Cardiff Lexington Corp 10-K

ITEM 9A. 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 December 31, 2022. 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 below, our disclosure controls and procedures were not effective. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial and accounting officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this evaluation, management used the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on our evaluation, we determined that, as of December 31, 2022, our internal control over financial reporting was not effective due to the following material weaknesses. · We have not developed and effectively communicated to our employees our accounting policies and procedure, which has resulted in inconsistent practices. · We lack formal documentation over internal control procedures and environment. · We lack proper segregation of duties and multiple level of reviews. · We lack expertise in accounting of derivative liabilities 56 In order to cure the foregoing material weakness, we have taken or plan to take the following remediation measures: · 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 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. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Controls over Financial Reporting We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes. Except for the matters described above, there have been no changes in our internal control over financial reporting during the fourth quarter of fiscal year 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. 57 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Directors and Executive Officers The following sets forth information about our directors and executive officers as of the date of this report. Name Age Position Daniel Thompson 74 Chairman of the Board Directors Alex Cunningham 67 Chief Executive Officer, President and Director Daniel Thompson . Mr. Thompson has been Chairman of our board of directors since May 2014. Prior to serving as Chairman, Mr. Thompson served Chief Executive Officer from February 2005 to May 2014 and also served as a consultant from January 2001 to February 2005. Prior to joining us, Mr. Thompson was founder, president and chief executive officer of Creative Entertainment Services, a full-service entertainment company specializing in Feature Film, Television, Closed Captioning and Game Show fulfilment, from 1982 to December 2001. Mr. Thompson also founded CableRep USA, a media sales firm specializing in local market cable advertising, which he sold to Cox Cable in 1981. Mr. Thompson attended Wayne State University, Bellevue College, and College of Continuing Studies at University of Nebraska at Omaha. We believe Mr. Thompson is well suited to serve as a director because of his previous business management and merger and acquisition experience. Alex Cunningham . Mr. Cunningham has been our Chief Executive Officer and President since June 2015 and has served on our board of directors since June of 2015. Prior to joining us in 2015, Mr. Cunningham founded Francnsult, Inc., a business development company representing franchise operations, where he was in charge of identifying prospects for franchising, mergers and acquisitions, and was the managing partner at AH Cunningham & Associates, LLC, a firm which provided financial and operational consulting services to owners of small and medium-sized businesses, EB-5 immigrant investors, passive investment, franchise owners, and franchisors. Prior to his employment at Francnsult, Inc. and AH Cunningham & Associates, Mr. Cunningham was the president and chief executive officer of Profit Management Consulting, a management consulting company that assisted in the management of private and closely held middle-market companies, from 1996 to 2005. From 1991 to 1996, Mr. Cunningham was a partner at London Capital Corporation, a company which provides merger and acquisition services to small and medium-sized businesses. Mr. Cunningham received a BBA-Finance and Administration at the University of Kentucky and an MBA from Rollins College. We believe Cunningham is well suited to serve as a director because of his previous business management, financial, and merger and acquisition experience. Our directors currently have terms which will end at our next annual meeting of the stockholders or until their successors are elected and qualify, subject to their prior death, resignation or removal. Officers serve at the discretion of the board of directors. There is no arrangement or understanding between any director or executive officer and any other person pursuant to which he was or is to be selected as a director, nominee or officer. Family Relationships There are no family relationships among any of our officers or directors. 58 Involvement in Certain Legal Proceedings To the best of our knowledge, except as described below, none of our directors or executive officers has, during the past ten years: · been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); · had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; · been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; · been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; · been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or · been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. Governance Structure We chose to appoint a separate Chairman of the Board who is not our Chief Executive Officer. Our board of directors has made this decision based on their belief that a separate Chairman of the Board can act as a balance to the Chief Executive Officer, who also serves as a non-independent director. The Board’s Role in Risk Oversight The board of directors oversees that the assets of our company are properly safeguarded, that the appropriate financial and other controls are maintained, and that our business is conducted wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the board’s oversight of the various risks facing our company. In this regard, our board seeks to understand and oversee critical business risks. Our board does not view risk in isolation. Risks are considered in virtually every business decision and as part of our business strategy. Our board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, purposeful and appropriate risk-taking is essential for our company to be competitive on a global basis and to achieve its objectives. While the board oversees risk management, company management is charged with managing risk. Management communicates routinely with the board and individual directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management. 59 Our board administers its risk oversight function as a whole by making risk oversight a matter of collective consideration; however, much of the work will be delegated to committees, which will meet regularly and report back to the full board. We plan to establish a standing audit committee, compensation committee and nominating and corporate governance committee of our board of directors. We anticipate that the audit committee will oversee risks related to our financial statements, the financial reporting process, accounting and legal matters, the compensation committee will evaluate the risks and rewards associated with our compensation philosophy and programs, and the nominating and corporate governance committee will evaluate risk associated with management decisions and strategic direction. Material Changes to Director Nomination Procedures There have been no material changes to the procedures by which stockholders may recommend nominees to our board of directors since such procedures were last disclosed. Code of Ethics We have adopted a code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. Such code of ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, and reporting of violations of the code. We are required to disclose any amendment to, or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of disseminating this disclosure, as permitted by applicable SEC rules. Any such disclosure will be posted to our website within four (4) business days following the date of any such amendment to, or waiver from, a provision of our code of ethics. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our directors and executive officers and beneficial holders of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our equity securities. We believe, based solely on a review of the copies of such reports furnished to us and representations of these persons, that all reports were timely filed for the year ended December 31, 2022. ITEM 11. EXECUTIVE COMPENSATION. Summary Compensation Table - Years Ended December 31, 2022 and 2021 The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000. Name and Principal Position Year Salary ($) Bonus ($) Total ($) Alex Cunningham, 2022 360,000 200,000 560,000 Chief Executive Officer 2021 360,000 200,000 560,000 Daniel Thompson, 2022 360,000 200,000 560,000 Chairman of the Board 2021 360,000 200,000 560,000 Steven Healy, 2022 156,000 – 156,000 Former Chief Financial Officer 2021 156,000 – 156,000 60 Employment Agreements Effective July 15, 2020, we entered into an employment agreement with Alex Cunningham, pursuant to which Mr. Cunningham agreed to serve as President and Chief Executive Officer. Pursuant to the employment agreement, Mr. Cunningham will earn $360,000 per year as his base salary. Mr. Cunningham is eligible for an annual bonus with respect to each fiscal year ending during his employment. Mr. Cunningham is also eligible to receive compensation in shares of preferred stock in the event that we are unable to pay his base salary in dollars. The term of employment agreement is from July 15, 2020 to December 31, 2025 with automatic extensions for additional successive one (1) year renewals terms unless terminated by notice of at least three (3) months from us or Mr. Cunningham of the termination. The employment agreement may be terminated immediately for cause (as such term is defined in the employment agreement), which would cause no severance payment obligations to Mr. Cunningham. In the event of termination without cause or for good reason, we must provide Mr. Cunningham with thirty (30) days prior written notice and would be required to pay all accrued payments, base salary and $200,000, Mr. Cunningham’s maximum target bonus amount for the twelve months after the termination. In the event of termination of employment without cause or for good reason following a change-in-control of our company, Mr. Cunningham would be entitled to all accrued payments, a lump sum separation allowance equal to two times the sum of his then base salary and then target bonus, any annual incentive bonuses, payment of benefits until the earlier of twenty-four months after termination or receipt of comparable benefits from subsequent employment and all then-outstanding equity awards under any equity plan will vest in full. The employment agreement also provides that Mr. Cunningham may not compete against us for a period of twelve (12) months after termination of his employment for any reason or solicit employees or customers from us for a period of twenty-four (24) months after termination of his employment for any reason. Effective July 15, 2020, we entered into an employment agreement with Daniel Thompson, pursuant to which Mr. Thompson agreed to serve as Chairman of the Board. Pursuant to the employment agreement, Mr. Thompson will earn $360,000 per year as his base salary. Mr. Thompson is eligible for an annual bonus with respect to each fiscal year ending during his directorship. Mr. Thompson is also eligible to receive compensation in shares of preferred stock in the event that we are unable to pay his base salary in dollars. The term of agreement is from July 15, 2020 to December 31, 2025 with automatic extensions for additional successive one (1) year renewals terms unless terminated by notice of at least three (3) months from us or Mr. Thompson of the termination. The employment agreement may be terminated immediately for cause (as such term is defined in the employment agreement), which would cause no severance payment obligations to Mr. Thompson. In the event of termination without cause or for good reason, we must provide Mr. Thompson with thirty (30) days prior written notice and would be required to pay all accrued payments, base salary and $200,000, Mr. Thompson’s maximum target bonus amount for the twelve months after the termination. In the event of termination of employment without cause or for good reason following a change-in-control of our company, Mr. Thompson would be entitled to all accrued payments, a lump sum separation allowance equal to two times the sum of his then base salary and then target bonus, any annual incentive bonuses, payment of benefits until the earlier of twenty-four months after termination or receipt of comparable benefits from subsequent employment and all then-outstanding equity awards under any equity plan will vest in full. The employment agreement also provides that Mr. Thompson may not compete against us for a period of twelve (12) months after termination of his employment for any reason or solicit employees or customers from us for a period of twenty-four (24) months after termination of his employment for any reason. Outstanding Equity Awards at Fiscal Year-End No executive officer named above had any unexercised options, stock that has not vested or equity incentive plan awards outstanding as of December 31, 2022. Additional Narrative Disclosure Retirement Benefits We have not maintained, and do not currently maintain, a defined benefit pension plan, nonqualified deferred compensation plan or 401(k) plan. 61 Potential Payments Upon Termination or Change in Control As described under “—Employment Agreements” above, Messrs. Cunningham and Thompson are entitled severance if their employment is terminated without cause. Director Compensation Except for our Chairman, no member of our board of directors received any compensation for services as a director during the fiscal year ended December 31, 2022. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following table sets forth information regarding beneficial ownership of our common stock as of March 31, 2023 by (i) each of our executive officers and directors; (ii) all of our executive officers and directors as a group; and (iii) each person who is known by us to beneficially own more than 5% of our common stock. Unless otherwise specified, the address of each of the persons set forth below is in care of our company, 3200 Bel Air Drive, Las Vegas, NV 89109. Name and Address of Beneficial Owner Title of Class Amount and Nature of Beneficial Ownership (1) Percent of Class (2) Daniel Thompson, Chairman of the Board (3) Common Stock 3,202,228,327 80.72% Alex Cunningham, Chief Executive Officer and Director (4) Common Stock 37,591,628 4.68% Rollan Roberts II, Chief Operating Officer (5) Common Stock 122,000 * All executive officers and directors (3 persons) Common Stock 3,239,941,955 85.42% ___________________ (1) Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as otherwise indicated, each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to our common stock. (2) A total of 789,796,735 shares of common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of the Record Date. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator. (3) Includes 25,004,127 shares of common stock, 3,167,023,252 shares of common stock issuable upon the conversion of 1 share of series A preferred stock, 26,124 shares of common stock issuable upon the conversion of 13,062 shares of series B preferred stock, 100,000 shares of common stock issuable upon the conversion of 1 share of series C preferred stock and 10,074,824 shares of common stock issuable upon the conversion of 5,037,412 shares of series I preferred stock. (4) Includes 25,004,128 shares of common stock, 12,500 shares of common stock issuable upon the conversion of 6,250 shares of series B preferred stock, 100,000 shares of common stock issuable upon the conversion of 1 share of series C preferred stock and 12,475,000 shares of common stock issuable upon the conversion of 6,237,500 shares of series I preferred stock. (5) Represents 122,000 shares of common stock issuable upon the conversion of 61,000 shares of series B preferred stock. We do not currently have any arrangements which if consummated may result in a change of control of our company. 62 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Transactions with Related Persons The following includes a summary of transactions since the beginning of our 2021 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under Item 11 “ Executive Compensation ” above). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions. We have obtained short-term advances from Daniel Thompson, the Chairman of the Board, that are non-interest bearing and due on demand. As of December 31, 2022 and 2021, we owed the Chairman $123,192 and $126,765, respectively. Director Independence We do not have any independent directors within the meaning of the rules of the Nasdaq Stock Market. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. Independent Auditors’ Fees The following is a summary of the fees billed to us for professional services rendered for the fiscal years ended December 31, 2022 and 2021. Fees for the year ended December 31, 2022 includes fees paid to Grassi & Co., CPAs, P.C. and fees for the year ended December 31, 2021 includes $205,500 paid to Grassi & Co., CPAs, P.C. , $31,255 paid to Rosenberg Rich Baker Berman PA and $37,806 paid to Daszkal Bolton LLP. Year Ended December 31, 2022 2021 Audit Fees $ 155,805 $ 274,561 Audit-Related Fees – – Tax Fees – 6,750 All Other Fees – – TOTAL $ 155,805 $ 281,311 “Audit Fees” consisted of fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-K and 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements. “Audit-Related Fees” consisted of fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit or review of our financial statements and are not reported under the paragraph captioned “Audit Fees” above. “Tax Fees” consisted of fees billed for professional services rendered by the principal accountant for tax returns preparation. “All Other Fees” consisted of fees billed for products and services provided by the principal accountant, other than the services reported above under other captions of this Item 14. Pre-Approval Policies and Procedures Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the auditors’ independence from us. In accordance with its policies and procedures, our board of directors pre-approved the audit service performed by Grassi & Co., CPAs, P.C. for our financial statements as of and for the year ended December 31, 2022. 63 PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES. (a) List of Documents Filed as a Part of This Report: (1) Index to Financial Statements: Report of Independent Registered Public Accounting Firm (PCAOB ID 606) Consolidated Balance Sheets as of December 31, 2022 and 2021 Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021 Consolidated Statements of Stockholders’ Deficiency for the Years Ended December 31, 2022 and 2021 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 Notes to Consolidated Financial Statements (2) Index to Financial Statement Schedules: All schedules have been omitted because the required information is included in the financial statements or the notes thereto, or because it is not required. (3) Index to Exhibits: See exhibits listed under Part (b) below. 64 (b) Exhibits: Exhibit No. Description 3.1* Articles of Incorporation Cardiff Lexington Corporation, as amended 3.2* Amended and Restated Bylaws of Cardiff Lexington Corporation 3.3* Certificate of Designation of Series N Senior Convertible Preferred Stock 4.1* Description of Securities of Cardiff Lexington Corporation 4.2* Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to SILAC Insurance Company on May 21, 2021 10.1 Management Agreement, dated June 4, 2021, among by Cardiff Lexington Corporation, Nova Ortho and Spine, PLLC and Dr. Marc D Brodsky, Michael Wycoki, Jr., PA and Dr. Kevin Fitzgerald (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on June 7, 2021) 10.2* Securities Exchange and Purchase Agreement, dated September 22, 2022, among Cardiff Lexington Corporation, We Three, LLC, d/b/a Affordable Housing Initiative, Edge View Properties, Inc., Platinum Tax Defenders, Nova Ortho and Spine, PLLC and Leonite Capital LLC 10.3* Consolidated Senior Secured Convertible Promissory Note issued by Cardiff Lexington Corporation to Leonite Capital LLC on September 22, 2022, as amended 10.4* Pledge and Security Agreement, dated September 22, 2022, among Cardiff Lexington Corporation, We Three, LLC, d/b/a Affordable Housing Initiative, Edge View Properties, Inc., Platinum Tax Defenders, Nova Ortho and Spine, PLLC and Leonite Fund I, LP 10.5* Securities Purchase Agreement, dated June 1, 2021, between Cardiff Lexington Corporation and SILAC Insurance Company 10.6* Guaranty, dated June 1, 2021, by Nova Ortho and Spine, PLLC in favor of SILAC Insurance Company 10.7* Security Agreement, dated June 1, 2021, between Nova Ortho and Spine, PLLC and SILAC Insurance Company 10.8* Security and Stock Pledge Agreement, dated June 1, 2021, between Cardiff Lexington Corporation and SILAC Insurance Company 10.9* Securities Purchase Agreement, dated September 3, 2020, between Cardiff Lexington Corporation and GHS Investments, LLC 10.10* Senior Secured Convertible Promissory Note issued by Cardiff Lexington Corporation to GHS Investments, LLC on September 3, 2020 10.11* Security and Pledge Agreement, dated September 3, 2020, between Cardiff Lexington Corporation and GHS Investments, LLC 10.12* Convertible Promissory Note issued by Cardiff Lexington Corporation to Power Up Lending Group Ltd. on April 26, 2021 10.13* Convertible Promissory Note issued by Cardiff Lexington Corporation to Power Up Lending Group Ltd. on February 9, 2021 10.14* Convertible Promissory Note issued by Cardiff Lexington Corporation to Greentree Financial Group, Inc. on January 24, 2017 10.15* Convertible Promissory Note issued by Cardiff Lexington Corporation to Greentree Financial Group, Inc. on September 12, 2016 10.16† Employment Agreement, dated July 15, 2020, between the Cardiff Lexington Corporation and Alex Cunningham (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K filed on March 31, 2021) 10.17† Employment Agreement, dated July 15, 2020, between Cardiff Lexington Corporation and Daniel Thompson (incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K filed on March 31, 2021) 14.1* Code of Business Ethics and Conduct 21.1* List of Subsidiaries of the registrant 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 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 † Executive compensation plan or arrangement 65 ITEM 16. FORM 10-K SUMMARY. None. 66 FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID 606 ) F-2 Consolidated Balance Sheets as of December 31, 2022 and 2021 (Restated) F-3 Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021 (Restated) F-4 Consolidated Statements of Stockholders’ Deficiency for the Years Ended December 31, 2022 and 2021 (Restated) F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 (Restated) F-7 Notes to Consolidated Financial Statements F-8 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Cardiff Lexington Corp and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Cardiff Lexington Corp and Subsidiaries (the “Company”) as of December 31, 2022 and 2021 (restated), and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years in the two-year period ended December 31, 2022 and 2021 (restated), and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and 2021 (restated), and the results of its operations and its cash flows for the years in the two-year period ended December 31, 2022 and 2021 (restated), in conformity with accounting principles generally accepted in the United States of America. Restatement of Financial Statements As discussed in Note 2 to the consolidated financial statements, the Company’s consolidated financial statements as of and for the year ended December 31, 2021 have been restated to correct certain misstatements. Substantial Doubt Regarding the Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 to the consolidated financial statements, the Company has sustained net losses and has accumulated and working capital deficits, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. F- 2 Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Goodwill Critical Audit Matter Description At December 31, 2022, the Company had approximately $5.7 million of goodwill. Additionally, during the year ended December 31, 2022, the Company recorded an impairment of goodwill of approximately $2.1 million related to its financial services segment goodwill. As discussed in Note 1 and Note 14 to the consolidated financial statements, goodwill is tested annually for impairment at the reporting unit level, or more frequently if impairment indicators arise. In accordance with the FASB revised guidance on “Testing of Goodwill for Impairment,” a company first has the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the company decides, as a result of its qualitative assessment, that it is more-likely-than- not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a two-step goodwill impairment test. The first step compares the fair value of each reporting unit to its carrying amount. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. The principal consideration for our determination that this was a critical audit matter resulted from the Company’s goodwill impairment analyses being complex and highly judgmental due to the nature of qualitive assessment and, where necessary, the significant estimation required to determine the fair value of the reporting units. In particular, the fair value estimate was sensitive to significant assumptions, such as future operating results, cash flows and the weighted average cost of capital. These significant assumptions are forward looking and could be materially affected by future market or economic conditions. How we addressed the matter: We obtained an understanding of the Company’s goodwill impairment evaluation process, including controls over management’s review of the significant assumptions described above. We considered the material weakness relating to management’s internal controls in determining the nature, timing and extent of audit tests applied in our audit. Our audit procedures to test the Company’s goodwill impairment analyses included evaluating the reasonableness of management’s qualitative assessments and in certain instances the estimated fair value of the Company’s reporting units. In evaluating estimated fair value of a reporting unit, we evaluated management’s significant assumptions used within the fair value method, and tested the completeness and accuracy of the underlying data. We compared certain significant assumptions to existing market conditions and information and, where relevant, to the plans of the Company, including management’s expectations with regard to the Company’s business model, customer base and other relevant factors. We also considered the historical accuracy of management’s projected cash flows. Finally, we assessed the adequacy of the disclosures in the consolidated financial statements. /s/ Grassi & Co., CPAs, P.C. We have served as the Company’s auditor since 2022. Jericho, New York June 6, 2023 F- 3 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 (Restated) December 31, 2022 2021 (Restated) ASSETS Current assets Cash $ 226,802 $ 580,968 Accounts receivable-net 6,604,780 6,006,399 Prepaid and other current assets 5,000 5,000 Total current assets 6,836,582 6,592,367 Property and equipment, net 55,439 78,570 Land 540,000 540,000 Goodwill 5,666,608 7,758,656 Right of use - assets 218,926 283,622 Due from related party 4,979 4,942 Other assets 30,823 38,882 Total assets $ 13,353,357 $ 15,297,039 LIABILITIES, MEZZANINE EQUITY AND DEFICIENCY IN STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expense $ 2,038,595 $ 1,390,458 Accrued expenses - related parties 3,750,557 2,961,057 Accrued interest 350,267 449,455 Right of use - liability 142,307 176,285 Contingent consideration – 3,275,000 Due to director & officer 123,192 126,765 Notes payable 15,809 458,177 Notes payable - related party 37,024 – Convertible notes payable, net of debt discounts of $ 46,797 and $ 0 , respectively 3,515,752 2,077,753 Net liabilities of discontinued operations – 259,706 Total current liabilities 9,973,503 11,174,656 Other liabilities Notes payable 139,789 142,755 Operating lease liability – long term 84,871 122,264 Total liabilities 10,198,163 11,439,675 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 December 31, 2022 and 2021 3,125,002 3,125,002 Redeemable Series X Senior Convertible Preferred Stock - 5,000,000 shares authorized, $0.001 par value, stated value of $ 4.00 par value; 375,000 and - 0 - shares issued and outstanding at December 31, 2022 and 2021 1,500,000 – Total Mezzanine Equity 4,625,002 3,125,002 Stockholders' equity (deficit) Series B Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value of $ 4.00 , 2,131,328 and 1,945,078 shares issued and outstanding at December 31, 2022 and 2021, respectively 8,525,313 7,780,313 Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value of $ 4.00 , 122 shares issued and outstanding at December 31, 2022 and 2021, respectively 488 488 Series D Preferred Stock - 800,000 shares authorized, $0.001 par value, stated value $ 4.00 , zero 0 and 37,500 shares issued and outstanding at December 31, 2022 and 2021 – 150,000 Series E Preferred Stock - 1,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 150,750 shares issued and outstanding at December 31, 2022 and 2021, respectively 603,000 603,000 Series F Preferred Stock - 800,000 shares authorized, $0.001 par value, stated value $ 4.00 , zero 0 and 175,045 shares issued and outstanding at December 31, 2022 and 2021, respectively – 700,180 Series F-1 Preferred Stock - 800,000 shares authorized, $0.001 par value, stated value $ 4.00 , 35,752 shares issued and outstanding at December 31, 2022 and 2021, respectively 143,008 143,008 Series H Preferred Stock - 4,859,379 shares authorized, $0.001 par value, stated value $ 4.00 , zero 0 and 37,500 shares issued and outstanding at December 31, 2022 and 2021, respectively – 150,000 Series I Preferred Stock - 500,000,000 shares authorized, $ 0.001 par value, 14,885,000 issued and outstanding at December 31, 2022 and 2021, respectively 59,540,000 59,540,000 Series J Preferred Stock - 10,000,000 shares authorized, $0.001 par value, stated value $ 4 , 1,713,584 and 894,834 shares issued and outstanding at December 31, 2022 and 2021 6,854,336 3,579,336 Series K Preferred Stock - 10,937,500 shares authorized, $ 0.001 par value, 8,200,562 shares issued and outstanding at December 31, 2022 and 2021 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 December 31, 2022 and 2021 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 December 31, 2022 and 2021 198,000 198,000 Common Stock; 7,500,000,000 shares authorized, $ 0.001 par value; 789,796,735 and 166,130,069 shares issued and outstanding at December 31, 2022 and 2021, respectively 789,696 167,421 Treasury stock; zero 0 and 619,345 shares of Series H Preferred stock at December 31, 2022 and 2021 – ( 4,967,686 ) Additional paid-in capital ( 8,554,368 ) ( 3,479,127 ) Accumulated deficit ( 70,855,453 ) ( 65,118,744 ) Total stockholders' equity ( 1,469,808 ) 732,362 Total liabilities, mezzanine equity and stockholders' equity $ 13,353,357 $ 15,297,039 The accompanying notes are an integral part of these consolidated financial statements F- 4 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (Restated) December 31, 2022 2021 (Restated) REVENUE Financial services $ 1,305,077 $ 4,313,167 Healthcare 10,693,196 5,413,890 Real estate – 152,000 Total revenue 11,998,273 9,879,057 COST OF SALES Financial services 397,347 1,942,411 Healthcare 4,060,034 1,746,561 Real estate – 79,481 Total cost of sales 4,457,381 3,768,453 GROSS PROFIT 7,540,892 6,110,604 OPERATING EXPENSES Depreciation expense 23,132 13,886 Goodwill impairment 2,092,048 – Selling, general and administrative 3,733,728 4,434,594 Total operating expenses 5,848,908 4,448,480 INCOME (LOSS) FROM OPERATIONS 1,691,984 1,662,124 OTHER INCOME (EXPENSE) Other income 150,256 32,629 Gain on divestiture – 788,500 Gain on debt refinance and forgiveness 1,397,271 – Gain on change of estimate – 184,243 Penalties and fees ( 2,063,916 ) – Interest expense ( 6,392,242 ) ( 1,906,844 ) Conversion cost penalty and reimbursement – ( 13,000 ) Amortization of debt discounts ( 253,823 ) ( 1,051,264 ) Total other income (expenses) ( 7,162,454 ) ( 1,965,736 ) NET LOSS BEFORE DISCONTINUED OPERATIONS ( 5,470,470 ) ( 303,612 ) GAIN FROM DISCONTINUED OPERATIONS 40,949 2,171,076 LOSS FROM DISPOSAL OF DISCONTINUED OPERATIONS – ( 1,201,171 ) INCOME FROM DISCONTINUED OPERATIONS 40,949 969,905 NET INCOME (LOSS) FOR THE YEAR $ ( 5,429,521 ) $ 666,293 BASIC LOSS PER SHARE CONTINUED OPERATIONS $ ( 0.01 ) $ ( 0.01 ) DISCONTINUED OPERATIONS $ 0.00 $ 0.01 WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC CONTINUED OPERATIONS 436,636,918 128,021,527 DISCONTINUED OPERATIONS 436,636,918 128,021,527 The accompanying notes are an integral part of these consolidated financial statements F- 5 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY AND MEZZANINE EQUITY FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (Restated) Preferred Stock Series A, I, K, K-1 Preferred Stock Series B, D, E, F, F-1, G, H, L Preferred Stock Series C and R Treasury Stock Shares Amount Shares Amount Shares Amount Shares Amount Balance December 31, 2020 (Restated) 203,210,563 $ 780,048,201 3,139,629 $ 12,558,517 287 $ 198,488 ( 294,101 ) $ ( 2,365,864 ) Reclassify derivative liabilities to additional paid in capital – – – – – – – – Surrender of series I preferred stock ( 180,000,000 ) ( 720,000,000 ) – – – – – – Issuance of common stock in exchange for preferred stock ( 125,000 ) ( 500,000 ) – – – – – – Issuance of series J preferred stock – – 579,768 3,579,336 – – – – Issuance of series N preferred stock – – – – – – – – Issuance of series B preferred stock – – 201,799 807,196 – – – – Divestiture of subsidiary – – ( 325,244 ) ( 2,561,241 ) – – ( 325,244 ) ( 2,601,822 ) Conversion of convertible notes payable – – – – – – – – Reclassify warrant liabilities to additional paid in capital – – – – – – – – Reclass of derivative liability due to change in accounting policy – – – – – – – – Issuance of common stock for services – – – – – – – – Distribution of dividends – – – – – – – – Net loss – – – – – – – – 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 ) Issuance of Series B preferred stock for contribution – – 25,000 100,000 – – – – Issuance of series B preferred stock in exchange for series D and H preferred stock – – 75,000 300,000 – – – – Cancellation of series D preferred stock – – ( 37,500 ) ( 150,000 ) – – – – Cancellation of series H preferred stock – – ( 37,500 ) ( 150,000 ) – – – – Issuance of series B preferred stock for settlement of employment – – 18,750 75,000 – – – – Issuance of series B preferred stock in exchange for series F – – 67,500 270,000 – – – – Cancellation of series F preferred stock – – ( 175,045 ) ( 700,180 ) – – – – Issuance of series J preferred stock – – 818,750 3,275,000 – – – – Issuance of series X preferred stock – – – – – – – – Issuance of common stock for settlement of RRT – – – – – – – – Reclassification for cancelled shares – – – – – – – – Distribution of dividend – – – – – – 619,345 4,967,686 Net loss – – – – – – – – Balance, December 31, 2022 23,085,563 $ 59,548,201 4,350,907 $ 17,403,628 287 $ 198,488 – $ – The accompanying notes are an integral part of these consolidated financial statements F- 6 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY (continued) FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (Restated) Common Stock Additional Paid-in Capital Accumulated Deficit Total Shareholders’ Deficit Redeemable Convertible Preferred Stock Total Mezzanine Equity Shares Amount Shares Amount Balance December 31, 2020 (Restated) 5,267,433 $ 5,267 $ ( 733,733,688 ) $ ( 65,583,255 ) ( 8,872,334 ) – $ – $ – Reclassify derivative liabilities to additional paid in capital – – 644,997 – 644,997 – – – Surrender of series I preferred stock – – 720,000,000 – – – – – Issuance of common stock in exchange for preferred stock 50,000,000 50,000 450,000 – – – – – Issuance of series J preferred stock – – – – 3,579,336 – – – Issuance of series N preferred stock – – – – – 868,056 3,125,002 3,125,002 Issuance of series B preferred stock – – – – 807,196 – – – Divestiture of subsidiary – – 5,163,063 – – – – – Conversion of convertible notes payable 109,234,241 109,234 804,991 – 914,225 – – – Reclassify warrant liabilities to additional paid in capital – – 260,443 – 260,443 – – – Reclass of derivative liability due to change in accounting policy – – 2,903,663 – 2,903,663 – – – Issuance of common stock for services 1,628,395 2,920 27,404 – 30,324 – – – Distribution of dividends – – – ( 201,782 ) ( 201,782 ) – – – Net income – – – 666,293 666,293 – – – Balance December 31, 2021 (Restated) 166,130,069 $ 167,421 $ ( 3,479,127 ) $ ( 65,118,744 ) 732,362 868,056 $ 3,125,002 $ 3,125,002 Issuance of Series B preferred stock for contribution – – ( 75,000 ) – 25,000 – – – Issuance of series B preferred stock in exchange for series D and H preferred stock – – – – 300,000 – – – Cancellation of series D preferred stock – – – – ( 150,000 ) – – – Cancellation of series H preferred stock – – – – ( 150,000 ) – – – Issuance of series B preferred stock for settlement of employment – – ( 56,250 ) – 18,750 – – – Issuance of series B preferred stock in exchange for series F – – – – 270,000 – – – Cancellation of series F preferred stock – – 430,180 – ( 270,000 ) – – – Issuance of series J preferred stock – – – – 3,275,000 – – – Issuance of series X preferred stock – – – – – 375,000 1,500,000 1,500,000 Issuance of common stock for settlement of RRT 658,666,666 622,275 ( 406,485 ) – 215,790 – – – Prior period adjustment – – – – – – – – Reclassification for cancelled shares – – ( 4,967,686 ) – – – – – Distribution of dividend – – – ( 307,188 ) ( 307,188 ) – – – Net loss – – – ( 5,429,521 ) ( 5,429,521 ) – – – Balance, December 31, 2022 789,796,735 $ 789,696 $ ( 8,554,368 ) $ ( 70,855,453 ) ( 1,469,808 ) 1,243,056 $ 4,625,002 $ 4,625,002 The accompanying notes are an integral part of these consolidated financial statements F- 7 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (Restated) December 31, 2022 2021 (Restated) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) from continuing operations $ ( 5,429,521 ) $ 666,293 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 23,131 13,886 Amortization of loan discount 253,823 1,051,264 Other income ( 150,256 ) – Goodwill impairment 2,092,048 – Loss on finance penalties and fees 2,063,916 – Gain on refinance of debt ( 1,397,271 ) – Gain on forgiveness of debt – ( 739,450 ) (Increase) decrease in: Accounts receivable ( 598,381 ) ( 2,157,880 ) Right of use - assets 64,696 100,715 Prepaids and other current assets 8,059 ( 30,282 ) Land – 63,000 Increase(decrease) in: Accounts payable and accrued expense 750,878 188,038 Due to from related party 36,988 ( 42,827 ) Accrued officers compensation 873,506 764,835 Accrued interest 379,428 ( 265,860 ) Right of use - liabilities ( 71,371 ) ( 108,043 ) Deferred revenue – ( 353,830 ) Net cash used in operating activities ( 1,100,327 ) ( 850,141 ) Net cash used in Discontinued Operations – Operating ( 42,633 ) ( 201,208 ) INVESTING ACTIVITIES Purchase of property and equipment – ( 3,407 ) Acquisition of Nova Ortho and Spine PLLC, net of cash acquired – ( 2,320,235 ) Net cash (used in) investing activities – ( 2,323,642 ) FINANCING ACTIVITIES Repayments to directors and officers ( 3,573 ) – Proceeds from convertible notes payable 879,083 444,500 Proceeds from PPP loan and SBA loans ( 3,068 ) 547,050 Repayment of credit line – ( 51,927 ) Repayment to convertible notes payable ( 5,908 ) ( 30,777 ) Payment of notes payable - 3rd party – ( 28,318 ) Dividend on preferred stock ( 102,740 ) ( 203,880 ) Issuance of preferred stock 25,000 3,000,000 Net cash provided by financing activities 788,794 3,676,648 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 354,166 ) 301,657 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 580,968 279,311 CASH AND CASH EQUIVALENTS, END OF YEAR $ 226,802 $ 580,968 SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for Interest $ – $ 127,242 NON-CASH INVESTING AND FINANCING ACTIVITIES: Common stock issued upon conversion of notes payable $ – $ 885,691 Common stock issued for settlement of accrued expense $ – $ 388,143 Preferred stock issued for business acquisition $ 3,275,000 $ 3,579,336 Preferred stock issued upon conversion of notes payable and accrued interest $ – $ 563,196 Preferred stock issued upon exchange of defaulted convertible notes payable $ 1,500,000 $ – Derivative liability settled upon conversion $ – $ 1,396,610 The accompanying notes are an integral part of these consolidated financial statements F- 8 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2022 AND 2021 1. 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; · Romeo’s Alpharetta, LLC dba Romeo’s NY Pizza (“Romeo’s”), which was acquired on September 30, 2014 and sold on July 1, 2020; · Edge View Properties, Inc. (“Edge View”), which was acquired on July 16, 2014; · Repicci’s Franchise Group, LLC (“Repicci’s”), which was acquired on August 10, 2016 and sold on June 1, 2020; · Platinum Tax Defenders (“Platinum Tax”), which was acquired on July 31, 2018; · JM Enterprises 1, Inc. dba Key Tax Group (“Key Tax”), which was acquired on May 8, 2019 and sold on December 31, 2021; · Red Rock Travel Group, LLC (“Red Rock”), which was acquired on July 31, 2018 and discontinued on May 31, 2019; · Nova Ortho and Spine, PLLC (“Nova”), which was acquired on May 31, 2021. Principles of Consolidation The consolidated financial statements include the accounts of Cardiff and its wholly owned subsidiaries AHI, Edge View, Platinum Tax, Nova, Red Rock, Romeo’s, Repicci’s and Key Tax (collectively, the “Company”). Subsidiaries shown as discontinued operations include Red Rock, Romeo’s, Repicci’s, Key Tax and AHI. 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 consolidated financial results. Subsidiaries discontinued are shown as discontinued operations. F- 9 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. COVID-19 Pandemic The outbreak of a novel coronavirus throughout the world, including the United States, during early calendar year 2020 has caused widespread business and economic disruption through mandated and voluntary business closings and restrictions on the movement and activities of people (“COVID-19 Pandemic”). The extent of the impact of the COVID-19 Pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the COVID-19 Pandemic is rapidly evolving in many countries, including the United States and other markets where the Company operates. It is expected that many of the Company's customers and suppliers could be impacted by these closings and restrictions which could materially and adversely affect demand for our products, our ability to obtain or deliver inventory or services, and our ability to collect accounts receivables as customers face higher liquidity and solvency risk. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 Pandemic, and it is possible that it could cause an economic downturn, recession, or depression. Such economic disruption could have a material adverse effect on our business. Policymakers around the world have responded with fiscal and monetary policy actions to support the economy. The magnitude and overall effectiveness of these actions remains uncertain. 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 $ 0 and $ 21,870 as of December 31, 2022 and 2021, respectively. As of December 31, 2022, and 2021, the Company had accounts receivable of $ 6,604,780 and $ 6,006,399 , respectively. Accounts receivables are primarily generated from our subsidiaries in their normal course of business. 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 years ended December 31, 2022 and 2021, the Company recognized goodwill impairment in the amount of $ 2,092,048 and $ 0 , respectively. The Company based this decision on impairment testing of the underlying assets, expected cash flows, decreased asset value and other factors. F- 10 Valuation of Long-lived Assets In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 360-10-5, “ Impairment or Disposal of Long-Lived Assets ”, all long-lived assets such as plant and equipment and construction in progress held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated discounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. Revenue Recognition On January 1, 2018, 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. 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 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. F- 11 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. Service Fees – Net (PIP) The Company generates services fees from performing various procedures on the date the services are performed. These services primarily include slip and falls as well as smaller nominal Non-PIP services. Fees are collected primarily from third party insurance providers. These revenues are based on established insurance billing rates less allowances for contractual adjustments and uncollectible amounts. These contractual adjustments vary by insurance company and self-pay patients. The Company computes these contractual adjustments and collection allowances based on its historical collection experience. Completing the paperwork for each case and preparing it for billing takes approximately ten business days after a procedure is performed. The majority of claims are then filed electronically except for those remaining insurance carriers requiring paper filing. An initial response is usually received within four weeks from electronic filing and up to six weeks from paper filing. Responses may be a payment, a denial, or a request for additional information. Historical collection rates are estimated using the most current prior 12-month historical payment and collection percentages. The Company generally receives all of its collections within 12 months from the date of service. Historically the Company receives 49.9% of collections billed and these net collection receipts represent revenue. The Company recognizes the remaining 51.1% of uncollectible portions as finance charges as other expenses on the Consolidated Statement of Operations. The Company accounts for chargebacks as they occur and records an estimate for expected chargebacks as they are received from insurance companies. For the years ended December 31, 2022 and 2021, the Company recorded $0 bad debt expense. Additionally, the Company has not recorded any estimate for expected chargebacks. The Company’s contracts for both its contract and service fees each contain a single performance obligation (providing orthopedic services), as the promise to transfer the individual services is not separately identifiable from other promises in the contracts and, therefore, not distinct, as a result, the entire transaction price is allocated to this single performance obligation. Accordingly, the Company recognizes revenues (net) when the patient receives orthopedic care services. 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. 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. F- 12 Rental Income The Company’s rent revenue is derived from the mobile home leases. The expired leases are considered month-to-month leases. In accordance with section ASC 842, the cost of property held for leasing by major classes of property according to nature or function, and the amount of accumulated depreciation in total, is presented in the accompanying consolidated balance sheets as of December 31, 2022 and 2021. There are no contingent rentals included in income in the accompanying consolidated statements of operations. With the exception of the month-to-month leases, revenue was recognized on a straight-line basis and amortized into income on a monthly basis, over the lease term. Advertising Costs Advertising costs are expensed as incurred. Advertising costs are included as a component of cost of sales in the consolidated statements of operations and changes in stockholders’ equity. The Company recognized advertising and marketing expense of $ 233,798 and $ 1,301,050 for the years ended December 30, 2022 and 2021, 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 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 Preferred Shares and Series X Preferred Shares 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 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. F- 13 Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest. The expense resulting from share-based payments is recorded in general and administrative expense in the consolidated statements of operations. Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services 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. For the periods ended December 31, 2022 and 2021, the Company did not have any interest and penalties associated with tax positions and did no t have any significant unrecognized uncertain tax positions. Loss per Share FASB ASC Subtopic 260, Earnings Per Share , provides for the calculation of "Basic" and "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 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. Going Concern The accompanying consolidated financial statements have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The Company has sustained operating losses since its inception and has negative working capital and an accumulated deficit. These factors raise substantial doubts about the Company’s ability to continue as a going concern. As of December 31, 2022, the Company has sustained recurring losses and accumulated a working capital deficit of approximately $ 3,136,921 . The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might result if the Company is unable to continue as a going concern. F- 14 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 new standard will be effective for the Company in the first quarter of fiscal year beginning January 1, 2023, and early adoption is permitted. Management does not expect that the adoption of this standard will have a material effect on the Company's financial statements. Reclassifications Certain accounts relating to the prior year have been reclassified to conform to the current period’s presentation. These reclassifications had no effect on the net income or net assets as previously reported. 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS Subsequent to the initial issuance of the Company's 2021 financial statements on October 26, 2022, management identified certain errors and other items requiring restatement of 2021 amounts. 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 equity line item. F- 15 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 $49,300 on the consolidated statement of operations for the year ended December 31, 2021. 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 increase to accounts receivable as of December 31, 2021 and $1,076,000 decrease in finance charges for the year ended December 31, 2021. The following table summarizes the impacts of the error corrections on the Company's consolidated financial statements for the year ended December 31, 2021 presented below: i. Balance sheet Schedule of restated financial information Impact of correction of error December 31, 2021 As previously reported Adjustments As restated Total assets $ 11,159,915 $ 4,137,124 $ 15,297,039 Current liabilities 7,642,214 3,272,736 10,914,950 Net, liabilities of discontinued operations 471,318 ( 211,612 ) 259,706 Non-current liabilities 265,019 – 265,019 Total liabilities 8,378,551 3,061,124 11,439,675 Mezzanine equity – 3,125,002 3,125,002 Preferred stock 77,602,722 ( 3,472,224 ) 74,130,498 Accumulated deficit ( 66,194,744 ) – ( 66,194,744 ) Others ( 8,626,614 ) 1,423,222 ( 7,203,392 ) Total deficiency in shareholders' equity $ 2,781,364 $ ( 2,049,002 ) $ 732,362 F- 16 ii. Statement of operations Impact of correction of error - year Year ended December 31, 2021 As previously reported Adjustments As restated Revenue $ 10,008,860 $ ( 129,803 ) $ 9,879,057 Cost of sales ( 3,848,406 ) 79,953 ( 3,768,453 ) Gross margin 6,160,454 ( 49,850 ) 6,110,604 Operating expense ( 4,534,352 ) 85,872 ( 4,448,480 ) Income from operations $ 1,626,102 $ 36,022 $ 1,662,124 Other income (expense) ( 3,055,015 ) 1,089,279 ( 1,965,736 ) Net loss before discontinued operations ( 1,428,913 ) 1,125,301 ( 303,612 ) Income (loss) from discontinued operations 1,019,206 ( 49,301 ) 969,905 Net income (loss) $ ( 409,707 ) $ 1,076,000 $ 666,293 Basic and Diluted Earnings (loss) per Share Continued Operations ( 0.01 ) ( 0.01 ) Discontinued Operations 0.01 0.01 Weighted Average Shares Outstanding - Basic Earnings (loss) per Share Continued Operations 128,021,527 128,021,527 Discontinued Operations 128,021,527 128,021,527 3. ACQUISITIONS On May 31, 2021, the Company completed the acquisition of Nova pursuant to the terms of a securities purchase agreement acquiring 100% of the common shares of NOVA. The sellers received a cash payment in the amount of $ 2,500,000 and were issued 894,834 shares of series J preferred stock with an aggregate stated value equal to $3,579,334. In addition, the Company agreed to pay to the sellers 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. On August 25, 2022, the parties entered into an addendum to the securities purchase agreement in which the parties recognized that an unanticipated series of events prevented alternative financing and equity funding during the initial year that impacted the Milestone outcome, and the parties acknowledged the significant gains and accomplishments during the initial year. Based upon those accomplishments and the performance of Nova during its initial year, the Company agreed to issue the supplemental payment of 818,750 additional shares of series J preferred stock. F- 17 The following table summarizes the consideration transferred to acquire NOVA and the amounts of identified assets acquired and liabilities assumed at the acquisition date: Schedule of identified assets acquired and liabilities assumed Nova Ortho and Spine, PLLC Cash $ 177,977 Accounts receivable 653,134 Property and equipment 92,064 Other assets 342,493 Goodwill 5,666,608 Liabilities ( 852,942 ) Total $ 6,079,334 NOVA contributed revenue of $ 5,413,890 and earnings of $ 638,627 to the Company for the period from June 1, 2021 to December 31, 2021. The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2020. Schedule of unaudited pro forma information Pro Forma Years Ended December 31, 2021 (Unaudited) 2020 (Unaudited) Revenue $ 13,875,924 $ 10,877,821 Earnings $ 328,646 $ 262,917 These pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of NOVA. In 2021, the Company paid legal fees of $ 24,127 and a consulting fee of $ 296,900 of acquisition-related costs. The legal and consulting fees are included in general and administrative expenses on the Company’s consolidated statement of operation for the year ended December 31, 2021 and are reflected as an adjustment in computing pro forma earnings for the year ended December 31, 2021 in the table above. F- 18 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Schedule of accrued expenses December 31, 2022 2021 Accounts payable $ 342,330 $ 170,914 Accrued credit cards 45,722 16,466 Accrued expense – previously factored liability 776,414 846,754 Accrued income taxes, and other taxes 6,732 7,553 Accrued professional fees 573,040 268,563 Accrued advertising 69,656 39,886 Accrued payroll 14,292 39,959 Accrue expense - other 363 363 Accrued expense - dividend payable 210,046 – Total $ 2,038,595 $ 1,390,458 The Company is delinquent paying certain income and property taxes. As of December 31, 2022 and 2021, the balance for these taxes, penalties and interest is $ 6,732 and $ 7,553 , respectively. 5. PLANT AND EQUIPMENT, NET Property and equipment as of December 31, 2022 and 2021 is as follows: Schedule of Property and Equipment December 31, 2022 2021 Medical equipment $ 96,532 $ 96,532 Computer Equipment 9,189 9,189 Furniture, fixtures and equipment 35,974 35,974 Leasehold Improvement 15,950 15,950 Total 157,645 157,645 Less: accumulated depreciation ( 102,206 ) ( 79,075 ) Property and equipment, net $ 55,439 $ 78,570 For the years ended December 31, 2022 and 2021, depreciation expense was $ 23,132 and $ 13,886 , respectively. For the years end December 31, 2022 and 2021, the Company recorded depreciation expense of $ 23,132 and $ 13,886 in operations expense, respectively. F- 19 6. LAND As of December 31, 2022 and 2021, the Company had 27 acres of land of approximately $ 540,000 . During the year ended December 31, 2021, the Company sold 3 lots for $ 152,000 . The land is currently vacant and is expected to be developed into a residential community. 7. LINE OF CREDIT At December 30, 2022 and 2021, the Company had a revolving line of credit with a financial institution for $ 92,500 and was personally guaranteed by the manager of Platinum Tax Defender. The loan accrues interest at 10.45 % at December 30, 2022 and 6.70 % at December 31, 2021. As of December 31, 2022 and 2021, there were no borrowings against the line of credit. 8. RELATED PARTY TRANSACTIONS On February 11, 2021, the Chairman of the Board and the Chief Executive Officer each converted 62,500 shares of series I preferred stock into 25,000,000 restricted shares of common stock for a total of 125,000 shares of series I preferred stock into 50,000,000 restricted shares of common stock. Effective December 28, 2021, the Chairman of the Board and Chief Executive Officer each forfeited and surrendered for no consideration 90,000,000 shares of series I preferred stock totaling 180,000,000 shares. 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 December 31, 2022 and 2021 were $ 37,025 and $ 37 , 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 due from the previous owners as of December 31, 2022 and 2021, respectively. On August 6, 2022, Edge View terminated one of its two employees for fraud, deceit, larceny, and thievery for selling property belonging to Edge View and personally taking the $ 162,598 in proceeds. The Company hired counsel to terminate the employee and handle all legal matters for return of monies and criminal prosecution. The Company obtained short-term advances from the Chairman of the Board that are non-interest bearing and due on demand. As of December 31, 2022 and 2021, the Company owed the Chairman $ 123,192 and $ 126,765 , respectively. See also Note 15 for compensation paid to employees of the Company. 9. NOTES AND LOANS PAYABLE Notes payable at December 31, 2022 and 2021, respectively, are summarized as follows: Schedule of notes payable December 31, 2022 2021 Notes and Loans Payable $ 155,598 $ 600,932 Less current portion ( 15,809 ) ( 458,177 ) Long-term portion $ 139,789 $ 142,755 F- 20 Long-term debt matures as follows: Schedule of Maturities of Long-term Debt Amount 2023 $ 15,809 2024 4,820 2025 4,820 2026 4,820 2027 4,820 Thereafter 120,509 Total $ 155,598 Loans and Notes Payable – Unrelated Party On March 12, 2009, the Company issued a debenture in the principal amount of $20,000. The debenture bore interest at 12% per year and matured on September 12, 2009. The Company assigned all of its receivables from consumer activations of the rewards program as collateral on this debenture. The balance of the debenture was $ 10,989 at December 31, 2022 and 2021. The accrued interest of the debenture was $ 6,229 and $ 4,910 at December 31, 2022 and 2021, respectively. On September 7, 2011, the Company issued a promissory note in the principal amount of $50,000. The note bore interest at 8% per year and matured on September 7, 2016. Effective March 29, 2021, the principal balance of $50,000 and accrued interest of $37,282 were converted into 61,830 shares of series B preferred stock. On November 17, 2011, the Company issued a promissory note in the principal amount of $50,000. The note bore interest at 8% per year and matured on November 17, 2016. Effective March 29, 2021, the principal balance of $50,000 and accrued interest of $36,505 were converted into 60,606 shares of series B preferred stock. On March 11, 2009, the Company issued a promissory note in the principal amount of $15,000. The note bore interest at 12% per year and matured on April 29, 2014. Effective March 29, 2021, the principal balance of $15,000 and accrued interest of $19,465 were converted into 13,860 shares of series B preferred stock. On September 9, 2019, the Company issued a promissory note in the principal amount of $410,000. The note bore interest at 10% per year and matured on September 9, 2020. On November 10, 2020, the Company entered into addendum No. 1 to the note extending the maturity date until December 31, 2021. On May 4, 2021, the Company entered into addendum No. 2, whereby the maturity date was extended to November 3, 2021 , accrued interest of $ 22,266 was added to the principal balance of $ 410,000 resulting in a new principal balance of $ 432,266 , and the interest rate was increased to 24 %. This note was consolidated to Note 40-1 on September 22, 2022 (see Note 9). The principal balance of the note was $ 0 and $ 432,266 at December 31, 2022 and 2021, respectively. The accrued interest of the note was $ 0 and $ 137,345 at December 31, 2022 and 2021, respectively. Paycheck Protection Program (“PPP”) Loans On April 14, 2020, the Company obtained a PPP loan in the principal amount of $ 127,400 with an interest rate of 1 % and a maturity date of April 14, 2022 . This loan was forgiven in 2021 as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and was recognized as a gain from forgiveness of debt in the amount of $128,640 recorded in other income and expenses in the consolidated statement of operations during the year ended December 31, 2021. F- 21 On May 8, 2020, the Company obtained a PPP loan in the principal amount of $ 257,500 with an interest rate of 1 % and a maturity date of May 8, 2022 . This loan was forgiven in 2021 as part of the CARES Act and was recognized as a gain from forgiveness of debt in the amount of $261,675 recorded in other income and expenses in the consolidated statement of operations during the year ended December 31, 2021. On February 19, 2021, the Company obtained a PPP loan in the principal amount of $ 229,500 with an interest rate of 1 % and a maturity date of February 19, 2023 . This loan was forgiven in 2021 as part of the CARES Act and was recognized as a gain from forgiveness of debt in the amount of $ 231,374 recorded in other income and expenses in the consolidated statement of operations during the year ended December 31, 2021. On February 23, 2021, the Company obtained a PPP loan in the principal amount of $ 117,550 with an interest rate of 1 % and a maturity date of February 23, 2023 . This loan was forgiven in 2021 as part of the CARES Act and was recognized as a gain from forgiveness of debt in the amount of $ 118,130 recorded in other income and expenses in the consolidated statement of operations during the year ended December 31, 2021. 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 . The principal balance and accrued interest at December 31, 2022 was $ 144,609 and $ 5,723 , respectively, and principal and accrued interest at December 31, 2021 was $ 147,677 and $ 5,723 , respectively. On October 7, 2020, Key Tax obtained an SBA loan in the principal amount of $ 150,000 with an interest rate of 3.50 % and a maturity date of October 7, 2050 . On August 31, 2021, this SBA loan was amended to add an additional $ 200,000 of principal to the original note and the interest rate was increased to 3.75 %. The principal and accrued interest at December 31, 2021 was $ 349,900 and $ 9,608 , respectively. Key Tax was divested on December 31, 2021 and this loan was eliminated. On April 12 and June 16, 2020, the Company obtained SBA loans totaling $ 20,000 with an interest rate of 5 % and maturity dates one year from advance, if not forgiven. This was the grant a part of the EIDL loan and was recognized as other income in the amount of $ 10,000 recorded in other income and expenses in the consolidated statement of operations during the year ended December 31, 2022 and 2021, accordingly. The principal balance and accrued interest at December 31, 2022 were both $ 0 and principal and accrued interest at December 31, 2021 was $ 10,000 and $ 860 , respectively. 10. CONVERTIBLE NOTES PAYABLE As of December 31, 2022 and 2021, the Company had convertible debt outstanding net of amortized debt discount of $ 3,515,752 and $ 2,077,753 , respectively. During the year ending December 31, 2022, the Company received proceeds of $ 1,490,706 from convertible notes and repaid $ 5,908 to convertible noteholders. During the year ending December 31, 2021, the Company received proceeds of $ 444,500 from convertible notes and repaid $ 66,315 to convertible noteholders. There are debt discounts associated with the convertible debt of $ 46,798 and $ 0 at December 31, 2022 and 2021, respectively. For the year ended December 31, 2022 and 2021, the Company recorded amortization of debt discounts of $ 253,823 and $ 1,051,264 , respectively. 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 them and related accrued interest in exchange for (1) one consolidated senior secured convertible promissory note (“New 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 . During the year ended December 31, 2021, the Company converted $ 885,691 of convertible debt, $ 388,143 in accrued interest and $ 13,000 in penalties and fees into 109,234,241 shares of the Company’s common stock. In addition to the conversions of convertible debt into common stock, the Company converted convertible debt principal of $150,000 and accrued interest of $225,800 into 140,799 shares of series B preferred stock. F- 22 Convertible notes as of December 31, 2022 and 2021 are summarized as follows: Schedule of convertible notes summary December 31, 2022 2021 Convertible notes payable $ 3,562,550 $ 2,077,753 Discounts on convertible notes payable ( 46,798 ) – Total convertible debt less debt discount 3,515,752 2,077,753 Current portion 3,515,752 2,077,753 Long-term portion $ – $ – The following is a schedule of convertible notes payable as of and for the year ended December 31, 2022. Schedule of convertible notes details Note # Issuance Maturity Principal Balance 12/31/21 New Loan Debt Consolidation Cash Paydown Principal Balance 12/31/22 Accrued Interest on Convertible Debt at 12/31/21 Interest Expense On Convertible Debt For the Period Ended 12/31/22 Accrued Interest on Convertible Debt at 12/31/22 Unamortized Debt Discount At 12/31/22 7-1 10/28/2016 10/28/2017 10,000 $ – $ – $ – $ 10,000 $ 10,899 $ 2,000 $ 2,263 $ – 9 9/12/2016 9/12/2017 50,080 – – – 50,080 4,141 10,016 14,157 – 10 1/24/2017 1/24/2018 54,991 – 9 – 55,000 14,831 11,000 69,876 – 11-2 3/16/2017 3/16/2018 – – – – – 9,843 – – – 13-2 7/24/2018 1/24/2019 43,961 – ( 43,961 ) – – 34,113 8,075 – – 22 7/10/2018 1/10/2021 772,118 – ( 766,210 ) ( 5,908 ) – – 68,808 – – 22-1 2/20/2019 1/10/2021 61,704 – ( 61,704 ) – – 28,523 11,076 – – 22-3 4/10/2019 1/10/2021 56,095 – ( 56,095 ) – – 25,303 10,069 – – 26 8/10/2017 1/27/2018 20,000 – ( 20,000 ) – – 10,525 – – – 29-1 11/8/2019 11/8/2020 – – – – – 2,283 – – – 29-2 11/8/2019 11/8/2020 36,604 – – – 36,604 11,374 8,785 20,160 – 31 8/28/2019 8/28/2020 – – – – – 8,385 – 8,385 – 32 5/22/2019 5/22/2020 – – – – – 12,277 – – – 34 5/18/2020 5/18/2021 – – – – – 219 – – – 35 8/24/2020 8/24/2021 – – – – – 74 – – – 36-1 9/3/2020 1/3/2021 122,400 – ( 122,400 ) – – 25,906 16,479 – – 36-2 11/3/2020 3/3/2021 122,400 – ( 122,400 ) – – 23,906 16,479 – – 36-3 12/29/2020 4/29/2021 122,400 – ( 122,400 ) – – 22,070 16,479 – – 36-4 5/5/2021 9/5/2021 187,500 – ( 187,500 ) – – 22,131 25,243 – – 36-5 1/11/2022 5/11/2022 – 202,300 ( 202,300 ) – – – 26,138 – – 36-6 3/9/2022 7/9/2022 – 146,667 ( 146,667 ) – – – 14,827 – – 36-7 3/22/2022 7/22/2022 – 202,000 ( 202,000 ) – – – 19,126 – – 36-8 4/25/2022 8/25/2022 – 201,293 ( 201,293 ) – – – 15,684 – – 36-9 7/25/2022 11/25/2022 – 68,692 ( 68,692 ) – – – 2,270 – – 36-10 8/4/2022 12/4/2022 – 74,120 ( 74,120 ) – – – 2,083 – – 36-11 9/12/2022 1/12/2023 – 95,000 ( 95,000 ) – – – 843 – – 37-1 9/3/2020 6/30/2021 67,000 46,667 – – 113,667 8,878 12,060 28,756 – 37-2 11/2/2020 8/31/2021 66,500 46,667 – – 113,167 7,722 11,970 27,510 – 37-3 12/29/2020 9/30/2021 66,500 46,667 – – 113,166 6,686 11,970 26,474 – 38 2/9/2021 2/9/2022 64,000 32,000 – – 96,000 4,614 21,120 27,939 – 39 4/26/2021 4/26/2022 153,500 15,366 – – 168,866 5,915 37,150 39,684 – 40-1 9/22/2022 9/22/23 – 2,600,000 – – 2,600,000 – 71,233 71,233 – 40-2 11/4/2022 11/4/2023 – 68,666 – – 68,666 – 1,072 1,072 14,486 40-3 11/28/2022 11/28/2023 – 68,667 – – 68,667 – 621 620 15,615 40-4 12/21/2022 12/21/2023 – 68,667 – – 68,667 – 188 187 16,697 $ 2,077,753 $ 3,983,439 $ ( 2,492,733 ) $ ( 5,908 ) $ 3,562,550 $ 300,618 $ 452,864 $ 338,316 $ 46,798 F- 23 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 at a default interest rate of 20% per annum. Note 9 On September 12, 2016, the Company issued a convertible promissory note in the principal of $80,000 for services rendered, which matured on September 12, 2017. Note 9 is currently in default and accrues at a default interest rate of 20% per annum. Note 10 On January 24, 2017, the Company issued a convertible promissory note in the principal of $80,000 for services rendered, which matured on January 24, 2018. Note 10 is currently in default and accrues at a default interest rate of 20% per annum. Note 11-2 On March 16, 2017, the Company issued a convertible promissory note in the principal amount of $40,000, which matured on March 16, 2018. Note 11-2 was consolidated to Note 40-1 on September 22, 2022. Note 13-2 On July 24, 2018, the Company issued a convertible promissory note in the principal amount of $237,909, which matured on January 24, 2019. Note 13-2 was consolidated to Note 40-1 on September 22, 2022. Notes 22, 22-1 and 22-3 On July 10, 2018, the Company issued a convertible promissory note in the principal amount of $1,040,000 with an original issue discount of $103,000. On February 20, 2019, the Company executed an addendum to this note, whereby the Company will receive two additional tranches. On February 20, 2019, the Company received $55,216 less expenses of $5,216 resulting in net cash to the Company of $50,000 and on April 10, 2019, the Company received $55,616 less expenses of $5,616 resulting in net cash of $50,000, which was paid directly to a certain vendor. The notes 22, 22-1 and 22-3 matured on January 1, 2021. Note 22, 22-1 and 22-3 were consolidated to Note 40-1 on September 22, 2022. Note 26 On August 10, 2017, the Company issued a convertible promissory note in the principal amount of $20,000, which matured on January 27, 2018. Note 26 is currently in default and accrues interest at a default interest rate of 15% per annum. Note 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 $5,917.81, 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. Notes 29-1 and 29-2 are currently in default and accrue interest at a default interest rate of 24% per annum. F- 24 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 32 On May 22, 2019, the Company issued a convertible promissory note in the principal amount of $25,000 from a draw on a line of credit, which matured on May 22, 2020. Note 32 is currently in default and accrues interest at a default interest rate of 20% per annum. Note 34 On May 18, 2020, the Company entered into a 6% Convertible Promissory Note with an unrelated entity in the amount $63,000 and expenses of $3,000 resulting in net cash to the company of $60,000. Note 34 matured May 18, 2021. Note 35 On August 24, 2020, the Company entered into a 6% Convertible Promissory Note with an unrelated entity in the amount $85,000 with expenses of $3,500 resulting in net cash to the company of $81,500. Note 35 matured August 24, 2021. Note 36-1, 36-2 and 36-3, 36-4, 36-5, 36-6, 36-7, 36-8, 36-9, 36-10 and 36-11 On September 3, 2020, the Company issued a convertible promissory note in the principal amount of $733,500, with an original issue discount of $183,500, which could be drawn in several tranches. On September 3, 2020, the first tranche executed the first tranche in the principal amount of $122,400, less original issue discount of $30,000, which matured on January 3, 2021 (Note 36-1). On November 3, 2020, the Company executed the second tranche in the principal amount of $120,000, less original issue discount of $30,000, which matured on March 3, 2021 (Note 36-2). On December 29, 2020, the Company executed the third tranche in the principal amount of $120,000, less original issue discount of $30,000, which matured on April 29, 2021 (Note 36-3). Notes 37-1, 37-2 and 37-3 On September 3, 2020, the Company issued a convertible promissory note in the principal amount $200,000, with 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 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 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 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. F- 25 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 19 is currently in default and accrues interest at a default interest rate of 22% per annum. Note 40-1, 40-2, 40-3 and 40-4 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 principal amount of $68,667, less 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 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 original issue discount and fee of $18,667 (Note 40-4). Notes 40-1, 40-2, 40-3 and 40-4 mature on the first anniversary of issuance and accrued interest at a rate of 10% per annum. 11. CAPITAL STOCK Preferred Stock The Company has designated multiple series of preferred stock, including 4 shares of series A preferred stock, 3,000,000 shares of series B preferred stock, 500 shares of series C preferred stock, 1,000,000 shares of series E preferred stock, preferred stock, 800,000 shares of series F-1 preferred stock, 500,000,000 shares of series I preferred stock, 10,000,000 shares of series J 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 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. F- 26 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. 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. F- 27 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. 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, a ny 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. 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. 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. F- 28 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. 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, a ny 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. 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. F- 29 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. 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 H Preferred Stock Each share of series H preferred stock is entitled to one (1) vote on all matters submitted to a vote of stockholders. Each share of series H preferred stock is convertible into two (2) shares of common stock. Holders of series H preferred stock do not have any 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. 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. F- 30 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. 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 During the year ended December 31, 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 37,500 shares of series B preferred stock. · On September 7, 2022, the Company issued 818,750 shares of series J preferred stock in connection with the acquisition of Nova. See also Note 2. · On September 12, 2022, the Company issued 375,000 shares of series X preferred stock for $ 1,500,000 . See Note 9 for further discussion. · On October 10, 2022, the Chief Operating Officer received 18,750 shares of series B preferred stock in exchange for the settlement of employment at the fair value of $ 1 per share. · On October 31, 2022, the Company entered into a Buyback Agreement, pursuant to which the managers of AHI purchased back AHI and returned 175,045 shares of series F preferred stock issued to them, which were remitted to treasury, in exchange for 67,500 shares of series B preferred stock. There was a loss on disposal in the amount of $ 217,769 which represented net assets and liabilities at the time of sale back. F- 31 · On November 11, 2022, the Company issued 15,000 shares of series B preferred stock series B to Eric Raper, Investor in exchange for $ 15,000 at the fair value of $ 1 per share. · On December 15, 2022, the Company issued 10,000 shares of series B preferred stock series B to Gregg E Russell, Investor in exchange for $ 10,000 at the fair value of $ 1 per share. During the year ended December 31, 2021, the Company executed the following transactions: · On February 11, 2021, the Chairman of the Board and the Chief Executive Officer each converted 62,500 shares of series I preferred stock into 25,000,000 shares of common stock for a total of 125,000 shares of series I preferred stock converted into 50,000,000 shares of common stock. · On March 29, 2021, $ 265,000 in principle from convertible debt and conventional debt and $ 298,195 in accrued interest was converted into 140,799 shares of series B preferred stock. · On May 31, 2021, the Company issued 894,834 shares of series J preferred stock in connection with the acquisition of Nova. See also Note 3. · On July 22, 2021, the Chief Operating Officer received 61,000 shares of series B preferred stock in exchange for accrued salaries of $ 244,000 . · On December 28, 2021, the Chairman of the Board and Chief Executive Officer each forfeited and surrendered for no consideration 90,000,000 shares of series I preferred stock totaling 180,000,000 shares. · On December 31, 2021, the Company entered into a Buyback Agreement, pursuant to which the managers of Key Tax purchased back Key Tax and returned 325,244 shares of series G preferred stock. There was a loss on disposal in the amount of $ 1,201,169 which represented net assets and liabilities at the time of sale back. Common Stock During the year ended December 31, 2022, the Company executed the following transactions: · As part of the Red Rock settlement, the Company issued 658,666,666 shares of common stock (see Note 12). · The settlement also required the previous owners to relinquish 35,000,000 shares of common stock resulting in a gain to the Company of $ 35,000 · The Red Rock settlement required the previous owners to relinquish warrants for 25,000 shares of common stock. During the year ended December 31, 2021, the Company executed the following transactions: · The Company issued 109,234,241 shares of common stock upon conversion of certain convertible notes. · The Company issued 50,000,000 shares of common stock in exchange for 125,000 shares of series I preferred stock. · The Company issued 1,627,031 shares of common stock in exchange for professional services. F- 32 12. WARRANTS The table below sets forth warrant activity during the years ended December 31, 2022 and 2021: Schedule of warrant activity Number of Warrants Weighted Average Exercise Price Stock Warrants Balance at January 1, 2022 244,452,143 $ 0.02 Granted – – Exercised – – Expired ( 8,894,287 ) 0.146 Balance at December 31, 2022 235,557,856 0.015 Warrants Exercisable at December 31, 2022 235,557,856 $ 0.015 Number of Warrants Weighted Average Exercise Price Stock Warrants Balance at January 1, 2021 14,274,477 $ 0.105 Granted 231,481,466 0.015 Exercised – – Expired ( 1,303,800 ) 0.030 Balance at December 31, 2021 244,452,143 0.02 0 Warrants Exercisable at December 31, 2021 235,481,466 $ 0.020 13. DISCONTINUED OPERATIONS The Company and We3 managers entered into a resignation, release and buyback agreement and addendum, effective October 31, 2022, pursuant to which We3 managers purchased We3 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. On May 1, 2018, the Company entered into a stock for stock purchase agreement with the sellers of Red Rock and a related management agreement to manage Red Rock. The terms and conditions of those agreements were subsequently violated causing the transaction to be reversed and dissolved on May 31, 2019. Red Rock reverted to its previous ownership, the Company canceled the shares of series K preferred stock related to the aborted acquisition and the Company filed notice with the State of Florida of the dissolution. F- 33 On October 4, 2020, the Company filed a lawsuit in Florida seeking to nullify agreements with six individuals. In violation of the management agreement entered into by the Company and Ihsane (Jay) Jahid in connection with the Company’s acquisition of Red Rock, the Company alleges that Mr. Jahid engaged in self-interested, self-serving conduct utilizing the Company’s goodwill to enter into certain convertible note agreements with Matt Kanuck, Rita Home & Investment, LLC, Taoufik Litefti, Khalid Ahroum, and Iham Taharraoui without the legal authority to bind the Company. The Company alleges that it did not authorize Mr. Jahid to enter into the subject agreements with the five other defendants, was not aware that Mr. Jahid had done so, Mr. Jahid was acting outside of the scope of his authority when he caused the Company to enter into the agreements, the five other defendants knew or should have known that Mr. Jahid did not have the authority to bind the Company to the obligations contemplated by the subject agreements, and any rights that the five other defendants claim under the agreements with Mr. Jahid are controverted by the management agreement that was in place between the Company and Mr. Jahid and therefore cannot form the basis for any breach of contract claims against the Company. The parties are currently engaged in settlement negotiations. On April 26, 2021, the Company filed a lawsuit against investors in Red Rock seeking a judgement declaring that convertible secured notes issued to them by Red Rock purportedly convertible into the Company’s common stock to be null and void, and defendants subsequently filed a counterclaim. On July 29, 2022, the parties entered into a mediated settlement agreement whereby defendants agreed to dismiss all claims against the Company related to the notes and accrued interest in the amount of $ 510,418 and further agreed to cancel and return common stock and warrants issued to claimants in a related 2020 settlement. The Company agreed to issue defendants 592,000,000 shares of common stock. As a result of the settlement agreement, the convertible notes and accrued interest were written-off in the third quarter of 2022 resulting in a gain of $ 510,417 which is recorded in discontinued operations. As of December 31, 2022, in a separate settlement and additional 66,666,666 shares were added to the settlement for a total of 658,666,666 shares issued and recorded in common stock for $ 658,666 , additional paid in capital for $( 409,775 ). The settlement also required the previous owners to relinquish 35,000,000 shares of common stock. Prior to the settlement, the Company continued to carry Red Rock liabilities on its balance sheet including accounts payables and accrued expenses of $ 1,872,086 , convertible notes payable of $ 240,000 , accrued interest of $ 214,318 and a derivative liability of $ 378,877 as of September 30, 2021. The derivative liability is a function of the convertible notes and accrued interest and the accounts payable and accrued expenses of $ 1,872,086 is deemed to be the responsibility of the current owners of Red Rock and was written-off by the Company in the third quarter of 2021 resulting in a gain of $ 328,718 , which is recorded in discontinued operations. Schedule of discontinued operations December 31, 2022 2021 Net liabilities of discontinued operations Cash $ – $ 15,019 Accounts receivable – 18,397 Residential housing – 319,856 (Accumulated depreciation) – ( 139,397 ) Accounts payable and accrued expenses – ( 2,264 ) Accrued interest – ( 231,318 ) Convertible debt – ( 240,000 ) Derivative liability – – Net liabilities of discontinued operations $ – $ ( 259,707 ) F- 34 Year Ended December 31, 2022 2021 Gain (Loss) from discontinued operations Revenue $ 133,217 $ 129,803 Cost of sales ( 65,209 ) ( 79,953 ) Selling, general and administrative expenses ( 63,534 ) ( 85,872 ) Interest expense ( 39,100 ) ( 68,378 ) Change in derivative liability – 37,793 Loss on divestiture of subsidiary ( 217,769 ) – Gain no change in estimate ( 4,474 ) ( 13,279 ) Gain on elimination of derivative liability – 378,877 Gain on settlement of debt – – Gain on reversal of Red Rock liability 510,418 1,872,086 Loss on settlement ( 212,600 ) – Gain from discontinued operations $ 40,949 $ 2,171,077 Loss from discontinued operations of We3, divested on October 31, 2022, which are presented in total as discontinued operations in the Company’s Consolidated Statement of Operations for the years ended December 31, 2022 and 2021, are as follows: Year Ended December 31, 2022 2021 Gain (Loss) from discontinued operations Revenue $ 133,217 $ 129,803 Cost of sales ( 65,209 ) ( 79,953 ) Selling, general and administrative expenses ( 63,534 ) ( 85,871 ) Loss on divestiture of subsidiary ( 217,769 ) – Gain no change in estimate ( 4,474 ) ( 13,279 ) (Loss) from discontinued operations $ ( 217,769 ) $ ( 49,300 ) 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 years ended December 31, 2022 and 2021, the Company recognized goodwill impairment in the amount of $ 2,092,048 and $ 0 , respectively. The Company based this decision on impairment testing of the underlying assets, expected cash flows, decreased asset value and other factors. F- 35 The following table shows goodwill balances by reportable segment: Schedule of goodwill balances Affordable Housing Rentals Financial Services Healthcare Total Gross carrying value at December 31, 2021 $ – $ 2,092,048 $ 5,666,608 $ 7,758,656 Accumulated impairment – – – – Carrying value at December 31, 2021 – 2,092,048 5,666,608 7,758,656 Accumulated impairment – ( 2,092,048 ) – ( 2,092,048 ) Carrying value at December 31, 2022 $ – $ – $ 5,666,608 $ 5,666,608 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 $ 301,321 and $ 185,831 for the years ended December 31, 2022 and 2021, respectively. The Company has operating leases with future commitments as follows: Schedule of property leases Amount 2023 $ 148,192 2024 62,355 2025 16,631 Total $ 227,178 F- 36 Employees The Company agreed to pay $360,000 per year and a $200,000 of target annual incentive granted in December 2021 and 2022 to the Chief Executive Officer based on his employment agreement since July 1, 2020 of which currently 50% is paid in cash and 50% is accrued. The Company previously paid the Chief Executive Officer $300,000 per year. The total outstanding accrued compensation as of December 31, 2022 and 2021 were $ 1,870,500 and $ 1,385,000 , respectively. The Company agreed to pay $360,000 per year and a $200,000 of target annual incentive in December 2021 and 2022 to the Chairman of the Board based on his employment agreement since July 1, 2020 of which currently 50% is paid in cash and 50% is accrued. The Company previously paid the Chairman of the Board $300,000 per year. The total outstanding accrued compensation as of December 31, 2022 and December 31, 2021 were $ 1,863,000 and $ 1,400,000 , respectively. The Company agreed to pay $120,000 per year to the Chief Operating Officer based on his amended employment agreement executed on May 15, 2019. In the third quarter of 2021, the Chief Operating Officer received 61,000 shares of series B preferred stock in exchange for accrued salaries of $ 244,000 . In September 6, 2022, the Chief Operating Officer received 18,750 shares of series B preferred stock in exchange for services. On October 10, 2022, the Company issued 18,750 shares of series B preferred stock at the fair value of $1 per share in exchange for the accrued salaries of $ 159,000 resulting in a gain on accrued compensation settlement of $ 140,250 . The total outstanding accrued compensation as of December 31, 2022 and December 31, 2021 was $ 0 and $ 159,000 , 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 December 31, 2022 and December 31, 2021 was $ 17,057 . 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 3 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 objective of financial performance Year Minimum Annual Nova EBITDA Cash Annual Bonus Series J Preferred Stock 2022 $ 2 .0M $ 120,000 120,000 Shares 2022 $ 2.4 M $ 150,000 135,000 Shares 2023 $ 3.7 M $ 210,000 150,000 Shares 2024 $ 5.5 M $ 300,000 180,000 Shares 2025 $ 8 .0M $ 420,000 210,000 Shares On May 31, 2019, Platinum Tax Defenders entered into an employment agreement with a manager with a term of 5 years, whereby Platinum Tax Defenders provides for compensation of $17,333 per month along with a bonus incentive if financial performance measures were met. The contract was terminated December 31, 2021. 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. F- 37 17. INCOME TAXES At December 31, 2022, the Company had federal and state net operating loss carry forwards of approximately $ 27,858,733 that expire in various years through the year 2038. Due to operating losses, there is no provision for current federal or state income taxes for the years ended December 31, 2022 and 2021. Due to operating losses, there is no provision for current federal or state income taxes for the years ended December 31, 2022 and 2021. 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. The Company’s deferred tax asset at December 31, 2022 and 2021 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $ 5,991,000 and $ 4,991,000 , respectively, less a valuation allowance in the amount of approximately $ 5,991,000 and $ 4,991,000 , respectively. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance in both 2022 and 2021. The valuation allowance increased by approximately $ 1 million from the year ended December 31, 2022. The Company’s total deferred tax asset as of December 31, 2022 and 2021 is as follows: Schedule of deferred tax assets 2022 2021 Deferred tax assets $ 5,991,000 $ 4,991,000 Valuation allowance ( 5,991,000 ) ( 4,991,000 ) Net deferred tax asset $ – $ – F- 38 On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law by President Trump. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018, while also repealing the deduction for domestic production activities, implementing a territorial tax system, and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted. The provisional amounts incorporate assumptions made based upon the Company’s current interpretation of the Tax Reform Act and may change as the Company receives additional clarification and implementation guidance. 18. SEGMENT REPORTING The Company has four reportable operating segments as determined by management using the “management approach” as defined by the authoritative guidance on Disclosures about Segments of an Enterprise and Related Information : (1) Affordable Housing (AHI) (Divested as of October 31, 2022) (2) Tax Resolution Services (Platinum Tax and Key Tax (Divested as of December 31, 2021) (3) Real Estate (Edge View) (4) 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, which owns 30 prime acres of land; 23.5 acres zoned MDR (Medium Density Residential) with 12 lots already platted and 48 lots zoned HDR (High Density Residential), 4 acres of dedicated river front property zoned for recreation on the Salmon River, Idaho’s premier whitewater river and 2.5 acres zoned for commercial use. All land is in the city limits of Salmon and adjacent to the Frank church Wilderness Park (the largest wilderness park in the lower 48 states). 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. F- 39 Management uses numerous tools and methods to evaluate and measure of its subsidiaries’ success. To help succeed, management retains the prior owners of the subsidiaries and allow them to do what they do best is run the business. Additionally, management monitors key metrics primarily revenues and net income from operations. Schedule of segment reporting As of December 31, 2022 2021 (Restated) Assets: Financial Services $ 8,577 $ 2,897,272 Healthcare 12,692,531 12,443,820 Real Estate 592,557 611,900 Others 59,692 ( 655,953 ) Consolidated assets $ 13,353,357 $ 15,297,039 Years Ended December 31, 2022 2021 (Restated) Revenues: Financial Services $ 1,305,077 $ 4,313,167 Healthcare 10,693,196 5,413,890 Real Estate – 152,000 Consolidated revenues $ 11,998,273 $ 9,879,057 Cost of Sales: Financial Services $ 397,347 $ 1,942,411 Healthcare 4,060,034 1,746,561 Real Estate – 79,481 Consolidated cost of sales $ 4,457,381 $ 3,768,453 Income (Loss) from operations from subsidiaries Financial Services $ ( 122,857 ) $ 187,027 Healthcare 5,845,052 3,272,241 Real Estate ( 19,345 ) 68,744 Income (loss) from operations from subsidiaries $ 5,702,850 $ 3,528,012 Loss from operations from Cardiff Lexington $ ( 4,010,866 ) $ ( 1,865,888 ) Total income (loss) from operations $ 1,691,984 $ 1,662,124 Income (Loss) before taxes Financial Services $ ( 2,219,832 ) $ 794,778 Healthcare 74,880 1,714,627 Real Estate ( 19,345 ) 68,744 Corporate, administration and other non-operating expenses ( 3,265,224 ) ( 1,911,856 ) Consolidated income (loss) before taxes $ ( 5,429,521 ) $ 666,293 F- 40 19. SUBSEQUENT EVENTS The Company has evaluated its operations subsequent to December 31, 2022 to the date these consolidated financial statements were available to be issued and determined the following subsequent events and transactions required disclosure in these consolidated financial statements. On the various dates in January and February 2023, the Company converted $58,800 of various convertible debts, $5,873 in accrued interests and $1,390 in penalties and fees into 118,682,378 shares of the Company’s common stock. 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. F- 41 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 6, 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) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ Alex Cunningham Chief Executive Officer, President and Director (principal executive officer) June 6, 2023 Alex Cunningham /s/ Zia Choe Interim Chief Financial Officer (principal financial and accounting officer) June 6, 2023 Zia Choe /s/ Daniel Thompson Chairman of the Board Directors June 6, 2023 Daniel Thompson