-49709

CARDIFF LEXINGTON CORP.

(Exact name of registrant as specified in its charter)

401 East Las Olas Blvd., Suite 1400, Ft. Lauderdale, FL33301

(Address of principal executive offices)

(844) (844) 628-2100

(Registrant's telephone no., including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Par Value $0.001 Common Stock

(Title of each class)

Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☒.

Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐No☒.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes☒     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its annual report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐No☒

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $1,990,001.00$1,990,001.00

Common shares outstanding at March 30, 2021October 20, 2022 is 109,944,821232,796,735 with a par value of $0.001.

DOCUMENTS INCORPORATED BY REFERENCE

None.

EXPLANATORY NOTE

This Amendment No. 1 to the Annual Report on Form 10-K is being filed solely to furnish the Interactive Data files as Exhibit 101, in accordance with Rule 405 of Regulation S-T. No other changes have been made to the Form 10-K, as originally filed on October 21, 2022.

FORM 10-K

CARDIFF LEXINGTON CORP

INDEX

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K10-K/A (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward- looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance, or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties, and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Considering these risks, uncertainties and assumptions, the events described in the forward- looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances, or assumptions underlying such statements, or otherwise.

PART I

ItemITEM 1. DESCRIPTION OF BUSINESS.

History and Operation of the Business

Legacy Card Company, LLC (“Legacy”) was formed as a California limited liability company on August 29, 2001. On April 18, 2005, Legacy converted to a Nevada corporation. On November 10, 2005, Legacy merged with Cardiff Lexington Corp (formerly Cardiff International, Inc.) (“Cardiff Lexington”, the “Company”), a publicly traded Colorado corporation. On August 27, 2014, Cardiff Lexington redomiciled to Florida. On April 13, 2021, Cardiff Lexington Corporation converted from a Florida Corporation to a Nevada Corporation.

In the first quarter of 2013, Cardiff Lexington was restructured into a holding company that began targeting the acquisition of undervalued, niche companies with high growth potential, income-producing commercial real estate properties, or high return investments, with the goal of generating the net income required to support a consistent dividend to our shareholders. The reason for this strategy was to protect our shareholders by acquiring profitable small- to minimum-sized businesses with little to no debt, and provide financing and management support to enhance their ability to provide acceptable returns to investors. New classes of preferred stock have been and may continue to be created to streamline voting rights, avoid debt, and acquire new businesses. By December 31, 2020,2021, we had acquired ten businesses. Four of the acquired businesses were merged into two, one was discontinued, and two were sold during 2020.2021. Accordingly, we currently operate the following four businesses, each as a separate subsidiary:

Cardiff Lexington divested its holdings in the food services sector: Repicci's Italian Ice and Gelato and Romeo's New York Style Pizza. And divested in one of its tax resolution companies. The companies’ restaurant franchise 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 federal, state, and local government. In light of current circumstances arising from the COVID-19 pandemic, management is continuing to evaluate alternatives to mitigate the negative effects of the pandemic on the Company and its shareholders. Cardiff Lexington Board of Directors has narrowed its forward focus to acquisitions in the financial services, healthcare and real estate sectors.

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”). Due to the IRS prolonging individual tax filings, this affected our tax resolution businesses in 2021 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. Considering 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.

Cardiff Lexington is a diversified holding company that operates much like a cooperative, leveraging proven management in private companies that become subsidiaries under our umbrella. Our current emphasis is on the financial services, healthcare, and real estate sectors. Our platform provides an “Equity Exit or Equity Capitalization” strategy for acquisitions as well as a diversified investment platform for investors that is intended to mitigate risk. Our “Buy and Build” strategy seeks niche companies which complement existing subsidiaries. Our acquisition strategy is driven by structure, transaction value, alignment, resources and return on investment. Our acquisition strategy is not limited by geographic location, and is focused on proven management teams, attractive markets, and historical operating margins. We target acquisitions of mature, high growth, niche companies. Cardiff Lexington’s strategy identifies and empowers select, income-producing, middle market private businesses and commercial real estate properties.

The target company’s management team typically maintains control of the day-to-day operations. Acquisitions become standalone autonomous subsidiaries that gain the advantages of a publicly traded company without losing their independent management control. Management enjoys the advantage of improved valuation, liquidity, synergies, and support, along with diversification and asset appreciation through collective subsidiary performance. Diversification and pooled resources leverage value and mitigate risk.

Cardiff Lexington provides these companies both 1) the enhanced ability to raise money for operations or expansion, and 2) an equity exit and liquidity strategy for the owner, heirs, and/or Investors.

For investors, Cardiff Lexington provides a diversified lower risk to protect and safely enhance their investment by continually adding assets and holdings.

Cardiff Lexington employs a merge, acquire, and hold strategy to maximize value and potential of private, often family run, enterprises while providing diversification and risk mitigation for all shareholders.

Cardiff Lexington is led by strong and talented roster of executives and advisors providing expert acquisition, market guidance and added value for subsidiaries and investors.

Impact of COVID-19 Pandemic

The outbreak of a novel coronavirus throughout the world, including the United States, duringsince 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, 2020.2021. 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 many of the Company's customers and suppliers willmay well continue to be impacted by these closings and restrictions which could materially and adversely affect demand for our products, ourthe Company. Our ability to obtain or deliver inventory or services, and our ability to collect accounts receivables as customers face higher liquidity and solvency risk. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 Pandemic, and it is possible that economic distress will continue in many markets for the foreseeable future. Such economic disruption could have a material adverse effect on our business. Policymakers around the world have responded with fiscal and monetary policy actions to support the economy. The magnitude and overall effectiveness of these actions remains uncertain.may be affected

The Company’s restaurant franchise operations have been severely and adversely affected by the economic pressure of the COVID-19 pandemic and the subsequent directives and responses to the crisis taken by the federal, state, and local governments. In light of circumstances arising from the COVID-19 Pandemic, management divested of all food service operations and is continuing to evaluate the Company’s current operations and acquisition opportunities to mitigate the impact of the pandemic and maximize shareholder value.

The decrease in revenue in 2020 is primarily attributable to the COVID-19 Pandemic. Both the affordable housing and financial services segments of the economy have beenwas adversely affected by the COVID-19 Pandemic, due mainlyPandemic. Management will continue to the significant increase in unemployment, which directly affected our subsidiaries prospects and customer base. We believe the segment of the population which was adversely affected by unemployment overlaps significantly with the customer base of our affordable housing and financial servicesmonitor its businesses and consequently, these customers were no longer able to affordfocus our services.growth primarily in the health industry.

Human Capital

Collectively, Cardiff Lexington and its subsidiaries employ approximately 3719 employees and anticipates hiring additional personnel with new acquisitions. We believe that we have good relations with our employees and our employees are not represented by any collective bargaining group or agreement. We believe our ability to attract and retain employees is a key to a successful acquisition strategy.

Competition

We are a small capitalization holding company that seeks to enable businesses to take advantage of the potential access to capital markets provided by affiliation with a publicly traded company. Cardiff Lexington began targeting the acquisition of undervalued, niche companies with high growth potential, income-producing commercial real estate properties, and high return investments, all designed to generate sufficient earnings to pay a consistent dividend to our shareholders. The strategy is intended to mitigate risk to shareholders by building a diversified portfolio of profitable small- to minimum-sized businesses with little to no debt, seeking support with both financing and management that had the ability to offer a return to investors. We will continue to establish new classes of preferred stock to streamline voting rights, negate debt, and acquire new businesses in the financial services and healthcare, and real estate sectors.

We face significant competition in the markets in which our subsidiaries operate. Platinum Tax and Key Tax havehas significant competition in most of the markets in which they operate from other local tax resolution entities and from larger national companies. AHI has significant competition from other private companies in the area and a few real estate investment trusts, which compete in the manufactured housing communities EdgeviewEdge View competes in the highly competitive housing industry. Some of our subsidiaries’ competitors may have advantages over us in terms of greater operational, financial, management or other resources in particular markets or in general. Our market position depends on our financing, development and operation capabilities, reputation, experience and track record. There can be no assurance that our current or potential competitors will not offer products or services comparable or superior to those that our subsidiaries offer. Increased competition may result in price reductions, reduced profit margins and loss of market share.

Proprietary Information

We own the following trademarks: Cardiff USA; Mission Tuition, Legacy Card Company and Small Cap Rescue.

Government Regulation

We do not expect to be subject to material governmental regulation. However, it is our policy to fully comply with all governmental regulation and regulatory authorities.

Research and Development

We are investing in the development of a new website that will effectively present the Company’s acquisition strategy and its benefits to prospective acquisition targets and the communities we serve, as well as keep investors informed of our progress in executing our strategy.

Environmental Compliance

We believe that we are not subject to any material costs for compliance with any environmental laws.

How to Obtain our SEC Filings

We file annual, quarterly, and special reports, information statements, and other information with the Securities and Exchange Commission (the “SEC”). Reports, information statements and other information filed with the SEC can be inspected and copied at the public reference facilities of the SEC at 100 F Street N.E., Washington, DC 20549. Such material may also be accessed electronically by means of the SEC's website at www.sec.gov.

Our investor relations department can be contacted at our principal executive office located at, 401 East Las Olas Blvd. Unit 1400, Fort Lauderdale, FL 33301. Our telephone number is (844-628-2100).

ItemITEM 1A. RISK FACTORSFACTORS.

You should carefully consider the risks and uncertainties described below and the other information in this document before deciding to invest in shares of our common stock.

The occurrence of any of the following risks could materially and adversely affect our business, financial condition, and operating result. In this case, the trading price of our common stock could decline, and you might lose all or part of your investment.

Risks Relating to Our Business, Strategy and Industry

We are a holding company and rely on distributions and other payments, advances and transfers of funds from our subsidiaries to meet our obligations.

We have no direct operations and derive all of our cash flow from our subsidiaries. Because we conduct our operations through our subsidiaries, we depend on those entities for payments or distributions to meet our obligations. The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could limit or impair their ability to pay us.

Our acquisition strategy exposes us to substantial risk.

Our acquisition of companies is subject to substantial risk, including but not limited to the failure to identify material problems during due diligence (for which we may not be indemnified post-closing), the risk of over-paying for assets (or not making acquisitions on an accretive basis), the ability to obtain or retain customers and the risks of entering markets where we have limited experience. While we perform due diligence on prospective acquisitions, we may not be able to discover all potential operational deficiencies in such entities.

Our prior and future acquisitions may not perform as expected or the returns from such acquisitions may not support the financing utilized to acquire them or maintain them. Furthermore, integration and consolidation of acquisitions requires substantial human, financial and other resources and may divert management's attention from our existing business concerns, disrupt our ongoing business or not be successfully integrated. Even if we consummate acquisitions that we believe will be accretive to such cash per unit, those acquisitions may in fact result in a decrease in such cash per unit as a result of incorrect assumptions in our evaluation of such acquisitions, unforeseen consequences or other external events beyond our control. Furthermore, if we consummate any future acquisitions, our capitalization and results of operations may change significantly, and stockholders will generally not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of these funds and other resources. As a result, the consummation of acquisitions may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Failure to manage our growing and changing business could have a material adverse effect on our business, prospects, financial condition and results of operations.

As we grow, we expect to encounter additional challenges to our internal processes, capital commitment process, and acquisition funding and financing capabilities. Our existing operations, personnel, systems and internal control may not be adequate to support our growth and expansion and may require us to make additional unanticipated investments in our infrastructure. To manage the future growth of our operations, we will be required to improve our administrative, operational and financial systems, procedures and controls, and maintain, expand, train and manage our growing employee base. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, execute our business strategies successfully or respond to competitive pressures. As a result, our business, prospects, financial condition and results of operations could be materially and adversely affected.

During our startup phase we were not profitable and generated minimal revenue and no profit.

Since the launch of its acquisition strategy in 2013, the Company has not been profitable. Although management is pleased with the execution of the Company’s acquisition strategy and the revenues it has generated to date, the Company may never become profitable, and could go out of business.

Despite having sustained net losses from our inception, we still consider ourselves a going concern.

For the fiscal years ended December 31, 20202021 and December 31, 20192020, our independent registered public accounting firm has included an emphasis of matter paragraph about our ability to continue as a going concern, due to our continued losses and deficiencies in working capital. We believe our ability to achieve and maintain profitability and positive cash flow is dependent upon:

Based upon current plans, we may incur operating losses in future periods. Also, we expect to incur approximately $6,400,000 in operating costs to be incurred over the next twelve months. We cannot guarantee that we will be successful in generating sufficient revenues or obtaining other financing in the future to cover these operating costs. Additionally, financing may not be available on terms favorable to the Company. Failure to generate sufficient revenues may cause us to go out of business.

Since we are an early-stage company that has generated minimal revenue, an investment in our shares is highly risky and could result in a complete loss of your investment if we are unsuccessful in our business plans.

We were incorporated in August 2001 and, since 2013, have focused all our efforts on the acquisition and development of our portfolio of companies which have quadrupled our revenue since 2015. However, there is no guarantee that we will be successful in realizing revenues or in achieving or sustaining positive cash flow at any time in the future. Any such failure could result in the possible closure of our business or force us to seek additional capital through loans or additional sales of our equity securities to continue business operations, which would dilute the value of any shares you hold and could result in the loss of your entire investment.

Future acquisitions are important to our success. We may not be able to successfully integrate our acquisitions into our operations.

The acquisition of new companies is central to our business model and critically important to our success. Although we generally seek companies that have positive cash flows, we cannot be certain that the acquired companies will remain cash flow positive and could possibly lose revenues. In addition, there are no assurances that the companies acquired will continue as profitable businesses and could adversely affect our business and any possible revenues.

Successful implementation of our business strategy depends on factors specific to acquiring successful businesses. Adverse changes in our acquisition process could undermine our business strategy and have a material adverse effect on our business, financial condition, and results of operations and cash flow:

There are no substantial barriers to acquire established businesses and there is no guarantee the Company will successfully acquire additional businesses, which could severely limit our anticipated revenues. If we cannot acquire established businesses, it could result in the loss of your investment.

Since we have no copyright protection, unauthorized persons may attempt to copy aspects of our business model, including our governance design or functionality, services, or marketing materials. Any encroachment upon our corporate information, including the unauthorized use of our brand name, the use of a similar name by a competing company or a lawsuit initiated against us for infringement upon another company's proprietary information or improper use of their copyright, may affect our ability to create brand name recognition, cause confusion among prospective portfolio companies and their customers, and/or have a detrimental effect on our business. Litigation or proceedings before the U.S. or International Patent and Trademark Offices may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets and domain name and/or to determine the validity and scope of the proprietary rights of others. Any such infringement, litigation or adverse proceeding could result in substantial costs and diversion of resources and could seriously harm our business operations and/or results of operations. As a result, an investor could lose his or her entire investment.

Risks Associated with our Common Stock

Our stock has limited liquidity.

Our common stock trades on the OTC Pink Market, which is operated by OTC Markets Group Inc. (“OTC Pink Market”). Trading volume in our shares may be sporadic and the price could experience volatility. If adverse market conditions exist, you may have difficulty selling your shares.

The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, including the following:

Our shares are defined as a “penny stock” under the Exchange Act and rules of the SEC. In general, buying low-priced penny stocks is very risky and speculative. You may not be able to sell your shares when you want to do so, if at all.

Our shares are defined as a “penny stock” under the Exchange Act and rules of the SEC. The Exchange Act and SEC rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse, or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser's written agreement prior to such sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the Commission. Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock and may also affect your ability to resell any shares you may purchase in the public markets.

We do not expect to pay dividends on common stock in the foreseeable future.

We have not paid any cash dividends with respect to our common stock, and it is unlikely that we will pay any dividends on our common stock for the year. Earnings, if any, that we may realize will be retained in the business for further development and expansion.

Other General Risks

The loss of the services of the current officers and directors could severely impact our business operations and future development, which could result in a loss of revenues and one’s ability to ever sell any shares.

Our performance is substantially dependent upon the professional expertise of the current officers and board of directors. Each has extensive expertise in business development and acquisitions, and we are dependent on their abilities. If they are unable to perform their duties, this could have an adverse effect on business operations, financial condition, and operating results if we are unable to replace them with other individuals qualified to develop and market our business. The loss of their services could result in a loss of revenues, which could result in a reduction of the value of any shares you hold as well as the complete loss of your investment.

Because of our size and limited resources, we may have difficulty establishing adequate management, legal and financial controls, which we are required to do in order to comply with U.S. GAAP and securities laws, and which could cause a materially adverse impact on our financial statements, the trading of our common stock and our business.

We are a small holding company that lacks the financial resources and qualified personnel to implement and sustain adequate internal controls. As a result, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet proper internal control standards. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002. This may result in significant deficiencies or material weaknesses in our internal controls which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002. Any such deficiencies, material weaknesses or lack of compliance could result in restatements of our historical financial information, cause investors to lose confidence in our reported financial information, have an adverse impact on the trading price of our common stock, adversely affect our ability to access the capital markets and our ability to recruit personnel, lead to the delisting of our securities from the electronic platform on which they are traded, lead to litigation claims, thereby diverting management’s attention and resources, and which may lead to the payment of damages to the extent such claims are not resolved in our favor, lead to regulatory proceedings, which may result in sanctions, monetary or otherwise, and have a materially adverse effect on our reputation and business.

ITEM 2. DESCRIPTION OF PROPERTY.

The Company had operating lease expense of $87,649$185,831 and $210,286$87,649 for the years ended December 31, 20202021 and 2019,2020, respectively, consisting of the followings.

Edge View Properties, Inc. 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.

Cardiff 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 authorize Mr. Jahid to enter 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 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.

On August 31, 2021, without knowledge or consent of Cardiff Lexington or Edge View Properties and in a manner to conceal his unlawful actions, a property manager used a new company check from Summit National Bank to withdraw $50,000 from the Company Account. The Defendant is being charged with intentional, oppressive, fraudulent, malicious and outrageous damages.  We received the Court’s decision on our Motion for Partial Summary Judgment. In the decision, the Judge denied our Motion for Partial Summary Judgment due to several disputed facts and unanswered questions.  Case is pending.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.Applicable.

PART II

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

Holders

As of March 24, 2021,August 15, 2022, there were 853 record holders of our common stock, and there were 109,944,821166,130,069 shares of our common stock outstanding.

Public Market for Common Stock

Our common stock, par value $.001$0.001 per share (the “Common Stock”), is currently quoted on the OTC Pink Market, which is operated by OTC Markets Group Inc. under the symbol “CDIX.” The OTC Pink Market is a quotation service that displays real-time quotes, last-sale prices, and volume information in over the counter, or “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 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)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 SEC has 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 Company’s common stock constitute penny stock under the Exchange Act and 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 promulgated under the 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, shareholders 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 issuedFebruary 11, 2021, the following securitiesChairman of the Board and the Chief Executive Officer each converted 62,500 Preferred Series I shares into 25,000,000 restricted common shares for services rendered to the Company’s chief operating officer, Dr. Rollan Roberts: one sharea total of 125,000 Preferred Series CI shares into 50,000,000 restricted common shares.

Effective March 29, 2021, $265,000 in principle from convertible debt and conventional debt and $298,195 in accrued interest was converted into 140,799 shares of preferred stock valued at $4,000 and 21,000series B with a $4.00 stated value per share. This has been reflected in the statement of deficiency in shareholders’ equity.

As part of the Nova Ortho acquisition, on May 31, 2021, the Company issued 894,834 shares of Series B preferred stock series J with par value at $84,000. In addition, during 2020$0.001 and a stated value of $4.00, for $3,579,334.

Also, as part of the Nova Ortho acquisition, the Company agreed to issue 96,000issued 868,056 shares of Series B preferred stock valued at $222,000series N with par value $0.001 and a stated value of $4.00, for $3,000,000 including a discount of $472,224 which was recorded as a reduction to Dr. Roberts.APIC.

On February 20, 2020, a preferred stockholder exchanged 1,447,157July 22, 2021, the Chief Operating Officer received 61,000 shares of Series K-1 preferred stock series B in exchange for 3,500accrued salaries of $244,000.

Effective December 28, 2021, the Chairman of the Board and Chief Executive Officer each forfeit and surrendered for no consideration 90,000,000 preferred I shares each totaling 180,000,000.

The Company and Key Tax managers have entered into a Buyback Agreement (“Agreement”) which is effective December 31, 2021. Pursuant to the Agreement, Key Tax managers resigned employment from the Company effective December 31, 2021 and has purchased back the subsidiary in exchange for returning 325,244 Preferred Shares Series G stock (“Preferred G”) which is 100% of Preferred G shares. The Key Tax managers will retain zero shares of Preferred G shares subject to the terms of the Agreement. There was a loss on disposal in the amount of $1,201,171, which represented net assets and liabilities at the time of sale back

During the year ended December 31, 2021, the Company converted convertible debt into 109,234,241 shares of common stock.

In the second quarter of 2021, the Company issued 1,627,031 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.exchange for professional services.

See footnote Nos. 33 through 37-3#10 to the Company’s consolidated financial statements appearing elsewhere in this report for information on convertible notes payable issued during 2020.2021.

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 2020.2021.

ITEM 6. SELECTED FINANCIAL DATADATA.

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 OPERATIONSOPERATIONS.

This Management’s Discussion and Analysis or Financial 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, 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 the Company as of and for the years ended December 31, 20202021 and December 31, 2019.2020. For detailed financial information, see the audited consolidated financial statements included in this report.

Results of Operations

Revenues. We had revenues in the amount of $3,453,05810,008,860 and $3,707,360$3,453,058 for the years ended December 31, 2021 and 2020, and 2019, respectively.respectively, an increase of $6,555,802 or 189.9%. The decreaseincrease in revenue was primarily due toto: (i) the dispositionacquisition of our food services sector businesses mid-yearNova Ortho which generated revenue of $5,413,890 for the seven months ending December 31, 2021, (ii) the sale of three parcels of land by Edge View for $152,000 and (iii) higher sales in the effect of the COVID 19 Pandemic to ongoing operations. We expect revenue to increase during 2021, as our financial services sector holdings rebound fromfor the Covid-19 Pandemic. Further, we continue our e continuous effort for new acquisitions.twelve months ended December 31, 2021 due primarily to the impact of the COVID-19 pandemic during 2020, offset by a decrease in housing rentals.

Cost of Goods Sold. We had costs of sales in the amount of $1,668,146$3,848,406 and $1,665,486$1,668,146 for the years ended December 31, 2021 and 2020, and 2019, respectively.respectively, an increase of $2,180,260 or 130.7%. The increase in revenue was primarily due to: (i) the acquisition of Nova Ortho which incurred cost of sales was primarily due to our Tax Service businessesof $1,685,625 for the seven months ending December 31, 2021, (ii) the sale of three parcels of land by Edge View which incurred increasing labor costs.cost of sales of $79,481 and (iii) higher cost of sales for the financial services sector for the twelve months ended December 31, 2021, offset by a decrease in housing rentals.

Operating Expenses. Operating expenses consist of acquisition costs, depreciation impairments,expense, and general and administrative expenses. We had operating expenses of $3,589,063$4,534,352 and $3,313,142$3,589,063 for the years ended December 31, 2021 and 2020, and 2019, respectively.respectively, an increase of $945,289 or 26.3%. The decrease isincrease in operating expenses was primarily due to reduced sellingto: (i) the acquisition of Nova Ortho which incurred operating expenses of $395,088 for the seven months ending December 31, 2021, and administrative(ii) higher operating expenses as a result of closures due tofor the COVID-19 Pandemic.

Change in value of derivative liability. Duringfinancial services sector for the yearstwelve months ended December 31, 2020 and 2019 the change in value of derivative liability amounted to $379,892 and $(3,102,392), respectively. In 2020, we issued nine convertible promissory notes totaling $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 of $(697,034). We remeasured the fair value of the beneficial conversion derivative through the date of conversion (with a change to earnings), with $262,959 derivative liability reclassified to paid-in capital at conversion.2021.

Amortization of debt discounts.discounts. We had amortization of debt discount of $1,192,044$1,051,264 and $648,468$1,192,044 for years ended December 31, 2021 and 2020, and 2019, respectively.respectively, a decrease of $140,780 or 11.8%. Amortization of debt discount is related to our convertible debt.

Interest Expense.Expense and finance charge. During the years end December 31, 20202021 and 2019,2020, interest expense amountedand finance charge was $2,982,844 and $332,704, respectively, an increase of $2,650,140 or 796.5%. The increase is due primarily to $332,704 and $489,294, respectively. The decrease in interest was a resultfinance charges of conversions in 2020.$2,633,634 for the seven months ended December 31, 2021 for Nova Ortho factoring certain accounts receivables.

Net Loss. Loss. As a result of the foregoing, we had a net loss of $2,905,133$409,707 for the year ending December 31, 2020, which is2021, compared to thea net loss for the year ending December 31, 20192020 of $6,363,632.$2,836,893.

Our activities have a focus on growing revenue and cash flow. We plan to continue this strategy into 2021.2022.

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$9,000,000 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 borrow such funds as may be necessary through December 31, 2021for the next 12 months 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 $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, 2021, we had cash of $595,987 and a working capital deficit of $2,502,813. As of December 31, 2020, we had cash of $279,311 and a working capital deficit of $12,303,549. As of December 31, 2019, we had cash of $76,902 and a working capital deficit of $10,826,234.$13,107,015.

Net cash used in by operating activities was $1,048,243 for the December 31, 2020, representing a $225,857 increase in net cash used in operating activities$844,826 for the year ended December 31, 2019.2021, representing a $903,416 decrease from the prior year ended December 31, 2020. The increaseimprovement in the amount of net cash used in operating activities is primarily due to a $903,416 reduction in 2020 compared to last year was primarily attributable the recognition of deferred revenue of $222,428.loss from operating income.

Net cash used in investing activities was $32,448$2,323,642 for the year ended December 31, 2021, used for the acquisition of the new business, compared with cash provided by investing activities of $0 for the year ended the December 31, 2020 compared with cash used in investing activities of $760,153, during the December 31, 2019.2020.

Cash flows provided by financing activities were $1,399,825 for the December 31, 2020, which compares toNet cash flows provided by financing activities of $717,859was $3,676,648 for the year ended December 31, 2019.2021, compared with cash provided by financing activities of $1,150,423 for the year ended December 31, 2020. The increase is due primarily issuance of preferred stock for the acquisition of Nova Ortho.

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 (sold at December 31, 2021) 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 out of their company. Our focus is not industry or geographic-specific, but rather proven management, 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 their 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.

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 publicly-traded holding company utilizing a form of 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 potential access to capital markets of a publicly-traded company without losing management control. Cardiff Lexington seeks to provide companies the ability to raise money and investors a low-risk environment that protects their investment.

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 and sells them or rents the homes or properties to individual families. The acquisition of mobile homes and 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. 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.

EDGE VIEW PROPERTIES LLC: Edge View Properties was 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. Three lots were sold during 2021 for a total price of $152,000. 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.

JM ENTERPRISES 1, INC. (DBA) Key Tax GroupNOVA ORTHO AND SPINE, PLLC (“Key Tax”NOVA ORTHO”), waswhich we acquired on May 13, 2019,31, 2021 is a full-service tax resolution firm locatedcompany in Jacksonville, FL. Key Tax assists businesseswhich doctors provides a full range of diagnostic and individuals aroundsurgical services for injuries and disorders of the nation with tax debt issues. Key Tax has a team of twelve members, including tax lawyers, enrolled agents,skeletal system and support staff with an aggregate of more than 35 years of experience in the tax industry, whoassociated bones, joints, tendons, muscles, ligaments, and nerves. From sports injuries, to sprains, strains, and fractures, our doctors are well versed in both the accounting portion of tax debtdedicated 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 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.

of Florida.

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 historically 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, 2020 and December 31, 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 sales to third 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 the corresponding cost is an immediate expense or a prepaid asset.

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.

Goodwill and Other Intangible Assets

Goodwill and indefinite-lived brands are not amortized, but are evaluated for impairment annually or when indicators of a potential impairment are present. Our impairment testing of goodwill is performed separately from our impairment testing of indefinite-lived intangibles. The annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans. The Company believes such assumptions are also comparable to those that would be used by other marketplace participants. During the years ended December 31, 2021 and 2020, the Company did not recognize any goodwill impairment. The Company based this decision on impairment testing of the underlying assets, expected cash flows, decreased asset value and other factors.

Inflation

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

Seasonality

We do not expect our revenues to be impacted by seasonal demands for our services.

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.

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INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Cardiff Lexington Corp. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Cardiff of Lexington Corp. and Subsidiaries (the “Company”) as of December 31, 2021, and the related consolidated statement of operations, stockholders’ equity, and cash flows for 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 as of December 31, 2021, 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.

Substantial Doubt Regarding the Company’s Ability to Continue as a Going Concern

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. 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 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, 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 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 audit 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 audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Goodwill

Critical Audit Matter Description

At December 31, 2021, the Company had approximately $7.9 million of goodwill. As discussed in Note 1 and Note 14 to the consolidated financial statements, goodwill is tested annually for impairment at the reporting unit level, or more frequently if impairment indicators arise. In accordance with the FASB revised guidance on “Testing of Goodwill for Impairment,” a company first has the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the company decides, as a result of its qualitative assessment, that it is more-likely- than- not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a two-step goodwill impairment test. The first step compares the fair value of each reporting unit to its carrying amount. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill.

Auditing the Company’s goodwill impairment analyses was complex and highly judgmental due to the nature of qualitative assessment and, where necessary, the significant estimation required to determine the fair value of the reporting units. In particular, the fair value estimate was sensitive to significant assumptions, such as future operating results, cash flows and the weighted average cost of capital. These significant assumptions are forward looking and could be materially affected by future market or economic conditions.

How we addressed the matter:

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s goodwill impairment evaluation process, including controls over management’s review of the significant assumptions described above.

Our audit procedures to test the Company’s goodwill impairment analyses included evaluating the reasonableness of management’s qualitative assessments and in certain instances the estimated fair value of the Company’s reporting units. In evaluating estimated fair value of reporting units we, among others, evaluated management’s significant assumptions described above and used within the fair value method, and tested the completeness and accuracy of the underlying data. We engaged our valuation specialists to assist in assessing fair valuation methodologies utilized in the Company’s goodwill impairment analyses. We compared certain significant assumptions to existing market information and, where relevant, to the plans of the Company, including management’s expectations with regard to the Company’s business model, customer base, product mix and other relevant factors. We assessed the historical accuracy of management’s projected cash flows, where applicable, and performed sensitivity analyses of the significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions. We involved our valuation specialists to assist in evaluating the discount rates, which included comparison of the selected discount rates to the Company’s weighted average cost of capital and the risk associated with projected cash flows. Finally, we assessed the adequacy of the disclosures in the consolidated financial statements.

/s/ Grassi & Co., CPAs, P.C.

Jericho, New York

October 21, 2022

We have served as the Company’s auditor since 2022.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Cardiff Lexington Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cardiff Lexington Corporation (the Company) at December 31, 2020, and 2019, and the related consolidated statements of operations, deficiency in shareholder’s equity, and cash flows for each of the years in the two-year periodyear ended December 31, 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As discussed in Note 2, the accompanying 2020 consolidated financial statements for the have been restated.

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 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 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 audits 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 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 audits 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 audits 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 audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Intangible Assets Impairment Assessments

As described in Notes 2 and 8Note 14 to the consolidated financial statements, the Company has goodwill of $3.5 million at December 31, 2020. In most cases, no directly observable market inputs are available to measure the fair value to determine if the asset is impaired. Therefore, an estimate is derived indirectly and is based on net present value techniques utilizing post-tax cash flows and discount rates. The estimates that management used in calculating the net present values depend on assumptions specific to the nature of the management service activities with regard to the amount and timing of projected future cash flows; long-term professional service forecasts; actions of competitors (competing services), future tax and discount rates.

The principal considerations for our determination that performing procedures relating to the intangible assets impairment assessment is a critical audit matter are the significant judgment by management when developing the net present value of the intangible assets. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the amount and timing of projected future cash flows and the discount rate.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing management’s process for developing the fair value estimate; evaluating the appropriateness of the net present value techniques; testing the completeness and accuracy of underlying data used in the model; and evaluating the significant assumptions used by management, including the amount and timing of projected future cash flows and the discount rate. Evaluating management’s assumptions related to the amount and timing of projected future cash flows and the discount rate involved evaluating whether the assumptions used by management were reasonable considering the current and past performance of the intangible assets, the consistency with external market and industry data, and whether these assumptions were consistent with evidence obtained in other areas of the audit.

/s/ Daszkal Bolton LLP

Daszkal Bolton LLP

March 31, 2021, except for Note 2 as to which the date is February 8, 2022

Fort Lauderdale, Florida

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

2018 through 2021.

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 20202021, AND 20192020

The accompanying notes are an integral part of these consolidated financial statements

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

AS OF DECEMBER 31, 2021 AND 2020 AND 2019

The accompanying notes are an integral part of these consolidated financial statements

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019

The accompanying notes are an integral part of these consolidated financial statements

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY)

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

The accompanying notes are an integral part of these consolidated financial statements

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY) (continued)

FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019

The accompanying notes are an integral part of these consolidated financial statements

(Restated)

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2020 AND DECEMBER 31, 2019

The accompanying notes are an integral part of these consolidated financial statements

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND DECEMBER 31, 2020