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)

 

Florida84-1044583
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

 

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:

 

Title of each classTrading Symbol(s)Name of each exchange on which registered
N/AN/AN/A

 

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)

 

 Large accelerated filer  Accelerated filer 
 Non-accelerated filerSmaller reporting company 
 Emerging growth company   

 

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

 

 Page
  
PART I
  
Item 1. Business1
  
Item 1A. Risk Factors4
  
Item 2. Property8
  
Item 3. Legal Proceedings8
  
Item 4. Mine Safety Disclosures8
  
PART II
  
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities9
  
Item 6. Selected Financial Data11
  
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations1112
  
Item 7A. Quantitative and Qualitative Disclosures About Market Risk1819
  
Item 8. Financial Statements and Supplementary Data1819
  
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures5320
  
Item 9A. Controls and Procedures5320
  
Item 9B. Other Information5421
  
PART III
  
Item 10. Directors, Executive Officers and Corporate Governance5522
  
Item 11. Executive Compensation5724
  
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters5825
  
Item 13. Certain Relationships and Related Transactions, and Director Independence5925
  
Item 14. Principal Accountant Fees and Services6027
  
PART IV
  
Item 15. Exhibits and Financial Statement Schedules6128
  
Signatures

62

29
  
Index to Financial Statements19F-1

 

 i 

 

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 ii 

 

 

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:

 

·We Three, LLC, which operates under the name “Affordable Housing Initiative” or “AHI,” was acquired in April 2014. AHI is located in Maryville, Tennessee. AHI acquires both mobile homes and mobile home parks offering an alternative to traditional housing. Their mobile home business 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, Inc., was acquired in July 2014 (“Edge View”). Edge View consists of 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).

 

·Platinum Tax Defenders, LLC, which we acquired on July 31, 2018, is a full-service tax resolution servicefirm 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 was acquiredhave 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 July 2018.compromise, audit representation, amending tax returns, tax preparation, tax resolution, wage garnishment relief, removal of bank levies and liens, bookkeeping, and other financial challenges.

 

·JM Enterprises 1, Inc.Nova Ortho and Spine, PLL, a tax resolution service which operates under the name “Key Tax Group,” that was acquired May 8, 2019.31, 2021 and provides a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments, and nerves. From sports injuries, to sprains, strains, and fractures, our doctors are dedicated to helping you return to your active lifestyle. Orthopedic and pain procedure services include hip and knee replacement, shoulder reconstruction, fracture care and hand surgery, as well as spinal surgery in the State of Florida.

1

 

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.

 

1

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.

 

2

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.

2

 

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.

3

 

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).

 

3

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.

 

4

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.

 

4

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:

 

 ·our ability to acquire profitable businesses;

 ·
·our ability to generate substantial revenues; and

 ·
·our ability to obtain additional financing

 

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.

 

5

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:

 

 ·The competitive environment in the specific field of business acquired;

 ·
·Our ability to acquire the right businesses that meet customers’ needs; and

 ·
·Our ability to establish, maintain and eventually grow market share in a competitive environment.

5

 

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:

 

 ·actual or anticipated fluctuations in our operating results;

 ·
·changes in financial estimates by securities analysts or our failure to perform in line with such estimates;

 ·
·changes in market valuations of other companies, particularly those that market services such as ours;

 ·
·announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

 ·
·introduction of product enhancements that reduce the need for our products; and

 ·
·departure of key personnel.

6

 

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.

6

 

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.

 

 

 

 

 7 

 

 

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.

 

  For the year ended 
  December 31,
2020
  December 31,
2019
 
       
Lot $408  $65,208 
Office  87,169   71,557 
Total $87,649  $136,765 

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).

  For the year ended 
  December 31,
2021
  December 31,
2020
 
       
Lot $0  $408 
Office  185,831   87,169 
Total $185,831  $87,649 

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 8 

 

 

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.

 

 High  Low  High  Low 
December 31, 2021        
1st Quarter $.0660  $.0102 
2nd Quarter $.0240  $.0104 
3rd Quarter $.0165  $.0045 
4th Quarter $.0071  $.0001 
December 31, 2020                
1st Quarter $40  $.0001  $40.00  $.0001 
2nd Quarter $.51  $.0001  $.5100  $.0001 
3rd Quarter $.42  $.04  $.4200  $.0400 
4th Quarter $.081  $.018  $.0810  $.0180 
December 31, 2019        
1st Quarter $1.34  $.06 
2nd Quarter $.10  $.07 
3rd Quarter $.01  $.005 
4th Quarter $.006  $.002 

 

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.

 

 

 

 9 

 

 

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:

 

 ·contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;

 ·
·contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of the Securities Act;

 ·
·contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" prices for penny stocks and the significance of the spread between the bid and ask price;

 ·
·contains a toll-free telephone number for inquiries on disciplinary actions;

 ·
·defines significant terms in the disclosure document or in the conduct of trading penny stocks; and

 ·
·contains such other information and is in such form (including language, type, size, and format) as the SEC shall require by rule or regulation;

 

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

 

 ·the bid and offer quotations for the penny stock;

 ·
·the compensation of the broker-dealer and its salesperson in the transaction;

 ·
·the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and

 ·
·monthly account statements showing the market value of each penny stock held in the customer's account.

 

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.

 

 

 

 10 

 

 

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.

 

11

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.

 

  As of  As of 
  

December 31,

2021

  

December 31,

2020

 
Assets:        
Affordable Housing Rentals $213,876  $258,813 
Financial Services  2,212,379   4,369,195 
Healthcare  8,092,820    
Real Estate  611,900    
Cardiff Lexington  28,940   302,139 
Consolidated assets $11,159,915�� $4,930,147 

 

11

  As of  As of 
  

December 31,

2020

  

December 31,

2019

 
Assets:        
Affordable Housing Rentals $258,813  $299,565 
Financial Services  4,369,195   4,302,238 
Others  302,139   314,002 
Consolidated assets $4,930,147  $4,915,805 

  

December 31,

2020

  

December 31,

2019

 
Revenues:        
Affordable Housing Rentals $138,832  $176,882 
Financial Services  3,314,226   3,530,480 
Other      
Consolidated revenues $3,453,058  $3,707,360 
         
Cost of Sales:        
Affordable Housing Rentals $156,191  $174,433 
Financial Services  1,511,995   1,491,053 
Other      
Consolidated cost of sales $1,668,146  $1,665,486 
         
Income (Loss) from operations from subsidiaries        
Affordable Housing Rentals $(40,378) $(18,720)
Financial Services  (190,338)  114,773 
Loss from operations $(230,716) $96,053 
         
Loss from operations from Cardiff Lexington $(1,573,435) $(1,374,409)
         
Income (Loss) before taxes        
Affordable Housing Rentals $(40,378) $(18,720)
Financial Services  (187,943)  82,354 
Corporate and administration  (2,676,812)  (6,382,542)
Consolidated income (loss) before taxes $(2,905,133) $(6,318,908)

 

 

 12 

 

 

  

December 31,

2021

  

December 31,

2020

 
Revenues:        
Affordable Housing Rentals $129,803  $138,832 
Financial Services  4,313,167   3,314,226 
Healthcare  5,413,890    
Real Estate  152,000    
Consolidated revenues $10,008,860  $3,453,058 
         
Cost of Sales:        
Affordable Housing Rentals $79,953  $156,191 
Financial Services  1,942,411   1,511,955 
Healthcare  1,746,561    
Real Estate  79,481    
Consolidated cost of sales $3,848,406  $1,668,146 
         
Income (Loss) from operations from subsidiaries        
Affordable Housing Rentals $(36,022) $(40,378)
Financial Services  187,027   (190,338)
Healthcare  3,272,241    
Real Estate  68,744    
Income (loss) from operations from subsidiaries $3,491,990  $(230,716)
         
Loss from operations from Cardiff Lexington $(1,865,888) $(1,573,435)
Total income (loss) from operations $1,626,102   (1,804,151)

Income (Loss) before taxes      
Affordable Housing Rentals $(36,022) $(40,378)
Financial Services  187,027   (190,338)
Healthcare  3,272,241    
Real Estate  68,744    
Corporate, admin and other non-operating expenses  (3,901,697)  (2,608,572)
Consolidated loss before taxes $(409,707) $(2,836,893)

13

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.

 

 

 

 1314 

 

 

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.

 

 

 

 1415 

 

 

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.

 

15

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.

 

16

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.

 

16

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:

 

 ·Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees expected exercise and post vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

 ·
·Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f) (2)(ii) a thinly traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for 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

 17 

 ·Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.

 

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.

 

17

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:

 

 ·Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

 ·
·Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f) (2)(ii) a thinly traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for 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.

18

 

 ·Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.

 ·
·Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.

 

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.

 

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

 

 

 

 1819 

 

 

INDEX TO FINANCIAL STATEMENTS

 

 Page
Reports of Independent Registered Public Accounting FirmFirms (PCAOB IDs 606 and 229)20F-2
  
Consolidated Balance Sheets (Restated)22F-6
  
Consolidated Statements of Operations (Restated)24F-8
  
Consolidated Statements of Shareholders’ Equity (Restated)25F-9
  
Consolidated Statements of Cash Flows (Restated)27F-11
  
Notes to Consolidated Financial Statements29F-13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 19F-1 

 

 

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.

F-2

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.

F-3

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.

 

 

 

 20F-4 

 

 

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.

 

 

 

 

 21F-5 

 

 

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 20202021, AND 20192020

 

        
 December 31, 
 December 31,  2021  2020 
 2020  2019     (Restated) 
ASSETS             
Current assets                
Cash $279,311  $76,902  $595,987  $279,311 
Accounts receivable-net  16,377   99,540   4,948,796   16,377 
Prepaid and other     10,234 
Prepaid and other current assets  5,000    
Total current assets  295,688   186,676   5,549,783   295,688 
                
Property and equipment, net of accumulated depreciation of $205,443 and $182,343 respectively  211,779   234,879 
Property and equipment, net of accumulated depreciation of $218,471 and $205,443, respectively  259,030   211,799 
Land  603,000   603,000   540,000   603,000 
Intangible assets, net  253,550   253,550      253,550 
Goodwill  3,499,963   3,499,963   4,483,656   3,499,963 
Deposits  13,600   13,600 
Right of use - assets  52,567   90,799   283,622   52,567 
Due from related party     23,338   4,942    
Other assets     10,000   38,882   13,600 
Total assets $4,930,147  $4,915,805  $11,159,915  $4,930,147 
                
LIABILITIES AND DEFICIENCY IN SHAREHOLDERS' EQUITY                
Current liabilities                
Accounts payable and accrued expense $617,073  $795,964  $1,392,722  $617,073 
Accrued expenses - related parties  2,196,222   1,447,487   2,961,057   2,196,222 
Accrued interest  722,815   586,461   449,455   722,815 
Right of use - liability  54,185   92,328   176,285   54,185 
Due to director & officer  126,849   136,349   126,765   126,849 
Deferred revenue  353,830   235,895      353,830 
Line of credit  51,927   91,099      51,927 
Common stock to be issued     500 
Preferred stock to be issued  222,000         222,000 
Notes payable  947,912   207,351   458,177   947,912 
Notes payable - related party  37,885   84,746      37,885 
Convertible notes payable, net of debt discounts of $108,321 and $828,468, respectively  2,476,647   595,257 
Convertible notes payable, net of debt discounts of $0 and $108,321, respectively  2,077,753   2,476,647 
Derivative liabilities     2,903,663 
Net, liabilities of discontinued operations  2,441,965   2,555,837   471,318   2,691,695 
Derivative Liability  2,405,358   3,102,392 
Total current liabilities  12,654,668   9,931,666   8,113,532   13,402,703 
                
Other Liabilities                
Notes payable  399,778   410,000   142,755   399,778 
Convertible notes payable, net of current portion and net of debt discounts of $0 and $687,849, respectively     484,568 
Operating lease liability – long term  122,264    
                
Total liabilities $13,054,446  $10,826,234  $8,378,551  $13,802,481 

 

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

 

 

 

 22F-6 

 

 

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

AS OF DECEMBER 31, 2021 AND 2020 AND 2019

Deficiency in shareholders' equity        
Preferred stock        
Preferred Stock Series B- 3,000,000 shares authorized, no par, stated value of $4.00, 1,764,244 and 1,733,254 shares issued and outstanding at December 31, 2020 and 2019, respectively  7,056,977   6,933,012 
Preferred Stock Series C- 500 shares authorized, no par, stated value of $4.00, 122 and 120 shares issued and outstanding at December 31, 2020 and 2019, respectively  488   480 
Preferred Stock Series D- 800,000 shares authorized, no par, stated value $4.00, 250,000 shares issued and outstanding at December 31, 2020 and 2019  1,000,000   1,000,000 
Preferred Stock Series E- 1,000,000 shares authorized, no par, stated value $4.00, 150,750 and 150,749 shares issued and outstanding at December 31, 2020 and 2019, respectively  603,000   602,998 
Preferred Stock Series F- 800,000 shares authorized, no par, stated value $4.00, 175,045 and 175,043 shares issued and outstanding at December 31, 2020 and 2019, respectively  700,180   700,173 
Preferred Stock Series F-1- 800,000 shares authorized, no par, stated value $4.00, 35,752 and 35,745 shares issued and outstanding at December 31, 2020 and 2019, respectively  143,008   142,983 
Preferred Stock Series G- 20,000,000 shares authorized, no par, stated value $4.00, 325,244 shares issued and outstanding at December 31, 2020 and 2019  1,300,976   1,300,976 
Preferred Stock Series H- 4,859,379 shares authorized, no par, stated value $4.00, 119,101 and -0- shares issued and 37,500 and -0- shares outstanding at December 31, 2020 and 2019, respectively  476,404    
Preferred Stock Series I- 500,000,000 shares authorized, with par value of $.001, 195,010,000 and 195,000,000 issued and outstanding at December 31, 2020 and 2019, respectively  195,010   195,000 
Preferred Stock Series K- 10,937,500 shares authorized, par value of $.001, 8,200,562 shares issued and outstanding at December 31, 2020 and 2019  8,201   8,200 
Preferred Stock Series K1- 35,000,000 shares authorized, par value of $.001, -0- and 1,447,157 shares issued and outstanding at December 31, 2020 and 2019, respectively     1,447 
Preferred Stock Series L- 100,000,000 shares authorized, no par, stated value $4.00, 319,492 shares issued and outstanding at December 31, 2020 and 2019  1,277,972   1,277,968 
Preferred Stock Series R-5,000 shares authorized, stated value of $1,200, 165 shares issued and outstanding at December 31, 2020 and 2019  198,000   198,000 
Common stock; 7,500,000,000 shares authorized with $0.001 par value; 5,268,797 and 67,742 shares issued and outstanding at December 31, 2020 and 2019, respectively  5,267   68 
Treasury stock; 294,101 and -0- shares of Series H Preferred stock at December 31, 2020 and 2019  (2,365,864)   
Additional paid-in capital  46,111,302   43,470,501 
Accumulated deficit  (64,835,220)  (61,742,235)
Total deficiency in shareholders' equity  (8,124,299)  (5,910,429)
         
Total liabilities and deficiency in shareholders' equity $4,930,147  $4,915,805 

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

23

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

  DECEMBER 31, 
  2020  2019 
REVENUE        
Rental income $138,832  $176,882 
Financial Services  3,314,226   3,530,478 
Other      
Total revenue  3,453,058   3,707,360 
         
COST OF SALES        
Rental business  156,191   174,433 
Tax Services  1,511,995   1,491,053 
Other      
Total cost of sales  1,668,146   1,665,486 
         
GROSS MARGIN  1,784,912   2,041,874 
         
OPERATING EXPENSES        
Depreciation expense  1,274   7,318 
Selling, general and administrative  3,587,789   3,305,824 
Total operating expenses  3,589,063   3,313,142 
         
LOSS FROM OPERATIONS  (1,804,151)  (1,271,268)
         
OTHER INCOME (EXPENSE)        
Change in value of derivative liability  379,892   (2,482,145)
Interest expense  (332,704)  (489,294)
Conversion cost penalty and reimbursement  (25,400)  (813,220)
Amortization of debt discounts  (1,192,044)  (972,047)
Total other income (expenses)  (1,170,256)  (4,756,706)
         
NET INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS  (2,974,407)  (6,027,974)
         
LOSS FROM DISCONTINUED OPERATIONS  (125,599)  (335,658)
         

GAIN (LOSS) FROM DISPOSAL OF DISCONTINUED OPERATIONS

  194,873    
         
INCOME (LOSS) FROM DISCONTINUED OPERATIONS  69,274   (335,658)
         
NET LOSS FOR THE YEAR $(2,905,133) $(6,363,632
         
Basic Earnings (loss) per Share      
Continuing Operations $(3.20) $(250.53)
Discontinued Operations $0.08  $(13.21)
         
Diluted Earnings (loss) per Share        
Continuing Operations $(3.20) $(250.53)
Discontinued Operations $  $(13.21)
         
Weighted Average Shares Outstanding - Basic Earnings (loss) per Share        
Continuing Operations  908,485   25,401 
Discontinued Operations  908,485   25,401 
         
Weighted Average Shares Outstanding - Diluted Earnings (loss) per Share        
Continuing Operations  908,485   25,401 
Discontinued Operations  1,444,295,967,109   25,401 

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

24

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY)

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

  Preferred Stock Series A, I, K, K-1  Preferred Stock Series B, D, E, F, F-1, G, H, L  Preferred Stock, Series C and R 
  Shares  Amount  Shares  Amount  Shares  Amount 
Balance December 31, 2018  9,647,720  $9,648   2,664,283  $10,657,137   119  $480 
Issuance to balance reverse split partial rounding shares                  
Issuance of I Series preferred stock as compensation  250,000,000   250,000             
Issuance of Series G preferred stock for Key Tax acquisition        325,244   1,300,976       
Conversion of preferred stock I series  (55,000,000)  (55,000)            
Issuance of R Series preferred stock              165   198,000 
Conversion of convertible notes payable                  
Reclassify Derivative liabilities to Additional Paid in Capital                  
Net loss          ��       
Balance December 31, 2019  204,647,720  $204,648   2,989,528  $11,958,113   284  $198,480 
Issuance of common stock for services                  
Issuance of preferred stock for services  10,000   10   31,000   124,000   2   8 
Preferred stock to be issued                  
Issuance of common stock in exchange for preferred stock  (1,447,157)  (1,447)            
Issuance of preferred stock in exchange for common stock        119,101   476,404       
Dividend on Series G preferred stock                  
Conversion of convertible notes payable                  
Reclassify Derivative liabilities to Additional Paid in Capital                  
Sale of subsidiaries                  
Issuance of common stock                  
Net loss                  
Balance, December 31, 2020  203,210,563  $203,211   3,139,629  $12,558,517   286  $198,488 

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

25

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY) (continued)

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

  Treasury Stock  Common Stock  Additional Paid-in  Accumulated    
  Shares  Amount  Shares  Amount  Capital  Deficit  Total 
Balance December 31, 2018    $   60  $1  $39,665,111  $(55,378,603) $(4,846,225)
Issuance to balance reverse split partial rounding shares        (826)            
Issuance of I Series preferred stock as compensation              (50,000)      
Issuance of Series G preferred stock for Key Tax acquisition        50   1   (977)     1,300,000 
Conversion of preferred stock I series        8,250   8   54,992       
Issuance of R Series preferred stock              (83,000)     115,000 
Conversion of convertible notes payable        59,382   59   1,027,377      1,027,436 
Reclassify Derivative liabilities to Additional Paid in Capital              2,856,994      2,856,994 

Net loss

                 (6,363,632)  (6,363,632
Balance December 31, 2019    $   67,742  $68  $43,470,497  $(61,742,235) $(5,910,429)
Issuance of common stock for services        18,000   18   (18)      
Issuance of preferred stock for services              (124,018)      
Preferred stock to be issued                     
Issuance of common stock in exchange for preferred stock        3,500   4   1,444       
Issuance of preferred stock in exchange for common stock        (320)  (1)  (476,403)      
Dividend on Series G preferred stock                 (187,850)  (187,850)
Conversion of convertible notes payable        5,014,697   5,014   262,959      267,973 
Reclassify Derivative liabilities to Additional Paid in Capital              611,141      611,141 
Sale of subsidiaries  (294,101)  (2,365,864)        2,365,864       
Issuance of common stock        163,814   164   (164)      
Net loss                 (2,905,133)  (2,905,133)
Balance, December 31, 2020  (294,101) $(2,365,864)  5,267,433  $5,267  $46,111,302  $(64,835,220) $(8,124,299)

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

(Restated)

 

26

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

  2020  2019 
       
CASH FLOWS FROM OPERATING ACTIVITIES        
Net (Loss) from continuing operations $(2,905,133) $(6,363,632)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:        
Depreciation  23,100   67,702 
Bad debt expense     (16,338)
Amortization of loan discount  (1,183,147)  972,047 
Change in value of derivative liability  (379,892)  2,482,145 
Convertible note issued for conversion cost reimbursement      
Conversion cost penalty     813,220 
(Increase) decrease in:        
Accounts receivable  83,163   53,324 
Inventory      
Deposits     11,804 
Right of use - assets  38,232    
Prepaids and other  10,234   64,454 
Other assets  10,000   7,274 
Intangible assets     (3,550)
Increase(decrease) in:        
Accounts payable & Accrued expense  (156,678)  303,576 
Accrued officers compensation  748,735   775,000 
Accrued interest  185,820   169,455 
Right of use - liabilities  (38,143)   
Preferred shares to be issued  222,000    
Due to officers and shareholders  23,338    
Deferred revenue  117,935   222,428 
Net cash provided by (used in) operating activities  (834,142)  (1,048,243)
         
Net cash from Discontinued Operations - Operating  (113,872)  240,037 
         
INVESTING ACTIVITIES        
Purchase of equipment     3,178 
Disposal of equipment     29,275 
Net cash provided by (used in) investing activities      32,448 
         
Net cash from Discontinued Operations - Investing      
Shareholders' equity (deficit)      
Preferred stock      
Preferred Stock Series B- 3,000,000 shares authorized, no par, stated value of $4.00, 1,945,078 and 1,733,254 shares issued and outstanding at December 31, 2021 and 2020, respectively $7,780,313  $7,056,977 
Preferred Stock Series C- 500 shares authorized, no par, stated value of $4.00, 122 and 122 shares issued and outstanding at December 31, 2021 and 2020, respectively  488   488 
Preferred Stock Series D- 800,000 shares authorized, no par, stated value $4.00, 37,500 and 250,000 shares issued and outstanding at December 31, 2021 and 2020  150,000   1,000,000 
Preferred Stock Series E- 1,000,000 shares authorized, no par, stated value $4.00, 150,750 and 150,750 shares issued and outstanding at December 31, 2021 and 2020, respectively  603,000   603,000 
Preferred Stock Series F- 800,000 shares authorized, no par, stated value $4.00, 175,045 and 175,045 shares issued and outstanding at December 31, 2021 and 2020, respectively  700,180   700,180 
Preferred Stock Series F-1- 800,000 shares authorized, no par, stated value $4.00, 35,752 and 35,752 shares issued and outstanding at December 31, 2021 and 2020, respectively  143,008   143,008 
Preferred Stock Series G- 20,000,000 shares authorized, no par, stated value $4.00 zero 0 and 325,444 shares issued and outstanding at December 31, 2021 and 2020     1,300,976 
Preferred Stock Series H- 4,859,379 shares authorized, no par, stated value $4.00, 37,500 shares issued and outstanding at December 31, 2021 and 2020, respectively  150,000   476,404 
Preferred Stock Series I- 500,000,000 shares authorized, with par value of $4.00, 14,885,000 and 195,010,000 issued and outstanding at December 31, 2021 and 2020, respectively  59,540,000   780,040,000 
Preferred Stock Series J-10,000,000 shares authorized, no par, stated value $4, 894,834 and -0- shares issued and outstanding at December 31, 2021 and 2020  3,579,336    
Preferred Stock Series K- 10,937,500 shares authorized, par value of $.001, 8,200,562 shares issued and outstanding at December 31, 2021 and 2020  8,201   8,201 
Preferred Stock Series K1- 35,000,000 shares authorized, par value of $.001, -0- shares issued and outstanding at December 31, 2021 and 2020, respectively      
Preferred Stock Series L- 100,000,000 shares authorized, no par, stated value $4.00, 319,493 shares issued and outstanding at December 31, 2021 and 2020  1,277,972   1,277,972 
Preferred Stock Series N-3,000,000 shares authorized, no par, stated value $4, 868,058 and -0- shares issued and outstanding at December 31, 2021 and 2020  3,472,224    
Preferred Stock Series R-5,000 shares authorized, stated value of $1,200, 165 shares issued and outstanding at December 31, 2021 and 2020  198,000   198,000 
Common stock; 7,500,000,000 shares authorized with $0.001 par value; 166,130,069 and 5,268,797 shares issued and outstanding at December 31, 2021 and 2020, respectively  167,421   5,267 
Treasury stock; 619,345 and 294,101 shares of Series H Preferred stock at December 31, 2021 and 2020  (4,967,686)  (2,365,864)
Additional paid-in capital  (3,826,349)  733,733,688 
Accumulated deficit  (66,194,744)  (65,583,252)
Total shareholders' equity (deficit)  2,781,364    (8,872,334)
         
Total liabilities and shareholders' equity $11,159,915  $4,930,147 

 

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

 

 

 

 27F-7

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

         
  DECEMBER 31, 
  2021  2020 
     (Restated) 
REVENUE      
Rental income $129,803  $138,832 
Financial services  4,313,167   3,314,226 
Healthcare  5,413,890    
Real estate  152,000    
Total revenue  10,008,860   3,453,058 
         
COST OF SALES        
Rental business  79,953   156,191 
Financial services  1,942,411   1,511,955 
Healthcare  1,746,561    
Real estate  79,481    
Total cost of sales  3,848,406   1,668,146 
         
GROSS MARGIN  6,160,454   1,784,912 
         
OPERATING EXPENSES        
Depreciation expense  13,886   1,274 
Selling, general and administrative  4,520,466   3,587,789 
Total operating expenses  4,534,352   3,589,063 
         
INCOME (LOSS) FROM OPERATIONS  1,626,102   (1,804,151)
         
OTHER INCOME (EXPENSE)        
Other income (loss)  32,629    
Gain on divestiture  788,500    
Change in derivative liability     434,714 
Gain on change of estimate  170,964    
Interest expense  (2,982,844)  (332,704)
Conversion cost penalty and reimbursement  (13,000)  (25,400)
Amortization of debt discounts  (1,051,264)  (1,192,044)
Total other income (expenses)  (3,055,015)  (1,115,434)
         
NET LOSS BEFORE DISCONTINUED OPERATIONS  (1,428,913)  (2,919,585)
         
GAIN (LOSS) FROM DISCONTINUED OPERATIONS  2,220,377   (112,181)
         
GAIN (LOSS) FROM DISPOSAL OF DISCONTINUED OPERATIONS  (1,201,171)  194,873 
         
INCOME FROM DISCONTINUED OPERATIONS  1,019,206   82,692 
NET LOSS FOR THE YEAR $(409,707) $(2,836,893)
         
Deemed dividend - modification of preferred stock     (1,605,266)
         
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $(409,707) $(4,442,159)
         
BASIC EARNINGS (LOSS) PER SHARE        
CONTINUED OPERATIONS $(0.01) $(4.98)
DISCONTINUED OPERATIONS $0.01  $0.09 
         
DILUTED EARNINGS (LOSS) PER SHARE        
CONTINUED OPERATIONS $(0.01) $(4.98)
DISCONTINUED OPERATIONS $0.00  $(0.00)
         
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC EARNING (LOSS) PER SHARE        
CONTINUED OPERATIONS  128,021,527   908,485 
DISCONTINUED OPERATIONS  128,021,527   908,485 
         
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED EARNINGS (LOSS) PER SHARE        
CONTINUED OPERATIONS  128,021,527   908,485 
DISCONTINUED OPERATIONS  110,239,662,132   1,444,295,967,109 

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

F-8

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY)

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

                 
  

Preferred Stock Series

A, I, K, K-1

 

Preferred Stock Series

B, D, E, F, F-1, G, H, L

 

Preferred Stock,

Series C and R

 
  Shares Amount Shares Amount Shares Amount 
Balance December 31, 2019 (Restated) 204,647,720 $780,049,638 2,989,528 $11,958,113 285 $198,480 
Issuance of preferred stock for services 10,000  10 31,000  124,000 2  8 
Issuance of common stock in exchange for preferred stock (1,447,157) (1,447)      
Issuance of preferred stock in exchange for common stock    119,101  476,404    
Issuance of common stock for services          
Issuance of common stock          
Distribution from an entity          
Conversion of convertible notes payable          
Reclassify Derivative liabilities to Additional Paid in Capital          
Sale of subsidiary          
Net loss          
Balance December 31, 2020 (Restated) 203,210,563 $780,048,201 3,139,629 $12,558,517 287 $198,488 
                 
Conversion of convertible notes payable          
Reclassify derivative liabilities to additional paid in capital          
Surrender of Preferred I shares (180,000,000) (720,000,000)      
Issuance of common stock in exchange for preferred I shares (125,000) (500,000)      
Warrants issued with indebtedness          
Issuance of preferred stock series J    579,768  3,579,336    
Issuance of preferred stock series N    868,056  3,472,224    
Issuance of preferred stock series B    201,799  807,196    
Issuance of common stock for services          
Distribution of dividend          
Divestiture of subsidiary    (325,244) (2,561,241)   
Issuance of warrant          
Net loss          
Balance, December 31, 2021 23,085,563 $59,548,201 4,464,008 $17,856,032 287 $198,488 

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

F-9

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY) (continued)

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

                       
  Treasury Stock Common Stock Additional Paid-in Accumulated   
  Shares  Amount Shares Amount Capital Deficit Total 
Balance December 31, 2019 (Restated)    $ 67,742 $68 $(736,374,493)$(62,558,509)$(6,726,704)
Issuance of preferred stock for services          (124,018)    
Issuance of common stock in exchange for preferred stock      3,500  4  1,444     
Issuance of preferred stock in exchange for common stock      (320) (1) (476,403)    
Issuance of common stock for services      18,000  18  (18)    
Issuance of common stock      163,814  164  (164)    
Distribution from an entity            (187,853) (187,853)
Conversion of convertible notes payable      5,014,697  5,014  262,959    267,973 
Reclassify Derivative liabilities to Additional Paid in Capital upon conversion of debt          611,143    611,141 
Sale of subsidiary  (294,101)  (2,365,864)    2,365,864      
Net loss            (2,836,893) (2,836,893)
Balance December 31, 2020 (Restated)  (294,101) $(2,365,864)5,267,433 $5,267 $(733,733,688)$(65,583,255)$(8,872,334)
                       
Conversion of convertible notes payable      109,234,241  109,234  804,991    914,225 
Reclassify derivative liabilities to additional paid in capital upon conversion of debt          644,997    644,997 
Surrender of Preferred I shares          720,000,000     
Issuance of common stock in exchange for preferred I shares      50,000,000  50,000  450,000     
Warrants issued with indebtedness          260,433    260,433 
Issuance of preferred stock series J              3,579,336 
Issuance of preferred stock series N          (347,222)   3,125,002 
Issuance of preferred stock series B              807,196 
Issuance of common stock for services      1,628,395  2,920  27,404    30,324 
Distribution of dividend            (201,782) (201,782)
Divestiture of subsidiary  (325,244)  (2,601,822)    5,163,063     
Reclass of derivative liability due to change in accounting policy          2,903,663    2,903,663 
Net loss            (409,707) (409,707)
Balance, December 31, 2021  (619,345) $(4,967,686)166,130,069 $167,421 $(3,826,349)$(66,194,744)$2,781,364 

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

F-10

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

         
  2021  2020 
      (Restated) 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net (Loss) from continuing operations $(409,707) $(2,836,893)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:        
Depreciation  35,334   23,100 
Amortization of loan discount  1,051,264   1,183,147 
Change in value of derivative liability     (517,406)
Gain on forgiveness of debt  (739,450)   
(Increase) decrease in:        
Accounts receivable  (1,100,277)  83,163 
Right of use - assets  100,715   38,232 
Prepaids and other current assets  (30,282)  20,234 
Land  63,000    
Increase(decrease) in:        
Accounts payable & Accrued expense  190,302   (156,678)
Due to from related party  (42,827)   
Accrued officers compensation  764,835   748,735 
Accrued interest  (265,860)  185,820 
Right of use - liabilities  (108,043)  (38,143)
Preferred shares to be issued     222,000 
Due to officers and shareholders     23,338 
Deferred revenue  (353,830)  117,935 
Net cash provided by (used in) operating activities  (844,826)  (903,416)
         
Net cash from Discontinued Operations - Operating  (191,504)  (44,598)
         
INVESTING ACTIVITIES        
Purchase of property and equipment  (3,407)   
Acquisition of Nova Ortho and Spine PLLC, net of cash acquired  (2,320,235)   
Net cash used in investing activities  (2,323,642)   
         
Net cash from Discontinued Operations - Investing $  $ 

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

F-11 

 

 

CARDIFF LEXINGTON CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

FOR THE YEARS ENDED DECEMBER 31, 20202021 AND DECEMBER 31, 20192020

  

FINANCING ACTIVITIES      
Proceeds from shareholder     32,000 
Repayments to directors and officers  (9,500)  (56,805)
Proceeds from convertible notes payable  746,072   613,526 
Proceeds from notes payable - related party  127,445   21,199 
Proceeds from notes payable  706,807   419,778 
Proceeds from line of credit     149,247 
Repayment of line of credit  (39,172)  (60,147)
Repayments to convertible notes payable  (27,106)  (358,437)
Repayments to notes payable - related party  (163,316)  (150,134)
Repayments to notes payable - 3rd party  (2,957)   (7,368)
Issuance of preferred I stock     115,000 
        
Net cash provided by (used in) financing activities  1,150,423   717,859 
         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  202,409   (17,530)
         
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD  76,902   158,676 
         
CASH AND CASH EQUIVALENTS, END OF PERIOD $279,311  $100,776 
         
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION        
Cash paid during the period for:        
Interest $379,892  $226,748 
         
NON-CASH INVESTING AND FINANCING ACTIVITIES:        
Common stock issued upon conversion of notes payable $196,291  $593,817 
Common stock issued for settlement of accrued expense  49,466  $ 
Series G Preferred Stock issued for acquisition of Key Tax Group $  $1,300,000 
Series I preferred stock issued for compensation    $ 
Conversion of preferred stock to common stock $  $55,000 
Derivative liability settled upon conversion $611,141  $2,856,994 
FINANCING ACTIVITIES        
Repayments to directors and officers $  $(9,500)
Proceeds from convertible notes payable  444,500   746,072 
Proceeds from notes payable - related party     127,445 
Proceeds from notes payable     706,807 
Proceeds from PPP loan and SPA loans  547,050    
Repayment of credit line  (51,927)  (39,172)
Repayment to convertible notes payable  (30,777)  (27,106)
Repayments to notes payable - related party     (163,316)
Payment of notes payable - 3rd party  (28,318)  (2,957)
Dividend on preferred stock  (203,880)  (187,850)
Issuance of preferred stock series N  3,000,000    
Net cash provided by financing activities  3,676,648   1,150,423 
         
NET INCREASE IN CASH AND CASH EQUIVALENTS  316,676   202,409 
         
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR  279,311   76,902 
         
CASH AND CASH EQUIVALENTS, END OF YEAR $595,987  $279,311 
         
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION        
Cash paid during the year for:        
Interest $127,242  $379,892 
         
NON-CASH INVESTING AND FINANCING ACTIVITIES:        
Common stock issued upon conversion of notes payable $885,691  $196,291 
Common stock issued for settlement of accrued expense $388,143  $49,466 
Preferred stock issued for business acquisition $3,579,336  $ 
Preferred stock issued upon conversion of notes payable and accrued interest $563,196  $ 
Derivative liability settled upon conversion $1,396,610  $611,141 

 

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

 

 

 

 28F-12 

 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization and Nature of Operations

 

Legacy Card Company, LLC (“Legacy”) was formed as a Limited Liability Company on August 29, 2001. On April 18, 2005, Legacy converted from a California Limited Liability Company to a Nevada Corporation. On November 10, 2005, Legacy merged with Cardiff Lexington Corp.Corporation (“Cardiff Lexington”, the “Company”), a publicly held corporation. On April 13, 2021, Cardiff Lexington Corporation converted from a Florida Corporation to a Nevada Corporation.

 

In the first quarter of 2013, it was decided to restructure Cardiff Lexington into a holding company that adopted a new business model known as "Collaborative Governance," a form of governance enabling 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 niche companies with high growth potential. The reason for this strategy was to protect the Company’s shareholders by acquiring businesses with little to no debt, seeking support with both financing and management that had the ability to offer a return to investors.

 

Description of Business

 

Cardiff Lexington consists of the following wholly owned subsidiaries:

 

We Three, LLC dba Affordable Housing Initiative (“AHI”), acquired May 15, 2014

Romeo’s Alpharetta, LLC dba Romeo’s NY Pizza (“Romeo’s Pizza”), acquired JuneSeptember 30, 2014; Sold July 1, 2020.

Edge View Properties, Inc., (“Edge View”) acquired July 16, 2014

Repicci’s Franchise Group, LLC (“Repicci’s Group”), acquired August 10, 2016; Sold June 1, 2020.

Platinum Tax Defenders, LLC (“Platinum Tax”), acquired July 31, 2018

JM Enterprises 1, Inc. dba Key Tax Group (“Key Tax”), acquired May 20198, 2019; Sold December 31, 2021

Red Rock Travel Group, LLC (“Red Rock”), acquired July 31, 2018, discontinued May 31, 2019

Nova Ortho and Spine, PLLC (“Nova”), acquired May 31, 2021

Principles of Consolidation

 

The consolidated financial statements include the accounts of Cardiff, and its wholly-owned subsidiaries: AHI, dba We Three, LLC, Edge View, Platinum Tax, Nova Ortho and Key tax,Spine and subsidiaries shown as discontinued operations includes Red Rock, Travel Group, LLC, Romeo’s, Repicci’s and Repicci’s.Key Tax. All significant intercompany accounts and transactions are eliminated in consolidation. Certain prior period amounts may have been reclassified for consistency with the current period presentation. These reclassifications would have no material effect on the reported condensed consolidated financial results. Subsidiaries discontinued are shown as discontinued operations.

 

Use of Estimates

 

The preparation of financial statements in conformity with USU.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Management uses its historical records and knowledge of its business in making estimates. Accordingly, actual results could differ from those estimates.

 

29

Change in Capital Structure

 

In the first quarter of 2019, the Company executed a reverse stock split of 1,500:1 effective March 21, 2019.

In January 2020, the Company announced a reverse split of several of its Preferred Stock Classes which has been given retrospective treatment in the consolidated financial statements.effective December 31, 2020.

 

F-13

In May 2020, the Company affected a 10,000:1 reverse split of Common Stock which has been given retrospective treatment in the financial statements for all periods presented.effective March 31, 2020.

 

COVID-19 PandemicIn the second quarter of 2021, the Company completed a change in domicile from a Florida corporation to a Nevada Corporation.

 

COVID-19 Pandemic

The outbreak of a novel 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”). 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 could be impacted by these closings and restrictions which could materially and adversely affect demand for our products, 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 it could cause an economic downturn, recession, or depression. 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.

 

Revenue Recognition

On January 1, 2018, we adopted ASC 606, Revenue from contracts with customers (“Topic 606”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018.

The Company applies a five-step approach in determining the amount and timing of revenue to be recognized:

(1)identifying the contract with a customer,

(2)identifying the performance obligations in the contract,

(3)determining the transaction price,

(4)allocating the transaction price to the performance obligations in the contract and

(5)recognizing revenue when the performance obligation is satisfied.

Substantially all of the Company’s revenue is recognized at the time control of the products transfers to the customer.

Our tax services subsidiaries receive payments in advance of service and are recorded as deferred revenue. Revenues are as services are provided.

30

Rental Income

The Company’s rent revenue is derived from the mobile home leases. The expired leases are considered month-to-month leases. In accordance with section 605- 10-S99-1 of the FASB Accounting Standards Codification for revenue recognition, the cost of property held for leasing by major classes of property according to nature or function, and the amount of accumulated depreciation in total, is presented in the accompanying consolidated balance sheets as of December 31, 2020 and 2019. There are no contingent rentals included in income in the accompanying statements of operations. With the exception of the month-to-month leases, revenue was recognized on a straight-line basis and amortized into income on a monthly basis, over the lease term.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company has no cash equivalents.

Accounts Receivable

 

Accounts receivable is reported on the balance sheet at grossthe net amounts dueexpected to be collected by the Company. Management closely monitors outstanding accounts receivable and charges off to expense any balances that are determined to be uncollectible which was $21,870$0 and none$21,870 as of December 31, 2021 and December 31, 2020, and 2019, respectfully.respectively. As of December 31, 20202021, and 2019,December 31, 2020, the Company had accounts receivable of $16,377$4,948,796 and $99,540,$16,377, respectively. Accounts receivables are primarily generated from our subsidiaries in their normal course of business.

 

Property Equipment and Leasehold ImprovementsEquipment

 

Property equipment, and leasehold improvementsequipment are carried at cost. Expenditures for renewals and betterments that extend the useful lives of property, equipment or leasehold improvements are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is calculated using the straight-line method for financial reporting purposes based on the following estimated useful lives:

ClassificationSchedule of estimated useful livesUseful Life
ClassificationUseful Life
Equipment, furniture, and fixtures5 - 7 years
Medical equipment10 years
Leasehold improvements10 years or lease term, if shorter

 

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 believebelieves such assumptions are also comparable to those that would be used by other marketplace participants. During years-endedthe years ended December 31, 2021 and 2020, and 2019, the companyCompany did notnot recognize any Goodwillgoodwill impairment. The Company based this decision on impairment testing of the underlying assets, expected cash flows, decreased asset value and other factors.

 

 

 

 31F-14 

 

 

Valuation of long-lived assets

 

In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 360-10-5, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and construction in progress held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated discounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.

 

Revenue Recognition

On January 1, 2018, we adopted ASC 606, Revenue from contracts with customers (“Topic 606”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018.

The Company applies the following five-step model to determine revenue recognition:

·Identification of a contract with a customer
·Identification of the performance obligations in the contact
·Determination of the transaction price
·Allocation of the transaction price to the separate performance allocation
·Recognition of revenue when performance obligations are satisfied

The Company only applies the five-step model when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, the Company assesses services promised within each contract and determines those that are performance obligations and assesses whether each promised service is distinct.

The Company’s financial services sector reports revenues as services are performed and its healthcare sector reports revenues at the time control of the services transfer to the customer and from providing licensed and/or certified orthopedic procedures. Our healthcare subsidiary does not have contract liabilities or deferred revenue as there are no amounts prepaid for services.

Established billing rates are not the same as actual amounts recovered for our healthcare subsidiary.  They generally do not reflect what the Company is ultimately paid and therefore are not reported in our consolidated financial statements.  The Company is typically paid amounts based on established charges per procedure with guidance from the annually updated Current Procedural Terminology (“CPT”) guidelines (a code set maintained by the American Medical Association through the CPT Editorial Panel), that designates relative value units (“RVU's”) and a suggested range of charges for each procedure which is then assigned a CPT code.

This fee is discounted to reflect the percentage paid to the Company “using a modifier” recognized by each insurance carrier for services, less deductible, co-pay, and contractual adjustments which are deducted from the calculated fee.  The net revenue is recorded at the time the services are rendered.

Contract Fees (Non-PIP)

The Company has contract fees for amounts earned from its Non-Personal Injury Protection (“PIP”) related procedures, typically car accidents, and are collected on a contingency basis. These cases are sold to a factor, who bears the risk of economic benefit or loss. After selling patient cases to the factor, any additional funds collected by the Company are remitted to the factor.

F-15

Service Fees – Net (PIP)

The Company generates services fees from performing various procedures on the date the services are performed. These services primarily include slip and falls as well as smaller nominal Non-PIP services. Fees are collected primarily from third party insurance providers. These revenues are based on established insurance billing rates less allowances for contractual adjustments and uncollectible amounts. These contractual adjustments vary by insurance company and self-pay patients. The Company computes these contractual adjustments and collection allowances based on its historical collection experience.

Completing the paperwork for each case and preparing it for billing takes approximately ten business days after a procedure is performed. The majority of claims are then filed electronically except for those remaining insurance carriers requiring paper filing. An initial response is usually received within four weeks from electronic filing and up to six weeks from paper filing. Responses may be a payment, a denial, or a request for additional information.

Historical collection rates are estimated using the most current prior 12-month historical payment and collection percentages. The Company generally receives all of its collections within 12 months from the date of service. The Company accounts for chargebacks as they occur and records an estimate for expected chargebacks as they are received from insurance companies.

For the years ended December 31, 2021 and 2020, the Company recorded $0 and $21,870 of bad debt expense, respectively. Additionally, the Company has not recorded any estimate for expected chargebacks.

The Company’s contracts for both its contract and service fees each contain a single performance obligation (providing orthopedic services), as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, not distinct, as a result, the entire transaction price is allocated to this single performance obligation.

Accordingly, the Company recognizes revenues (net) when the patient receives orthopedic care services. Our patient service contracts generally have performance obligations which are satisfied at a point in time. The performance obligation is for onsite or off-site care provided. Patient service contracts are generally fixed-price, and the transaction price is in the contract. Revenue is recognized when obligations under the terms of the contract with our patients are satisfied; generally, at the time of patient care.

Financial Services Income

The Company generates revenue from providing tax resolution services to individuals and business owners that have federal and state tax liabilities by assisting its clients to settle outstanding tax debts. Additionally, services include back taxes, offer in compromise, audit representation, amending tax returns, tax preparation, wage garnishment relief, removal of bank levies and liens, and other financial challenges. The Company recognizes revenues for these services as services are performed.

Rental Income

The Company’s rent revenue is derived from the mobile home leases. The expired leases are considered month-to-month leases. In accordance with section ASC 842, the cost of property held for leasing by major classes of property according to nature or function, and the amount of accumulated depreciation in total, is presented in the accompanying consolidated balance sheets as of December 31, 2021 and December 31, 2020. There are no contingent rentals included in income in the accompanying consolidated statements of operations. With the exception of the month-to-month leases, revenue was recognized on a straight-line basis and amortized into income on a monthly basis, over the lease term.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs are included as a component of cost of sales in the consolidated statements of operations and changes in members’ equity. The Company recognized advertising and marketing expense of $1,301,050 and $1,511,955 for the years ended December 30, 2021 and 2020, respectively.

F-16

Valuation of Derivative Instruments

 

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815-10, Derivatives and Hedging (“ASC 815-10”), requires that embedded derivative instruments be bifurcated and assessed, along with freestanding derivative instruments such as convertible promissory notes, on their issuance date to determine whether they would be considered a derivative liability and measured at their fair value for accounting purposes. The Company evaluates all of it financial instruments, including stock purchase warrants, 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 revalued at each reporting date, with changes in the fair value reported as charges or credits to income.

 

For option based simple derivative financial instruments, the Company uses the Lattice BinomialBlack-Scholes option pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.

 

Beneficial Conversion Feature

 

For conventional convertible debt where the rate of conversion is below market value, the Company records a “beneficial conversion feature” (“BCF”) discount against the face amount of the respective debt instrument (offset to additional paid in capital).

 

When the Company records a BCF which is not a conventional convertible, the fair value of the BCF is recorded as a derivative liability with an offset against the face amount of the respective debt instrument which is and amortized to interest expense over the term of the debt.

 

Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value in the Consolidated Balance Sheetsconsolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs), and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

32

Level Input Definition

 

Level 1Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level 2Inputs, other than quoted prices included in Level 1, which are observable for the asset or liability through corroboration with market data at the measurement date.

Level 3

Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The following table presents certain investments and liabilities of the Company’s financial assets measured and recorded at fair value on the Company’s Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of December 31, 2020 and 2019.

 

  Level 1  Level 2  Level 3  Total 
Fair Value of BCF Derivative Liability – December 31, 2020 $  $  $2,405,358  $2,405,358 
                 

  Level 1  Level 2  Level 3  Total 
Fair Value of BCF Derivative Liability – December 31, 2019 $  $  $3,102,392  $3,102,392 
                 
F-17

Stock-Based Compensation

 

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.

 

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 consolidated statements of operations.

 

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

 

The Company early adopted ASU No 2018-07 for equity instruments issued to parties other than employees.

 

33

Income Taxes

 

Income taxes are determined in accordance with ASC Topic 740, “Income Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

 

For the yearsperiods ended December 31, 20202021 and 20192020, the Company did not have any interest and penalties associated with tax positions. As of December 31, 2020positions and 2019, the Company did notnot have any significant unrecognized uncertain tax positions.

 

Earnings (Loss)Loss per Share

 

FASB ASC Subtopic 260, Earnings Per Share (“ASC 260”), provides for the calculation of "Basic" and "Diluted" earnings per share. Basic earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, warrants, and debts convertible into common shares. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s Common Stock can result in a greater dilutive effect from potentially dilutive securities.

 

F-18

Going Concern

 

The accompanying consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The Company has sustained operating losses since its inception and has negative working capital and an accumulated deficit. These factors raise substantial doubts about the Company’s ability to continue as a going concern. As of December 31, 2020,2021, the Company has sustained recurring loseslosses and accumulated a working capital deficit.deficit of approximately $5,975,487. The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might result if the Company is unable to continue as a going concern.

 

The ability of the Company to continue as a going concern and the appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusions. Management has prospective investors and believes the raising of capital will allow the Company to fund its cash flow shortfalls and pursue new acquisitions. There can be no assurance that the Company 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 it. Should the Company be unable to raise sufficient funds, it may be required to curtail its operating plans. In addition, increases in expenses may require cost reductions. No assurance can be given that the Company will be able to operate profitably on a consistent basis, or at all, in the future. Should the Company not be able to raise sufficient funds, it may cause cessation of operations.

 

Recent Accounting Standards

In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion accounting models. As a result, the Company’s convertible debt instruments will be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives. For contracts in an entity’s own equity, the type of contracts primarily affected by this update are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement conditions of the derivative scope exception. Management has adopted ASU 2020-06 as of the filing of this December 31, 2021 Form 10-K. Upon adoption of ASU 2020-06, we reclassified the previously identified beneficial conversion features to the associated debt.  We also determined, that in accordance with ASU 2017-11, such beneficial conversion features are not considered a liability classified derivative.

Changes to accounting principles are established by the FASB in the form of Accounting Standards Update (“ASU”) to the FASB's Codification. We consider the applicability and impact of all ASU's on our financial position, results of operations, shareholders’ deficit. cash flows, or presentation thereof.

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments, which supersedes current guidance by requiring recognition of credit losses when it is probable that a loss has been incurred. The new standard requires the establishment of an allowance for estimated credit losses on financial assets including trade and other receivables at each reporting date. The new standard will result in earlier recognition of allowances for losses on trade and other receivables and other contractual rights to receive cash. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments -- Credit Losses (Topic 326), Derivatives and hedging (Topic 815) and Leases (Topic 842), which extends the effective date of Topic 326 for certain companies until fiscal years beginning after December 15, 2022. The new standard will be effective for the Company in the first quarter of fiscal year beginning January 1, 2023, and early adoption is permitted.

Management does not expect that the adoption of this standard will have a material effect on the Company's financial statements.

Reclassifications

Certain accounts relating to the prior year have been reclassified to conform to the current period’s presentation. These reclassifications had no effect on the net income or net assets as previously reported.

 

 

 

 34F-19 

 

 

Accounting Pronouncements

2.RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent to the initial issuance of the Company's 2020 financial statements on March 31, 2021, management reconsidered the methodology previously applied in its valuation of derivative liabilities contained in its matured convertible notes which are in default, to include all inputs to measure the time value component to the application of the Black-Scholes Model. In addition, management also discovered that it did not reflect the impact of amendments which resulted in modifications in certain rights and privileges for certain classes of its preferred stock, which should have been accounted for as a deemed dividend at the time of modification.

 

Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significantThe restatement primarily relates to the Company’s financial position, resultsaccounting for (1) the valuation of operations or cash flows.

Reclassifications

Certain prior period amounts have been reclassifiedembedded derivative liabilities in certain matured convertible notes and (2) the accounting treatment for changes in certain rights and privileges with respect to conform with the current year presentation.certain classes of preferred stock on January 10, 2020.

 

2.(1)For certain convertible notes in default containing embedded derivatives (the “Notes”), the Company originally valued the derivative liability using a Black-Scholes Model, but without consideration to a time value component (the term, volatility, or discount rates), because these notes had matured and were immediately due. As a result, the embedded derivatives for expired notes were measured using a valuation methodology which was analogous to the use of intrinsic value. Company management has reconsidered the methodology previously applied, and determined that the use of all inputs to the Black-Scholes Model is more appropriate in the determination to measure the fair value of all derivative liabilities.

(2)The Company originally did not reflect the impact of amendments which resulted in modifications in certain rights and privileges for certain classes of its preferred stock. Subsequent to the issuance of its financial statements for the year ended December 31, 2020, Company management determined that these modifications resulted in changes to the carrying value of certain classes of preferred stock, which should have been accounted for as a deemed dividend at the time of modification.

The following table summarizes the impacts of the error corrections on the Company's financial statements for each of the periods presented below:

i. Balance sheet

Schedule of financial statements            
  Impact of correction of error 
December 31, 2020 As previously reported  Adjustments  As restated 
          
Total assets $4,930,147  $  $4,930,147 
             
Derivative liability  2,405,358   498,305   2,903,663 
Net, liabilities of discontinued operations  2,441,965   249,730   2,691,695 
Other  8,207,123      8,207,123 
Total liabilities  13,054,446   748,035   13,802,481 
             
Accumulated deficit  (64,835,220)  (748,035)  (65,583,255)
Others  56,710,921      56,710,921 
Total deficiency in shareholders' equity $(8,124,299) $(748,035) $(8,872,334)

F-20

ii. Statement of operations

             
  Impact of correction of error 
Year ended December 31, 2020 As previously reported  Adjustments  As restated 
          
Loss from operations $(1,804,151) $  $(1,804,151)
Change in value of derivative liability  379,892   54,822   434,714 
Others  (1,550,148)     (1,550,148)
Other income (expense)  (1,170,256)  54,822   (1,115,434)
Net loss before discontinued operations  (2,974,407)  54,822   (2,919,585)
Loss from discontinued operations  (125,599)  13,418   (112,181)
Gain from discontinued operations  194,873      194,873 
Income (loss) from discontinued operations  69,274   13,418   82,692 
Net loss  (2,905,133)  68,240   (2,836,893)
Deemed dividend on preferred stock     (1,605,266)  (1,605,266)
Net loss attributable to common stockholders $(2,905,133) $(1,537,026) $(4,442,159)
Basic Earnings (loss) per Share            
Continued Operations $(3.20)     $(4.98)
Discontinued Operations $0.08      $0.09 
Diluted Earnings (loss) per Share            
Continued Operations $(3.20)     $(4.98)
Discontinued Operations $      $0.00 
Weighted Average Shares Outstanding - Basic Earnings (loss) per Share            
Continued Operations  908,485       908,485 
Discontinued Operations  908,485       908,485 
Weighted Average Shares Outstanding - Diluted Earnings (loss) per Share            
Continued Operations  908,485       908,485 
Discontinued Operations  1,444,295,967,109       1,444,295,967,109 

3.ACQUISITIONS

 

JM Enterprise 1, Inc. (dba) Key Tax GroupNova Ortho and Spine, LLC

 

JM Enterprise 1, Inc. (d.b.a. Key Tax Group) (“Key Tax)On May 31, 2021 the Company completed the acquisition of Nova Ortho and Cardiff Lexington Corp. as previously announcedSpine LLC. Sellers received a cash payment in May 2019 signed a definitive merger agreement under which Key Tax became a wholly owned subsidiary effective May 8, 2019. In connection with the closingamount of $2,500,000 and were issued 894,834 shares of Series J Preferred Stock of the acquisition, a Preferred “G” Class of stockCompany with a par value of $0.001 was established and issued.a stated value of $4.00 with an aggregate stated value equal to $3,579,334 for a total transaction of $6,079,334. The Preferred “G” Class ofJ stock rights and privileges include voting rights, a conversion ratio of 1:1.25 and were distributed at the adjusted rate of $0.07 per share (pre-split) for a total of 18,571,428 representing a value of $1,300,000. Additionally, the Company issued 500,000 shares of common stock with a par value of $0.001 to novate a convertible debt of $30,912.32. These2:00. The Preferred “G”J shares have a lock-up/leak-out limiting the sale of stock for 126 months after which conversions and sales are limited to 20% of their portfolio per year, pursuant to the terms of the AcquisitionStock Purchase Agreement.

The parties further agreed to performance based contingent supplement payment to Sellers in 2022 should one year from the closing date the Company’s trailing twelve months minimum Pre-Tax Net Income exceed $1,979,320, the “Milestone”, which in that event would cause the issuance to Sellers of 818,750 additional shares of Preferred J Stock, with an aggregate stated value equal to Three Million Two Hundred Seventy-Five Thousand Dollars ($3,275,000). The preliminary purchase price allocation of the net assets acquired was finalizedis as follows:

  Key Tax Fair Value 
Cash $9,484 
Accounts receivable  90,766 
Key Tax Group trade name  250,000 
Property and equipment  6,044 
Goodwill  1,407,915 
Liabilities  (464,209)
Total $1,300,000 

3.ACCOUNTS PAYABLE AND ACCRUED EXPENSES

  December 31, 
  2020  2019 
Accounts payable $119,653  $228,971 
Accrued Credit cards  28,548   86,077 
Accrued Income, payroll, and other taxes  282,798   276,614 
Accrued advertising  75,963   53,189 
Accrued payroll  27,569   58,760 
Accrue expense - other  82,543   92,353 
Total $617,074  $795,964 

 

 

 

 35F-21

Schedule of preliminary purchase price allocation    
   Nova Ortho and Spine, PLLC 
Cash $177,977 
Accounts receivable  4,052,213 
Property and equipment  92,064 
Other assets  342,493 
Goodwill  2,391,608 
Liabilities  (977,021)
Total $6,079,334 

4.ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Schedule of accrued expenses        
  December 31, 
  2021  2020 
Accounts payable $170,914  $119,653 
Accrued credit cards  16,466   28,548 
Accrued expense – previously factored liability  846,754    
Accrued income taxes, and other taxes  7,553   282,798 
Accrued professional fees  270,827   27,727 
Accrued advertising  39,886   75,963 
Accrued payroll  39,959   27,569 
Accrue expense - other  363   54,815 
Total $1,392,722  $617,073 

The Company is delinquent paying certain income and property taxes. As of December 31, 2021 and 2020, the balance for these taxes, penalties and interest is $7,553 and $282,798.

5.PLANT AND EQUIPMENT, NET

Property and equipment as of December 31, 2021 and December 31, 2020 is as follows:

Schedule of Property and Equipment      
  

December 31,

2021

  

December 31,

2020

 
Residential housing $319,856  $341,205 
Medical equipment  35,974    
Computer Equipment  9,189    
Furniture, fixtures and equipment  96,532   76,017 
Leasehold Improvement  15,950    
         
Total  477,501   417,222 
Less: accumulated depreciation  (218,471)  (205,443)
Property and equipment, net $259,030  $211,799 

For the years ended December 31, 2021 and 2020, depreciation expense was $35,334 and $23,100, respectively. For the years end December 31, 2021 and 2020, the Company recorded depreciation expense of $13,886 and $1,274 in operations expense and $21,448 and $21,826 in cost of goods sold, respectively.

F-22 

 

 

The Company previously reported that it failed to remit payroll tax payments since 2006, as required by various taxing authorities. Payroll taxes and estimated penalties were accrued in recognition of accrued salaries subsequently settled via stock issue and other agreements that did not result in reportable or taxable payroll transactions. As of December 31, 2020 and 2019, the Company estimated the amount of taxes, interest, and penalties that the Company could incur as a result of payroll related taxes and penalties to be $0 and $45,238, respectively.

4.6.PLANT AND EQUIPMENT, NETLAND

Plant and equipment, net as of December 31, 2020 and 2019 was $211,779 and $234,879, respectively, consisting of the following:

  December 31, 
  2020  2019 
Residential housing $341,205  $341,205 
Furniture, fixture, and equipment  76,017   76,017 
Leasehold improvements      
Total  417,222   417,222 
Less: accumulated depreciation  (205,443)  (182,343)
Plant and equipment, net $211,779  $234,879 

During the years ended December 31, 2020 and 2019, depreciation expense was $23,100 and $278,154, respectively. During the years end December 31, 2020 and 2019, the Company recorded depreciation expense of $1,274 and $7,318, in operations expense and $21,826 and $60,384, in cost of goods sold, respectively.

 

During the year ended December 31, 2019,2021, the Company disposed fixed assetssold 3 lots for $152,000, and had 27 acres of $104,886 and related liabilities related to a company-owned franchise, resulting in net cash flowland of $0 and a gain on saleapproximately $540,000 as of $91,847 from disposal. 

5.LAND

December 31, 2021. As of December 31, 2020, and 2019, the Company ownshad 30 acres of land of $603,000 approximately $603,000 located in Salmon, Idaho, with area of approximately 30 acres, which was in connection with the acquisition of Edge View Properties, Inc. in July 2014. The Company issued 241,199 shares of Series E Preferred Stock as consideration for this acquisition. The land is currently vacant and is expected to be developed into a residential community.

 

6.7.LINE OF CREDIT

 

In February 2018, TheAt December 30, 2021 and December 31, 2020, the Company had a revolving line of credit with a financial institution for $92,500$92,500, expires February 2, 2021, which incurswas personally guaranteed by the manager of the subsidiary, accrues interest of PRIME plus 3.45% (6.7% and 8.2%at prime (3.25% at December 30, 2021 and December 31, 2020 and 2019, respectively) and is revolving.2020) plus 3.45%, for a total rate of 6.70%. As of December 31, 20202021 and 2019,2020, the Company had balance of $51,927$0 and 91,099,$51,927, respectively.

 

8.RELATED PARTY TRANSACTIONS

On February 11, 2021, the Chairman of the Board and the Chief Executive Officer each converted 62,500 Preferred Series I shares into 25,000,000 restricted common shares for a total of 125,000 Preferred Series I shares into 50,000,000 restricted common shares.

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 assumed notes payable from the previous owners of which are currently managers of certain subsidiaries related to the acquisition of Key Tax on May 8, 2019. These notes and loans are due on demand and do not bear interest. The balance of these notes and loans are $153,925 due from the previous owners at December 31, 2021 and $35,164 due to the previous owners at December 31, 2020, respectively.

From time to time, the previous owner which is currently the manager of Platinum Tax Defenders loans funds to the Company to cover short term operating needs. Amounts owed as of December 31, 2021 and 2020 were $37 and $2,721 respectively.

The Company assumed amounts due to previous owners who are current managers Edge View Properties Inc. related to the acquisition on July 16, 2014. These amounts are due on demand and do not bear interest. The balance of these amounts are $4,979 due from the previous owners as of December 31, 2021 and $50,021 due to the previous owners at December 31, 2020, respectively. On August 6, 2021, a Board Resolution was executed to terminate one of the two employees of Edge View Properties for fraud, deceit, larceny, and thievery for selling property belonging to the Company and personally taking the $162,598 in proceeds. The Company hired counsel to terminate the employee and handle all legal matters for return of monies and criminal prosecution.

The Company agreed to pay $360,000 per year and a $200,000 of target annual incentive granted in 2020 to the Chief Executive Officer based on his employment agreement since July 1, 2020 of which currently 50% is paid in cash and 50% is accrued. The Company previously paid the Chief Executive Officer $300,000 per year. The total outstanding accrued compensation as of December 31, 2021 and 2020 were $1,415,000 and $1,035,000, respectively.

The Company agreed to pay $360,000 per year and a $200,000 of target annual incentive to the Chairman of the Board based on his employment agreement since July 1, 2020 of which currently 50% is paid in cash and 50% is accrued. The Company previously paid the Chairman of the Board $300,000 per year. The total outstanding accrued compensation as of December 31, 2021 and 2020 were $1,400,000 and $1,020,000, respectively.

 

 

 

 36F-23 

 

 

7.RELATED PARTY TRANSACTIONS

The Company has entered into several unsecured loan agreements with related parties.

The Chairman of the Board was paid deferred compensation of $360,000 and $300,000agreed to pay $120,000 per year to the Chief Operating Officer based on his amended employment agreement executed on May 15, 2019. In the third quarter of 2021, the Chief Operating Officer received 61,000 shares of preferred stock series B in exchange for the years 2020 and 2019, respectfully. Additionally, a target bonus was granted and accrued in the amountsalaries of $200,000. Unpaid deferred$244,000. The total outstanding accrued compensation as of December 31, 2021 and 2020 was $159,000and 2019, respectively was $1,020,000 and $642,500.$120,000, respectively.

 

The Chief Executive Officer was paid compensation of $360,000 and $300,000Company pays $156,000 per year forto the years 2020 and 2019, respectfully. Additionally, a target bonus was granted andChief Financial Officer based on his amended employment agreement executed on May 15, 2021. The total outstanding accrued of $200,000. Unpaid deferred compensation as of December 31, 2021 and 2020 and 2019, respectively was $1,035,000 and $657,500.$17,057.

 

The Chief Operating Officer was paidCompany entered into a Management Agreement effective May 31, 2021 for compensation to the Principals of $120,000 per year for the years 2020Company’s Nova Ortho and 2019. Unpaid deferred compensationSpine subsidiary in the form of an annual base salaries of $372,000 to one of the 3 doctors, $450,000 to the second, and $372,000 to the third doctor.

Collectively, as a group, Principals will receive an annual cash bonus and stock equity set forth below (the “Annual Bonus”). The Annual Bonus will be conditioned upon the Company achieving 100% of December 31, 2020 and 2019, respectively was $120,000 and $222,000.the annual objectives of financial performance goals as set forth below.

Schedule of annual objectives of financial performance   
YearMinimum Annual Nova EBITDACash Annual BonusSeries J Preferred Stock
2021$2.0M$120,000120,000 Shares
2022$2.4M$150,000135,000 Shares
2023$3.7M$210,000150,000 Shares
2024$5.5M$300,000180,000 Shares
2025$8.0M$420,000210,000 Shares

 

The Company obtained short-term advances from the Chairman of the Board that are non-interest bearing and due on demand. As of December 31, 20202021 and 2019,2020, the Company owed the Chairman $126,849$126,765 and $136,349,$126,849, respectively.

 

8.9.NOTES AND LOANS PAYABLE

 

Notes and loans payable at December 31, 2021 and 2020, and 2019respectively, are summarized as follows:

Schedule of notes payable      
  

December 31,

2021

  

December 31,

2020

 
Notes and Loans Payable $600,932  $1,347,690 
Less current portion  (458,177)  (947,912)
Long-term portion $142,755  $399,778 

 

  December 31, 
  2020  2019 
Notes and Loans Payable - Unrelated Party $1,347,690  $617,351 
Notes and Loans Payable - Related Party  37,885   84,746 
Total  1,385,575   702,097 
Notes and Loans Payable - Related Party  37,885   84,746 
Current portion  947,912   207,351 
Long-term portion $399,778  $410,000 

Long-term debt matures as follows:

Schedule of Maturities of Long-term Debt   
  Amount 
2022 $458,177 
2023  4,923 
2024  4,923 
2025  4,923 
2026  4,923 
Thereafter  123,063 
Total $600,932 

F-24

 

Notes and Loans Payable – Related Party

 

The Company obtained short-term advancesassumed notes payable from Managers at several entities thatthe previous owners of which are none interest bearingcurrently managers of Key Tax related to the acquisition of Key Tax on May 8, 2019 and these amounts have been divested and returned to the previous owners. The notes are due on demand. These balances were $37,885demand and $84,746do not bear interest. The balance of these notes and loans are zero 0 as of December 31, 2021 and $36,642 as of December 31, 2020. From time to time, the previous owner which is currently the manager of Platinum Tax Defenders loans funds to the Company to cover short term operating needs. Amounts owed as of December 31, 2021 and 2020, were $37and 2019,$2,721 respectively. The amounts due to the previous owners of Edge View were from the original acquisition of the subsidiary and the balance at December 31, 2021 is a receivable of $8,209 and at December 31, 2020 is a liability of $50,021, respectively.

 

Loans and Notes Payable – Unrelated Party

 

On March 12, 2009, the Company entered into a preferred debenture agreement with a shareholder for $20,000. The note bore interest at 12% per year and matured on September 12, 2009. The Company assigned all of its receivables from consumer activations of the rewards program as collateral on this debenture. No warrants had been exercised before the expiration. The balance of the note was $10,989$10,989 at December 31, 20202021 and 2019, respectively.2020. The accrued interest of the note was $2,272$4,910 and $3,591$3,591 at December 31, 2021 and 2020, and 2019, respectively.

37

 

On September 7, 2011, the Company entered into a Promissory Note agreement with for $50,000. The note bore interest at 8% per year and matured on September 7, 2016. Effective March 29, 2021, the principal balance of $50,000 and accrued interest of $37,282 were converted into shares of preferred stock. This note was converted to preferred stock in the first quarter. See footnote 12, Capital Stock. The balance of the note was $50,000-0- at December 31, 20202021 and 2019, respectively.$50,000 at December 31, 2020. The accrued interest of the note was $37,822-0- and $33,282$37,822 at December 31, 20202021 and 2019,December 31, respectively.

 

On November 17, 2011, the Company entered into a Promissory Note agreement for $50,000. The note bore interest at 8% per year and matured on November 17, 2016. Effective March 29, 2021, the principal balance of $50,000 and accrued interest of $36,505 were converted into shares of preferred stock. This note was converted to preferred stock in the first quarter. See footnote 12, Capital Stock. The balance of the note was $50,000-0- at December 31, 20202021 and 2019, respectively.$50,000 December 31, 2020. The accrued interest of the note was $55,500-0- and $32,505$55,500 at December 31, 2021 and 2020, respectively.

On March 11, 2009, the Company entered into a Promissory Note agreement for $15,000. The note bore interest at 12% per year and 2019,matured on April 29, 2014. Effective March 29, 2021, the principal balance of $15,000 and accrued interest of $19,465 were converted into shares of preferred stock. This note was converted to preferred stock in the first quarter. See footnote 12, Capital Stock. The balance of the note was -0- at December 31, 2021 and $15,000 at December 31, 2020. The accrued interest of the note was -0- and $21,265 at December 31, 2021 and 2020, respectively.

  

On September 9, 2019, the Company obtained a promissory note for $410,000 at 10% interest which is due inand matured on September 9, 2020. TheOn November 10, 2020, the Company entered into addendum No. 1 on the note extending the maturity date until December 31, 2020. On May 4, 2021, the Company entered into addendum No. 2, whereby the maturity date shall be amended to be November 3, 2021, accrued interest of $22,266 was added to the principal balance of $410,000 resulting in a new principal balance of $432,266 at May 4, 2021 and interest accruing at the note,rate of 24%. The principal balance was $410,000$432,266 and $410,000 at December 31, 20202021 and 2019,2020, respectively. The accrued interest of the note was $53,805$137,345 and $41,000$53,805 at December 31, 2021 and 2020, and 2019, respectivelyrespectively.

 

The Company obtained short-term loans from unsecured sources. These short-term loans were due on demand and accrue interest at 18%. This subsidiary was divested 12-31-21 and these loans were eliminated.

F-25

Paycheck Protection Program (“PPP”) Loans

 

On April 14, 2020, the Company obtained a PPP loan of $127,400for $127,400 at an interest rate of 1%1% with a maturity date of April 14, 2022.2022. This loan has been forgiven as part of the 2020 US Federal government Coronavirus Aid, Relief and Economic Security Act.Act (“CARES Act”) and was recognized as a gain from forgiveness of debt in the amount of $128,640 recorded in other income and expenses in the consolidated statement of operations. The balanceprincipal and accrued interest at December 31, 2021 was -0- and the principal and accrued interest at December 31, 2020 was $127,400$127,400 and $923,$923 respectively.

 

On May 8, 2020, the Company obtained a PPP loan of $257,500 for $257,500 at an interest rate of 1%1% with a maturity date of May 8, 2022.2022. This loan has been forgiven as part of the 2020 US Federal government Coronavirus Aid, ReliefCARES Act and Economic Security Act.was recognized as a gain from forgiveness of debt in the amount of $261,675 recorded in other income and expenses in the consolidated statement of operations. The balanceprincipal and accrued interest at December 31, 2021 was -0- and the principal and accrued interest at December 31, 2020 was $257,500 and $1,695, respectively.$257,500.

 

TheOn February 19, 2021, the Company obtained short-term loansa PPP loan of $229,500 at an interest rate of 1% with a maturity date of February 19, 2023. This loan has been forgiven as part of the CARES Act and was recognized as a gain from individuals. These short-term loans are due on demandforgiveness of debt in the amount of $231,374 recorded in other income and accrueexpenses in the consolidated statement of operations. The principal and accrued interest from 12% - 18%. These short-term loans were $119,129 and $166,000 at December 31, 20202021 was -0-.

On February 23, 2021, the Company obtained a PPP loan of $117,550 at an interest rate of 1% with a maturity date of February 23, 2023. This loan has been forgiven as part of the CARES Act and 2019, respectively.was recognized as a gain from forgiveness of debt in the amount of $118,130 recorded in other income and expenses in the consolidated statement of operations. The principal balance and accrued interest of these short-term loans was $29,544 and $30,050 at December 31, 2020 and 2019, respectively2021 was -0-. This note was forgiven in the third quarter of 2021.

 

Small Business Administration (“SBA”) Loans

 

On June 2, 2020, The Company obtained an SBA loan of $150,000$150,000 at an interest rate of 3.75%3.75% with a maturity date of June 2, 2050.2050. The principal balance and accrued interest at December 31, 2021 was $147,677 and $5,723, respectively, and principal and accrued interest at December 31, 2020 was $149,900$149,900 and $3,310,$3,310, respectively.

On October 7, 2020, the Company obtained an SBA loan for $150,000 at an interest rate of 3.50% with a maturity date of October 7, 2050. On August 31, 2021, this SBA loan was amended to add an additional $200,000 of principal to the original note and the new interest rate was increased to 3.75%. The principal balance and accrued interest at December 31, 2021 was $349,900 and $9,608, respectively, and principal and accrued interest at December 31, 2020 was $149,900 and $1,239 respectively.

 

On April 12, and June 16, 2020, the Company obtained an SBA grants totaling $20,000 at interest rate of $20,0005% and mature in one year from advance, if not forgiven. The balancesprincipal balance and accrued interest at December 31, 2021 was $10,000 and $860, respectively, and principal and accrued interest at December 31, 2020 was $20,000$20,000 and $628,$628 respectively.

 

On October 7, 2020, the company obtained an SBA loan of $150,000 at an interest rate of 3.5% with a maturity date of October 7, 2050. The balance and accrued interest at December 31, 2020 was $149,900 and $1,239, respectively.

9.10.CONVERTIBLE NOTES PAYABLE

 

Some of the Convertible Notes issued as described below included an anti-dilution provisions that allowed for the adjustment of the conversion price. The Company considered the guidance provided by the FASB in “Determining Whether an Instrument Indexed to an Entity’s Own Stock,” the result of which indicates that the instrument is not indexed to the issuer’s own stock. Accordingly, the Company determined that, as the conversion price of the Notes issued in connection therewith could fluctuate based future events, such prices were not fixed amounts. As a result, the Company determined that the conversion features of the Notes issued in connection therewith are not considered indexed to the Company’s stock and characterized the value of the conversion feature of such notes as derivative liabilities.

 

 

 

 38F-26 

 

 

As of December 31, 2021, and 2020, the Company had convertible debt outstanding of $2,077,753 and $2,584,967, respectively. During the yearsyear ending December 31, 2020 and 2019,2021, the Company had proceeds of $865,500 and $613,526$444,500 from convertible notes and repaid $223,397 and $218,863$66,315 to convertible noteholders resulting in balances due tonoteholders. There are debt discounts associated with the convertible note holdersdebt of $2,476,647$0 and $1,079,825, as of$108,320 at December 31, 2021, and 2020, and 2019, respectively net of debt discounts. The following amounts reflect debt discount of $108,320 and $828,468 as ofrespectively. For the year ended December 31, 20202021 and 2019, respectively.

During the years ending December 31, 2020, and 2019, the Company recorded amortization of debt discounts of $1,192,044$1,051,264 and $972,047 during$1,192,044, respectively.

During the years endingyear ended December 31, 20202021, the Company converted $885,691 of convertible debt principal, $388,143 in accrued interest and 2019, respectively.$13,000 in penalties and fees into 109,234,241 shares of the company’s Common Stock.

 

During the years ended December 31, 2020, and 2019, respectively, the Company converted $196,291 and $422,809$196,291 of convertible debt, $49,466 in accrued interest, and $49,466 and $53,255$53,255 in interest, penalties and fees into 5,014,6975,014,696 shares of the company’s Common Stock.

 

In addition to the conversions of convertible debt into common stock, the Company converted convertible debt principal of $150,000 and accrued interest of $225,800 into 140,799 shares of preferred series B stock. The series B stock has a par value of $.001 and a stated value of $4.00 per share.

Convertible notes atas of December 31, 20202021 and December 31, 20192020 are summarized as follows:

Schedule of convertible notes summary      
  

December 31,

2021

  

December 31,

2020

 
Convertible notes payable $2,077,753  $2,584,967 
Discounts on convertible notes payable     (108,320)
Total convertible debt less debt discount  2,077,753   2,476,647 
Current portion  2,077,753   2,476,647 
Long-term portion $  $ 

 

  Year Ended December 31, 
  2020  2019 
Convertible notes payable - unrelated party $2,584,967  $1,908,293 
Convertible notes payable - related party      
Total convertible debt  2,584,967   1,908,293 
Discounts on convertible notes payable  (108,320)  (828,468)
Total convertible debt less debt discount  2,476,647   1,079,825 
Current portion  2,476,647   595,257 
Long-term portion $  $484,568 

Convertible Notes Payable – Unrelated Party

   

Note 1

On April 21, 2008, the Company entered into an unsecured Convertible Debenture (“Debenture 1”) with a shareholder in the amount of $150,000.. Debenture 1 bore interest at 12% per year, matured in August 2009, and was unsecured. All principal and unpaid accrued interest was due at maturity.

 

On March 11, 2009, the Company entered into an unsecured Convertible Debenture (“Debenture 2”) with a shareholder in the amount of $15,000. Debenture 2 bore interest at 12% per year, matured on March 11, 2014. All principal and unpaid accrued interest was due at maturity. The Company was in default on Debenture 2. The note is in default and currently accrues interest at the default interest rate of 12%.

 

Note 7

 

On February 9, 2016, the Company entered into a 15% convertible line of credit with an unrelated entity in the amount up to $50,000. On February 9, 2016, the Company received $17,500 cash for the line of credit, which matured on February 9, 2017. Note 7, is currently in default and accrues at a default interest rate of 20%.

 

39

Note 7-1

 

On October 28, 2016, the Company received $25,000 cash pursuant to the terms of Note 7, which matured on October 28, Note 7-1 is currently in default and accrues at a default interest rate of 20%.

 

F-27

Note 8

 

On March 8, 2016, the Company entered into a 15% convertible promissory note in the principal of $50,000 \withwith an unrelated entity for services rendered. Note 8 is matured on March 8, 2017. Note 8 is currently in default and accrues at a default interest rate of 20%.

 

Note 9

 

On September 12, 2016, the Company entered into a 10% convertible promissory note in the principal of $80,000 (“Note 9”) with an unrelated entity for services rendered. Note 9 is matured on September 12, 2017Note2017 Note 9 is currently in default and accrues at a default interest rate of 20%.

 

Note 10

 

On January 24, 2017, the Company entered into a 10% convertible promissory note in the principal of $80,000 with an unrelated entity for services rendered. Note 10 is matured on January 24, 2018. Note 10 is currently in default and accrues at a default interest rate of 20%.

 

Note 11-1

 

On February 21, 2017, the Company received $25,000 cash pursuant to the terms of Note 11, which matured on February 21, 2018. Note 11-1 is currently in default and accrues at a default interest rate of 20%.

 

Note 11-2

 

On March 16, 2017, the Company received $40,000 cash pursuant to the terms of Note 11-2, which matured on March 16, 2018. Note 11-2 is currently in default and accrues at a default interest rate of 20%.

 

Note 13-1 & -2

 

On April 21, 2017, the Company entered into a convertible promissory note with an unrelated entity in the amount $330,000, with original issue discount of $30,000 for net cash to the company of $300,000 (“Note 13-1”). Note 13-1 matured on April 21, 2018.

 

On July 24, 2018, Note 13-1 was purchased by an unrelated party with a new Replacement Convertible Promissory Note (“Note 13-2”) in the amount of $237,909. Note 13-2 bearsThe note is in default and currently accrues interest at 5%, matured on January 24, 2019.

the default interest rate of 18%.

 

40

Note 22,-1,&-3 22-1 and 22-3

 

On July 10, 2018, the Company entered into a Senior Secured Convertible Promissory Note \withwith an unrelated entity in the amount $1,040,000, with original issue discount of $103,000, expenses of $64,160 and an interest deposit of $20,000 resulting in net cash to the company of $852,840. The notes 22, 22-1 and 22-3 are in default and currently accrues interest at the default interest rate of 24%. On February 20, 2019, the Company executed an addendum to Note 22, matures Januarywhereby the Company will receive 2 additional tranches. The first upon closing, the Company received $55,216 less expenses of $5,216 resulting in net cash to the Company of $50,000 and on April 10, 2021 and is current. Note 22 bears interest at2019, the Company received the second tranche, upon completing certain events, of $55,616 less expenses of $5,616 resulting in net cash of $50,000 which was paid directly to a 12 % rate.certain vendor.

F-28

 

Note 25

 

On August 13, 2018, the Company entered into a Convertible Promissory Note with an unrelated entity in the amount $126,560, with original issue discount of $13,560 and expenses of $13,000 resulting in net cash to the company of $100,000. Note 25 matured February 13, 2019 and is currently in default. The default interest rate is 18%.

 

Note 26

 

On August 10, 2017, the Company entered into a Debt Purchase Agreement with an unrelated entity in the amount $20,000. The Note matured January 27, 2018 and is currently in default. The default interest rate is 15%.

 

Note 29, 29-1 and 29-2

 

On May 10, 2019, the Company entered into an 8% Convertible Secured Redeemable Note (“Note 29”) with an unrelated entity in the amount $150,000 and expenses of $7,500 resulting in net cash to the company of $142,500. Note 29 is secured, prior to maturity of May 10, 2020.

 

On November 8, 2019, Note 29 was purchased by and assigned to an unrelated party upon execution of Amendment No. 1 to Convertible Promissory Note. The amount assigned was the existing principal amount of the Note 29 of $150,000 and accrued interest of $5,917.81 (“Note 29-1”) plus a new 8% Convertible Secured Redeemable Note (“Note 29-2). The total amount assigned to the new note holder is $218,284.93. Note 29-2 bears interest at 8%, matured on November 8. The note is in default and currently accrues interest at the default interest rate of 24%..

Note 30

On July 26, 2019, the Company entered into a Convertible Note Payable (“Note 30”) with an unrelated entity in the amount $73,500, with expenses of $3,000 resulting in net cash to the company of $70,500. Note 30 matured on July 26, 2020. The note is in default and currently accrues interest at the default interest rate of 22%.

 

Note 31

 

On August 28, 2019, the Company entered into an 8% Convertible Secured Redeemable Note with an unrelated entity in the amount $120,000, with expenses of $6,000 resulting in net cash to the company of $114,000. Note 31 matured August 28, 2020. The note is in default and currently accrues interest at the default interest rate of 24%.

 

41

Note 32

 

On May 22, 2019, the Company received $25,000 from a draw on the line of credit. Note 32 matured May 22, 2020. The note is in default and currently accrues interest at the default interest rate of 20%. 

 

Note 33

 

On February 11, 2020, the Company entered into a 6% Convertible Promissory Note with an unrelated entity in the amount $157,500, with original issue discount of $7,500 and expenses of $7,500 resulting in net cash to the company of $142,500. Note 33The note is matures February 11, 2021.in default and currently accrues interest at 6%. 

 

Note 34

 

On May 18, 2020, the Company entered into a 6% Convertible Promissory Note with an unrelated entity in the amount $63,000 and expenses of $3,000 resulting in net cash to the company of $60,000. Note 34 matures May 18, 2021.The note is in default and currently accrues interest at the default interest rate of 22%. 

 

F-29

Note 35

 

On August 24, 2020, the Company entered into a 6% Convertible Promissory Note with an unrelated entity in the amount $85,000 with expenses of $3,500 resulting in net cash to the company of $81,500. Note 35 matures August 24, 2021.The note is in default and currently accrues interest at the default interest rate of 22%. 

 

Note 36-1

 

On September 03,3, 2020, the Company entered into a 10% Senior Secured Convertible Promissory Note (“10% Senior Secured Note”) with an unrelated entity in the amount of $733,500, with a gross amount of original issue discount of $183,500 resulting in a gross net cash available to the company of $550,000. Note 36-1 matures September 03, 2021.2021 The first tranche (Note 36-1) executed upon closing was a principal amount of $122,400, less original issue discount of $30,000 and expenses of $7,500 resulting in net cash of $84,900. The note is in default and currently accrues interest at the default interest rate of 18%.

 

Note 36-2

 

On November 03,3, 2020, the Company entered into aexecuted the second tranche of the 10% Senior Secured Convertible Promissory Note with an unrelated entity in theThe second tranche was a principal amount $733,500, withof $120,000, less original issue discount of $183,500 resulting in net cash to the company of $550,000. Note 36- matures November 3, 2021. The first tranche executed upon closing, the Company received $90,000 and a second tranche of $30,000 resulting in net cash toof $90,000. The note is in default and currently accrues interest at the Companydefault interest rate of $120,000.18%.

 

Note 36-3

 

On December 29, 2020, the Company entered into aexecuted the third tranche of the 10% Senior Secured Convertible Promissory Note with an unrelated entity in theThe third tranche was a principal amount $126,500, withof $120,000, less original issue discount of $13,560$30,000 resulting in net cash toof $90,000. The note is in default and currently accrues interest at the companydefault interest rate of $113,000. Note 36-3 matures June 03, 2021 and is current.18%.

 

Note 36-4

 

On May 5, 2021, the Company executed the fourth tranche of the 10% Senior Secured Note The fourth tranche was a principal amount of $187,500, less original issue discount of $37,500 resulting in net cash of $150,000. The note is in default and currently accrues interest at the default interest rate of 18%.

 

42

Note 37-1

 

On September 03, 2020, the Company entered into a 10% Senior Secured Convertible Promissory Note \ with an unrelated entity in the amount $200,000, with original issue discount of $50,000 resulting in net cash to the company of $150,000. Note 37-1 matures June 3, 2021. This Note became eligible to convert April 03, 2021 and is convertible into shares of the Company’s common stock as defined in the agreement. The first tranche executed upon closing; the Company received $50,000 resulting in net cash to the Company of $100,000.

Note 37-2

On November 02, 2020, the Company entered into a(“Second 10% Senior Secured Convertible PromissoryNote”) Note with an unrelated entity in the amount $200,000, with original issue discount of $50,000 resulting in net cash available to the company of $150,000. The note is in default. This Note 37-2 matures November 3, 2021.became eligible to convert March 31, 2021 and is convertible into shares of the Company’s common stock as defined in the agreement The first tranche executed upon closing; the Company received $50,000closing was a principal amount of $67,000, less original issue discount of $17,000 and expenses of $1,500 resulting in net cash toof $48,500. The note is in default and currently accrues interest at the default interest rate of 18%.

Note 37-2

On November 02, 2020, the Company executed the second tranche of $100,000.the 10% Senior Secured Note. The second tranche was a principal amount of $66,500, less original issue discount of $16,500 resulting in net cash of $50,000 The note is in default and currently accrues interest at the default interest rate of 18%.

 

Note 37-3

 

On December 29, 2020, the Company executed the second tranche of the 10% Senior Secured Note. The second tranche was a principal amount of $66,500, less original issue discount of $16,500 resulting in net cash of $50,000. The note is in default and currently accrues interest at the default interest rate of 18%.

F-30

Note 38

On February 9, 2021, the Company entered into a 10 % Senior Secured6% Convertible Promissory Note \ with an unrelated entity in the amount $200,000, with original issue discount$103,500 and expenses of $50,000$3,500 resulting in net cash to the company of $150,000. $100,000.

Note 37-3 matures December 29, 2021. The first tranche executed upon closing;39

On April 26, 2021, the Company received $50,000entered into a 6% Convertible Promissory Note with an unrelated entity in the amount $153,500 and expenses of $3,500 resulting in net cash to the Companycompany of $100,000.$150,000.

 

As of December 31, 2020,Previously, the Company’s derivative liabilities are embedded derivatives associated with the Company’s convertible notes payable. Due to the Notes’ conversion features, the actual number of shares of common stock that would be required if a conversion of the note as described in Note 9 was made through the issuance of the Company’s common stock cannot be predicted. As a result, the conversion feature requires derivative accounting treatment and will be bifurcated from the note and “marked to market” each reporting period through the statement of operations.

The Company used the Black-Scholes Model to measure the fair value of the derivative liabilities, resulting in a valuation measurement of $2,405,358 and $3,102,392 at December 31, 2020 and 2019, respectively.

The valuation of the derivative liabilities attached to the convertible debt was arrived at through the use of the Black-Scholes Option Pricing Model (“Black-Scholes Model”). Refer

Schedule of derivative liabilities            
  Original Account Balance at 1-1-21  Adjustment to Remove the Derivative Liability  Original Account Balance at 1-1-21 
   (Restated)         
Derivative Liability  2,903,663   (2,903,663)   

Upon adoption of ASU 2020-06, we reclassified the previously identified beneficial conversion features to Note 10 for the derivative liabilities associated debt.  We also determined, that in accordance with convertible debt instruments, at December 2020 and 2019.ASU 2017-11, such beneficial conversion features are not considered a liability classified derivative.

 

 

 

 

 

 

 43F-31 

 

 

The following is a schedule of convertible notes payable from December 31, 2019 to December 31, 2020.

Note #Issuance Maturity Principal Balance 12/31/19  New Loan  Cash Paydown  Principal Conversions  Shares Issued Upon Conversion  Principal Balance 12/31/20  Accrued Interest on Convertible Debt at 12/31/19  Interest Expense On Convertible Debt For the Year Ended 12/31/20  Accrued Interest on Convertible Debt at 12/31/20  Unamortized Debt Discount At 12/31/20 
1 8/21/2008  8/21/2009 $150,000  $  $  $    $150,000  $204,608  $16,300  $225,800  $ 
7 2/9/2016  On demand  8,485              8,485   2,412   1,537   4,431    
7-1 10/28/2016  10/28/2017  25,000              25,000   10,321   4,528   23,120    
8 3/8/2016  3/8/2017  1,500                 9,863   272       
9 9/12/2016  9/12/2017  80,000              80,000   47,876   14,489   64,701    
10 1/24/2017  1/24/2018  32,621              55,000   23,212   5,908   42,134    
11-1 2/21/2017  2/21/2018  9,733                 2,533   1,763       
11-2 3/16/2017  3/16/2018  20,032              21,345   2,367   3,628   4,433    
13-2 7/24/2018  1/24/2019  92,205      (48,246)       43,961   24,002   1,990   1,525    
22 7/10/2018  1/10/2021  953,414      (144,905)       838,433   87,762      74,654   12,634 
22-1 2/20/2019  1/10/2021        61,704        61,704   6,350   6,705       
22-3 4/10/2019  1/10/2021        56,095        56,095   5,145   6,096       
25 8/13/2018  2/13/2019  78,314      48,246   (8,268) 1,140,161   118,292   17,226   19,283   6,811    
26 8/10/2017  1/27/2018  20,000              20,000   4,533   2,717   7,533    
29-1 11/8/2019 ��11/8/2020  141,122         (40,225) 924,249   101,374   2,409   7,309   178    
29-2 11/8/2019  11/8/2020  62,367              62,367      13,555   7,176    
30 7/26/2019  7/26/2020  73,500         (73,500) 30,913      1,909   463       
31 8/28/2019  8/28/2020  120,000         (58,170) 1,356,979   61,839   3,288   13,438   10,825    
32 5/22/2019  5/22/2020  25,000              25,000   2,291   4,528   7,301    
33 2/11/2020  2/11/2021     157,500      (3,328) 355,556   153,672      7,438   8,384   14,364 
34 5/18/2020  5/18/2021     63,000      (12,800) 1,206,838   50,200      1,699   2,414   35,150 
35 8/24/2020  8/24/2021     85,000           85,000      1,640   1,803    
36-1 9/3/2020  1/3/2021     120,000           127,200      3,563   3,969   922 
36-2 11/3/2020  1/3/2021     120,000           120,000      1,752   1,937   1,475 
36-3 12/29/2020  1/3/2021     120,000           120,000      89   98   18,000 
37-1 9/3/2020  6/30/2021     67,000           67,000      1,989   2,197   11,162 
37-2 11/2/2020  6/30/2021     66,500           66,500      987   1,090   8,319 
37-3 12/29/2020  6/30/2021     66,500           66,500      49   55   6,295 
                                             
       $1,893,293  $865,500  $(27,106) $(196,291) 5,014,696  $2,584,967  $458,107  $143,715  $502,569  $108,320 

44

10.FAIR VALUE MEASUREMENT

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

The following are the hierarchical levels of inputs to measure fair value:

Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.
Level 2 – Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable – related party, approximate their fair values because of the short maturity of these instruments.

The Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using terms in the notes that are subject to volatility and market price of the underlying common stock of the Company.

As of December 31, 2020, and December 31, 2019, the Company did not have any derivative instruments that were designated as hedges.

The derivative liability as of December 31, 2020 and 2019, respectively, in the amounts of $2,405,358 and $3,102,392, have a level 3 classification.

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. During the year ended December 31, 2020, the Company’s stock price decreased from its initial valuation and thus, the derivative liability also decreased. Generally, as the stock price decreases for each of the related convertible notes that have an embedded derivative liability, the value of the derivative liability decreases. Stock price is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s convertible notes with an embedded derivative liability.

45

The Company used the Black-Scholes Model to measure the fair value of the derivative liabilities as $2,405,358 and $3,102,392 on December 31, 2020 and 2019, respectively, and will subsequently remeasures the fair value at the end of each period, and record the change of fair value in the consolidated statement of operation during the corresponding period.

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the year ended December 31, 2019:2021.

Derivative Liability, December 31,2018 $1,870,625 
Day 1 Loss  24,762,381 
Discount from derivatives  1,275,912 
Resolution of derivative liability upon conversion  (2,856,994)
Mark to market adjustment  21,949,532 
Derivative Liability, December 31, 2019 $3,102,392 

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. During the year ended December 31, 2020, the Company’s stock price decreased from initial valuation. As the stock price decreases for each of the related derivative instruments, the value to the holder of the instrument generally decreases. Stock price is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.

Derivative Liability, December 31, 2019 $3,102,392 
Day 1 Loss  564,952 
Discount from derivatives  294,000 
Derivatives settled  (611,141)
Mark to market adjustment  (944,485)
Derivative Liability, December 31, 2020 $2,405,358 

The above tables also include derivative liabilities related to warrants to purchase common stock of $6,135 at December 31, 2020. Net gain for the period included mark-to-market adjustments relating to the liabilities held during the year ended December 31, 2019 in the amounts of $2,340.

The valuation of the derivative liabilities attached to the convertible debt was arrived at through the use of the Black-Scholes Option Pricing Model (“Black-Scholes Model”) using the following assumptions:

  Year Ended December 31, 
  2020  2019 
Volatility 204.5% - 1,005.9%  378.8% - 1,872.7% 
Risk-free interest rate 9% - 15%  1.55% - 1.62% 
Expected term .33 – 2.5  .47 – 2.8 

Schedule of convertible notes details                                  
Note # Issuance Maturity Principal Balance 12/31/20 New Loan Cash Paydown Principal Conversions Shares Issued Upon Conversion Principal Balance 12/31/21 Accrued Interest on Convertible Debt at 12/31/20 Interest Expense On Convertible Debt For the Period Ended 12/31/21 Accrued Interest on Convertible Debt at 12/31/21 Unamortized Debt Discount At 12/31/21
1 8/21/2008 8/21/2009 $150,000 $ $ $(150,000) 140,799 $ $222,608 $ $ $
7 2/9/2016 On demand  8,485      (8,485) 18,024,012    4,109  1,167    
7-1 10/28/2016 10/28/2017  25,000      (15,000)   10,000  29,963  4,190  10,899  
9 9/12/2016 9/12/2017  80,000      (29,920) 17,278,267  50,080  63,876  12,639  4,141  
10 1/24/2017 1/24/2018  55,000      (42,355) 4,714,626  12,646  29,736  3,166  14,831  
11-2 3/16/2017 3/16/2018  21,345      (4,000)   17,345  6,374  3,469  9,843  
13-2 7/24/2018 1/24/2019  43,961          43,961  26,200  7,913  34,113  
22 7/10/2018 1/10/2021  838,433    (66,315)     772,118  75,040      
22-1 2/20/2019 1/10/2021  61,704          61,704  13,754  14,768  28,523  
22-3 4/10/2019 1/10/2021  56,095          56,095  11,877  13,426  25,303  
25 8/13/2018 2/13/2019  118,292      (118,292) 17,823,255    5,788  4,169    
26 8/10/2017 1/27/2018  20,000          20,000  7,533  2,992  10,525  
29-1 11/8/2019 11/8/2020  101,374      (101,374) 13,561,809    19  3,683  2,283  
29-2 11/8/2019 11/8/2020  62,367      (25,763)   36,604  14,968  9,283  11,374  
31 8/28/2019 8/28/2020  61,839    (9) (61,830) 5,247,042    14,059  1,447  8,385  
32 5/22/2019 5/22/2020  25,000          25,000  7,291  4,986  12,277  
33 2/11/2020 2/11/2021  153,672    500  (154,172) 15,522,516    8,214  1,277    
34 5/18/2020 5/18/2021  50,200    (200) (50,000) 4,121,766    1,876  233  219  
35 8/24/2020 8/24/2021  85,000      (85,000) 5,759,130    1,811  813  74  
36-1 9/3/2020 1/3/2021  122,400          122,400  3,934  21,972  25,906  
36-2 11/3/2020 3/3/2021  122,400          122,400  1,934  21,972  23,906  
36-3 12/29/2020 4/29/2021  122,400          122,400  98  21,972  22,070  
36-4 5/5/2020 9/5/2021    187,500        187,500    22,131  22,131  
37-1 9/3/2020 6/30/2021  67,000          67,000  2,197  6,682  8,878  
37-2 11/2/2020 8/31/2021  66,500          66,500  1,090  6,632  7,722  
37-3 12/29/2020 9/30/2021  66,500          66,500  55  6,632  6,686  
38 2/9/2021 2/9/2022    103,500    (39,500) 7,181,818  64,000    4,614  4,614  
39 5/10/2021 5/10/2022    153,500        153,500    5,915  5,915  
      $2,584,967 $444,500 $(66,024)$(885,691) 109,375,040 $2,077,753 $554,404 $208,143 $300,618 $

 

46

11.CAPITAL STOCK

 

Preferred Stock

 

During January 2020, we facilitated a reverse split of several classes our Preferred Stock which has been given retrospective treatment in these financial statements. In addition to the reverse stock split, management established new rights and privileges for certain classes of preferred stock. The reverse split ratio ranges from 1.6:1 to 307.7:1 resulting in a reclassification of $11,837,482$11,837,482 from preferred stock to additional paid in capital. The rights and privileges were changed with unanimous consent of all parties. All holders agreed to replace existing rights and privileges with new uniform conditions and a simplified uniform preferred $4.00 per share stated value.

F-32

 

Holders of Series B, D, D1, E, E1, F, F1, G, G1, H, H1, I, J, J1, L, L1, M, and P Preferred Stock shall have conversion rights that are affected by the closing common share market price on the date of conversion as reported on such national exchange where the Company’s common stock is traded:

 

i. If the closing market price is less than $4 per share one (1) share of the respective Series of Preferred Stock described in this Section 4(a) shall convert into an amount of common stock equal to: two (2) times the Stated Value, as defined herein, divided by the closing market price as reported on such national exchange where the Company’s common stock is traded on the date of conversion. For Example. If the closing price of the common stock as reported on such national exchange where the Company’s common stock is traded is $1.00 and the Stated Value is $4.00, one (1) preferred share would convert into eight (8) shares of common stock.

 

ii. If the closing market price is equal to or greater than $4 per share one (1) share of the respective Series of Preferred Stock described in this Section 4(a) shall convert into two (2) shares of common stock. For Example. If the closing price of the common stock as reported on such national exchange where the Company’s common stock is traded is $5.00 one (1) preferred share would convert into two (2) shares of common stock.

 

Holders of Series C Preferred Stock shall have Conversion Rights such that upon Conversion each one (1) share of Series C Preferred Stock shall convert into one hundred thousand (100,000) shares of the Common Stock. In the event that the Company should up list to a national exchange as defined by the U.S. Securities and Exchange Commission, each share of Series C Preferred Stock shall automatically be redeemed by the Company in exchange for a total of Fifty Thousand Dollars ($50,000.00) worth of the Common Stock, valued at the time of redemption.

 

Holders of the Series K and K1 Preferred Stock shall have Conversion Rights such that upon Conversion each one (1) share of Series K and K1 Preferred Stock shall convert into 1.25 shares of the Common Stock.

 

Holders of Series R Preferred Stock shall be the amount equal to $0.30; provided, however if the price of the Common Stock closes below $0.30 for the five (5) consecutive Trading Days immediately prior to the Conversion Date, then the Conversion Price shall be adjusted to $0.20, and if the price of the Common Stock closes below $0.20 for the five (5) consecutive Trading Days immediately prior to the Conversion Date, then the Conversion Price shall be adjusted to $0.10.

On February 11, 2021, the Chairman of the Board and the Chief Executive Officer each converted 62,500 Preferred Series I shares into 25,000,000 restricted common shares for a total of 125,000 Preferred Series I 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 series 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 preferred stock series J with par value $.001 and a stated value of $4.00, for $3,579,334.

Also. as part of the Nova Ortho acquisition, the Company issued 868,056 shares of preferred stock series N with par value $.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 APIC.

On July 22, 2021, the Chief Operating Officer received 61,000 shares of preferred stock series B in exchange for accrued 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, totally 180,000,000.

F-33

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 $1,201,169 which represented net assets and liabilities at the time of sale back

Common Stock

 

During the twelve months ended December 31, 2019,2021, we executed the following transactions:

 

 ·59,382109,234,241 shares of common stock were issued upon conversion of certain convertible notes payable.notes.
 ·May 8, 2019, the Company issued 5050,000,000 shares of common stock with a par value of $0.001 pursuant to the terms of the Acquisition Agreement.were issued in exchange for 125,000 preferred shares series I.
 ·On March 21, 2019, the Company completed a reverse stock split1,627,031 shares of 1,500:1 for common shares.
·On April 26, 2019, conversion of 55,000,000 series I shares were converted to common stock of 8,250
·On August 24, 2020, 163,814 shares were issued to a financial advisorin exchange for professional services.

 

47

During the twelve months ended December 31, 2020, we executed the following transactions:

 

 ·5,014,697 shares of common stock were issued upon conversion of certain convertible notes payable.
 ·On January 9, 2020, we issued 25,000 warrants and a free trading common share certificate in the amount of 3,500 shares of common stock for settlement of a threatened lawsuit, refer to Note 14.
 ·On May 11, 2020, the Company completed a reverse stock split of 10,000:1 for common shares.
 ·On August 24, 2020, 163,814 shares were issued to a financial advisor for services.
  ·       On November 5, 2020, 18,000 shares were issued to investor relations advisor for services
services.
·
       On February 10, 2020, 320 shares were purchased in exchange for 119,101 preferred series H shares.

 

12.WARRANTS

The initial and ending valuation of the warrants as of December 31, 2021 are as follows:

Valuation of warrants    
  Year Ended
December 31,
2021
 
Initial Valuation $3,795 
Ending Value $296 

The table below set forth the assumptions for the Black-Scholes Model on each initial date and December 31, 2021:

Schedule of warrant assumptions
Year Ended
December 31, 2021
Volatility935.98%
Risk-free interest rate126.0%
Expected term5.0

F-34

 

The initial and ending valuation of the warrants as of December 31, 2020 are as follows:

 Year Ended
December 31,
2020
  Year Ended
December 31, 2020
 
Initial Valuation $6,135  $6,135 
Ending Value $3,795  $3,795 

 

The table below set forth the assumptions for the Black-Scholes Model on each initial date and December 31, 2020:

  Year Ended

December 31, 2020
 
Volatility 1,847%1.847% - 1,861%1.861% 
Risk-free interest rate 1.60%1.60% - 1.83%1.83% 
Expected term 0.57.0

The initial and ending valuation of the warrants as of December 31, 2019 are as follows:

  Year Ended
December 31, 2019
 
Initial Valuation $3,795 
Ending Value $6,135 

The table below set forth the assumptions for the Black-Scholes Model on each initial date and December 31, 2019:

Year Ended
December 31, 2019
Volatility1,847% - 1,861%
Risk-free interest rate1.60% - 1.83%
Expected term0.5 – 7.0 

  

Accordingly, the Company recorded warrant expense of $2,340$2,340 during the year ended December 31, 2019.

2020.

  

48

The following tables summarize all warrant outstanding as of December 31, 2020,2021, and the related changes during this period. The warrants expire three years from grant date, which as of December 31, 20202021 is 1.31 years. The intrinsic value of the warrants as of December 31, 20202021 was $-0-.$2.96.

Schedule of warrant activity        
 Number of
Warrants
  Weighted
Average
Exercise
Price
  Number of
Warrants
  Weighted
Average
Exercise
Price
 
Stock Warrants                
Balance at January 1, 2020  6,614,287  $0.21 
Balance at January 1, 2021  14,274,477  $0.105 
Granted        231,481,466   0.015 
Exercised            
Expired        (1,335,000)  0.030 
Balance at December 31, 2020  6,614,287   0.21 
Warrants Exercisable at December 31, 2020  6,614,287  $0.21 
Balance at December 31, 2021  244,420,943   0.200 
Warrants Exercisable at December 31, 2021  244,420,943  $0.200 

 

14.13.COMMITMENTS AND CONTINGENCIESDISCONTINUED OPERATIONS

 

Operating LeasesManagement has decided to divest from the food services sector due primarily to a shift in strategy to focus time and resources on opportunities in the financial services sector to build upon its tax subsidiaries with related debt, credit, billing, real estate and healthcare. The Company’s 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 federal, state, and local governments. In light of current 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 from the negative effects of this pandemic.

 

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

  For the year ended 
  December 31,
2020
  December 31,
2019
 
       
Lot $408  $65,208 
Office  87,169   71,557 
Total $87,649  $136,765 

The Company has property leases’ future commitments are as follows at December 31, 2020:

2020 $50,916 
2021  8,486 
  $59,402 

We have an employment agreement, renewed May 15, 2014,As a result, management entered into agreements with the Chairman, Mr. Thompson amended on July 15, 2020, effective July 15, 2020existing managers who were the original owners of Romeo’s NY Pizza (“Romeo’s”) and Repicci’s Franchise Group (“Repicci’s”) to December 31, 2025 with automatic extension for additional successive one (1) year renewals terms unless terminated as definedbuyback the agreement. We provide for compensation of $30,000 per month along with additional incentives.

We have an employment agreement with the Chief Executive Officer, Mr. Cunningham, amended on July 15, 2020, effective on July 15, 2020 to December 31, 2025 with automatic extension for additional successive one (1) year renewals terms unless terminated as defined the agreement. We provide for compensation of $30,000 per month.

subsidiaries previously purchased by Cardiff Lexington Corporation

 

 

 

 49F-35 

 

 

The Company and the Repicci’s manager have entered into a Resignation, Release & Buyback Agreement and a Resignation, Release & Buyback Agreement Addendum (“Repicci’s Agreements”) which was effective June 1, 2020. Pursuant to the Repicci’s Agreement, the Repicci’s manager resigned employment from the Company effective June 1, 2020 and has purchased the Repicci’s subsidiary in exchange for returning 81,601 Preferred Shares Series H stock (“Preferred H”) which is held by the Company as treasury stock. The Repicci’s manager retained 37,500 shares of Preferred H shares subject to the terms of the Repicci’s Agreements. There was a gain on disposal in the amount of $216,013 in June 2020 which represented net assets and liabilities at the time of sale back.

The Company and the Romeo’s manager have entered into a Resignation, Release & Buyback Agreement and a Resignation, Release & Buyback Agreement Addendum (“Romeo Agreements”) which is effective July 1, 2020. Pursuant to the Romeo Agreement, Romeo’s manager resigned employment from the Company effective July 1, 2020 and has purchased back the Romeo’s subsidiary in exchange for returning 212,500 Preferred Shares Series D stock (“Preferred D”). The Romeo’s manager will retain 37,500 shares of Preferred D shares subject to the terms of the Romeo Agreements. There was a loss on disposal in the amount of $21,140 in July 2020 which represented net assets and liabilities at the time of sale back

On May 1, 2018, the Company entered into a stock for stock purchase agreement with the sellers of Red Rock Travel, LLC and a related management agreement to manage Red Rock Travel, LLC (“Red Rock”). The terms and conditions of those agreements were subsequently violated causing the transaction to be reversed and dissolved on May 31, 2019. Red Rock reverted to its previous ownership, the Company canceled the preferred series K shares related to the aborted acquisition and the Company filed notice with the State of Florida of the dissolution.

The Company continued to carry Red Rock liabilities on its balance sheet including accounts payables and accrued expenses of $1,872,086, convertible notes payable of $240,000, accrued interest of $214,318 and a derivative liability of $378,877 as of September 30, 2021. The party responsible for the convertible notes and related accrued interest is in dispute and is currently in litigation. The derivative liability is a function of the convertible notes and accrued interest. And the accounts payable and accrued expenses of $1,872,086 is deemed to be the responsibility of the current owners of Red Rock and was written-off by the Company in the third quarter of 2021 resulting in a gain of $1,872,086 which is recorded in discontinued operation.

On April 26, 2020, the Company filed a lawsuit against Investors of Red Rock seeking a judgment declaring that convertible secured notes totaling $240,000 issued by Red Rock and purportedly convertible into the Company’s common stock, be deemed null and void. The Company continues to maintain the liability of these Red Rock Investor notes on its balance sheet under discontinued operations together with corresponding accrued interest and related derivative liability. Subsequently, in the first quarter of 2022, the company settled a $40,000 note with one Red Rock Investor. Litigation and settlement discussions continue on the remaining $200,000 of Red Rock Investor notes.

Schedule of Red Rock Travel      
  December 31, 2021  December 31, 2020 
       (Restated) 
Net liabilities of discontinued operations        
Accounts payable and accrued expenses $  $1,869,961 
Accrued interest  231,318   165,065 
Convertible debt  240,000   240,000 
Derivative liability     416,669 
Net liabilities of discontinued operations $471,318  $2,691,695 

       
  Year Ended December 31, 
  2021  2020 
(Gain) Loss from discontinued operations        
Selling, general and administrative expenses $  $28,148 
Interest expense  68,378   68,756 
Change in derivative liability  (37,792)  15,277 
Gain on elimination of derivative liability  (378,877)   
Gain on reversal of RRT liability  (1,872,086)   
Loss from discontinued operations $(2,220,377) $112,181 

F-36

14.GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET

The following table shows our goodwill balances by reportable segment. We review goodwill for impairment on a reporting unit basis quarterly and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Since the date of our last quarterly assessment, we have not identified any changes in circumstances that would indicate the carrying value of goodwill is not recoverable.

Allocation of Goodwill to Reporting Segments

The following table shows our goodwill balances by reportable segment:

Schedule of goodwill balances                
  

Affordable

Housing Rentals

  

Financial

Services

  Healthcare  Total 
             
Gross carrying value at December 31, 2020 $  $3,499,963  $  $3,499,963 
Accumulated impairment            
Carrying value at December 31, 2020     3,499,963      3,499,963 
Acquisition        2,391,608   2,391,608 
Accumulated impairment            
Carrying value at December 31, 2021 $  $2,092,048  $2,391,608  $4,483,656 

15.COMMITMENTS AND CONTINGENCIES

Leases

ASC 842, “Leases”, requires that a lessee recognize the assets and liabilities that arise from operating leases, A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transaction, lessees and lessors are required to recognize and measure leases at either the effective date (the “effective date method”) or the beginning of the earliest period presented (the “comparative method”) using a modified retrospective approach. Under the effective date method, the Company’s comparative period reporting is unchanged. In contrast, under the comparative method, the Company’s date of initial application is the beginning of the earliest comparative period presented, and the Topic 842 transition guidance is then applied to all comparative periods presented. Further, under either transition method, the standard includes certain practical expedients intended to ease the burden of adoption. The Company adopted ASC 842, January 1, 2020, using the effective date method and elected certain practical expedients allowing the Company not to reassess:

·whether expired or existing contracts contain leases under the new definition of a lease;
·lease classification for expired or existing leases; and
·whether previously capitalized initial direct costs would qualify for capitalization under Topic 842.

The Company also made the accounting policy decision not to recognize lease assets and liabilities for leases with a term of 12 months or less.

The Company recorded operating lease expense of $185,831 and $87,649 for the years ended December 31, 2021 and 2020, respectively. 

F-37

The Company has operating leases with future commitments as follows:

Schedule of property leases   
  Amount 
2022 $166,568 
2023  77,697 
2024  35,527 
2025  22,215 
Total $302,007 

Employees

The Company agreed to pay $360,000 per year and a $200,000 of target annual incentive granted in 2020 to the Chief Executive Officer based on his employment agreement withsince July 1, 2020 of which currently 50% is paid in cash and 50% is accrued. The Company previously paid the Chief Executive Officer $300,000 per year. The total outstanding accrued compensation as of December 31, 2021 and 2020 were $1,385,000 and $1,035,000, respectively.

The Company agreed to pay $360,000 per year and a $200,000 of target annual incentive to the Chairman of the Board based on his employment agreement since July 1, 2020 of which currently 50% is paid in cash and 50% is accrued. The Company previously paid the Chairman of the Board $300,000 per year. The total outstanding accrued compensation as of September 30, 2021 and December 31, 2020 were $1,400,000 and $1,020,000, respectively.

The Company agreed to pay $120,000 per year to the Chief Operating Officer effective June 13, 2016based on his amended employment agreement executed on May 15, 2019. In the third quarter of 2021, the Chief Operating Officer received 61,000 shares of preferred stock series B in exchange for accrued salaries of $244,000. The total outstanding accrued compensation as of September 30, 2021 and December 31, 2020 was $159,000 and $120,000, respectively.

The Company agreed to pay $156,000 per year to the Chief Financial Officer based on his amended employment agreement executed on May 15, 2021. The total outstanding accrued compensation as of December 31, 2021 with automatic extensionand December 31, 2020 was $17,057.

The Company entered into a Management Agreement effective May 31, 2021 for additional successive one (1) year renewals terms unless terminated as definedcompensation to the Principals of the Company’s Nova Ortho and Spine (“Nova”) subsidiary in the agreement. We provide for compensationform of $10,000 per month.an annual base salaries of $372,000 to one of the 3 doctors, $450,000 to the second, and $372,000 to the third doctor.

Collectively, as a group, Principals of Nova will receive an annual cash bonus and stock equity set forth in footnote 8 (the “Annual Bonus”). The Annual Bonus will be conditioned upon the Company achieving 100% of the annual objectives of financial performance goals as set forth in footnote 8.

 

We have an employment agreement with a subsidiary manager,managers, effective May 31, 2019 with a term of 5 years, whereby we provide for compensation of $17,333 per month along with a bonus incentive if financial performance measures are met.

 

We have an employment agreement with a subsidiary manager, effective July 1, 2018 with a term of 5 years, whereby we provide for compensation of $20,000 per month along with a bonus incentive if financial performance measures are met.

 

There are no other stock option plans, retirement, pension, or profit-sharing plans for the benefit of our sole officer and director other than as described herein.

On December 31, 2020, the Company’s Chief Financial Officer resigned and was replaced on February 8, 2021. Whereby we provide for compensation of $8,500 per month along with a bonus contingent upon successful up listing on Nasdaq with preferred share and stock options.

The Company is currently in negotiations for the purchase two companies planning to finalize in first two quarters of 2021. One purchase is for $11,000,000 for a time share removal service and other is for $9,213,083 for medical doctor’s office who specializes in orthopedic care and surgery.

The CompanyWe acquired Redrock Travel on May 1, 2018. ItAfter numerous violations of the Management Agreement it was determined by the Boardour board of Directorsdirectors to terminate the acquisition agreement and to file with the State of Floridafor the cancelation of the Redrock Stock Class.Class with the State of Florida. A declaration has been served notifying Red Rock and its investors the Board nor officer of the Company approved any transactions entered into with Red Rock. The Company settledis waiting for a threatened lawsuit related to this entity with issuance of common shares, refer to Note 11.response.

 

From timeOn August 6, 2021, a Board Resolution was executed to timeterminate one of the two employees of Edge View Properties for fraud, deceit, larceny, and thievery for selling property belonging to the Company may be involvedand personally taking the $162,598 in various asserted claimsproceeds. The Company hired counsel to terminate the employee and handle all legal proceedings arising in the ordinary coursematters for return of business, some of which may involve claims for substantial amounts.monies and criminal prosecution.

F-38

 

15.16.INCOME TAXES

 

At December 31, 2020,2021, the Company had federal and state net operating loss carry forwards of approximately $17,330,000$17,330,000 that expire in various years through the year 2038.

 

Due to operating losses, there is no provision for current federal or state income taxes for the years ended December 31, 20202021 and 2019.2020.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.

 

50

The Company’s deferred tax asset at December 31, 20202021 and 20192020 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $4,391,000$4,991,000 and $3,815,102,$4,391,000, respectively, less a valuation allowance in the amount of approximately $4,391,000$4,991,000 and $3,815,102,$4,391,000, respectively. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance in both 20202021 and 2019.2020. The valuation allowance increased by approximately $576,700 for$600,000 from the year ended December 31, 2020.

 

The Company’s total deferred tax asset as of December 31, 20202021 and 20192020 is as follows:

Schedule of deferred tax assets        
 2020  2019  2021  2020 
Deferred tax assets $4,391,000  $3,815,102  $4,991,000  $4,391,000 
Valuation allowance  (4,391,000)  (3,815,102)  (4,991,000)  (4,391,000)
                
Net deferred tax asset $  $  $  $ 

 

The reconciliation of income taxes computed at the federal and state statutory income tax rate to total income taxes for the years ended December 31, 2020 and 2019 is as follows:

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law by President Trump. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35%35% to 21%21% effective January 1, 2018, while also repealing the deduction for domestic production activities, implementing a territorial tax system, and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted. The provisional amounts incorporate assumptions made based upon the Company’s current interpretation of the Tax Reform Act and may change as the Company receives additional clarification and implementation guidance.

 

16.17.SUBSEQUENT EVENTS

General Matters

February 17, 2022 - The Company concluded that the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020 included in its Annual Report on Form 10-K (the “2020 10-K”) and unaudited condensed consolidated financial statements for the three months ended and year-to-date period ended March 31, 2021 (the “2021 Q-1 10-Q”) (the periods covered by the 2020 10-K and the 2021 Q-1 10-Q being referred to herein as the “Affected Periods”) should no longer be relied upon. The Company filed an amendment to its 2020 10-K to restate its financial annual statements and disclose the impact of the restatement on previously reported quarterly amounts for the Affected Periods. The restatement primarily related to the accounting for (1) the valuation of embedded derivative liabilities in certain matured convertible notes and (2) the accounting treatment for changes in certain rights and privileges with respect to certain classes of preferred stock on January 10, 2020. The quantification of this restatement is summarized in Note 2.

F-39

On March 15, 2022 the Company settled a $40,000 promissory note between Red Rock Travel and note holder. The settlement amount was $13,333 payable by the issuance of common shares of stock.

June 27, 2022 – The Board of Directors confirms the transfer of 1,000,000,000 share from Cardiff Acquisition & Growth Fund to treasury.

July 15, 2022 Entered into a new agreement to represent the Company in the Edge View Properties lawsuit.

July 29, 2022 Settlement Agreement Signed by Red Rock Travel all parties agreed to the negotiated terms.

Stock Issuances:

March 31, 2022 – 1,275,427 preferred shares were returned to treasury.

April 28, 2022 – 37,500 preferred shares were issued in exchange for 37,500 preferred shares of a different class of preferred. Same Rights & Privileges.

18.SEGMENT REPORTING

 

The Company has twofour reportable operating segments as determined by management using the “management approach” as defined by the authoritative guidance on Disclosures about Segments of an Enterprise and Related Information:

 

(1)Affordable Housing (We Three), and

(2)Tax Resolution Services (Platinum Tax and Key Tax)Tax (Divested as of December 31, 2021))
(3)Real Estate (Edge View)
(4)Healthcare (Nova Ortho)

 

These segments are a result of differences in the nature of the products and services sold. Corporate administration costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated to the three operating segments. Other revenue consists of nonrecurring items.

 

The Affordable Housing segment leases and sells mobile homes as an option for a homeowner wishing to avoid large down payments, expensive maintenance costs, large monthly mortgage payments and high property taxes and insurance which is a common trait of brick-and-mortarbrick and mortar homes. Additionally, if bad credit is an issue preventing potential homeowners from purchasing a traditional house, the Company will provide a "lease to own" option so people secure their family home.

 

51

Platinum Tax Defenders and Key Tax (divested as of December 31, 2021) provides tax resolution services to individuals and companies that have federal and state tax liabilities. The company collects fees based on efforts to negotiate and assist in the settlement of outstanding tax debts.

 

  As of  As of 
  

December 31,

2020

  

December 31,

2019

 
Assets:        
Affordable Housing Rentals $258,813  $299,565 
Financial Services  4,369,195   4,302,238 
Others  302,139   314,002 
Consolidated assets $4,930,147  $4,915,805 

Edge View consists of 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).

  December 31, 2020  

December 31,

2019

 
Revenues:        
Affordable Housing Rentals $138,832  $176,882 
Financial Services  3,314,226   3,530,480 
Other      
Consolidated revenues $3,453,058  $3,707,360 
         
Cost of Sales:        
Affordable Housing Rentals $156,191  $174,433 
Financial Services  1,511,995   1,491,053 
Other      
Consolidated cost of sales $1,668,146  $1,665,486 
         
Income (Loss) from operations from subsidiaries        
Affordable Housing Rentals $(40,378) $(18,720)
Financial Services  (190,338)  114,773 
Loss from operations $(230,716) $96,053 
         
Loss from operations from Cardiff Lexington $(1,573,435) $(1,374,409)
         
Income (Loss) before taxes        
Affordable Housing Rentals $(40,378) $(18,720)
Financial Services  (187,943)  82,354 
Corporate and administration  (2,676,812)  (6,382,542)
Consolidated income (loss) before taxes $(2,905,133) $(6,318,908)

 

Nova Ortho and Spine is a group of doctors that provide a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments, and nerves.

 

 

 

 52F-40 

 

Management uses numerous tools and methods to evaluate and measure of its subsidiaries success. To help succeed, management retains the prior owners of the subsidiaries and allow them to do what they do best is run the business. Additionally, management monitors key metrics primarily revenues and net income from operations.

Schedule of segment reporting        
  As of  As of 
  

December 31,

2021

  

December 31,

2020

 
Assets:        
Affordable Housing Rentals $213,876  $258,813 
Financial Services  2,212,379   4,369,195 
Healthcare  8,092,820    
Real Estate  611,900    
Others  28,940   302,139 
Consolidated assets $11,159,915  $4,930,147 

  

December 31,

2021

  

December 31,

2020

 
Revenues:        
Affordable Housing Rentals $129,803  $138,832 
Financial Services  4,313,167   3,314,226 
Healthcare  5,413,890    
Real Estate  152,000    
Consolidated revenues $10,008,860  $3,453,058 
         
Cost of Sales:        
Affordable Housing Rentals $79,953  $156,191 
Financial Services  1,942,411   1,511,955 
Healthcare  1,746,561    
Real Estate  79,481    
Consolidated cost of sales $3,848,406  $1,668,146 
         
Income (Loss) from operations from subsidiaries        
Affordable Housing Rentals $(36,022) $(40,378)
Financial Services  187,027   (190,338)
Healthcare  3,272,241    
Real Estate  68,744    
Income (loss) from operations from subsidiaries $3,491,990  $(230,716)
         
Loss from operations from Cardiff Lexington $(1,865,888) $(1,573,435)
Total income (loss) from operations $1,626,102  $(1,804,151)

Income (Loss) before taxes      
Affordable Housing Rentals $(36,022) $(40,378)
Financial Services  187,027   (187,943)
Healthcare  3,272,241    
Real Estate  68,744    
Corporate, admin and other non-operating items  (3,901,697)  (2,608,572)
Consolidated loss before taxes $(409,707) $(2,836,893)

 

F-41

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None.On June 18, 2021, Daszkal Bolton did not re-engage as independent registered public accounting firm for Cardiff Lexington Corporation (“the Company”). There were no disagreements with Daszkal Bolton at the time of non-reengagement.

On June 24, 2021, the Company engaged Rosenberg Rich Baker Berman & Company (“RRBB”) to be its independent registered public accounting firm. On March 16, 2022, management terminated RRBB from being its independent registered public accounting firm. There were no disagreements with RRBB at the time of termination.

On March 15, 2022, the Company engaged Grassi & CO., CPAs, P.C. to be its independent registered public accounting firm.

 

ITEM 9A. CONTROLS AND PROCEDURES.

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that are filed and submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that are filed under the Exchange Act are accumulated and communicated to management, including the principal executive officer, as appropriate to allow timely decisions regarding required disclosure. Under the supervision of and with the participation of its executive officer, the Company has evaluated the effectiveness of its disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this Annual Report. Based on that evaluation, the executive officers of the Company has concluded that, as of the end of the period covered in this Annual Report, these disclosure controls and procedures were ineffective.

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules forms, and that such information is accumulated and communicated to our management, including our principal executive officer (our president) and our principal accounting and financial officer (our chief financial officer) to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluation the cost-benefit relationship of possible controls and procedures.

 

Our management does not expect that our disclosure controls or our internal controls over financial reporting will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but no absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources and benefits of a control system must be considered relative to its costs. These limitations also include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of a control. A design of a control system is also based upon certain assumptions about potential future condition; over time controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

 

As of December 31, 2020,2021, the year-end period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this annual report.

 

There have been no significant changes in our internal controls over financial reporting that occurred during the fiscal year ended December 31, 2020 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

 

 

 5420 

 

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a- 15(f) under the Exchange Act, and assessed the effectiveness of our internal control over financial reporting as of December 31, 2020.2021. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses:

 

1.             As of December 31, 2020,2021, our controls over the control environment were not effective. Specifically, we have not developed and effectively communicated to our employees our accounting policies and procedure. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

 

2.             As of December 31, 2020,2021, our controls over financial statement disclosure were not effective. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our consolidated financial statements. Accordingly, management has determined that this deficiency constitutes a material weakness.

 

3.             Lack of formal documentation over internal control procedures and environment.

 

4.             Lack of proper segregation of duties and multiple level of reviews.

 

5.             Lack of expertise in accounting of derivative liabilities.

 

Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2020,2021, based on the criteria established in “2013 Internal Control-Integrated Framework” issued by COSO.

 

This annual report does not include an attestation report of the company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report.

 

Changes in Internal Controls

 

There were no changesWe had a material weakness in our internal control over financial reporting during the fiscal year ended December 31, 2021 and 2020 that have affected, or are reasonably likely to affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION.

 

None.

 

 

 

 5521 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

Officers and Directors

 

Our directors will serve until successors are elected and qualified. Our Chief Executive Officer is appointed by the Board of Directors to a term of one year and serve until a successor is duly elected and qualified, or until that person resigns or is removed from office. Our Board of Directors has no nominating, or compensation committees. Our Board of Directors has two members.

 

The name, address, age and position of our officers and directors is set forth below:

 

Name and Address AgePositions
Daniel Thompson 72Positions
Daniel Thompson73Chairman of the Board of Directors
Alex Cunningham 6566Chief Executive Officer and President, Director
Dr. Rollan Roberts II 4344Chief Operating Officer
Patrick LambertSteven Healy, CPA 5860Chief Financial Officer

Background of our officers and directors

 

Daniel Thompson, 72,73, Chairman of the Board of Directors. In June of 2010 Thompson was previously appointed Chairman and CEO of Cardiff Lexington formerly a television and entertainment industry professional with a 30-year career that embraces network and cable advertising sales programming production and product placement, Mr. Thompson was president of Creative Entertainment Services, which he founded and successfully sold in a transaction. Mr. Thompson also co-founded and successfully sold an industry service company – Creative Television Marketing, a producer of short-form advertising concepts: Closed- Captioning Sponsorships, 10-Second Promotional Advertising vehicles, and network Game Show Merchandising. He also oversaw new business for A Creative Group, a full-service entertainment marketing company. Mr. Thompson also founded CableRep USA, a media sales firm specializing in local market cable advertising, which he sold to Cox Cable in 1981. Mr. Thompson attended Wayne State University, Bellevue College, and College of Continuing Studies at University of Nebraska at Omaha.

 

Alex Cunningham, 65,66, Chief Executive Officer, President, and Director. Mr. Cunningham has agreed to join the Cardiff Lexington family in June of 2015. Mr. Cunningham's background is in Business Development. His focus is on identifying prospects for franchising, mergers and acquisitions specializing in structuring one or multiple franchise acquisitions; and/or franchising existing businesses. He is a founder of Fran Consult, Inc. a business development company representing over 300 Franchise operations; owner, managing partner at AH Cunningham & Associates, LLC 2006 - Present; Profit Management Consulting, Inc., founder, President & CEO 1996-2005; managed projects and staff of 85 for 20 years for over 2000 private or closely held middle-market companies throughout 24 states. He was a partner at London Capital Corporation 1991 - 1996; President & CFO at Vance Communications, Inc. 1988-1991. Honors and Awards: 2010 Consultant of the Year - Franchise, Inc. National Association of Franchise Consultants. MBA - Crummer Graduate School of Business Rollins College - Winter Park, Florida; BBA's - Finance and Business Administration University of Kentucky - Lexington, Kentucky.

 

Dr. Rollan Roberts II, 43,44, Chief Operating Officer. Dr. Roberts II turned around large, established companies, and has created high growth revenue organizations. Dr. Roberts has passionately led with excellence a multi-billion, publicly held database company along with healthcare, technology, manufacturing, and direct sales companies. He has led nearly 1,500 employees at a given time servicing clients such as Capital One, IndyMac Bank, State Farm, Allstate, Nationwide along with federal and state government agencies.

 

Dr. Roberts has authored four business and leadership books, holds an MBA from Liberty University, a doctorate degree in International Business & Entrepreneurship from California InterContinental University and was recognized as the “Top 100 Most Influential Floridians” of 2015.

 

 

 

 5622 

 

 

Patrick LambertSteven Healy, CPA 60, , 58,Chief Financial Officer brings to Cardiff Lexington over 3525 years’ progressive public and private company experience in finance and operations management. He is familiar with and has been instrumental in numerous levels of consolidations in manufacturing, distribution, retail, and service industries with start-ups, multi-location and multi-state companies.  Mr. Lambert has worked inHealy founded Dania Solutions (2017–present) a financial and accounting consulting company working closely with the Banking industry, Consumer goods, and the Hospitality industry for the last 20 years with many yearsBoard of Directors of public company reporting experience being skilled incompanies providing SEC reporting including 10Qs, 10Ks, and 8Ks services, month end closings and reconciliations, financial statements and reports, budgets and variance analysis. He developed and rolled out performance metrics and has designed cash forecasting and debt covenants sensitivity models. Mr.  LambertHealy served for 11 years as CFO (2014–2016) of Prince-Bush Hotels,NetTalk.COM, Inc., a chain of franchised hotels in the United States responsible for SEC reporting for 10Kpublic telecommunications company and 10Q as well as SOX compliance reporting.app developer which provides low cost phone service and business wireless service via devices and mobile apps using VoIP and other technologies. He was CFO at Kerzner International Resorts,(2009-2013) of National Molding, LLC, a private injection molding and tooling manufacturing company which makes small plastic parts using custom molds primarily for the automotive industry and military with plants in South Florida, Pennsylvania, and Shanghai, China. Mr. Healy was CFO (2005-2008) of Imperial Industries, Inc., Atlantis Resort Casino, One & Only Resorts where he was responsible for all monthly financial reporting, G/L,A/P, & A/R, Payroll & Tax Returns,a public manufacturer and reviewdistributer of building materials from 15 distribution centers and analysis of new investment/acquisition opportunities, business plans2 manufacturing plants throughout Florida and strategies.the Southeast United States. He managed rapid growth from both organic and acquisitions. Mr. Lambert was Director of Finance for Air Jamaica and U.S. Controller for both SuperClubs Resorts & International Lifestyles, (Hotel Corporation) and Controller for Cendant Corporation-Avis Rent A Car Systems, Wyndham Resorts. He also served as Regional Controller for the Miller Brewing Company, a Phillip Morris Subsidiary. Mr. LambertHealy began his career with Citicorp going through their management training program.Deloitte (f/k/a Touche Ross & Co.) as an auditor and subsequently Audit Manager. He holds a Bachelor's of ScienceBachelors in Accounting Degree in Business Administration and Finance from The Statethe University of New York.Florida graduating with honors 

 

Audit Committee Financial Expert

 

The functions of the Audit Committee are currently carried out by our Board of Directors. Our Board of Directors has determined that we do not have an audit committee financial expert on our Board of Directors carrying out the duties of the Audit Committee. The Board of Directors has determined that the cost of hiring a financial expert to act as a director and to be a member of the Audit Committee or otherwise perform Audit Committee functions outweighs the benefits of having a financial expert on the Audit Committee. Our Board of Directors has two members.

 

Code of Ethics

 

We have not adopted a code of ethics that applies to our President, Chief Executive Officer, Secretary, Treasurer, Chief Financial Officer, or persons performing similar functions, because of the small number of persons involved in the management of the Company.

 

Compliance with Section 16 (a) of the Exchange Act

 

Under Section 16(a) of the Exchange Act, requires that our directors and executive officers and persons who beneficially own more than 10% of our Common Stock (referred to herein as the “Reporting Persons”) file with the SEC various reports as to their ownership of and activities relating to our Common Stock. Such Reporting Persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon our review of the copies of the forms we have received and representations that no other reports were required, we believe that all Reporting Persons complied on a timely basis with all filing requirements applicable to them with respect to transactions during fiscal year ended December 31, 202012021 except as stated below.

 

 

 

 5723 

 

 

ITEM 11. EXECUTIVE COMPENSATIONCOMPENSATION.

 

Summary Compensation Table

 

           Long-Term Compensation            Long-Term Compensation 
   Annual Compensation Awards Payouts    Annual Compensation Awards Payouts 
Names         Under Restricted            Under Restricted   
Executive       Other Options/ Shares or   Other        Other Options/ Shares or   Other 
Officer and       Annual SARs Restricted LTIP Annual        Annual SARs Restricted LTIP Annual 
Principal   Salary Bonus Compensation Granted Share/Units Payouts Compensation    Salary Bonus Compensation Granted Share/Units Payouts Compensation 
Position Year (US$) (US$) (US$) (#) (US$) (US$) (US$)  Year (US$) (US$) (US$) (#) (US$) (US$) (US$) 
Daniel Thompson 2019 300,000 150,000 0 0   0 0  2020 327,500 200,000 0 0 0 0 0 
Chairman of the Board of Directors 2020 327,500 200,000 0 0 0 0 0  2021 360,000 200,000 0 0 0 0 0 
                                
Alex Cunningham 2019 300,000 150,000 0 0 0 0 0  2020 327,500 200,000 0 0 0 0 0 
President and Chief Executive Officer 2020 327,500 200,000 0 0 0 0 0  2021 360,000 200,000 0 0 0 0 0 
                                
Dr. Rollan Roberts II 2019 120,000 0 0 0 0 0 0  2020 120,000 0 0 0 0 0 0 
Chief Operating Officer 2020 120,000 0 0 0 0 0 0  2021 120,000 0 0 0 0 0 0 
               
Steven Healy 2020 135,000 0 17,057 0 0 0 0 
Chief Financial Officer 2021 156,000 0 0 0 0 0 0 

 

Employment Agreements

 

The Company has an employment agreement with Mr. Thompson whereby the Company provides for compensation of $360,000 per year plus additional performance bonus incentives with a term of July 15, 2020 to December 31, 2025 with automatic extension for additional successive one (1) year renewals terms unless terminated as defined in the agreement.

 

The Company has an employment agreement with Mr. Cunningham whereby the Company provides for compensation of $360,000 per year plus additional performance bonus incentives with a term of July 15, 2020 to December 31, 2025 with automatic extension for additional successive one (1) year renewals terms unless terminated as defined in the agreement.

 

The Company has an employment agreement, with the Chief Operating Officer, whereby the Company provides for compensation of $120,000 per year plus additional incentives with a term of June 13, 2016 to December 31, 2021 with automatic extension for additional successive one (1) year renewals terms unless terminated as defined in the agreement.

 

The Company has an employment agreement, with the Chief Financial Officer, whereby the Company provides for compensation of $156,000 per year plus additional incentives with a term of June 13, 2016 to December 31, 2021 with automatic extension for additional successive one (1) year renewals terms unless terminated as defined in the agreement.

There are no other stock option plans, retirement, pension, or profit-sharing plans for the benefit of our sole officer and director other than as described herein.

 

24

Long-Term Incentive Plan Awards

 

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.

 

Compensation of Directors

 

Our directors do not receive any compensation for serving as members of the Board of Directors.

58

 

Indemnification

 

Under our Articles of Incorporation and Bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defended a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defended the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Florida.

 

Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Florida law, we are informed that, in the opinion of the SEC, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTMANAGEMENT.

 

The following table sets forth certain information regarding our shares of common stock beneficially owned as of March 31, 2021 for (i) each shareholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

 

Name of Beneficial Owner and Address (1) Amount and
Nature of
Beneficial
Ownership of
Common Stock
  Percent of
Common Stock (1)
  Amount and
Nature of
Beneficial
Ownership of
Common Stock
 Percent of
Common Stock (1)
 
Daniel Thompson             
401 East Las Olas Blvd. Unit 1400             
Ft. Lauderdale, Florida  25,095,168   23.9%  25,095,168 11.7% 
             
Alex Cunningham             
401 East Las Olas Blvd. Unit 1400             
Ft. Lauderdale, Florida  25,095,169   23.9%  25,095,169 11.7% 
             
All directors and officers and 5% shareholders as a group  50,190,337   47.8%  50,190,337 23.4% 

 

(1) Based on 303,780166,130,069 shares of common stock issued and outstanding as of December 31, 2020.2021.

 

(2) The above table does not include 176,181,18627,488,862 of shares of series A, B, C, D, E, F, F-1, G, H, I, J, K, K-1, L, N, and LR preferred stock which are convertible into 398,776,94249,558,962 shares of common stock.

 

(3) Daniel Thompson owns 1 share of Preferred “A”, 13,062 shares of Preferred “B”, 1 share of Preferred “C” and 83,500,0005,037,412 shares of Preferred “I” and Alex Cunningham 6,250 shares of Preferred “B”, 1 share of Preferred “C” and 83,800,0006,237,500 shares of Preferred “I”.

 

 

 

 5925 

 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEINDEPENDENCE.

The Company borrows funds from Daniel Thompson, who is a Shareholder and Officer of the Company. The terms of repayment stipulate the loans are due 24 months after the launch of the Legacy Tuition Card (or prior to such date) at an annual interest rate of six percent. As of December 31, 2020, the loans had been repaid.

 

The Company obtained short-term advances from the Chairman of the Board that are none interestnon-interest bearing and due on demand. As of December 31, 20202021 and 2019,2020, the Company owed the Chairman $126,849$126,765 and $136,349,$126,849, respectively.

 

Blank Check Preferred Stock

 

As of December 31, 2020,2021, the Company has designated 100,000,0001,000,000,000 shares of Blank Check Preferred Stock zero of which have been issued.

 

20202021 Preferred Stock Activity:

 

Series J Preferred Stock

On July 20th, 2020 CDIX executed a Buyback Agreement finalizingMay 31, 2021 as part of the saleNova Ortho acquisition, the Company issued 894,834 shares of Repicci's Franchise Group, LLC (RFG) acquired by Cardiff, August 10, 2016. The buyer is Frank Repici effective June 1st, 2020. Each Preferred "H" Share, had apreferred stock series J with par value $0.001 per share$.001 and a Stated Valuestated value of $4.00, for $3,579,336.

Series N Preferred Stock

On May 31, 2021 and also as part of the Nova Ortho acquisition, the Company issued 868,056 shares of preferred stock series N with par value $.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 APIC.

Series Preferred B Stock

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 series B with a $4.00 stated value per share. Repici exchanged 81,601 CDIX Preferred "H" Shares forThis has been reflected in the purchase pricestatement of $652,808.deficiency in shareholders’ equity.

 

OnOnn July 23rd, 2020 CDIX executed a Buyback Agreement finalizing22, 2021, the saleChief Operating Officer received 61,000 shares of Romeo's Alpharetta, Inc., Fortuna Restaurant Group, Inc., R&T Restaurant Group, LLC acquired by Cardiff, June 30, 2014. The purchaser was Gene Romeo effective July 1st, 2020. Each Preferred "D" Shares, had a par valuepreferred stock series B in exchange for accrued salaries of $0.001 per share and a Stated Value of $4.00 per share. Romeo exchanged 212,500 Preferred "D" Shares for the purchase price of $1,700,000.$244,000.

2019 Preferred Stock Activity:

Series I Preferred Stock

In the fourth quarterOn December 31, 2021 Daniel Thompson and Alex Cunningham Shareholders and officers of 2018, the Company agreedeach forfeited and surrendered for no consideration 90,000,000 Preferred Class I Shares resulting in aggregate of 180,000,000 outstanding Preferred Class I Shares returned to issue 125,000,000 preferred I shares each tothe Treasury.

On February 11, 2021 the Chairman of the Board and the CEO which were reflected as preferredand each converted 62,500 Preferred Series I shares to be issued on the financial statements atinto 25,000,000 restricted common shares for a total cost of stock compensation of $200,000. The125,000 Preferred Series I shares were issued in March 2019.into 50,000,000 restricted common shares.

 

In the fourth quarter of 2019,

Common Stock

Stock Issuances:

November 9, 2021 - the Company issued 165351,604 shares of Series R preferredcommon stock in connection with a par value of $1,200.service agreement.

 

Series R Preferred Stock

The Company has designated shares of preferred stock as Series R Preferred Stock (“Series R”), with a par value of $1,200 per share, of which 165December 28, 2021 – 180,000,000 shares were issued November 20, 2019 and outstanding as of December 31, 2020. Series R is awarded “Voting Right” atsurrendered back to the ratio of 1 vote per share owned. Each one share of Series I convertible as defined in the agreement.

treasury.

 

 

 

 6026 

 

 

Common StockDecember 29, 2021 - the Company issued 1,275,427 shares of common stock in connection with a service agreement.

  

Effective May 12, 2020 the Company completed a reverse stock split of 10,000:1 for common shares. In conjunction with the reverse stock split, the Company canceled 826 partial rounding shares to balance the shares outstanding.

 

Effective March 21, 2019, the Company completed a reverse stock split of 1500:1 for common shares. In conjunction with the reverse stock split, the Company canceled 826 partial rounding shares to balance the shares outstanding.

May 8, 2019, the Company issued 500,000 shares of common stock with a par value of $0.001 to novate a convertible debt of $30,912.32. These Preferred “G” shares have a lock-up/leak-out limiting the sale of stock for 12 months after which conversions and sales are limited to 20% of their portfolio per year, pursuant to the terms of the Acquisition Agreement.

In the second quarter of 2019, the Company converted 55,000,000 shares of Preferred Stock I into 82,500,000 shares of common stock at a par value of $0.001. Of the converted shares, 27,500,000 shares were owed by the Chairman of the Board and 27,500,000 shares were owned by the CEO.

During the years ended December 31, 20202021 and 2019,2020, respectively, the Company converted $423,766$855,691 and $423,766$196,291 of convertible debt and $72,131$208,143 and $72,131$74,866 in interest, penalties, and fees into 593,817,812109,234,241 and 5,014,696 shares (post reverse split of 1500:1) of the company’sCompany’s commons stock.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESSERVICES.

 

The aggregate fees billed for the years ended December 31, 20202021 and 20192020 for professional services rendered by the principal accountant for the audit of its annual financial statements included in Form 10-K10-K/A (“Audit Fees”), (2) tax compliance, advice, and planning (“Tax Fees”), and (iv) other products or services provided (“Other Fees”) and for(3) other professional services rendered by the Company’s principal accountant:accountant (“Other Fees”):

 

Daszkal Bolton 

Year Ended

December 31,

  Year Ended
December 31,
 
 

Year Ended

December 31,

  Year Ended
December 31,
  2021  2020 
 2020  2019 
Accounting Fees $120,000  $122,500 
Audit Fees $57,500  $97,000 
Tax Fees            
Other Fees            
Total $120,000  $122,500  $57,500  $97,000 

 

Rosenberg Rich Baker Berman & Company 

Year Ended

December 31,

  Year Ended
December 31,
 
  2021  2020 
Audit Fees $31,255  $ 
Tax Fees      
Other Fees      
Total $31,255  $ 

 

 

 6127 

 

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Exhibit No.Description1
3.1Articles of Incorporation, (incorporated by reference to the Company’s Form 10 filed with the SEC on March 27, 2002
3.2Articles of Amendment, (incorporated by reference to the Company’s Form 10 filed with the SEC on March 27, 2002
3.3Articles of Amendment, (incorporated by reference to the Company’s Form 10 filed with the SEC on March 27, 2002
3.4Articles of Amendment adopted July 18, 2012, (incorporated by reference to the Company’s Form 8-K/A filed with the SEC on August 9, 2012
3.5Articles of Incorporation dated August 22, 2014, (incorporated by reference to the Company’s Form 8-K filed with the SEC on September 15, 2014
3.6Bylaws, filed with the Company’s Form 8-K on September 15, 2014
4.1Description of Cardiff Lexington Corp. Common Stock
10.1Employment Agreement by and between the Company and Daniel Thompson
10.2Employment Agreement by and between the Company and Alex Cunningham
10.3Employment Agreement by and between the Company and Dr. Rollan Roberts
10.4Employment Agreement by and between the Company and Patrick Lambert
21.1List of Subsidiaries of the Company
31.1Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*XBRL Instance Document
101.SCH*XBRL Taxonomy Schema
101.CAL*XBRL Taxonomy Calculation Linkbase
101.DEF*XBRL Taxonomy Definition Linkbase
101.LAB*XBRL Taxonomy Label Linkbase
101.PRE*XBRL Taxonomy Presentation Linkbase

* To be filed by amendment

 

1 NTD: Item 601(b)(2) requires filing of material plans of acquisition. Given the company’s strategy, it appears the agreements for each of its acquisitions should be filed. Item 601(b)(4) requires filing of all instruments defining rights of securities holders. Confirm the Articles of Incorporation on file reflect all classes of outstanding preferred stock. Item 601(b)(10) requires filing of all material contracts. At a minimum, each of the executive employments agreements should be filed. Consider other agreements material to the Company’s business other than plans of acquisition covered by 601(b)(2) mentioned above. Item 601(b)(21) requires current list of subsidiaries and jurisdiction of organization. Item 601(b)(23) requires auditors consent if 10-K10-K/A will be incorporated by reference into the pending Form S-1 Registration Statement.

 

 

 

 

 

 

 

 6228 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities on this 31st26th day of March, 2021.October 2022.

 

 

 CARDIFF LEXINGTON CORP
  
 /s/ Alex Cunningham
 Alex Cunningham
 Chief Executive Officer

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signature Title Date
     
/s/ Daniel Thompson Chairman of the Board of Directors March 31, 2021October 26, 2022
Daniel Thompson    
     
     
/s/ Alex Cunningham Chief Executive Officer March 31, 2021October 26, 2022
Alex Cunningham (Principal Executive Officer)   
     
     

/s/ Patrick LambertSteven Healy

 

Chief Financial Officer

 March 31, 2021October 26, 2022
Patrick LambertSteven Healy (Principal Financial Officer)  
  (Principal Accounting Officer)  

 

 

 

 

 

 

 

 

 

 6329