UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: ~~March 31,~~June 30, 2023

☐	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 CORPORATION

(Exact name of registrant as specified in its charter)

Nevada		84-1044583
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~3200 Bel Air Drive~~3753 Howard Hughes Parkway, Suite 200, Las Vegas, NV		~~89109~~89169
(Address of principal executive offices)		(Zip Code)

844-628-2100

(Registrant’s telephone number, including area code)

3200 Bel Air Drive, Las Vegas, NV89109

~~N/A~~

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

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. Yesx ☒ 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx ☒  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.

Large accelerated ~~Filer~~filer ☐	Accelerated ~~Filer~~filer ☐
Non-accelerated ~~Filer~~filer ☒	Smaller 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 comply 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ Nox☒

As of June ~~29,~~30, 2023, there were ~~908,479,113~~943,475,613 shares of common stock of the registrant issued and outstanding.

CARDIFF LEXINGTON CORPORATION

Quarterly Report on Form 10-Q

Period Ended ~~March 31,~~June 30, 2023

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

~~PART I~~
~~FINANCIAL INFORMATION~~
Item 1.	Financial Statements	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3230
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4139
Item 4.	Controls and Procedures	4139

~~PART II~~
~~OTHER INFORMATION~~

PART II

OTHER INFORMATION

Item 1.	Legal Proceedings	4341
Item 1A.	Risk Factors	4341
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4341
Item 3.	Defaults Upon Senior Securities	4341
Item 4.	Mine Safety Disclosures	4341
Item 5.	Other Information	4341
Item 6.	Exhibits	4341

PART I

FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Page
Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2023 (Unaudited) and December 31, 2022 ~~(Unaudited)~~(Audited)		3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended ~~March 31,~~June 30, 2023 (Unaudited) and 2022 (Unaudited and restated)		4
Condensed Consolidated Statements of Stockholders’ Equity (Deficiency) for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2023 (Unaudited) and 2022 (Unaudited and restated)		5
Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2023 (Unaudited) and 2022 (Unaudited and restated)		6
Notes to Condensed Consolidated Financial Statements (Unaudited)		7

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF ~~MARCH 31,~~JUNE 30, 2023 AND DECEMBER 31, 2022

(UNAUDITED)

March 31,
2023
December 31,
2022

ASSETS
Current assets
Cash $ 350,329 $ 226,802
Accounts receivable-net 7,446,416 6,604,780
Prepaid and other current assets 5,000 5,000
Total current assets 7,801,745 6,836,582

Property and equipment, net 50,804 55,439
Land 540,000 540,000
Goodwill 5,666,608 5,666,608
Right of use - assets 189,626 218,926
Due from related party 4,979 4,979
Other assets 30,823 30,823
Total assets $ 14,284,585 $ 13,353,357

LIABILITIES, MEZZANINE EQUITY AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expense $ 2,070,490 $ 2,038,595
Accrued expenses - related parties 3,904,557 3,750,557
Accrued interest 461,307 350,267
Right of use - liability 140,777 142,307
Due to director & officer 123,192 123,192
Notes payable 36,596 15,809
Notes payable - related party 90,189 37,024
Convertible notes payable, net of debt discounts of $87,147 and $46,797, respectively 3,717,936 3,515,752
Total current liabilities 10,545,044 9,973,503

Other liabilities
Notes payable 144,646 139,789
Operating lease liability – long term 55,408 84,871
Total liabilities 10,745,097 10,198,163

Mezzanine equity
Redeemable Series N Senior Convertible Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $4.00, 868,058 shares issued and outstanding at March 31, 2023 and December 31, 2022 3,578,656 3,125,002
Redeemable Series X Senior Convertible Preferred Stock - 5,000,000 shares authorized, $0.001 par value, stated value $4.00, 375,000 shares issued and outstanding at March 31, 2023 and December 31, 2022 1,593,205 1,500,000
Total Mezzanine Equity 5,171,861 4,625,002

Stockholders' equity (deficit)
Series B Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $4.00, 2,131,328 shares issued and outstanding at March 31, 2023 and December 31, 2022 8,525,313 8,525,313
Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value $4.00, 122 shares issued and outstanding at March 31, 2023 and December 31, 2022 488 488
Series E Preferred Stock - 1,000,000 shares authorized, $0.001 par value, stated value $4.00, 150,750 shares issued and outstanding at March 31, 2023 and December 31, 2022 603,000 603,000
Series F-1 Preferred Stock - 800,000 shares authorized, $0.001 par value, stated value $4.00, 35,752 shares issued and outstanding at March 31, 2023 and December 31, 2022 143,008 143,008
Series I Preferred Stock - 500,000,000 shares authorized, $0.001 par value, 14,885,000 shares issued and outstanding at March 31, 2023 and December 31, 2022 59,540,000 59,540,000
Series J Preferred Stock - 10,000,000 shares authorized, $0.001 par value, stated value $4.00, 1,713,584 shares issued and outstanding at March 31, 2023 and December 31, 2022 6,854,336 6,854,336
Series K Preferred Stock - 10,937,500 shares authorized, $0.001 par value, 8,200,562 shares issued and outstanding at March 31, 2023 and December 31, 2022 8,201 8,201
Series L Preferred Stock - 100,000,000 shares authorized, $0.001 par value, stated value $4.00, 319,493 shares issued and outstanding at March 31, 2023 and December 31, 2022 1,277,972 1,277,972
Series R Preferred Stock - 5,000 shares authorized, $0.001 par value, stated value of $1,200, 165 shares issued and outstanding at March 31, 2023 and December 31, 2022 198,000 198,000
Common Stock - 7,500,000,000 shares authorized, $0.001 par value; 908,479,113 and 789,796,735 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively 908,378 789,696
Additional paid-in capital (8,482,814 ) (8,554,368 )
Accumulated deficit (71,208,254 ) (70,855,453 )
Total stockholders' equity (deficit) (1,632,373 ) (1,469,808 )
Total liabilities, mezzanine equity and stockholders' equity $ 14,284,585 $ 13,353,357


	June 30, 2023			December 31, 2022

ASSETS
Current assets
Cash	$	411,209		$	226,802
Accounts receivable-net		9,193,529			6,604,780
Prepaid and other current assets		5,000			5,000
Total current assets		9,609,738			6,836,582

Property and equipment, net		47,438			55,439
Land		540,000			540,000
Goodwill		5,666,608			5,666,608
Right of use - assets		153,933			218,926
Due from related party		4,979			4,979
Other assets		30,823			30,823
Total assets	$	16,053,519		$	13,353,357

LIABILITIES, MEZZANINE EQUITY AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expense	$	2,522,332		$	2,038,595
Accrued expenses - related parties		4,084,557			3,750,557
Accrued interest		590,144			350,267
Right of use - liability		126,752			142,307
Due to director & officer		123,192			123,192
Notes payable		24,724			15,809
Notes payable - related party		156,384			37,024
Convertible notes payable, net of debt discounts of $100,347 and $46,797, respectively		3,868,068			3,515,752
Total current liabilities		11,496,153			9,973,503

Other liabilities
Notes payable		144,594			139,789
Operating lease liability – long term		32,205			84,871
Total liabilities		11,672,952			10,198,163

Mezzanine equity
Redeemable Series N Senior Convertible Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $4.00, 868,058shares issued and outstanding at June 30, 2023 and December 31, 2022		3,682,537			3,125,002
Redeemable Series X Senior Convertible Preferred Stock - 5,000,000 shares authorized, $0.001 par value, stated value $4.00, 375,000 shares issued and outstanding at June 30, 2023 and December 31, 2022		1,615,068			1,500,000
Total Mezzanine Equity		5,297,605			4,625,002

Stockholders' equity (deficit)
Series B Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $4.00, 2,134,478 and 2,131,328 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		8,537,912			8,525,313
Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value $4.00, 122 shares issued and outstanding at June 30, 2023 and December 31, 2022		488			488
Series E Preferred Stock - 1,000,000 shares authorized, $0.001 par value, stated value $4.00, 150,750 shares issued and outstanding at June 30, 2023 and December 31, 2022		603,000			603,000
Series F-1 Preferred Stock - 800,000 shares authorized, $0.001 par value, stated value $4.00, 35,752 shares issued and outstanding at June 30, 2023 and December 31, 2022		143,008			143,008
Series I Preferred Stock - 500,000,000 shares authorized, $0.001 par value, 14,885,000 shares issued and outstanding at June 30, 2023 and December 31, 2022		59,540,000			59,540,000
Series J Preferred Stock - 10,000,000 shares authorized, $0.001 par value, stated value $4.00, 1,713,584 shares issued and outstanding at June 30, 2023 and December 31, 2022		6,854,336			6,854,336
Series L Preferred Stock - 100,000,000 shares authorized, $0.001 par value, stated value $4.00, 319,493 shares issued and outstanding at June 30, 2023 and December 31, 2022		1,277,972			1,277,972
Series R Preferred Stock - 5,000 shares authorized, $0.001 par value, stated value of $1,200, 165 shares issued and outstanding at June 30, 2023 and December 31, 2022		198,000			198,000
Common Stock - 7,500,000,000 shares authorized, $0.001 par value; 943,475,613 and 789,796,735 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		943,475			824,793
Additional paid-in capital		(8,497,309	)		(8,581,265	)
Accumulated deficit		(70,517,920	)		(70,855,453	)
Total stockholders' equity (deficit)		(917,038	)		(1,469,808	)
Total liabilities, mezzanine equity and stockholders' equity	$	16,053,519		$	13,353,357

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2023 AND 2022

(UNAUDITED)

Three Months Ended March 31,
2023
2022
(Restated)

REVENUE
Financial services $ 154,399 $ 464,843
Healthcare 2,706,399 2,432,307
Total revenue 2,860,798 2,897,150

COST OF SALES
Financial services 26,829 212,446
Healthcare 956,295 903,782
Total cost of sales 983,124 1,116,228

GROSS PROFIT 1,877,674 1,780,922

OPERATING EXPENSES
Depreciation expense 4,635 5,783
Selling, general and administrative 1,159,478 1,053,656
Total operating expenses 1,164,113 1,059,439

INCOME FROM OPERATIONS 713,561 721,483

OTHER INCOME (EXPENSE)
Other income 205 –
Gain on forgiveness of debt 390 –
Penalties and fees (15,000 ) –
Interest expense and finance charge (695,164 ) (2,220,176 )
Conversion cost penalty and reimbursement (2,000 ) –
Amortization of debt discounts (17,983 ) (44,546 )
Total other income (expense) (729,552 ) (2,264,722 )

NET LOSS BEFORE DISCONTINUED OPERATIONS (15,991 ) (1,543,239 )
LOSS FROM DISCONTINUED OPERATIONS – (19,215 )
NET LOSS FOR THE PERIOD $ (15,991 ) $ (1,562,454 )
DEEMED DIVIDENDS ON PREFERRED STOCK (336,811 ) –
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (352,802 ) $ (1,562,454 )

BASIC LOSS PER SHARE
Continuing operations $ 0.00 $ (0.01 )
Discontinued operations $ 0.00 $ (0.00 )

WEIGHTED AVERAGE NUMBER OF COMMON SHARES - BASIC AND DILUTED 871,989,778 166,130,069


	THREE MONTHS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	2023			2022 (Restated)			2023			2022 (Restated)
REVENUE
Financial Services	$	118,304		$	472,014		$	272,703		$	936,857
Healthcare		3,364,506			2,619,218			6,070,905			5,051,525
Total revenue		3,482,810			3,091,232			6,343,608			5,988,382

COST OF SALES
Financial Services		21,297			112,776			48,126			325,222
Healthcare		1,081,689			983,842			2,037,983			1,887,624
Total cost of sales		1,102,986			1,096,618			2,086,109			2,212,846

GROSS PROFIT		2,379,824			1,994,614			4,257,499			3,775,536

OPERATING EXPENSES
Depreciation expense		3,365			5,783			8,000			11,566
Selling, general and administrative		670,289			866,213			1,829,768			1,940,477
Total operating expenses		673,654			871,996			1,837,768			1,952,043

INCOME FROM OPERATIONS		1,706,170			1,122,618			2,419,731			1,823,493

OTHER INCOME (EXPENSE)
Other income		–			8			205			8
Gain on forgiveness of debt		–			–			390			–
Interest expense and finance charge		(844,459	)		(1,035,811	)		(1,539,623	)		(3,255,987	)
Conversion cost penalty and reimbursement		–			–			(2,000	)		–
Penalties and fees		(15,000	)		–			(30,000	)		–
Amortization of debt discounts		(30,633	)		(111,706	)		(48,616	)		(156,252	)
Total other income (expenses)		(890,092	)		(1,147,509	)		(1,619,644	)		(3,412,231	)

NET INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS		816,078			(24,891	)		800,087			(1,588,738	)

LOSS FROM DISCONTINUED OPERATIONS		–			(36,935	)		–			(35,542	)

NET INCOME (LOSS) FOR THE PERIOD	$	816,078		$	(61,826	)	$	800,087		$	(1,624,280	)
DEEMED DIVIDENDS ON PREFERRED STOCK		(125,744	)		–			(462,555	)		–
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	690,334		$	(61,826	)	$	337,532		$	(1,624,280	)

BASIC INCOME (LOSS) PER SHARE
Continuing operations	$	0.00			(0.00	)		0.00			(0.01	)
Discontinued operations	$	0.00			(0.00	)		0.00			(0.00	)

DILUTED INCOME (LOSS) PER SHARE
Continuing operations	$	0.00			(0.00	)		0.00			(0.00	)
Discontinued operations	$	0.00			(0.00	)		0.00			(0.00	)

BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES – CONTINUED AND DISCONTINUED OPERATIONS		930,254,713			166,130,069			901,781,592			166,130,069
DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES – CONTINUED AND DISCONTINUED OPERATIONS		14,435,802,103			166,130,069			17,836,079,282			166,130,069

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)

~~THREE~~FOR THE SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2023 AND 2022

~~(UNAUDITED)~~(UNAUDITED)

Preferred Stock Series
A, I, K

Preferred Stock Series
B, D, E, F, F-1, G, H, L

Preferred Stock
Series C and R
Treasury Stock
Shares Amount Shares Amount Shares Amount Shares Amount
Balance December 31, 2021 (Restated) 23,085,563 $ 59,548,201 3,595,952 $ 14,383,808 287 $ 198,488 (619,345 ) $ (4,967,686 )
Dividend to preferred stock – – – – – – – –
Net loss – – – – – – – –
Balance, March 31, 2022 (Restated) 23,085,563 $ 59,548,201 3,595,952 $ 14,383,808 287 $ 198,488 (619,345 ) $ (4,967,686 )

Balance December 31, 2022 23,085,563 $ 59,548,201 4,350,907 $ 17,403,628 287 $ 198,488 – $ –
Conversion of convertible notes payable – – – – – – – –
Dividend to preferred stock – – – – – – – –
Net loss – – – – – – – –
Balance, March 31, 2023 23,085,563 $ 59,548,201 4,350,907 $ 17,403,628 287 $ 198,488 – $ –


	Common Stock				Additional Paid-in			Accumulated			Total Stockholders’		Preferred Stock Series A, K and I				Preferred Stock Series B, D, E, F, F-1, G, H, L				Preferred Stock Series C and R				Treasury Stock
	Shares		Amount		Capital			Deficit			Deficit		Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount
Balance December 31, 2021 (Restated)	166,130,069	$	167,421	$	(3,479,126	)	$	(65,118,744	)	$	732,361			23,085,563	$	59,548,201		3,595,952	$	14,383,808		287	$	198,488		(619,345	)	$	(4,967,686	)
Dividend to preferred stock	–		–		–			(102,746	)		(102,746	)
Distribution of dividend														–		–		–		–		–							–
Net loss	–		–		–			(1,562,454	)		(1,562,454	)		–		–		–		–		–		–		–			–
Balance, March 31, 2022 (Restated)	166,130,069	$	167,421	$	(3,479,126	)	$	(66,783,944	)	$	(932,839	)
Balance, June 30, 2022 (Restated)														23,085,563	$	59,548,201		3,595,952	$	14,383,808		287	$	198,488		(619,345	)	$	(4,967,686	)



Balance December 31, 2022	789,796,735	$	789,696	$	(8,554,368	)	$	(70,855,453	)	$	(1,469,808	)		14,885,001	$	59,540,000		4,350,907	$	17,403,628		287	$	198,488		–			–
Conversion of convertible notes payable	118,682,378		118,682		71,555			–			190,237			–		–		–		–		–		–		–			–
Dividend to preferred stock	–		–		–			(336,811	)		(336,811	)
Net loss	–		–		–			(15,991	)		(15,991	)
Balance, March 31, 2023	908,479,113	$	908,378	$	(8,482,813	)	$	(71,208,255	)	$	(1,632,373	)
Distribution of dividend														–		–		–		–		–		–		–			–
Issuance of preferred stock series B														–		–		3,150		12,600		–		–		–			–
Net income														–		–		–		–		–		–		–			–
Balance, June 30, 2023														14,885,001	$	59,540,000		4,354,057	$	17,416,228		287	$	198,488		–		$	–


	Common Stock				Additional Paid-in			Accumulated			Total Stockholders’
	Shares		Amount		Capital			Deficit			Deficit
Balance December 31, 2021 (Restated)		166,130,069	$	167,421	$	(3,479,126	)	$	(65,118,744	)	$	732,361
Distribution of dividend		–		–		–			(100,476	)		(100,476	)
Net loss		–		–		–			(1,624,280	)		(1,624,280	)
Balance, June 30, 2022 (Restated)		166,130,069	$	167,421	$	(3,479,126	)	$	(66,843,500	)	$	(992,395	)



Balance December 31, 2022		824,793,235	$	824,793	$	(8,581,264	)	$	(70,855,453	)	$	(1,469,808	)
Conversion of convertible notes payable		118,682,378		118,682		71,555			–			190,237
Accrued dividend		–		–		–			(462,554	)		(462,554	)
Issuance of preferred stock series B		–		–		12,400			–			25,000
Net income		–		–		–			800,087			800,087
Balance, June 30, 2023		943,475,613	$	943,475	$	(8,497,308	)	$	(70,517,920	)	$	(917,038	)

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

~~THREE~~FOR THE SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2023 AND 2022

(UNAUDITED)


	Three Months Ended March 31						Six Months Ended June 30,
	2023			2022 (Restated)			2023			2022 (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period	$	(15,991	)	$	(1,562,454	)
Net income (loss) for the period							$	800,087		$	(1,624,280	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		4,635			10,814			8,000			21,628
Amortization of loan discount		17,983			44,546			48,616			156,252
Gain on forgiveness of debt		(390	)		–			(390	)		–
Other noncash items, net		–			(66,054	)		–			(28,271	)
Bad debt		270,000			–			270,000			–
Fair value settled upon conversion		123,566			–			123,566			–
Conversion and note issuance cost		5,000			–			7,000			–
(Increase) decrease in:
Share issuance for service rendered								25,000			–
Increase (decrease) in:
Accounts receivable		(1,111,636	)		343,840			(2,858,749	)		(192,425	)
Right of use – assets		29,300			103,119			64,993			(38,823	)
Prepaid expenses and other current assets		–			8,000			–			8,000
Increase (decrease) in:
Accounts payable and accrued expense		241,945			569,508			693,788			699,107
Accrued officer’s compensation		154,000			120,000			334,000			240,000
Due from related parties		–			3,988			–			3,988
Accrued interest		123,074			110,559			248,137			252,634
Right of use – liabilities		(30,993	)		(62,319	)		(68,221	)		29,015	)
Net cash used in operating activities		(189,507	)		(376,453	)
Net cash used in operating activities - continuing operations								(304,173	)		(473,175	)

Net cash provided by discontinued operations - operating activities		–			19,215
Net cash provided by operating activities - discontinued operations								–			35,542

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible notes payable		240,000			405,730			355,500			555,730
Repayment of convertible notes payable		–			(5,908	)		–			(5,908	)
Payment of SBA loan		(750	)		(756	)		–			(1,520	)
Dividend on preferred stock		–			(102,746	)		–			(100,477	)
Proceeds from credit line		37,000			–
Repayment of credit line		(16,381	)		–
Proceeds from line of credit								43,880			–
Repayment of line of credit								(30,160	)		–
Payment of notes payable related party		(835	)		(816	)		(5,336	)		(5,065	)
Proceeds from notes payable related party		54,000			4,803			124,696			7,948
Net cash provided by financing activities		313,034			300,307			488,580			450,708

NET (DECREASE) INCREASE IN CASH		123,527			(56,931	)
NET INCREASE IN CASH								184,407			13,075
CASH, BEGINNING OF PERIOD		226,802			595,987			226,802			595,987
CASH, END OF PERIOD	$	350,329		$	539,056		$	411,209		$	609,062

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	1,503		$	22,709		$	2,044		$	46,098

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued upon conversion of notes payable and accrued interest	$	66,673		$	–		$	66,673		$	–
Debt discount from derivative liabilities	$	–		$	94,321
Proceeds from related party							$	–		$	3,987

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH 31,~~FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations

Cardiff Lexington Corporation (“Cardiff”) was originally incorporated on September 3, 1986 in Colorado as Cardiff International Inc. On November 10, 2005, Cardiff merged with Legacy Card Company, LLC and changed its name to Cardiff Lexington Corporation. On August 27, 2014, Cardiff redomiciled and became a corporation under the laws of Florida. On April 13, 2021, Cardiff redomiciled and became a corporation under the laws of Nevada.

Cardiff is an acquisition holding company focused on locating undervalued and undercapitalized companies, primarily in the healthcare industry, and providing them capitalization and leadership to maximize the value and potential of their private enterprises while also providing diversification and risk mitigation for stockholders. All of Cardiff’s operations are conducted through, and its income derived from, its various subsidiaries, which includes:

	·	We Three, LLC dba Affordable Housing Initiative (“AHI”), which was acquired on May 15, 2014 and sold on October 31, 2022;

	·	Edge View Properties, Inc. (“Edge View”), which was acquired on July 16, 2014;

	·	Platinum Tax Defenders (“Platinum Tax”), which was acquired on July 31, 2018; and

Nova Ortho and Spine, PLLC (“Nova”), which was acquired on May 31, 2021.

~~Principles~~Princsiples of Consolidation

The condensed consolidated financial statements include the accounts of Cardiff and its wholly owned subsidiaries AHI, Edge View, Platinum Tax and Nova (collectively, the “Company”). AHI is included in discontinued operations. 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.

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles (“U.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.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

Accounts Receivable

Accounts receivable is reported on the balance sheet at the net amounts expected 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 $270,000 and $0 as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. As of ~~March 31,~~June 30, 2023 and December 31, 2022, the Company had net accounts receivable of $~~7,446,416~~9,193,529 and $6,604,780, respectively. Accounts receivables are primarily generated from subsidiaries in their normal course of business.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

Property and Equipment

Property and equipment 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:

Schedule of estimated useful lives
Classification	Useful Life
Equipment, furniture, and fixtures	5 - 7 years
Medical equipment	10 years
Leasehold improvements	10 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. The Company’s impairment testing of goodwill is performed separately from its 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 ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, 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.

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.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

Revenue Recognition

~~On January 1, 2018, the Company 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. The Company’s healthcare subsidiary does not have contract liabilities or deferred revenue as there are no amounts prepaid for services.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

Healthcare Income

Established billing rates are not the same as actual amounts recovered for the Company’s healthcare subsidiary. They generally do not reflect what the Company is ultimately paid and therefore are not reported in the condensed 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.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

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.

The Company’s healthcare revenues are generated from professional medical billings including facility and anesthesia services. With respect to facility and anesthesia services, the Company is the primary obligor as the facility and anesthesia services are considered part of one integrated performance obligation. Historically the Company receives 49.9% of collections from total gross billed. Accordingly, the Company recognized net healthcare service revenue as 49.9% of gross billed amounts. Historical collection rates are estimated using the most current prior 12-month historical payment and collection percentages.

The Company’s healthcare subsidiary has contractual medical receivable sales and purchase agreements with third party factors which result in approximately 51% to 56% reduction from the accounts receivables amounts when a receivable is sold to the factors. The Company evaluated the factored adjustments considering the actual factored amounts per patient quarterly, and the reductions from accounts receivable that are factored were recorded in finance charges as other expenses on the consolidated statement of operations.

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. The Company’s 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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

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.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs are included as a component of cost of sales in the condensed consolidated statements of operations and changes in stockholders’ equity. The Company recognized advertising and marketing expense of $~~38,353~~133,326 and $~~127,785~~82,269 for the three months ended ~~March 31,~~June 30, 2023 and 2022, respectively. The Company recognized advertising and marketing expense of $171,679 and $210,054 for the six months ended June 30, 2023 and 2022, respectively.

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 condensed consolidated 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:

Level 1

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


	Level 2	Inputs, 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.

Distinguishing Liabilities from Equity

The Company accounts for its series N senior convertible preferred stock and series X senior convertible preferred stock subject to possible redemption in accordance with ASC 480, “Distinguishing Liabilities from Equity”. Conditionally redeemable preferred shares are classified as temporary equity within the Company’s condensed consolidated balance sheet.

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 ASC. Pursuant to paragraph 718-10-30-6 of the FASB ASC, 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.

1110

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH 31,~~FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

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 condensed consolidated statements of operations.

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

FASB ASU No 2018-07 prescribes equity instruments issued to parties other than employees.

Income Taxes

Income taxes are determined in accordance with ASC Topic 740, “Income Taxes”. 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.

As of ~~March 31,~~June 30, 2023 and December 31, 2022, the Company did not have any interest and penalties associated with tax positions and did not have any significant unrecognized uncertain tax positions.

~~Loss~~Income (Loss) per Share

FASB ASC Subtopic 260, Earnings Per Share, provides for the calculation of ~~"Basic"~~“Basic” and ~~"Diluted"~~“Diluted” earnings per share. Basic earnings per common share is computed by dividing income available to common stockholders 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 stockholders 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 stock. The dilutive effect of ~~potentially dilutive securities is~~stock options and warrants are 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.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

The diluted effect of debt convertibles is reflected utilizing the if converted method.

Going Concern

The accompanying condensed 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 ~~March 31,~~June 30, 2023, the Company has an accumulated working capital deficit of approximately $~~2.7~~1.9 million. The accompanying condensed 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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

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

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

In June 2016, the FASB issued 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 Company has adopted this standard effective January 1, 2023, ~~which did not have a material impact to the consolidated financial statements,which~~and it resulted in the Company recognizing an allowance for doubtful accounts of $270,000 during the ~~three~~six months ended ~~March 31,~~June 30, 2023.

Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

2.	RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent to the initial issuance of the Company's 2021 financial statements on ~~March 31,~~June 30, 2022, management reconsidered the methodology previously applied in its valuation of goodwill and redeemable preferred stocks.

The Company agreed to issue 818,750 additional shares of series J Preferred Stock with an aggregate stated value equal to $3,275,000 if, as of May 31, 2022, Nova’s trailing twelve months minimum pre-tax net income exceeded $1,979,320 (the “Milestone”). The Company finalized its purchase price accounting and allocation in 2022 and recorded purchase consideration of $6,100,000 associated with the cash consideration, the fair value of the series J preferred stock and the fair value of the contingent consideration. The impact of the correction is reflected in $3,275,000 increase to goodwill and contingent consideration liability on the consolidated balance sheet.

In December 2022, the Company identified an error in its classification for its series N senior convertible preferred stock for the acquisition of NOVA as presented in its audited balance sheet as of December 31, 2021. Pursuant to ASC 250, “Accounting changes and error corrections” issued by FASB and SAB 99 “Materiality” issued by SEC, the Company determined the impact of the error was immaterial. The impact of the error correction is reflected in $3,125,002 increase to the mezzanine equity and offsetting decrease to the Series N Preferred Stock in subject to possible redemption mezzanine equity line item.

The Company and We3 managers entered into a resignation, release and buyback agreement and addendum, effective October 31, 2022. The Company presented in prior periods operating loss as loss from discontinued operations in the amount of ~~$2,593~~$1,920 on the consolidated statement of operations for the ~~three~~six months ended ~~March 31,~~June 30, 2022.

The Company identified that NOVA’s accounts receivable as presented in its balance sheet as of December 31, 2021, was understated due to an error in the collection utilized to estimate NOVA’s accounts receivable. The impact of this correction on the accounting estimates is reflected in $1,076,000 decrease to accounts receivable as of ~~March 31,~~June 30, 2022 and $1,076,000 increase in finance charges for the ~~three~~six months ended ~~March 31,~~June 30, 2022.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

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 restated financial information
	Impact of correction of error								Impact of correction of error
March 31, 2022 (Unaudited)	As previously reported		Adjustments			As restated
June 30, 2022 (Unaudited)									As previously reported		Adjustments			As restated

Total assets	$	11,704,750	$	3,275,000		$	14,979,750		$	12,464,017	$	3,275,000		$	15,739,017

Total liabilities		9,512,586		3,275,000			12,787,586			10,331,410		3,275,000			13,606,410

Mezzanine equity		–		3,125,002			3,125,002			–		3,125,002			3,125,002

Total shareholders' equity	$	2,192,163	$	(3,125,002	)	$	(932,839	)	$	2,132,607	$	(3,125,002	)	$	(992,395	)

ii. Statement of operations

	Impact of correction of error
Three months ended June 30, 2022 (Unaudited)	As previously reported			Adjustments			As restated

Revenue	$	3,130,744		$	(39,512	)	$	3,091,232
Cost of sales		1,115,232			(18,614	)		1,096,618
Gross margin		2,015,512			(20,898	)		1,994,614
Operating expense		912,829			(40,833	)		871,996
Income from operations	$	1,102,683		$	19,935		$	1,122,618
Other income (expense), net		(1,147,509	)		–			(1,147,509	)
Net loss before discontinued operations		(44,826	)		19,935			(24,891	)
Loss from discontinued operations		(17,000	)		(19,935	)		(36,935	)
Net loss	$	(61,826	)	$	–		$	(61,826	)
Basic Loss per Share
Continued Operations		(0.00	)					(0.00	)
Discontinued Operations		(0.00	)					(0.00	)
Weighted Average Shares Outstanding - Basic Earnings Loss per Share
Continued Operations		166,130,069						166,130,069
Discontinued Operations		166,130,069						166,130,069

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

	Impact of correction of error
Six months ended June 30, 2022 (Unaudited)	As previously reported			Adjustments			As restated

Revenue	$	6,071,738		$	(83,356	)	$	5,988,382
Cost of sales		2,250,934			(38,088	)		2,212,846
Gross margin		3,820,804			(45,268	)		3,775,536
Operating expense		1,994,757			(42,714	)		1,952,043
Income from operations	$	1,826,047		$	(2,554	)	$	1,823,493
Other income (expense), net		(2,340,705	)		(1,071,526	)		(3,412,231	)
Net loss before discontinued operations		(514,658	)		(1,074,080	)		(1,588,738	)
Loss from discontinued operations		(33,622	)		(1,920	)		(35,542	)
Net loss	$	(548,280	)	$	(1,076,000	)	$	(1,624,280	)
Basic Loss per Share
Continued Operations		(0.00	)					(0.01	)
Discontinued Operations		(0.00	)					(0.01	)
Weighted Average Shares Outstanding - Basic Earnings Loss per Share
Continued Operations		166,130,069						166,130,069
Discontinued Operations		166,130,069						166,130,069

REVISION OF FINANCIAL STATEMENTS

During the preparation of the financial statements for the six months ended June 30, 2023, the Company found that the results of the settlement agreement with Red Rock Travel Group (“Red Rock”) were incorrectly reflected on the consolidated statement of stockholders’ equity(deficiency) as of December 31, 2022. The Company determined that these errors were immaterial to the previously issued consolidated financial statements, and as such no restatement was necessary. The revisions discussed below were made to the December 31, 2022 balance sheet and statement of stockholders’ equity (deficiency).

As a result of the settlement agreement with Red Rock on July 29, 2022, the Company reduced 35,000,000 shares of common shares on the consolidated financial statements as of December 31, 2022. The certificate of the common stock for 35,000,000 shares which were originally issued on February 24, 2020 was returned as part of the 2022 agreement with Red Rock and 3,500 common shares were cancelled which were equivalent to 35,000,000 shares before the 10,000:1 reverse split on May 12, 2020. Consequently, the December 31, 2022 financial statements as originally reported were understated by 34,996,500 common shares. The impact of the correction is reflected in the $35,097 increase to common stock and decrease the same amount to additional paid-in-capital on the consolidated statement of shareholders’ equity. The adjustment had no impact on earnings per share for any 2022 period.

On July 31, 2018, the Company issued 8,200,562 shares of series K preferred stock to the prior owners of Red Rock for the consideration of the acquisition of Red Rock. The acquisition was not completed, and Red Rock returned the 8,200,562 shares of series K preferred shares during the year ended December 31, 2018. A total of 8,200,562 shares of series K Preferred Share were cancelled The impact of the correction is reflected in the $8,201 decrease to series K Preferred Stock and increase the same amount to additional paid-in-capital on the consolidated statement of shareholders’ equity (deficiency).

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH 31,~~FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

~~ii. Statement of operations~~

Impact of correction of error
Three months ended March 31, 2022 (Unaudited)
As previously
reported
Adjustments As restated

Revenue $ 2,940,994 $ (43,844 ) $ 2,897,150
Cost of sales 1,135,702 (19,474 ) 1,116,228
Gross margin 1,805,292 (24,370 ) 1,780,922
Operating expense 1,081,928 (22,489 ) 1,059,439
Income from operations $ 723,364 $ (1,881 ) $ 721,483
Other income (expense), net (1,193,196 ) (1,071,526 ) (2,264,722 )
Net loss before discontinued operations (469,832 ) (1,073,407 ) (1,543,239 )
Loss from discontinued operations (16,622 ) (2,593 ) (19,215 )
Net loss $ (486,454 ) $ (1,076,000 ) $ (1,562,454 )
Basic Loss per Share
Continued Operations (0.01 ) (0.01 )
Discontinued Operations 0.01 –
Weighted Average Shares Outstanding - Basic Earnings Loss per Share
Continued Operations 166,130,069 128,021,527
Discontinued Operations 166,130,069 128,021,527

3.4.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Schedule of account payable and accrued expenses
	March 31, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Accounts payable	$	492,391	$	342,330	$	437,718	$	342,330
Accrued credit cards		10,325		45,722		15,358		45,722
Accrued expense – previously factored liability		954,366		776,414		1,291,691		776,414
Accrued income taxes, and other taxes		6,732		6,732		5,346		6,732
Accrued professional fees		479,609		573,040		694,140		573,040
Accrued advertising		69,656		69,656		69,656		69,656
Accrued payroll		57,411		14,292		8,423		14,292
Accrue expense - other		–		363		–		363
Accrued expense - dividend payable		–		210,046		–		210,046
Total	$	2,070,490	$	2,038,595	$	2,522,332	$	2,038,595

The Company is delinquent paying certain income and property taxes. As of ~~March 31,~~June 30, 2023 and December 31, 2022, the balance for these taxes, penalties and interest is $5,346 and $6,732.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~, respectively.

4.5.

PLANT AND EQUIPMENT, NET

Property and equipment as of ~~March 31,~~June 30, 2023 and December 31, 2022 is as follows:

Schedule of Property and Equipment
Schedule of property and equipment
	March 31, 2023			December 31, 2022			June 30, 2023			December 31, 2022
Medical equipment	$	96,532		$	96,532		$	96,532		$	96,532
Computer Equipment		9,189			9,189			9,189			9,189
Furniture, fixtures and equipment		30,841			35,974			30,841			35,974
Leasehold Improvement		15,950			15,950			15,950			15,950
Total		152,512			157,645			152,512			157,645
Less: accumulated depreciation		(101,708	)		(102,206	)		(105,074	)		(102,206	)
Property and equipment, net	$	50,804		$	55,439		$	47,438		$	55,439

For the three and six months ended ~~March 31,~~June 30, 2023, ~~and 2022,~~total depreciation expense was $~~4,635~~3,365 and $~~10,814~~8,000, respectively. For the three and six months ended June 30, 2022, total depreciation expense was $10,814 and $21,628, respectively. Depreciation expense recorded as cost of sales for the three and six months ended June 30, 2022 was $5,031 and $10,062, respectively.

5.6.

LAND

As of ~~March 31,~~June 30, 2023 and December 31, 2022, the Company had 27 acres of land valued at approximately $540,000. The land is currently vacant and is expected to be developed into a residential community.

6.7.

LINE OF CREDIT

At ~~March 31,~~June 30, 2023 and December 31, 2022, the Company had a revolving line of credit with a financial institution for $92,500 which was personally guaranteed by the manager of Platinum Tax. The loan accrues interest at ~~11.20~~11.70% at ~~March 31,~~June 30, 2023 and 10.95% at December 31, 2022. As of ~~March 31,~~June 30, 2023 and December 31, 2022, the Company had $~~20,619~~8,749 and $0, respectively, of outstanding balance against the line of credit.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

7.8.

RELATED PARTY TRANSACTIONS

From time to time, the previous owner who is currently the manager of Platinum Tax loaned funds to Platinum Tax to cover short term operating needs. Amounts owed as of ~~March 31,~~June 30, 2023 and December 31, 2022 were $~~90,189~~156,384 and $~~37,025~~37,024, respectively.

In connection with the acquisition of Edge View on July 16, 2014, the Company assumed amounts due to previous owners who are current managers Edge View. These amounts are due on demand and do not bear interest. The balance of these amounts are $4,979 as of ~~March 31,~~June 30, 2023 and December 31, 2022.

The Company obtained short-term advances from the Chairman of the Board that are non-interest bearing and due on demand. As of ~~March 31,~~June 30, 2023 and December 31, 2022, the Company owed the Chairman $123,192 and $123,192., respectively.

See also Note 14 for compensation paid to employees of the Company.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

8.9.

NOTES AND LOANS PAYABLE

Notes payable at ~~March 31,~~June 30, 2023 and December 31, 2022, respectively, are summarized as follows:

Schedule of notes payable
	March 31, 2023			December 31, 2022			June 30, 2023			December 31, 2022
Notes and loans payable	$	181,242		$	155,598		$	169,318		$	155,598
Less current portion		(36,596	)		(15,809	)		(24,724	)		(15,809	)
Long-term portion	$	144,646		$	139,789		$	144,594		$	139,789

Long-term debt matures as follows:

Schedule of Maturities of Long-term Debt
Schedule of maturities of long-term debt
	Amount		Amount
2024	$	36,596	$	24,724
2025		4,988		4,986
2026		4,988		4,986
2027		4,988		4,986
2028		4,988		4,986
Thereafter		124,694		124,650
Total	$	181,242	$	169,318

Loans and Notes Payable – Unrelated Party

On March 12, 2009, the Company issued a debenture in the principal amount of $20,000. The debenture bears interest at 12% per annum and matured on September 12, 2009. The balance of the debenture was $10,989 at ~~March 31,~~June 30, 2023 and December 31, 2022 and the accrued interest was $~~6,554~~6,882 and $6,229 at ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. The Company assigned all of its receivables from consumer activations of the rewards program as collateral on this debenture.

Small Business Administration (“SBA”) Loans

On June 2, 2020, the Company obtained an SBA loan in the principal amount of $150,000 with an interest rate of 3.75% and a maturity date of June 2, ~~2050~~.2050. The Company reclassified $5,723 of accrued interest to the principal amounts for the ~~three~~six months ended ~~March 31,~~June 30, 2023. The principal balance and accrued interest at ~~March 31,~~June 30, 2023 was $~~149,633~~149,580 and $0, respectively, and principal and accrued interest at December 31, 2022 was $144,609 and $5,723, respectively.

1716

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH 31,~~FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

9.10.

CONVERTIBLE NOTES PAYABLE

As of ~~March 31,~~June 30, 2023 and December 31, 2022, the Company had convertible debt outstanding net of amortized debt discount of $~~3,717,936~~3,868,068 and $3,515,752, respectively. During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company received net proceeds of $~~240,000~~355,500 from convertible notes. During the ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company had proceeds of $~~550,967~~752,260 from convertible notes and repaid $5,908 to convertible noteholders. There are debt discounts associated with the convertible debt of $~~89,147~~100,347 and $46,798 at ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. For the ~~three~~six months ~~ended March 31,~~ending June 30, 2023 and 2022, the Company recorded amortization of debt discounts of $~~17,983~~48,616 and $~~44,546~~156,252, respectively. For the three months ending June 30, 2023 and 2022, the Company recorded amortization of debt discounts of $30,633 and $111,706, respectively. During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company converted $58,800 of convertible debt, $5,873 in accrued interest and $2,000 in penalties and fees into 118,682,378 shares of the Company’s common stock. The Company recognized $123,566 of interest expense and additional paid-in capital to adjust fair value for the debt settlement during the ~~three~~six months ended ~~March 31,~~June 30, 2023. The Company had no convertible debt conversions during the six months ended June 30, 2022.

On September 22, 2022, the Company entered into a security exchange and purchase agreement with its largest lender to consolidate all promissory notes held by it and related accrued interest in exchange for (1) one consolidated senior secured convertible promissory note in the amount of $2,600,000 and (2) 375,000 shares of series X senior convertible preferred stock totaling $1,500,000 with a par value of $0.001, stated value of $4.00, convertible into common shares at a 1:1 conversion rate, non-dilutive and non-voting shares. Prior to conversion, all promissory notes with this lender totaled to $4,791,099 consisting of principal of $3,840,448 and accrued interest of $950,651 resulting in a gain on debt consolidation of $1,397,271.

Convertible notes as of ~~March 31,~~June 30, 2023 and December 31, 2022 are summarized as follows:

Schedule of convertible notes summary
	March 31, 2023			December 31, 2022			June 30, 2023			December 31, 2022
Convertible notes payable	$	3,807,083		$	3,562,550		$	3,968,415		$	3,562,550
Discounts on convertible notes payable		(89,147	)		(46,798	)		(100,347	)		(46,798	)
Total convertible debt less debt discount		3,717,936			3,515,752			3,868,068			3,515,752
Current portion		3,717,936			3,515,752			3,868,068			3,515,752
Long-term portion	$	–		$	–		$	–		$	–

The following is a schedule of convertible notes payable as of and for the six months ended June 30, 2023.

Schedule of convertible notes payable
Note #	Issuance	Maturity	Principal Balance 12/31/22		New Loan		Principal Conversions			Shares Issued Upon Conversion		Principal Balance 6/30/23		Accrued Interest on Convertible Debt at 12/31/22		Interest Expense On Convertible Debt For the Period Ended 6/30/23		Accrued Interest on Convertible Debt at 6/30/23		Unamortized Debt Discount At 6/30/23
7-1	10/28/2016	10/28/2017		10,000	$	–	$	(10,000	)		23,405,455	$	–	$	2,263	$	–	$	–	$	–
9	9/12/2016	9/12/2017		50,080		–		–			–		50,080		14,157		4,967		19,124		–
10	1/24/2017	1/24/2018		55,000		–		–			–		55,000		69,876		5,455		75,331		–
10-1	2/10/2023	2/10/2024		–		50,000		–			–		50,000		–		2,877		2,877		–
10-2	3/30/2023	3/30/2024		–		25,000		–			–		25,000		–		945		945		–
29-2	11/8/2019	11/8/2020		36,604		–		–			–		36,604		20,160		4,356		24,516		–
31	8/28/2019	8/28/2020		–		–		–			–		–		8,385		–		8,385		–
37-1	9/3/2020	6/30/2021		113,667		–		–			–		113,667		28,756		10,146		48,902		–
37-2	11/2/2020	8/31/2021		113,167		–		–			–		113,167		27,510		10,101		47,611		–
37-3	12/29/2020	9/30/2021		113,166		–		–			–		113,166		26,474		10,101		46,575		–
38	2/9/2021	2/9/2022		96,000		–		(48,800	)		85,276,923		47,200		27,939		5,910		33,849		–
39	4/26/2021	4/26/2022		168,866		–		–			–		168,866		39,684		18,423		58,106		–
40-1	9/22/2022	9/22/23		2,600,000		–		–			10,000,000		2,600,000		71,233		128,932		196,164		–
40-2	11/4/2022	11/4/2023		68,666		–		–			–		68,666		1,072		3,405		4,477		5,973
40-3	11/28/2022	11/28/2023		68,667		–		–			–		68,667		620		3,405		4,025		7,102
40-4	12/21/2022	12/21/2023		68,667		–		–			–		68,667		187		3,405		3,592		8,184
40-5	1/24/2023	1/24/2024		–		90,166		–			–		90,166		–		3,878		3,878		13,486
40-6	3/21/2023	3/21/2024		–		139,166		–			–		139,166		–		3,851		3,851		26,520
40-7	6/5/2023	6/5/2024		–		139,166		–			–		139,166		–		953		953		34,155
40-8	6/13/2023	6/13/2024		–		21,167		–			–		21,167		–		99		99		4,927
			$	3,562,550	$	464,665	$	(58,800	)		118,682,378	$	3,968,415	$	338,316	$	221,209	$	583,260	$	100,347

1817

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH 31,~~FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

~~The following is a schedule of convertible notes payable as of and for the three months ended March 31, 2023.~~

Schedule of convertible notes details
Note # Issuance Maturity Principal Balance 12/31/22 New Loan Principal Conversions Shares Issued Upon Conversion Principal Balance 3/31/23 Accrued Interest on Convertible Debt at 12/31/22 Interest Expense On Convertible Debt For the Period Ended 3/31/23 Accrued Interest on Convertible Debt at 3/31/23 Unamortized Debt Discount At 3/31/23
7-1 10/28/2016 10/28/2017 10,000 $ – $ (10,000 ) 23,405,455 $ – $ 2,263 $ – $ – $ –
9 9/12/2016 9/12/2017 50,080 – – – 50,080 14,157 2,470 16,627 –
10 1/24/2017 1/24/2018 55,000 – – – 55,000 69,876 2,712 72,588 –
10-1 2/10/2023 2/10/2024 – 50,000 – – 50,000 – 1,007 1,007 –
10-2 3/30/2023 3/30/2024 – 25,000 – – 25,000 – 10 10 –
29-2 11/8/2019 11/8/2020 36,604 – – – 36,604 20,160 2,166 22,326 –
31 8/28/2019 8/28/2020 – – – – – 8,385 – 8,385 –
37-1 9/3/2020 6/30/2021 113,667 – – – 113,667 28,756 5,045 38,801 –
37-2 11/2/2020 8/31/2021 113,167 – – – 113,167 27,510 5,023 37,533 –
37-3 12/29/2020 9/30/2021 113,166 – – – 113,166 26,474 5,023 36,497 –
38 2/9/2021 2/9/2022 96,000 – (48,800 ) 85,276,923 47,200 27,939 3,321 31,260 –
39 4/26/2021 4/26/2022 168,866 – – – 168,866 39,684 9,160 48,844 –
40-1 9/22/2022 9/22/23 2,600,000 – – 10,000,000 2,600,000 71,233 64,110 131,343 –
40-2 11/4/2022 11/4/2023 68,666 – – – 68,666 1,072 1,693 2,765 10,253
40-3 11/28/2022 11/28/2023 68,667 – – – 68,667 620 1,693 2,313 11,382
40-4 12/21/2022 12/21/2023 68,667 – – – 68,667 187 1,693 1,880 12,464
40-5 1/24/2023 1/24/2024 – 90,166 – – 90,166 – 1,630 1,630 19,387
40-6 3/21/2023 3/21/2024 – 138,167 – – 138,167 – 379 379 35,661
$ 3,562,550 $ 303,333 $ (58,800 ) 118,682,378 $ 3,807,083 $ 338,316 $ 107,135 $ 454,188 $ 89,147

Note 7-1

On October 28, 2016, the Company issued a convertible promissory note in the principal amount of $50,000, which matured on October 28, 2017. Note 7-1 is currently in default and accrues interest at a default interest rate of 20% per annum.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

Note 9

On September 12, 2016, the Company issued a convertible promissory note in the principal amount of $80,000 for services rendered, which matured on September 12, 2017. Note 9 is currently in default and accrues interest at a default interest rate of 20% per annum.

Notes 10, 10-1 and 10-2

On January 24, 2017, the Company issued a convertible promissory note in the principal amount of $80,000 for services rendered, which matured on January 24, 2018. Note 10 is currently in default and accrues interest at a default interest rate of 20% per annum. On February 10, 2023, the Company executed a second tranche under this note in the principal amount of $50,000 (Note 10-1). On March 30, 2023, the Company executed a third tranche under this note in the principal amount of $25,000 (Note 10-2). Notes 10-1 and 10-2 accrue interest at a rate of 15% per annum.

Notes 29, 29-1 and 29-2

On May 10, 2019, the Company issued a convertible promissory note in the principal amount of $150,000. On November 8, 2019, this note (Note 29) was purchased by and assigned to an unrelated party. The amount assigned was the existing principal amount of $150,000 and accrued interest of $5,918 which was issued as Note 29-1, plus a new convertible promissory note in the principal amount of $62,367 which was issued as Note 29-2. Note 29-2 is currently in default and accrues interest at a default interest rate of 24% per annum.

Note 31

On August 28, 2019, the Company issued a convertible promissory note in the principal amount of $120,000, which matured on August 28, 2020. Note 31 is currently in default and accrues interest at a default interest rate of 24% per annum.

Notes 37-1, 37-2 and 37-3

On September 3, 2020, the Company issued a convertible promissory note in the principal amount of $200,000, with an original issue discount of $50,000, which could be drawn in several tranches. On September 3, 2020, the Company executed the first tranche in the principal amount of $67,000, less an original issue discount of $17,000, which matured on June 30, 2021 (Note 37-1). On November 2, 2020, the Company executed the second tranche in the principal amount of $66,500, less an original issue discount of $16,500, which matured on August 31, 2021 (Note 37-2). On December 29, 2020, the Company executed the third tranche in the principal amount of $66,500, less an original issue discount of $16,500, which matured on September 30, 2021 (Note 37-3). Notes 37-1, 37-2 and 27-3 are currently in default and accrue interest at a default interest rate of 18% per annum.

Note 38

On February 9, 2021, the Company issued a convertible promissory note in the principal amount $103,500, which matured on February 9, 2022. Note 38 is currently in default and accrues interest at a default interest rate of 22% per annum.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

Note 39

On April 26, 2021, the Company issued a convertible promissory note in the principal amount $153,500, which matured on May 10, 2022. Note 39 is currently in default and accrues interest at a default interest rate of 22% per annum.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

Notes 40-1, 40-2, 40-3, 40-4, 40-5, 40-6, 40-7 and ~~40-6~~40-8

On September 22, 2022, the Company issued a convertible promissory note in the principal amount of $2,600,000 in exchange for total of $4,791,099 of defaulted promissory notes balances (Note 40-1). On November 4, 2022, the Company executed a second tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-2). On November 28, 2022, the Company executed the third tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-3). On November 28, 2022, the Company executed a fourth tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-4). On January 24, 2023, the Company executed a fifth tranche under this note in the principal amount of ~~$88,6676,~~$90,166, less an original issue discount and fee of $25,166 (Note 40-5). On March 21, 2023, the Company executed a sixth tranche under this note in the principal amount of $136,666, less an original issue discount and fee of $39,166 (Note 40-6). On June 5, 2023, the Company executed a seventh tranche under this note in the principal amount of $136,667, less original issue discount and fee of $39,167 (Note 40-7). On June 13, 2023, the Company executed a eighth tranche under this note in the principal amount of $21,167, less original issue discount and fee of $5,167 (Note 40-8). All of the Note 40 tranches mature in one year from the note issuance date and accrue interest at a rate of ~~10%~~10% per annum.

~~10.~~11.

CAPITAL STOCK

Preferred Stock

The Company has designated multiple series of preferred stock, including 4shares of series A preferred stock, 3,000,000shares of series B preferred stock, 500shares of series C preferred stock, 800,000shares of series D preferred stock, 1,000,000shares of series E preferred stock, 800,000shares of series F preferred stock, 800,000shares of series F-1 preferred stock, 500,000,000shares of series I preferred stock, 10,000,000shares of series J preferred stock, 10,937,500 shares of series K preferred stock, 100,000,000 shares of series L preferred stock, 3,000,000 shares of series N senior convertible preferred stock, 5,000 shares of series R preferred stock and 5,000,000 shares of series X senior convertible preferred stock.

The following is a description of the rights and preferences of each series of preferred stock.

Redeemable Preferred Stock

The Company recognized the series N senior convertible preferred stock and series X senior convertible preferred stock as mezzanine equity since the redeemable preferred stock may be redeemed at the option of the holder, but is not mandatorily redeemable.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

Series N Senior Convertible Preferred Stock

Ranking. The series N senior convertible preferred stock ranks, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common stock and each other class or series that is not expressly made senior to or on parity with the series N senior convertible preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series N senior convertible preferred stock; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each class or series that is expressly made senior to the series N senior convertible preferred stock.

Dividend Rights. Holders of series N senior convertible preferred stock are entitled to dividends at a rate per annum of 12.0% of the stated value ($4.00 per share); provided that upon an event of default (as defined in the certificate of designation for the series N senior convertible preferred stock), such rate shall increase by 8% per annum. Dividends shall accrue from day to day, whether or not declared, and shall be cumulative. Dividends shall be payable quarterly in arrears on each dividend payment date in cash or common stock at the Company’s discretion. Dividends payable in common stock shall be calculated based on a price equal to eighty percent (80%) of the volume weighted average price for the common stock on the Company’s principal trading market (the “VWAP”) during the five (5) trading days immediately prior to the applicable dividend payment date. At ~~March 31,~~June 30, 2023, cumulative dividends on Series N Preferred Stock were $~~453,654~~557,535.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

Liquidation Rights. Subject to the rights of creditors and the holders of any senior securities or parity securities (in each case, as defined in the certificate of designation), upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of junior securities (as defined in the certificate of designation), including the common stock, each holder of outstanding series N senior convertible preferred stock shall be entitled to receive an amount of cash equal to 115% of the stated value of $4.00 per share, plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether or not declared) to, but not including the date of final distribution to such holders.

Voting Rights. Holders of series N senior convertible preferred stock do not have any voting rights; provided that, so long as any shares of series N senior convertible preferred stock are outstanding, the affirmative vote of holders of a majority of the series N senior convertible preferred stock, which majority must include SILAC Insurance Company so long as it holds any shares of series N senior convertible preferred stock, voting as a separate class, shall be necessary for approving, effecting or validating any amendment, alteration or repeal of any of the provisions of the certificate of designation or prior to the Company’s (or Nova’s) creation or issuance of any parity securities or new indebtedness (as defined in the certificate of designation); provided that the foregoing shall not apply to any financing transaction the use of proceeds of which will be used to redeem the series N senior convertible preferred stock and the warrants issued in connection therewith. In addition, the affirmative vote of holders of 66% of the series N senior convertible preferred stock, voting as a separate class, is required prior to the Company’s (or Nova’s) creation or issuance of any senior securities.

Conversion Rights. Each shares of series N senior convertible preferred stock, plus all accrued and unpaid dividends thereon, shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of common stock determined by dividing the stated value ($4.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price of $0.012 per share (subject to standard adjustments in the event of any stock splits, stock combinations, stock reclassifications, dividends paid in common stock, sales of substantially all assets, mergers, consolidations or similar transactions); provided that in no event shall the holder of any series N senior convertible preferred stock be entitled to convert any number of shares that upon conversion the sum of (i) the number of shares of common stock beneficially owned by the holder and its affiliates and (ii) the number of shares of common stock issuable upon the conversion of the series N senior convertible preferred stock with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the then outstanding common stock. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

Redemption Rights. The Company may redeem the series N senior convertible preferred stock at any time by paying in cash therefore a sum equal to 115% of the stated value of $4.00 per share, plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the certificate of designation. In addition, anyany holder may require the Company to redeem some or all of its shares of series N senior convertible preferred stock on the same terms after a period of twelve months from the date of issuance; provided, however, that such redemption right shall only be exercisable if the Company raises at least $5,000,000 or the common stock is trading on the Nasdaq Stock Market or the New York Stock Exchange.

Series X Senior Convertible Preferred Stock

Ranking. The series X senior convertible preferred stock ranks, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common stock and each other class or series that is not expressly made senior to or on parity with the series X senior convertible preferred stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series X senior convertible preferred stock; and (iii) junior to the series N senior convertible preferred stock, all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and each class or series that is expressly made senior to the series X senior convertible preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

Dividend Rights. Holders of series X senior convertible preferred stock are entitled to dividends at a rate per annum of 10.0% of the stated value ($4.00 per share); provided that upon an event of default (as defined in the certificate of designation for the series X senior convertible preferred stock), such rate shall increase by 5% per annum. Dividends shall accrue from day to day, whether or not declared, and shall be cumulative. Dividends shall be payable quarterly in arrears on each dividend payment date. At ~~March 31,~~June 30, 2023, cumulative dividends on Series X Preferred Stock were $~~93,205~~115,068.

Liquidation Rights. Subject to the rights of creditors and the holders of any senior securities, including the series N senior convertible preferred stock, or parity securities (in each case, as defined in the certificate of designation), upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of junior securities (as defined in the certificate of designation), including the common stock, each holder of outstanding series N senior convertible preferred stock shall be entitled to receive an amount of cash equal to 100% of the stated value of $4.00 per share, plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether or not declared) to, but not including the date of final distribution to such holders.

Voting Rights. Holders of series X senior convertible preferred stock do not have any voting rights; provided that, so long as any shares of series X senior convertible preferred stock are outstanding, the affirmative vote of holders of a majority of the series X senior convertible preferred stock, which majority must include Leonite Capital LLC so long as it holds any shares of series X senior convertible preferred stock, voting as a separate class, shall be necessary for approving, effecting or validating any amendment, alteration or repeal of any of the provisions of the certificate of designation or prior to the creation or issuance of any parity securities or new indebtedness (as defined in the certificate of designation); provided that the foregoing shall not apply to any financing transaction the use of proceeds of which will be used to redeem the series X senior convertible preferred stock and the warrants issued in connection therewith. In addition, the affirmative vote of holders of 66% of the series X senior convertible preferred stock, voting as a separate class, is required prior to the creation or issuance of any senior securities.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

Conversion Rights. Each shares of series X senior convertible preferred stock, plus all accrued and unpaid dividends thereon, shall be convertible, at the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of common stock determined by dividing the stated value ($4.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price equal to the lower of (i) the lowest VWAP during the five (5) trading days immediately prior to the applicable conversion date and (ii) the price per share paid in any subsequent financing (the “Fixed Price”). The Fixed Price is subject to standard adjustments in the event of any stock splits, stock combinations, stock reclassifications, dividends paid in common stock, sales of substantially all assets, mergers, consolidations or similar transactions, as well as a price based antidilution adjustment, pursuant to which, subject to certain exceptions, if the Company issues common stock at a price lower than the Fixed Price, the Fixed Price shall decrease to such lower price. Notwithstanding the foregoing, in no event shall the holder of any series X senior convertible preferred stock be entitled to convert any number of shares that upon conversion the sum of (i) the number of shares of common stock beneficially owned by the holder and its affiliates and (ii) the number of shares of common stock issuable upon the conversion of the series X senior convertible preferred stock with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the then outstanding common stock. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company.

Redemption Rights. Commencing on September 22, 2023, anyany holder may require the Company to redeem its shares by the payment in cash therefore of a sum equal to 100% of the stated value of $4.00 per share, plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the certificate of designation; provided however, that in the event that the Company completes a public offering prior to the redemption date, then any holder may only cause the Company to redeem any outstanding series X senior convertible preferred stock by paying such redemption price in twelve (12) equal monthly installments with the first such payment due on the date that is six (6) months following the date that the Company completes such public offering.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

Non-redeemable Preferred Stock

Series A Preferred Stock

Each share of series A preferred stock is entitled to a number of votes and converts to a number of shares equal to the sum of all shares of common stock and series B preferred stock issued and outstanding, divided by the number shares of series A preferred stock held. Holders of series A preferred stock do not have any dividend, liquidation or redemption rights.

Series B Preferred Stock

Each share of series B preferred stock is entitled to one (1) vote on all matters submitted to a vote of stockholders. Each share of series B preferred stock is convertible into two (2) shares of common stock (subject to adjustment for forward stock splits but not reverse stock splits). Holders of series B preferred stock do not have any dividend, liquidation or redemption rights.

Series C Preferred Stock

Each share of series C preferred stock is entitled to one (1) vote on all matters submitted to a vote of stockholders. Each share of series C preferred stock is convertible into 100,000 shares of common stock (subject to adjustment for forward stock splits but not reverse stock splits). If the Company lists on an exchange, it has the right to repurchase these shares at a purchase price of $50,000 per share. Holders of series C preferred stock do not have any dividend, liquidation or redemption rights.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

Series D Preferred Stock

Each share of series D preferred stock is entitled to one (1) vote on all matters submitted to a vote of stockholders. Each share of series D preferred stock is convertible into two (2) shares of common stock. Holders of series D preferred stock do not have any dividend, liquidation or redemption rights.

Series E Preferred Stock

Each share of series E preferred stock is entitled to one (1) vote on all matters submitted to a vote of stockholders. Each share of series E preferred stock is convertible into two (2) shares of common stock. Holders of series E preferred stock do not have any dividend, liquidation or redemption rights.

Series F Preferred Stock

Each share of series F preferred stock is entitled to one (1) vote on all matters submitted to a vote of stockholders. Each share of series F preferred stock is convertible into two (2) shares of common stock. Holders of series F preferred stock do not have any dividend, liquidation or redemption rights.

Series F-1 Preferred Stock

Each share of series F-1 preferred stock is convertible into two (2) shares of common stock. Holders of series F-1 preferred stock do not have any voting, dividend, liquidation or redemption rights.

Series I Preferred Stock

Each share of series I preferred stock is entitled to five (5) votes on all matters submitted to a vote of stockholders. Each share of series I preferred stock is convertible into two (2) shares of common stock. Holders of series I preferred stock do not have any dividend, liquidation or redemption rights.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

Series J Preferred Stock

Each share of series J preferred stock is entitled to one (1) vote on all matters submitted to a vote of stockholders. Each share of series J preferred stock is convertible into two (2) shares of common stock. Holders of series J preferred stock do not have any dividend, liquidation or redemption rights.

~~Series K Preferred Stock~~

Each share of series K preferred stock is entitled to one (1) vote on all matters submitted to a vote of stockholders. Each share of series K preferred stock is convertible into 1.25 shares of common stock. Holders of series K preferred stock do not have any dividend, liquidation or redemption rights.

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

Series L Preferred Stock

Each share of series L preferred stock is entitled to one (1) vote on all matters submitted to a vote of stockholders. Each share of series L preferred stock is convertible into two (2) shares of common stock. Holders of series L preferred stock do not have any dividend, liquidation or redemption rights.

Series R Preferred Stock

Each share of series R preferred stock is entitled to one (1) vote on all matters submitted to a vote of stockholders. Each share of series B preferred stock is convertible into one (1) shares of common stock (subject to adjustment for forward stock splits but not reverse stock splits). Holders of series R preferred stock do not have any dividend, liquidation or redemption rights.

Preferred Stock Transactions

~~The Company had no preferred stock transactions during~~During the ~~three~~six months ended ~~March 31,~~June 30, 2023, ~~and 2022.~~the Company executed the following transactions:

On May 25, 2023, the Company issued 3,150 shares of series B preferred stock to Zia Choe, Interim Chief Financial Officer for $25,000.

During the six months ended June 30, 2022, the Company executed the following transactions:

In the second quarter of 2022, 37,500 shares of series D preferred stock were cancelled and exchanged for 37,500 shares of series B preferred stock and 37,500 shares of series H preferred stock were cancelled and exchanged for 37,500shares of series B preferred stock.

Common Stock

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company ~~issued~~ ~~118,682,378~~ ~~shares of common stock upon conversion of certain convertible notes.~~executed the following transactions:

~~The Company did not issue any shares of common stock during the three months ended March 31, 2022.~~

The Company issued 118,682,378 shares of common stock upon conversion of certain convertible notes.

~~11.~~12.

WARRANTS

The table below sets forth warrant activity for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022:

Schedule of warrant activity
Number of
Warrants Weighted
Average
Exercise
Price
Balance at January 1, 2023 235,557,856 $ 0.015
Granted – –
Exercised – –
Expired – –
Balance at March 31, 2023 235,557,856 0.015
Warrants Exercisable at March 31, 2023 235,557,856 $ 0.015

Schedule of warrant activity
	Number of Warrants			Weighted Average Exercise Price
Balance at January 1, 2023		235,557,856		$	0.015
Granted		–			–
Exercised		–			–
Forfeited		(25,000	)		–
Balance at June 30, 2023		235,532,856			0.015
Warrants Exercisable at June 30, 2023		235,532,856		$	0.015

2623

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH 31,~~FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

As a result of the settlement agreement with Red Rock on July 29, 2022, the Company required the previous owners to relinquish warrants for 25,000 shares of common stock. The certificate of the 25,000 warrants were returned and cancelled during the second quarter of 2023. There was no impact on the consolidated financial statements as of December 31, 2022.

~~12.~~13.

DISCONTINUED OPERATIONS

The Company and the managers of AHI entered into a resignation, release and buyback agreement and addendum, effective October 31, 2022, pursuant to which the managers purchased AHI in exchange for returning 175,045 shares of series F preferred stock. There was a loss on disposal in the amount of $217,769 on October 31, 2022, which represented net assets and liabilities at the time of sale back.

The Company had no net liabilities of discontinued operations at ~~March 31,~~June 30, 2023 and December 31, 2022. The Company had $0 $0 and ~~$19,215~~$36,935 of loss from discontinued operations for the three months ended ~~March 31,~~June 30, 2023 and 2022, respectively. The Company had $0 and $35,542 of loss from discontinued operations for the six months ended June 30, 2023 and 2022, respectively.

Schedule of discontinued operations
Three Months Ended March 31,
2023 2022

Gain (Loss) from discontinued operations
Revenue $ – $ 43,844
Cost of sales – (19,474 )
Selling, general and administrative expenses – (1,881 )
Interest expense of Red Rock Investor Note – (16,622 )
Loss on divestiture of AHI subsidiary – (2,593 )
Gain no change in estimate – (4,474 )
Loss from discontinued operations $ – $ (19,215 )

Schedule of discontinued operations
	Three Months Ended June 30,
	2023		2022

Gain (Loss) from discontinued operations
Revenue of AHI subsidiary	$	–	$	39,512
Cost of sales of AHI subsidiary		–		(18,614	)
Selling, general and administrative expenses of AHI subsidiary		–		(40,833	)
Interest expense of Red Rock Investor Note		–		(17,000	)
Loss from discontinued operations	$	–	$	(36,935	)


	Six Months Ended June 30,
	2023		2022

Gain (Loss) from discontinued operations
Revenue AHI subsidiary	$	–	$	83,356
Cost of sales AHI subsidiary		–		(38,088	)
Selling, general and administrative expenses AHI subsidiary		–		(42,714	)
Interest expense of Red Rock Investor Note		–		(33,622	)
Gain no change in estimate of AHI subsidiary		–		(4,474	)
Loss from discontinued operations	$	–	$	(35,542	)

~~13.~~14.

GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET

The following table shows the Company’s goodwill balances by reportable segment. The Company reviews goodwill for impairment on a reporting unit basis annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. During the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, the Company had no goodwill impairment.

The following table shows goodwill balances by reportable segment:

Schedule of goodwill balances
Healthcare Total
Carrying value at December 31, 2022 $ 5,666,608 $ 5,666,608
Accumulated impairment – –
Carrying value at March 31, 2023 $ 5,666,608 $ 5,666,608

Schedule of goodwill balances
	Healthcare		Total
Carrying value at December 31, 2022	$	5,666,608	$	5,666,608
Accumulated impairment		–		–
Carrying value at June 30, 2023	$	5,666,608	$	5,666,608

2724

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH 31,~~FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

~~14.~~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 $~~77,852~~56,378 and $~~134,000~~34,305 for the three months ended ~~March 31,~~June 30, 2023 and 2022, respectively and the Company recorded operating lease expense of $134,230 and $170,150 for the six months ended June 30, 2023 and 2022, respectively.

The Company has operating leases with future commitments as follows:

Schedule of property leases
March 31, Amount
2024 $ 140,777
2025 55,408
Total $ 196,185

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

Schedule of property leases
June 30,	Amount
2024	$	126,752
2025		32,205
Total	$	158,957

Employees

The Company agreed to pay $360,000 per year and $200,000 of targeted annual incentives 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 total outstanding accrued compensation as of ~~March 31,~~June 30, 2023 and December 31, 2022 were $~~1,935,500~~2,025,500 and $1,870,500, respectively.

The Company agreed to pay $360,000 per year and $200,000 of targeted annual incentives 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 total outstanding accrued compensation as of June 30, 2023 and December 31, 2022 ~~and December 31, 2021~~ were $~~1,952,000~~2,042,000 and $1,863,000, respectively.

The Company agreed to pay $156,000 per year to the previous Chief Financial Officer based on his amended employment agreement executed on May 15, 2021. The total outstanding accrued compensation as of ~~March 31,~~June 30, 2023 and December 31, 2022 was $17,057.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

The Company entered into a Management Agreement effective May 31, 2021 for compensation to the principals of Nova in the form of an annual base salaries of $372,000 to one of the three doctors, $450,000 to the second, and $372,000 to the third doctor. Collectively, as a group, such principals will receive an annual cash bonus and stock equity set forth below, which will be conditioned upon the Company achieving 100% of the annual objectives of financial performance goals as set forth below.

Schedule of annual objectives of financial performance
Year	Minimum Annual Nova EBITDA	Cash Annual Bonus	Series J Preferred Stock
2022	$2.0M	$120,000	120,000 Shares
2022	$2.4M	$150,000	135,000 Shares
2023	$3.7M	$210,000	150,000 Shares
2024	$5.5M	$300,000	180,000 Shares
2025	$8.0M	$420,000	210,000 Shares

~~15.~~16.

LEGAL PROCEEDINGS

From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. Management is not currently aware of any such legal proceedings or claims that it believes will have a material adverse effect on the Company’s business, financial condition, or operating results.

~~16.~~

~~INCOME TAXES~~

~~Due to operating losses, there is no provision for current federal or state income taxes for the three months ended March 31, 2023 and 2022.~~

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.

~~At March 31, 2023 and December 31, 2022, the Company had federal and state net operating loss carry forwards of approximately~~ $~~22,429,214~~ ~~that expire in various years through the year 2039.~~

~~CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~MARCH 31, 2023 AND 2022~~

~~(UNAUDITED)~~

17.

SEGMENT REPORTING

The Company has ~~four~~three 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)	Tax Resolution Services (Platinum Tax)

	(2)	Real Estate (Edge View)

(3)

Healthcare (Nova)

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-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.

The Tax Resolution Services segment 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.

The Real Estate segment consists of Edge View, a real estate company that owns five (5) acres zoned medium density residential (MDR) with 12 lots already platted, six (6) acres zoned high-density residential (HDR) that can be platted in various configurations to meet current housing needs, and twelve (12) acres zoned in Lemhi County as Agriculture that is available for further annexation into the City of Salmon for development, as well as a common area for landowners to view wildlife, provide access to the Salmon River and fishing in a two (2) acre pond.

The Healthcare segment provides a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments, and nerves.

Schedule of segment reporting

March 31,
2023

December 31,
2022

Assets:
Financial Services $ 8,673 $ 8,577
Healthcare 13,595,507 12,692,531
Real Estate 592,461 592,557
Others 87,944 59,692
Consolidated assets $ 14,284,585 $ 13,353,357

3026

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH 31,~~FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

Three Months Ended March 31,
2023 2022
Revenues:
Financial Services $ 154,399 $ 464,843
Healthcare 2,706,399 2,432,307
Consolidated revenues $ 2,860,798 $ 2,897,150

Cost of Sales:
Financial Services $ 26,829 $ 212,446
Healthcare 956,295 903,782
Consolidated cost of sales $ 983,124 $ 1,116,228

Loss from operations from subsidiaries
Financial Services $ (43,987 ) $ (101,481 )
Healthcare 1,278,239 1,303,348
Real Estate (97 ) (825 )
Income from operations from subsidiaries $ 1,234,155 $ 1,201,042

Loss from operations from Cardiff Lexington $ (520,594 ) $ (479,559 )
Total income from operations $ 713,562 $ 721,483

Loss before taxes
Financial Services $ (45,490 ) $ (101,773 )
Healthcare 817,098 (797,140 )
Real Estate (97 ) (825 )
Corporate, administration and other non-operating expenses (787,502 ) (662,716 )
Consolidated loss before taxes $ (15,991 ) $ (1,562,454 )

Schedule of segment reporting
	June 30, 2023		December 31, 2022
Assets:
Financial Services	$	2,820	$	8,577
Healthcare		15,455,454		12,692,531
Real Estate		589,331		592,557
Others		5,914		59,692
Consolidated assets	$	16,053,519	$	13,353,357

	Three Months Ended June 30,
	2023			2022
Revenues:
Financial Services	$	118,304		$	472,014
Healthcare		3,364,506			2,619,218
Consolidated revenues	$	3,482,810		$	3,091,232

Cost of Sales:
Financial Services	$	21,297		$	112,776
Healthcare		1,081,689			983,842
Consolidated cost of sales	$	1,102,986		$	1,096,618

Income (Loss) from operations from subsidiaries
Financial Services	$	(43,269	)	$	11,361
Healthcare		2,106,551			1,481,055
Real Estate		(1,743	)		(1,688	)
Income from operations from subsidiaries	$	2,061,539		$	1,490,728

Loss from operations from Cardiff Lexington	$	(355,369	)	$	(388,717	)
Total income from operations	$	1,706,170		$	1,102,011

Income (Loss) before taxes
Financial Services	$	(43,810	)	$	(45,540	)
Healthcare		1,378,445			51,136
Real Estate		(1,743	)		(2,416	)
Corporate, administration and other non-operating expenses		(516,814	)		(65,006	)
Consolidated income (loss) before taxes	$	816,078		$	(61,826	)

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

	Six Months Ended June 30,
	2023			2022
Revenues:
Financial Services	$	272,703		$	936,857
Healthcare		6,070,905			5,051,525
Consolidated revenues	$	6,343,608		$	5,988,382

Cost of Sales:
Financial Services	$	48,126		$	325,222
Healthcare		2,037,983			1,887,624
Consolidated cost of sales	$	2,086,109		$	2,212,846

Income (Loss) from operations from subsidiaries
Financial Services	$	(87,256	)	$	(90,120	)
Healthcare		3,384,790			2,784,403
Real Estate		(1,840	)		(2,513	)
Income from operations from subsidiaries	$	3,295,694		$	2,691,770

Loss from operations from Cardiff Lexington	$	(875,962	)	$	(868,276	)
Total income from operations	$	2,419,732		$	1,823,494

Income (Loss) before taxes
Financial Services	$	(89,300	)	$	(91,030	)
Healthcare		2,195,542			868,234
Real Estate		(1,840	)		(2,513	)
Corporate, administration and other non-operating expenses		(1,304,315	)		(2,398,971	)
Consolidated income (loss) before taxes	$	800,087		$	(1,624,280	)

18.

SUBSEQUENT EVENTS

The Company has evaluated its operations subsequent to ~~March 31,~~June 30, 2023 to the date these condensed consolidated financial statements were issued and determined there was subsequent events or transactions the required recognition or disclosure in these consolidated financial statements.

On ~~May 25, 2023, the Company issued 3,150 shares of Series B Preferred Stock to Zia Choe, Interim Chief Financial Officer. These shares were fully vested upon grant.~~

~~On June 5,~~July 19, 2023, the Company executed a ~~seventh~~ninth tranche under ~~Convertible~~ Note 40 in the principal amount of ~~$136,667,~~$35,500, less an original issue discount and fee of ~~$39,167.~~$8,875 (See Note 10).

On ~~June 22,~~July 24, 2023, ~~8,200,562~~the Company issued 5,000 shares of series KE preferred stock ~~were cancelled~~as compensation for the property manager of Edge View in ~~connection with terminated acquisition~~exchange for the bonus of ~~Red Rock.~~$5,000.

On July 24, 2023, the Company executed a tenth tranche under Note 40 in the principal amount of $14,000, less an original issue discount and fee of $3,500 (See Note 10).

In July, the Company issued 156,000,000 shares of common stock upon conversion of certain convertible notes’ principal and accrued interests in the amount of $30,637 and $6,200, respectively.

On August 11, 2023, the Company executed a third tranche under Note 10 in the principal amount of $25,000 (See Note 10).

3128

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

On August 25, 2023, the Company issued a twelve-month convertible promissory note in the principal amount of $5,000 to the Company’s CEO for the Company’s operation expenses. The rate of interest is 10% per annum.

On September 29, 2023, the Company and its healthcare subsidiary entered into a two-year revolving purchase and security agreement with DML HC Series, LLC to sell the healthcare subsidiary’s accounts receivables for a revolving financing up to a maximum advance amount of $4.5 million. The Company received the first net cash advance in the amount of $861,071 on October 9, 2023 for the sale of accounts receivable and future claims in the amount of $1,428,571.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following management’s discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition. The following financial information is derived from our financial statements and should be read in conjunction with such financial statements and notes thereto set forth elsewhere herein.

Use of Terms

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,” “our” and “our company” are to Cardiff Lexington Corporation, a Nevada corporation, and its consolidated subsidiaries.

Special Note Regarding Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

	·	our ability to successfully identify and acquire additional businesses;
	·	our ability to effectively integrate and operate the businesses that we acquire;
	·	our expectations around the performance of our current businesses;
	·	our ability to maintain our business model and improve our capital efficiency;
	·	our ability to effectively manage the growth of our business;
	·	our lack of operating history and ability to attain profitability;
	·	the competitive environment in which our businesses operate;
	·	trends in the industries in which our businesses operate;
	·	the regulatory environment in which our businesses operate under;
	·	changes in general economic or business conditions or economic or demographic trends in the United States, including changes in interest rates and inflation;
	·	our ability to service and comply with the terms of indebtedness;
	·	our ability to retain or replace qualified employees of our businesses;
	·	labor disputes, strikes or other employee disputes or grievances;
	·	casualties, condemnation or catastrophic failures with respect to any of our business’ facilities;
	·	costs and effects of legal and administrative proceedings, settlements, investigations and claims; and
	·	extraordinary or force majeure events affecting the business or operations of our businesses.

In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2022. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

Overview

We are an acquisition holding company focused on locating undervalued and undercapitalized companies, primarily in the healthcare industry, and providing them capitalization and leadership to maximize the value and potential of their private enterprises while also providing diversification and risk mitigation for our stockholders. Specifically, we have and will continue to look at a diverse variety of acquisitions in the healthcare sector in terms of growth stages and capital structures and we intend to focus our portfolio of subsidiaries approximately as follows: 80% will be targeted to established profitable niche small to mid-sized healthcare companies and 20% will be targeted to second stage startups in healthcare and related financial services (emerging businesses with a strong organic growth plan that is materially cash generative).

All of our operations are conducted through, and our income derived from, our various subsidiaries. We operate the following businesses through our wholly owned subsidiaries.

	·	*Healthcare Business*. Nova Ortho and Spine, PLLC, or Nova, which we acquired May 31, 2021, operates a group of regional primary specialty and ancillary care facilities throughout Florida that provide traumatic injury victims with primary care evaluations, interventional pain management, and specialty consultation services. We focus on plaintiff related care are and a highly efficient provider of emergency medical condition, or EMC, assessments. We provide a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments, and nerves. From sports injuries, to sprains, strains, and fractures, our doctors are dedicated to helping patients return to active lifestyles.

	·	*Financial Services (Tax Resolution) Business*. Platinum Tax Defenders, or Platinum Tax, which we acquired on July 31, 2018, is a full-service tax resolution firm located in Los Angeles, California. Since 2011, we have been assisting all types of taxpayers resolve any and all issues with the IRS and applicable state tax agencies. We provide fee-based tax resolution services to individuals and companies that have federal and state tax liabilities by assisting clients to settle outstanding tax debts.

Real Estate Business. Edge View Properties, Inc., or Edge View, which we acquired on July 16, 2014, is a real estate company that owns five (5) acres zoned medium density residential (MDR) with 12 lots already platted, six (6) acres zoned high-density residential (HDR) that can be platted in various configurations to meet current housing needs, and twelve (12) acres zoned in Lemhi County as Agriculture that is available for further annexation into the City of Salmon for development, as well as a common area for landowners to view wildlife, provide access to the Salmon River and fishing in a two (2) acre pond. Salmon is known as Idaho’s premier whitewater destination as well as one of the easier accesses to the Frank Church Wilderness Area - the largest wilderness in the lower 48 states. Salmon’s airport has service to Boise, Idaho and serves as a hub to access whitewater rafting start points and wilderness landing strips. Management has invested years working to develop a new and exciting housing development in Salmon, Idaho and plans to enter into a joint venture agreement with a developer for this planned concept development.

We previously owned We Three,, LLC dba Affordable Housing Initiative, or AHI, which was acquired on May 15, 2014 and sold on October 31, 2022. AHI leased and sold mobile homes and also provided a “lease to own” option.

Segments

During the three months ~~March 31,~~ended June 30, 2023 and 2022, we had ~~four~~three reportable operating segments as determined by management using the “management approach” as defined by the authoritative guidance on Disclosures about Segments of an Enterprise and Related Information:

	(1)	Financial Services (Platinum Tax)

	(2)	Healthcare (Nova)

(3)

Real Estate (Edge View)

The financial services segment provides tax resolution services to individuals and companies that have federal and state tax liabilities. It collects fees based on efforts to negotiate and assist in the settlement of outstanding tax debts.

The healthcare segment provides a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments, and nerves.

Discontinued Operations

We and the managers of AHI entered into a resignation, release and buyback agreement and addendum, effective October 31, 2022, pursuant to which the managers purchased AHI in exchange for returning 175,045 shares of series F preferred stock. There was a loss on disposal in the amount of $217,769 on October 31, 2022, which represented net assets and liabilities at the time of sale back.

We had no net liabilities of discontinued operations at ~~March 31,~~June 30, 2023 and December 31, 2022. We had $0 and ~~$19,215~~$35,542 of loss from discontinued operations for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, respectively.

Results of Operations

Comparison of Three Months Ended ~~March 31,~~June 30, 2023 and 2022

The following table sets forth key components of our results of operations during the three months ended ~~March 31,~~June 30, 2023 and 2022, both in dollars and as a percentage of our revenue.

March 31, 2023 March 31, 2022
Amount
% of
Revenue
Amount
% of
Revenue

Revenue
Financial services $ 154,399 5.40% $ 464,843 16.04%
Healthcare 2,706,399 94.60% 2,432,307 83.96%
Total revenue 2,860,798 100.00% 2,897,150 100.00%
Cost of sales
Financial services 26,829 0.94% 212,446 7.33%
Healthcare 956,295 33.43% 903,782 31.20%
Total cost of sales 983,124 34.37% 1,116,228 38.53%
Gross profit 1,877,674 65.63% 1,780,922 61.47%
Operating expenses
Depreciation expense 4,635 0.16% 5,783 0.20%
Selling, general and administrative 1,159,478 40.53% 1,053,656 36.37%
Total operating expenses 1,164,113 40.69% 1,059,439 36.57%
Income from operations 713,561 24.94% 721,483 24.90%
Other income (expense)
Other income 205 0.01% – –
Gain on forgiveness of debt 390 0.01 – –
Penalties and fees (15,000 ) (0.52 )% – –
Interest expense and finance charge (695,164 ) (24.30 )% (2,220,176 ) (76.63 )%
Conversion cost penalty and reimbursement (2,000 ) (0.07 )% – –
Amortization of debt discounts (17,983 ) (0.63 )% (44,546 ) (1.54 )%
Total other income (expense) (729,552 ) (25.50 )% (2,264,722 ) (78.17 )%
Net loss before discontinued operations (15,991 ) (0.56 )% (1,543,239 ) (53.27 )%
Loss from discontinued operations – – (19,215 ) (0.66 )%
Net loss $ (15,991 ) (0.56 )% $ (1,562,454 ) (53.93 )%
Deemed dividends on preferred stock (336,811 ) (11.77 )% – –
Net loss attributable to common shareholders $ (352,802 ) (12.33 )% – –

	June 30, 2023					June 30, 2022
	Amount			% of Revenue		Amount			% of Revenue
Revenue
Financial services	$	118,304			3.40%	$	472,014			15.27%
Healthcare		3,364,506			96.60%		2,619,218			84.73%
Total revenue		3,482,810			100.00%		3,091,232			100.00%
Cost of sales
Financial services		21,297			0.61%		112,776			3.65%
Healthcare		1,081,689			31.06%		983,842			31.83%
Total cost of sales		1,102,986			31.67%		1,096,618			35.48%
Gross profit		2,379,824			68.33%		1,994,614			64.52%
Operating expenses
Depreciation expense		3,365			0.10%		5,783			0.19%
Selling, general and administrative		670,289			19.25%		866,213			28.02%
Total operating expenses		673,654			19.34%		871,996			28.21%
Income from operations		1,706,170			48.99%		1,122,618			36.32%
Other income (expense)
Other income		–			–		8			0.00%
Interest expense and finance charge		(844,459	)		(24.25)%		(1,035,811	)		(33.51)%
Penalties and fees		(15,000	)		(0.43)%		–			–
Amortization of debt discounts		(30,633	)		(0.88)%		(111,706	)		(3.61)%
Total other income (expense)		(890,092	)		(25.56)%		(1,147,509	)		(37.12)%
Net income (loss) before discontinued operations		816,078			24.43%		(24,891	)		(0.81)%
Loss from discontinued operations		–			–		(36,935	)		(1.19)%
Net income (loss)	$	816,078			24.43%	$	(61,826	)		(2.00)%

3532

Revenue. Our total revenue ~~decreased~~increased by ~~$36,352,~~$391,578, or ~~1.25%~~12.67%, to ~~$2,860,798~~$3,482,810 for the three months ended ~~March 31,~~June 30, 2023 from ~~$2,897,150~~$3,091,232 for the three months ended ~~March 31,~~June 30, 2022. Such ~~decrease~~increase was primarily due to ~~decreases in revenue from the financial services, offset by an increase~~increases in revenue from the healthcare segment.

The financial services segment generates revenue through the provision of tax resolution services to individuals and business owners. Revenue from the financial services segment decreased by ~~$310,444,~~$353,710, or ~~66.78%~~74.94%, to ~~$154,399~~$118,304 for the three months ended ~~March 31,~~June 30, 2023 from ~~$464,843~~$472,014 for the three months ~~ended March 31,~~June 30, 2022. Such decrease was primarily due to the loss of sales leads from the discontinued service with Optima Tax Relief, which affected the significant revenue reduction in the tax resolution business.

The healthcare segment generates revenue through a full range of diagnostic and surgical services. Revenue from the healthcare services segment increased by ~~$274,092,~~$745,288, or ~~11.27%~~28.45%, to ~~$2,706,399~~$3,364,506 for the three months ended ~~March 31,~~June 30, 2023 from ~~$2,432,307~~$2,619,218 for the three months ~~ended March 31,~~June 30, 2022. Such increase was primarily due to increased patients and Personal Injury Protection (PIP) services.

Cost of sales. Our total cost of sales ~~decreased~~increased by ~~$133,104,~~$6,368 or ~~11.92%~~0.58%, to ~~$983,124~~$2,379,824 for the three months ended ~~March 31,~~June 30, 2023 from ~~$1,116,228~~$1,994,614 for the three months ~~ended March 31,~~June 30, 2022. Such ~~decrease~~increase was primarily due a decrease from the financial service segment, offset by an increase from the healthcare segment. As a percentage of revenue, our total cost of sales was ~~34.37%~~31.67% and ~~38.53%~~35.48% for the three months ended ~~March 31,~~June 30, 2023 and 2022, respectively.

Cost of sales for the financial services segment consists of advertising, contract labor and merchant fees. Cost of sales for the financial services segment decreased by ~~$185,617,~~$91,479, or ~~87.37%~~81.12%, to ~~$26,829~~$21,297 for the three months ended ~~March 31,~~June 30, 2023 from ~~$212,446~~$112,776 for the three months ~~ended March 31,~~June 30, 2022. As a percentage of financial services revenue, cost of sales was ~~17.38%~~0.61% and ~~45.70%~~3.65% for the three months ended ~~March 31,~~June 30, 2023 and 2022, respectively. ~~Such decrease was generally in line with the decrease in revenue from this segment.~~

Cost of sales for the healthcare segment consists of surgical center fees, physician and professional fees, salaries and wages and medical supplies. Cost of sales from the healthcare services segment increased by ~~$52,513,~~$97,847, or ~~5.81%~~9.95%, to ~~$956,295~~$1,081,689 for the three months ended ~~March 31,~~June 30, 2023 from ~~$903,782~~$983,842 for the three months ~~ended March 31,~~June 30, 2022. As a percentage of healthcare revenue, cost of sales was ~~35.33%~~31.06% and ~~37.16%~~31.83% for the three months ended ~~March 31,~~June 30, 2023 and 2022, respectively. This ~~slight~~ increase was ~~primarily~~ due to increased ~~labor costs.~~surgical center fees and professional fees.

Gross profit. As a result of the foregoing, our total gross profit increased by ~~$96,752,~~$385,210, or ~~5.43%~~19.31%, to ~~$1,877,674~~$2,379,824 for the three months ended ~~March 31,~~June 30, 2023 from ~~$1,780,922~~$31,994,614 for three months ended ~~March 31,~~June 30, 2022. Our total gross margin (percent of revenue) was ~~65.63%~~68.33% and ~~61.47%~~64.52% for three months ended ~~March 31,~~June 30, 2023 and 2022, respectively.

Gross profit for the financial services segment decreased by ~~$124,827,~~$262,231, or ~~49.46%~~73.00%, to ~~$127,570~~$97,007 for the three months ended ~~March 31,~~June 30, 2023 from ~~$252,397~~$359,238 for the three months ~~ended March 31,~~June 30, 2022. Gross margin (percent of revenue) for the financial services segment was ~~82.62%~~82.00% and ~~54.30%~~76.11% for the three months ended ~~March 31,~~June 30, 2023 and 2022, respectively.

Gross profit for the healthcare services segment increased by ~~$221,579,~~$647,441, or ~~14.5%~~39.59%, to ~~$1,750,104~~$2,282,817 for the three months ended ~~March 31,~~June 30, 2023 from ~~$1,528,525~~$1,635,376 for the three months ended ~~March 31,~~June 30, 2022. Gross margin (percent of revenue) for the healthcare segment was ~~64.67%~~67.85% and ~~62.84% for the~~62.44% for the three months ended ~~March 31,~~June 30, 2023 and 2022, respectively. The increased gross margin was due to the increased number of patients and provided medical services without increased overhead. The healthcare segment still had available capacity to cover the increased patients and services.

Depreciation expense. Our depreciation expense was ~~$4,635,~~$3,365, or ~~0.16%~~0.10% of revenue, for the three months ~~ended March 31,~~June 30, 2023, as compared to $5,783, or ~~0.20%~~0.19% of revenue, for the three months ~~ended March 31,~~June 30, 2022.

Selling, general and administrative expenses. Our selling, general and administrative expenses consist primarily of accounting, auditing, legal and public reporting expenses, personnel expenses, including employee salaries and bonuses plus related payroll taxes, advertising expenses, professional advisor fees, bad debts, rent expense, insurance and other expenses incurred in connection with general operations. Our selling, general and administrative expenses ~~increased~~decreased by ~~$105,822,~~$195,924, or ~~10.04%~~22.62%, to ~~$1,159,478~~$670,289 for the three months ended ~~March 31,~~June 30, 2023 from ~~$1,053,656~~$866,213 for the three months ended ~~March 31,~~June 30, 2022. As a percentage of revenue, our selling, general and administrative expenses were ~~40.69%~~19.25% and ~~36.37%~~28.02% for the three months ended ~~March 31,~~June 30, 2023 and 2022, respectively. Such decrease was primarily due to terminated employees in the financial services segment due to the decreased revenue and the bad debt expense for allowances for doubtful accounts relating to our healthcare services business.

Total other income (expense). We had $890,092 in total other expense, net, for the three months ended June 30, 2023, as compared to other expense, net, of $1,147,509 for the three months ended June 30, 2022. Other expenses, net, for the three months ended June 30, 2023 consisted of interest expense and finance charges of $844,459, amortization of debt discounts of $30,633, and financing penalties and fees of $15,000. Other expense, net, for the three months ended June 30, 2022 consisted of interest expense and finance charges of $1,035,811, and amortization of debt discounts of $111,706, offset by other income of $8.

Discontinued operations. For the three months ended June 30, 2023 and 2022, we recorded a loss from discontinued operations of $0 and $36,935, respectively.

Net income (loss). As a result of the cumulative effect of the factors described above, our net income was $816,078 for the three months ended June 30, 2023, as compared to net loss of $61,826 for the three months ended June 30, 2022, an increase of $754,252, or 1219.96%.

Comparison of Six Months Ended June 30, 2023 and 2022

The following table sets forth key components of our results of operations during the six months ended June 30, 2023 and 2022, both in dollars and as a percentage of our revenue.

	June 30, 2023					June 30, 2022
	Amount			% of Revenue		Amount			% of Revenue
Revenue
Financial services	$	272,703			4.30%	$	936,857			15.64%
Healthcare		6,070,905			95.70%		5,051,525			84.36%
Total revenue		6,343,608			100.00%		5,988,382			100.00%
Cost of sales
Financial services		48,126			0.76%		325,222			5.43%
Healthcare		2,037,983			32.13%		1,887,624			31.52%
Total cost of sales		2,086,109			32.89%		2,212,846			36.95%
Gross profit		4,257,499			67.11%		3,775,536			63.05%
Operating expenses
Depreciation expense		8,000			0.13%		11,566			0.19%
Selling, general and administrative		1,829,768			28.84%		1,940,477			32.40%
Total operating expenses		1,837,768			28.97%		1,952,043			32.60%
Income from operations		2,419,731			38.14%		1,823,493			30.45%
Other income (expense)
Other income		205			0.00%		8			0.00%
Gain on forgiveness of debt		390			0.00%		–			–
Interest expense & finance charge		(1,539,623	)		(24.27)%		(3,255,987	)		(54.37)%
Conversion cost penalty and reimbursement		(2,000	)		(0.00)%		–			–
Penalties and fees		(30,000	)		(0.47)%		–			–
Amortization of debt discounts		(48,616	)		(0.77)%		(156,252	)		(2.61)%
Total other income (expense)		(1,619,644	)		(25.53)%		(3,412,231	)		(56.98)%
Net income (loss) before discontinued operations		800,087			12.61%		(1,588,738	)		(26.53)%
Income (loss) from discontinued operations		–			0.00%		(35,542	)		(0.59)%
Net loss	$	800,087			12.61%	$	(1,624,280	)		(27.12)%

Revenue. Our total revenue increased by $355,226, or 5.93%, to $6,343,608 for the six months ended June 30, 2023 from $5,988,382 for the six months ended June 30, 2022. Such increase was primarily due to increases in revenue from the healthcare segment.

Revenue from the financial services segment decreased by $664,154, or 70.89%, to $272,703 for the six months ended June 30, 2023 from $936,857 for the six months ended June 30, 2022. Such decrease was primarily due to the loss of sales leads from the discontinued service with Optima Tax Relief, which affected the significant revenue reduction in the tax resolution business.

Revenue from the healthcare services segment increased by $1,019,380, or 20.18%, to $6,070,905 for the six months ended June 30, 2023 from $5,051,525 for the six months ended June 30, 2022. Such increase was primarily due to increased Personal Injury Protection (PIP) services.

Cost of sales. Our total cost of sales decreased by $126,737 or 5.73%, to $2,086,109 for the six months ended June 30, 2023 from $2,212,846 for the six months ended June 30, 2022. Such decrease was primarily due a decrease from the financial service segment, offset by an increase from the healthcare segment. As a percentage of revenue, our total cost of sales was 32.89% and 36.95% for the six months ended June 30, 2023 and 2022, respectively.

Cost of sales for the financial services segment decreased by $277,096, or 85.20%, to $48,126 for the six months ended June 30, 2023 from $325,222 for the six months ended June 30, 2022. As a percentage of financial services revenue, cost of sales was 0.76% and 5.43% for the six months ended June 30, 2023 and 2022, respectively.

Cost of sales from the healthcare services segment increased by $150,359, or 7.97%, to $2,037,983 for the six months ended June 30, 2023 from $1,887,624 for the six months ended June 30, 2022. As a percentage of healthcare revenue, cost of sales was 32.13% and 31.52% for the six months ended June 30, 2023 and 2022, respectively. This increase was generally in line with the increase in revenue from this segment.

Gross profit. As a result of the foregoing, our total gross profit increased by $481,963, or 12.77%, to $4,257,499 for the six months ended June 30, 2023 from $3,775,536 for six months ended June 30, 2022. Our total gross margin (percent of revenue) was 67.11% and 63.05% for six months ended June 30, 2023 and 2022, respectively.

Gross profit for the financial services segment decreased by $387,058, or 63.28%, to $224,577 for the six months ended June 30, 2023 from $611,635 for the six months ended June 30, 2022. Gross margin (percent of revenue) for the financial services segment was 82.35% and 65.29% for the six months ended June 30, 2023 and 2022, respectively.

Gross profit for the healthcare services segment increased by $869,021, or 27.47%, to $4,032,922 for the six months ended June 30, 2023 from $3,163,901 for the six months ended June 30, 2022. Gross margin (percent of revenue) for the healthcare segment was 66.43% and 62.63% for the six months ended June 30, 2023 and 2022, respectively. The increased gross margin was due to the increased number of patients and provided medical services without increased overhead. The healthcare segment still had available capacity to cover the increased patients and services.

Depreciation expense. Our depreciation expense was $8,000, or 0.13% of revenue, for the six months ended June 30, 2023, as compared to $11,566, or 0.19% of revenue, for the six months ended June 30, 2022.

Selling, general and administrative expenses. Our selling, general and administrative expenses decreased by $110,709, or 5.71%, to $1,829,768 for the six months ended June 30, 2023 from $1,940,477 for the six months ended June 30, 2022. As a percentage of revenue, our selling, general and administrative expenses were 28.97% and 32.40% for the six months ended June 30, 2023 and 2022, respectively. Such decrease was primarily due to terminated employees in the financial services segment due to the decreased revenue and the bad debt expense for allowances for doubtful accounts relating to our healthcare services business.

3635

Total other income (expense). We had ~~$729,552~~$1,619,644 in total other expense, net, for the ~~three~~six months ended ~~March 31,~~June 30, 2023, as compared to other expense, net, of ~~$2,264,722~~$3,412,231 for the ~~three~~six months ended ~~March 31,~~June 30, 2022. Other expense, net, for the ~~three~~six months ended ~~March 31,~~June 30, 2023 consisted of interest expense and finance charges of ~~$695,164,~~$1,539,623, amortization of debt discounts of ~~$17,983,~~$48,616, financing penalties and fees of ~~$15,000~~$30,000 and conversion cost penalty and reimbursement related to convertible note of $2,000, offset by other income of $595. Other ~~expense,~~expenses, net, for the ~~three~~six months ended ~~March 31,~~June 30, 2022 consisted of interest expense and finance charges of ~~$2,220,176~~$3,255,987 and amortization of debt discounts of ~~$44,546.~~$156,252, offset by other income of $8.

Discontinued operations. For the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, we recorded a loss from discontinued operations of $0 and ~~$19,215,~~$35,542, respectively.

Net ~~loss~~income (loss). As a result of the cumulative effect of the factors described above, our net ~~loss~~income was ~~$15,991~~$800,087 for the ~~three~~six months ended ~~March 31,~~June 30, 2023, as compared to net loss of ~~$1,562,454~~$1,624,280 for the ~~three~~six months ended ~~March 31,~~June 30, 2022, an increase of ~~$1,546,463,~~$2,424,367, or ~~98.98%~~149.26%.

Liquidity and Capital Resources

As of ~~March 31,~~June 30, 2023, we had ~~$350,329~~$411,209 in cash. To date, we have financed our operations primarily through revenue generated from operations, sales of securities, advances from stockholders and third-party and related party debt.

We believe, based on our operating plan, that current working capital and current and expected additional financing should be sufficient to fund operations and satisfy our obligations as they come due for at least one year from the financial statement issuance date. However, additional funds from new financing and/or future equity raises are required for continued operations and to execute our business plan and our strategy of acquiring additional businesses. The funds required to sustain operations ranges between $600,000 to $1 million and additional funds execute our business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase price of a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one of our subsidiaries. Given these factors, we believe that the amount of outside additional capital necessary to execute our business plan on the low end (assuming target company sellers accept a significant portion of the purchase price in the form of seller notes or our equity or equity in one of our subsidiaries) ranges between $5 million to $7 million. If, and to the extent, that sellers are unwilling to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan could be as much as $10 million.

We intend to raise capital for additional acquisitions primarily through equity and debt ~~financings.~~financing. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. There is no guarantee that we will be able to acquire additional businesses under the terms outlined above.

Summary of Cash Flow

The following table provides detailed information about our net cash flow for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022.

Three Months Ended March 31,
2023 2022
Net cash used in operating activities from continuing operations $ (189,507 ) $ (376,453 )
Net cash from discontinued operations – 19,215
Net cash provided by financing activities 313,034 300,307
Net change in cash 123,527 (56,931 )
Cash and cash equivalents at beginning of period 226,802 595,987
Cash and cash equivalents at end of period $ 350,329 $ 539,056

	Six Months Ended June 30,
	2023			2022
Net cash used in operating activities from continuing operations	$	(304,173	)	$	(473,175	)
Net cash from discontinued operations		–			35,542
Net cash provided by financing activities		488,580			450,708
Net change in cash		184,407			13,075
Cash and cash equivalents at beginning of period		226,802			595,987
Cash and cash equivalents at end of period	$	411,209		$	609,062

Our net cash used in operating activities from continuing operations was ~~$189,507~~$304,173 for the ~~three~~six months ended ~~March 31,~~June 30, 2023, as compared to ~~$376,453~~$473,175 for the ~~three~~six months ended ~~March 31,~~June 30, 2022. For the ~~three~~six months ended ~~March 31,~~June 30, 2023, our net ~~loss~~income of ~~$15,991,~~$800,087, an increase in accounts payable and accrued expenses of $693,788, an increase in accrued officer’s compensation of $334,000, an increase in accrued interest of $248,137, an increase in bad debt expense of $270,000 and fair value settled upon conversion of $123,566, ~~accounts payable and accrued expenses of $241,945, an increase in accrued officer’s compensation of $154,000 and an increase in accrued interest of $123,074,~~ offset by ana decrease in accounts receivable of ~~$1,111,636,~~$2,858,749, were the primary drivers for the cash used in operations. For the ~~three~~six months ended ~~March 31,~~June 30, 2022, our net loss of ~~$1,562,454~~$1,624,280 and a ~~increase~~decrease in accounts receivable of ~~$343,840,~~$192,425, offset by increased accounts payable and accrued expense of ~~$569,508~~$699,107 an increase in accrued interest of $252,634 and an increase in accrued officers’ compensation of ~~$120,000,~~$240,000, were the primary drivers for the cash used in operations.

We had no investing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022.

Our net cash provided by financing activities was ~~$313,034~~$488,580 for the ~~three~~six months ended ~~March 31,~~June 30, 2023, as compared to ~~$300,307~~$450,708 for the ~~three~~six months ended ~~March 31,~~June 30, 2023. Net cash provided by ~~operating~~financing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2023 consisted of proceeds from convertible notes payable of ~~$240,000,~~$355,500, proceeds from related party notes payable of ~~$54,000~~$124,696 and proceeds from line of credit of ~~$37,000,~~$43,880, offset by repayments of line of credit of ~~$16,381,~~$30,160 and payment of related party notes payable of ~~$835 and payment of the SBA loan described below of $750.~~$5,336. Net cash provided by financing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2022 consisted of proceeds from convertible notes payable of ~~$405,730~~$555,730 and proceeds from related party notes payable of ~~$4,803,~~$7,948, offset by preferred stock dividends of ~~$102,746,~~$100,477, repayment of convertible notes payable of $5,908, payment of related party notes payable of ~~$816~~$5,065 and payment of the SBA loan described below of ~~$756.~~$1,520.

Convertible Notes

As of ~~March 31,~~June 30, 2023, we had convertible debt outstanding net of amortized debt discount of ~~$3,717,936.~~$3,868,068. During the ~~three~~six months ended ~~March 31,~~June 30, 2023, we received net proceeds of ~~$240,000~~$355,500 from convertible notes and converted $58,800 of convertible debt, $5,873 in accrued interest and ~~$1,390~~$2,000 in penalties and fees into 118,682,378 shares of common stock. The Company recognized $123,566 of interest expense and additional paid-in capital to adjust fair value for the debt settlement during the ~~three~~six months ended ~~March 31,~~June 30, 2023. For the ~~three~~six months ended ~~March 31,~~June 30, 2023, ~~and 2022,~~ we recorded amortization of debt discounts of ~~$17,983 and $44,546, respectively.~~$48,616.

The following is a schedule of convertible notes payable outstanding as of ~~March 31,~~June 30, 2023:

Note #
Issuance
Date

Maturity
Date

Principal
Balance

Accrued
Interest

Unamortized Debt
Discount

9 09/12/2016 09/12/2017 50,080 16,627 –
10 01/24/2017 1/24/2018 55,000 72,588 –
10-1 02/10/2023 02/10/2024 50,000 1,007 –
10-2 03/30/2023 03/30/2024 25,000 10
29-2 11/08/2019 11/08/2020 36,604 22,326 –
31 08/28/2019 08/28/2020 – 8,385 –
37-1 09/03/2020 06/30/2021 113,666 38,801 –
37-2 11/02/2020 08/31/2021 113,167 37,533 –
37-3 12/29/2020 09/30/2021 113,167 36,497 –
38 02/09/2021 02/09/2022 47,200 31,260 –
39 04/26/2021 04/26/2022 168,866 48,844 –
40-1 09/22/2022 09/22/2023 2,600,000 131,342 –
40-2 11/04/2022 11/04/2023 68,666 2,765 10,253
40-3 11/28/2022 11/28/2023 68,667 2,313 11,382
40-4 12/21/2022 12/21/2023 68,667 1,880 12,464
40-5 01/24/2023 01/24/2024 90,166 1,630 19,387
40-6 03/21/2023 03/21/2024 138,167 379 35,661
$ 3,807,083 $ 454,578 $ 89,147

Note #		Issuance Date	Maturity Date	Principal Balance		Accrued Interest		Unamortized Debt Discount
	9	09/12/2016	09/12/2017		50,080		19,124		–
	10	01/24/2017	1/24/2018		55,000		75,331		–
	10-1	02/10/2023	02/10/2024		50,000		2,877		–
	10-2	03/30/2023	03/30/2024		25,000		945
	29-2	11/08/2019	11/08/2020		36,604		24,516		–
	31	08/28/2019	08/28/2020		–		8,385		–
	37-1	09/03/2020	06/30/2021		113,667		48,902		–
	37-2	11/02/2020	08/31/2021		113,167		47,611		–
	37-3	12/29/2020	09/30/2021		113,166		46,575		–
	38	02/09/2021	02/09/2022		47,200		33,849		–
	39	04/26/2021	04/26/2022		168,866		58,106		–
	40-1	09/22/2022	09/22/2023		2,600,000		196,164		–
	40-2	11/04/2022	11/04/2023		68,666		4,477		5,973
	40-3	11/28/2022	11/28/2023		68,667		4,025		7,102
	40-4	12/21/2022	12/21/2023		68,667		3,592		8,184
	40-5	01/24/2023	01/24/2024		90,166		3,878		13,486
	40-6	03/21/2023	03/21/2024		139,166		3,851		26,520
	40-7	6/5/2023	6/5/2024		139,166		953		34,155
	40-8	6/13/2023	6/13/2024		21,167		99		4,926
				$	3,968,415	$	583,260	$	100,347

Note 9. On September 12, 2016, we issued a convertible promissory note in the principal amount of $80,000 for services rendered, which matured on September 12, 2017. Note 9 is currently in default and accrues interest at a default interest rate of 20% per annum.

Notes 10, 10-1 and 10-2. On January 24, 2017, we issued a convertible promissory note in the principal amount of $80,000 for services rendered, which matured on January 24, 2018. Note 10 is currently in default and accrues interest at a default interest rate of 20% per annum. On February 10, 2023, we executed a second tranche under this note in the principal amount of $50,000 (Note 10-1). On March 30, 2023, we executed a third tranche under this note in the principal amount of $25,000 (Note 10-2). Notes 10-1 and 10-2 accrue interest at a rate of 15% per annum.

Note 29-2. On May 10, 2019, we issued a convertible promissory note in the principal amount of $150,000. On November 8, 2019, this note (Note 29) was purchased by and assigned to an unrelated party. The amount assigned was the existing principal amount of $150,000 and accrued interest of $5,917.81, which was issued as Note 29-1, plus a new convertible promissory note in the principal amount of $62,367.12, which was issued as Note 29-2. Note 29-2 is currently in default and accrues interest at a default interest rate of 24% per annum.

Note 31. On August 28, 2019, we issued a convertible promissory note in the principal amount of $120,000, which matured on August 28, 2020. Note 31 is currently in default and accrues interest at a default interest rate of 24% per annum.

Notes 37-1, 37-2 and 37-3. On September 3, 2020, we issued a convertible promissory note in the principal amount of $200,000, with an original issue discount of $50,000, which could be drawn in several tranches. On September 3, 2020, we executed the first tranche in the principal amount of $67,000, less an original issue discount of $17,000, which matured on June 30, 2021 (Note 37-1). On November 2, 2020, we executed the second tranche in the principal amount of $66,500, less an original issue discount of $16,500, which matured on August 31, 2021 (Note 37-2). On December 29, 2020, we executed the third tranche in the principal amount of $66,500, less an original issue discount of $16,500, which matured on September 30, 2021 (Note 37-3). Notes 37-1, 37-2 and 27-3 are currently in default and accrue interest at a default interest rate of 18% per annum.

Note 38. On February 9, 2021, we issued a convertible promissory note in the principal amount $103,500, which matured on February 9, 2022. Note 38 is currently in default and accrues interest at a default interest rate of 22% per annum.

Note 39. On April 26, 2021, we issued a convertible promissory note in the principal amount $153,500, which matured on May 10, 2022. Note 39 is currently in default and accrues interest at a default interest rate of 22% per annum.

~~Notes~~Note 40-1 ~~40-2, 40-3, 40-4, 40-5 and 40-6~~through 40-8. On September 22, 2022, we issued a convertible promissory note in the principal amount of $2,600,000 in exchange for total of $4,791,099 of defaulted promissory notes balances (Note 40-1). On November 4, 2022, we executed a second tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-2). On November 28, 2022, we executed the third tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-3). On November 28, 2022, we executed a fourth tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-4). On January 24, 2023, we executed a fifth tranche under this note in the principal amount of ~~$88,667,~~$90,166, less an original issue discount and fee of $25,166 (Note 40-5). On March 21, 2023, we executed a sixth tranche under this note in the principal amount of $136,666, less an original issue discount and fee of $39,166 (Note 40-6). On June 5, 2023, we executed a seventh tranche under this note in the principal amount of $136,667, less original issue discount and fee of $39,167 (Note 40-7). On June 13, 2023, we executed an eighth tranche under this note in the principal amount of $21,167, less original issue discount and fee of $5,167 (Note 40-8). All of the Note 40 tranches mature in one year from the note issuance date and accrue interest at a rate of 10% per annum.

Line of Credit

In February 2018, we entered into a revolving line of credit with a financial institution for $92,500 which was personally guaranteed by the manager of Platinum Tax. The loan accrues interest at ~~11.20%~~11.70% as of ~~March 31,~~June 30, 2023. As of ~~March 31,~~June 30, 2023, the outstanding balance was ~~$20,619.~~$8,749.

Small Business Administration Loan

On June 2, 2020, we obtained a loan from the U.S. Small Business Administration, or SBA, in the principal amount of $150,000 with an interest rate of 3.75% and a maturity date of June 2, 2050. We reclassified $5,723 of accrued interest to the principal amount for the ~~three~~six months ended ~~March 31,~~June 30, 2023. The principal balance and accrued interest at ~~March 31,~~June 30, 2023 was ~~$149,633~~$149,580 and $0, respectively.

Debenture

On March 12, 2009, we issued a debenture in the principal amount of $20,000. The debenture bears interest at 12% per annum and matured on September 12, 2009. The balance of the debenture was $10,989 at ~~March 31,~~June 30, 2023 and the accrued interest was ~~$6,554.~~$6,882. We assigned all of our receivables from consumer activations of our rewards program as collateral on this debenture.

Related Party Loans

From time to time, the previous owner and current manager of Platinum Tax loaned funds to Platinum Tax to cover short term operating needs. The amount owed as of ~~March 31,~~June 30, 2023 was ~~$90,189.~~$156,384.

In connection with the acquisition of Edge View on July 16, 2014, we assumed amounts due to previous owners who are current managers of Edge View. These amounts are due on demand and do not bear interest. The balance of these amounts are $4,979 as of ~~March 31,~~June 30, 2023.

We have obtained short-term advances from the Chairman of the Board that are non-interest bearing and due on demand. As of ~~March 31,~~June 30, 2023, we owed the Chairman $123,192.

Critical Accounting Policies

The preparation of our unaudited condensed consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a regular basis, we evaluate these estimates. These estimates are based on management’s historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

For a description of the accounting policies that, in management’s opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgment or estimates were made, materially affect our reported financial position, results of operations, or cash flows, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission, or the SEC, on June 6,30, 2023.

Off Balance Sheet Arrangements

As of ~~March 31,~~June 30, 2023, we had no off-balance sheet arrangements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of ~~March 31,~~June 30, 2023. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that, because of the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which we are still in the process of remediating as of ~~March 31,~~June 30, 2023, our disclosure controls and procedures were not effective. Specifically, we did not design and maintain effective controls related to separation of duties as it relates to the preparation and review of financial statements and monitoring, documenting over internal control procedures and environment. Investors are directed to Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for the description of these weaknesses.

Remediation of Material Weaknesses in Internal Control Over Financial Reporting

We have evaluated the material weakness described above and our management and board of directors are committed to the design and successful implementation of internal control over financial reporting as promptly as possible. We currently plan to evaluate our updated internal controls design and determine whether the controls have operated effectively during the year ended of 2023 in order to fully remediate the aforementioned material weakness in our internal control over financial reporting.

As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, our management has identified the steps necessary to address the material weaknesses, and in the ~~first~~second quarter of 2023, we continued to implement the following remedial procedures:

	·	We plan to make necessary changes by providing training to our financial team and our other relevant personnel on the GAAP accounting guidelines applicable to financial reporting requirements.

	·	We plan to implement proper documentation procedures for key functional areas, control objectives and our workflows.

	·	We plan to reinforce effective compensating controls can improve the design of the current process with limited human resources.

	·	We plan to develop a more comprehensive review process over our accounting policies and procedures to ensure that all required disclosures are included in our consolidated financial statements.

We plan to perform a review of key business process controls related to high-risk financial statement accounts, such as revenue, accounts receivables, convertible notes, and significant transactions, which resulted in addition of newly developed documented control activities, in order to mitigate material weakness and strengthen the overall control environments.

We intend to complete the remediation of the material weaknesses discussed above as soon as practicable, but we can give no assurance that we will be able to do so. Designing and implementing an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our reporting obligations. The remedial measures that we have taken and intend to take may not fully address the material weaknesses that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.

Changes in Internal Control Over Financial Reporting

Other than in connection with the implementation of the remedial measures described above, there were no changes in our internal controls over financial reporting during the ~~first~~second quarter of 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4240

PART II

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

ITEM 1A.

RISK FACTORS.

Not applicable.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any equity securities during the three months ended ~~March 31,~~June 30, 2023 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter.

We did not repurchase any of our common shares during the three months ended ~~March 31,~~June 30, 2023.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5.

OTHER INFORMATION.

None.

ITEM 6.

EXHIBITS.

Exhibit No.		Description of Exhibit
3.1		Articles of Incorporation Cardiff Lexington Corporation, as amended (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K filed on June 6, 2023)
3.2		Certificate of Designation of Series N Senior Convertible Preferred Stock (incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K filed on June 6, 2023)
3.3		Amended and Restated Bylaws of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed on June 6, 2023)
4.1		Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to SILAC Insurance Company on May 21, 2021 (incorporated by reference to Exhibit 4.2 to the Annual Report on Form 10-K filed on June 6, 2023)
31.1*		Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certifications of Principal Financial and Accounting Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certifications of Principal Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certifications of Principal Financial and Accounting Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

______________

*Filed herewith

** Furnished herewith

4341

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~June 29,~~October 25, 2023	CARDIFF LEXINGTON CORPORATION

	/s/ Alex Cunningham
	Name: Alex Cunningham
	Title: Chief Executive Officer
	(Principal Executive Officer)

	/s/ Zia Choe
	Name: Zia Choe
	Title: Interim Chief Financial Officer
	(Principal Financial and Accounting Officer)

4442


	March 31, 2023			December 31, 2022

ASSETS
Current assets
Cash	$	350,329		$	226,802
Accounts receivable-net		7,446,416			6,604,780
Prepaid and other current assets		5,000			5,000
Total current assets		7,801,745			6,836,582

Property and equipment, net		50,804			55,439
Land		540,000			540,000
Goodwill		5,666,608			5,666,608
Right of use - assets		189,626			218,926
Due from related party		4,979			4,979
Other assets		30,823			30,823
Total assets	$	14,284,585		$	13,353,357

LIABILITIES, MEZZANINE EQUITY AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expense	$	2,070,490		$	2,038,595
Accrued expenses - related parties		3,904,557			3,750,557
Accrued interest		461,307			350,267
Right of use - liability		140,777			142,307
Due to director & officer		123,192			123,192
Notes payable		36,596			15,809
Notes payable - related party		90,189			37,024
Convertible notes payable, net of debt discounts of $87,147 and $46,797, respectively		3,717,936			3,515,752
Total current liabilities		10,545,044			9,973,503

Other liabilities
Notes payable		144,646			139,789
Operating lease liability – long term		55,408			84,871
Total liabilities		10,745,097			10,198,163

Mezzanine equity
Redeemable Series N Senior Convertible Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $4.00, 868,058 shares issued and outstanding at March 31, 2023 and December 31, 2022		3,578,656			3,125,002
Redeemable Series X Senior Convertible Preferred Stock - 5,000,000 shares authorized, $0.001 par value, stated value $4.00, 375,000 shares issued and outstanding at March 31, 2023 and December 31, 2022		1,593,205			1,500,000
Total Mezzanine Equity		5,171,861			4,625,002

Stockholders' equity (deficit)
Series B Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $4.00, 2,131,328 shares issued and outstanding at March 31, 2023 and December 31, 2022		8,525,313			8,525,313
Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value $4.00, 122 shares issued and outstanding at March 31, 2023 and December 31, 2022		488			488
Series E Preferred Stock - 1,000,000 shares authorized, $0.001 par value, stated value $4.00, 150,750 shares issued and outstanding at March 31, 2023 and December 31, 2022		603,000			603,000
Series F-1 Preferred Stock - 800,000 shares authorized, $0.001 par value, stated value $4.00, 35,752 shares issued and outstanding at March 31, 2023 and December 31, 2022		143,008			143,008
Series I Preferred Stock - 500,000,000 shares authorized, $0.001 par value, 14,885,000 shares issued and outstanding at March 31, 2023 and December 31, 2022		59,540,000			59,540,000
Series J Preferred Stock - 10,000,000 shares authorized, $0.001 par value, stated value $4.00, 1,713,584 shares issued and outstanding at March 31, 2023 and December 31, 2022		6,854,336			6,854,336
Series K Preferred Stock - 10,937,500 shares authorized, $0.001 par value, 8,200,562 shares issued and outstanding at March 31, 2023 and December 31, 2022		8,201			8,201
Series L Preferred Stock - 100,000,000 shares authorized, $0.001 par value, stated value $4.00, 319,493 shares issued and outstanding at March 31, 2023 and December 31, 2022		1,277,972			1,277,972
Series R Preferred Stock - 5,000 shares authorized, $0.001 par value, stated value of $1,200, 165 shares issued and outstanding at March 31, 2023 and December 31, 2022		198,000			198,000
Common Stock - 7,500,000,000 shares authorized, $0.001 par value; 908,479,113 and 789,796,735 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		908,378			789,696
Additional paid-in capital		(8,482,814	)		(8,554,368	)
Accumulated deficit		(71,208,254	)		(70,855,453	)
Total stockholders' equity (deficit)		(1,632,373	)		(1,469,808	)
Total liabilities, mezzanine equity and stockholders' equity	$	14,284,585		$	13,353,357


	Three Months Ended March 31,
	2023			2022 (Restated)
REVENUE
Financial services	$	154,399		$	464,843
Healthcare		2,706,399			2,432,307
Total revenue		2,860,798			2,897,150

COST OF SALES
Financial services		26,829			212,446
Healthcare		956,295			903,782
Total cost of sales		983,124			1,116,228

GROSS PROFIT		1,877,674			1,780,922

OPERATING EXPENSES
Depreciation expense		4,635			5,783
Selling, general and administrative		1,159,478			1,053,656
Total operating expenses		1,164,113			1,059,439

INCOME FROM OPERATIONS		713,561			721,483

OTHER INCOME (EXPENSE)
Other income		205			–
Gain on forgiveness of debt		390			–
Penalties and fees		(15,000	)		–
Interest expense and finance charge		(695,164	)		(2,220,176	)
Conversion cost penalty and reimbursement		(2,000	)		–
Amortization of debt discounts		(17,983	)		(44,546	)
Total other income (expense)		(729,552	)		(2,264,722	)

NET LOSS BEFORE DISCONTINUED OPERATIONS		(15,991	)		(1,543,239	)
LOSS FROM DISCONTINUED OPERATIONS		–			(19,215	)
NET LOSS FOR THE PERIOD	$	(15,991	)	$	(1,562,454	)
DEEMED DIVIDENDS ON PREFERRED STOCK		(336,811	)		–
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(352,802	)	$	(1,562,454	)

BASIC LOSS PER SHARE
Continuing operations	$	0.00		$	(0.01	)
Discontinued operations	$	0.00		$	(0.00	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES - BASIC AND DILUTED		871,989,778			166,130,069


	Preferred Stock Series A, I, K			Preferred Stock Series B, D, E, F, F-1, G, H, L			Preferred Stock Series C and R			Treasury Stock
	Shares		Amount	Shares		Amount	Shares		Amount	Shares			Amount
Balance December 31, 2021 (Restated)	23,085,563	$	59,548,201	3,595,952	$	14,383,808	287	$	198,488	(619,345	)	$	(4,967,686	)
Dividend to preferred stock	–		–	–		–	–		–	–			–
Net loss	–		–	–		–	–		–	–			–
Balance, March 31, 2022 (Restated)	23,085,563	$	59,548,201	3,595,952	$	14,383,808	287	$	198,488	(619,345	)	$	(4,967,686	)

Balance December 31, 2022	23,085,563	$	59,548,201	4,350,907	$	17,403,628	287	$	198,488	–		$	–
Conversion of convertible notes payable	–		–	–		–	–		–	–			–
Dividend to preferred stock	–		–	–		–	–		–	–			–
Net loss	–		–	–		–	–		–	–			–
Balance, March 31, 2023	23,085,563	$	59,548,201	4,350,907	$	17,403,628	287	$	198,488	–		$	–

	Impact of correction of error
Three months ended March 31, 2022 (Unaudited)	As previously reported			Adjustments			As restated

Revenue	$	2,940,994		$	(43,844	)	$	2,897,150
Cost of sales		1,135,702			(19,474	)		1,116,228
Gross margin		1,805,292			(24,370	)		1,780,922
Operating expense		1,081,928			(22,489	)		1,059,439
Income from operations	$	723,364		$	(1,881	)	$	721,483
Other income (expense), net		(1,193,196	)		(1,071,526	)		(2,264,722	)
Net loss before discontinued operations		(469,832	)		(1,073,407	)		(1,543,239	)
Loss from discontinued operations		(16,622	)		(2,593	)		(19,215	)
Net loss	$	(486,454	)	$	(1,076,000	)	$	(1,562,454	)
Basic Loss per Share
Continued Operations		(0.01	)					(0.01	)
Discontinued Operations		0.01						–
Weighted Average Shares Outstanding - Basic Earnings Loss per Share
Continued Operations		166,130,069						128,021,527
Discontinued Operations		166,130,069						128,021,527

Schedule of convertible notes details
Note #	Issuance	Maturity	Principal Balance 12/31/22		New Loan		Principal Conversions			Shares Issued Upon Conversion		Principal Balance 3/31/23		Accrued Interest on Convertible Debt at 12/31/22		Interest Expense On Convertible Debt For the Period Ended 3/31/23		Accrued Interest on Convertible Debt at 3/31/23		Unamortized Debt Discount At 3/31/23
7-1	10/28/2016	10/28/2017		10,000	$	–	$	(10,000	)		23,405,455	$	–	$	2,263	$	–	$	–	$	–
9	9/12/2016	9/12/2017		50,080		–		–			–		50,080		14,157		2,470		16,627		–
10	1/24/2017	1/24/2018		55,000		–		–			–		55,000		69,876		2,712		72,588		–
10-1	2/10/2023	2/10/2024		–		50,000		–			–		50,000		–		1,007		1,007		–
10-2	3/30/2023	3/30/2024		–		25,000		–			–		25,000		–		10		10		–
29-2	11/8/2019	11/8/2020		36,604		–		–			–		36,604		20,160		2,166		22,326		–
31	8/28/2019	8/28/2020		–		–		–			–		–		8,385		–		8,385		–
37-1	9/3/2020	6/30/2021		113,667		–		–			–		113,667		28,756		5,045		38,801		–
37-2	11/2/2020	8/31/2021		113,167		–		–			–		113,167		27,510		5,023		37,533		–
37-3	12/29/2020	9/30/2021		113,166		–		–			–		113,166		26,474		5,023		36,497		–
38	2/9/2021	2/9/2022		96,000		–		(48,800	)		85,276,923		47,200		27,939		3,321		31,260		–
39	4/26/2021	4/26/2022		168,866		–		–			–		168,866		39,684		9,160		48,844		–
40-1	9/22/2022	9/22/23		2,600,000		–		–			10,000,000		2,600,000		71,233		64,110		131,343		–
40-2	11/4/2022	11/4/2023		68,666		–		–			–		68,666		1,072		1,693		2,765		10,253
40-3	11/28/2022	11/28/2023		68,667		–		–			–		68,667		620		1,693		2,313		11,382
40-4	12/21/2022	12/21/2023		68,667		–		–			–		68,667		187		1,693		1,880		12,464
40-5	1/24/2023	1/24/2024		–		90,166		–			–		90,166		–		1,630		1,630		19,387
40-6	3/21/2023	3/21/2024		–		138,167		–			–		138,167		–		379		379		35,661
			$	3,562,550	$	303,333	$	(58,800	)		118,682,378	$	3,807,083	$	338,316	$	107,135	$	454,188	$	89,147

Schedule of property leases
March 31,	Amount
2024	$	140,777
2025		55,408
Total	$	196,185

	March 31, 2023						March 31, 2022
	Amount			% of Revenue			Amount			% of Revenue
Revenue
Financial services	$	154,399			5.40%		$	464,843			16.04%
Healthcare		2,706,399			94.60%			2,432,307			83.96%
Total revenue		2,860,798			100.00%			2,897,150			100.00%
Cost of sales
Financial services		26,829			0.94%			212,446			7.33%
Healthcare		956,295			33.43%			903,782			31.20%
Total cost of sales		983,124			34.37%			1,116,228			38.53%
Gross profit		1,877,674			65.63%			1,780,922			61.47%
Operating expenses
Depreciation expense		4,635			0.16%			5,783			0.20%
Selling, general and administrative		1,159,478			40.53%			1,053,656			36.37%
Total operating expenses		1,164,113			40.69%			1,059,439			36.57%
Income from operations		713,561			24.94%			721,483			24.90%
Other income (expense)
Other income		205			0.01%			–			–
Gain on forgiveness of debt		390			0.01			–			–
Penalties and fees		(15,000	)		(0.52	)%		–			–
Interest expense and finance charge		(695,164	)		(24.30	)%		(2,220,176	)		(76.63	)%
Conversion cost penalty and reimbursement		(2,000	)		(0.07	)%		–			–
Amortization of debt discounts		(17,983	)		(0.63	)%		(44,546	)		(1.54	)%
Total other income (expense)		(729,552	)		(25.50	)%		(2,264,722	)		(78.17	)%
Net loss before discontinued operations		(15,991	)		(0.56	)%		(1,543,239	)		(53.27	)%
Loss from discontinued operations		–			–			(19,215	)		(0.66	)%
Net loss	$	(15,991	)		(0.56	)%	$	(1,562,454	)		(53.93	)%
Deemed dividends on preferred stock		(336,811	)		(11.77	)%		–			–
Net loss attributable to common shareholders	$	(352,802	)		(12.33	)%		–			–