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Item 1. Financial Statements

2023-06-29 compared with 2023-01-06 · 911 added, 1148 removed, 293 unchanged (88% of the section changed)

Item 1 - Financial Statements

FINANCIAL STATEMENTS.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022 (Unaudited)

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 (Unaudited) and 2022 (Unaudited and restated)

Condensed Consolidated Statements of Stockholders’ Equity (Deficiency) for the Three Months Ended March 31, 2023 (Unaudited) and 2022 (Unaudited and restated)

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 (Unaudited) and 2022 (Unaudited and restated)

Notes to Condensed Consolidated Financial Statements (Unaudited)

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

September 30,

AS OF MARCH 31, 2023 AND DECEMBER 31, 2022

Current assets

2 unchanged sentences

Total current assets

Property and equipment, net of accumulated depreciation of $247,861 and $218,471, respectively

Due from related party

Property and equipment, net

Right of use - assets

LIABILITIES AND DEFICIENCY IN SHAREHOLDERS' EQUITY

Due from related party

LIABILITIES, MEZZANINE EQUITY AND DEFICIENCY IN STOCKHOLDERS' EQUITY

Current liabilities

2 unchanged sentences

Accrued interest

Operating lease liability

Common stock to be issued

Right of use - liability

Due to director & officer

Due to related party

Notes payable, current portion

Notes payable

Notes payable - related party

Convertible notes payable, net of debt discounts of $ 87,147 and $ 46,797 , respectively

Net liabilities of discontinued operations

Total current liabilities

Other liabilities

Notes payable –

net of current portion

Operating lease liability –

net of current portion

Notes payable

Operating lease liability – long term

Total liabilities

The accompanying notes are an integral part of

these condensed consolidated financial statements

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

September 30,

Shareholders' equity

Preferred stock

Preferred Stock Series B - 3,000,000 shares authorized, par value $.001, stated value $4.00, 2,020,078 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Preferred Stock Series C- 500 shares authorized, par value $.001, stated value $4.00, 122 shares issued and outstanding at September 30, 2022 and December 31, 2021

Preferred Stock Series D- 800,000 shares authorized, par value $.001, stated value $4.00, -0- shares issued and outstanding at September 30, 2022 and 37,500 shares issued and outstanding at December 31, 2021

Preferred Stock Series E- 1,000,000 shares authorized, par value $.001, stated value $4.00, 150,750 shares issued and outstanding at September 30, 2022 and December 31, 2021

Preferred Stock Series F- 800,000 shares authorized, par value $.001, stated value $4.00, 175,045 shares issued and outstanding at September 30, 2022 and December 31, 2021

Preferred Stock Series F-1- 800,000 shares authorized, par value $.001, stated value $4.00, 35,752 shares issued and outstanding at September 30, 2022 and December 31, 2021

Preferred Stock Series H- 4,859,379 shares authorized, par value $.001, stated value $4.00, -0- shares issued and outstanding at September 30, 2022 and 37,500 shares issued and outstanding December 31, 2021

Preferred Stock Series I- 500,000,000 shares authorized, par value $.001, stated value $4.00, 14,885,000 shares issued and outstanding at September 30, 2022 and December 31, 2021

Preferred Stock Series J- 10,000,000 shares authorized, par value $.001, stated value of $4.00, 1,713,584 shares issued and outstanding at September 30, 2022 and 894,834 shares issued and outstanding at December 31, 2021, respectively

Preferred Stock Series K- 10,937,500 shares authorized, par value of $.001, 8,200,562 shares issued and outstanding at September 30, 2022 and December 31, 2021

Preferred Stock Series L- 100,000,000 shares authorized, par value $.001, stated value $4.00, 319,493 shares issued and outstanding at September 30, 2022 and December 31, 2021

Preferred Stock Series N- 3,000,000 shares authorized, par value $.001, stated value of $4.00, 868,056 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Preferred Stock Series R- 5,000 shares authorized, par value $.001, stated value of $1,200, 165 shares issued and outstanding at September 30, 2022 and December 31, 2021

Preferred Stock Series X- 5,000,000 shares authorized, par value $.001, stated value of $4.00, 375,000 and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Common stock;

7,500,000,000 shares authorized with $0.001 par value;

197,796,735 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Treasury stock;

at cost, 212,500 shares of series D preferred stock, 81,601 of series H preferred stock and 325,244 shares of series G preferred stock at September 30, 2022 and December 31, 2021, respectively,

Mezzanine equity

Redeemable Series N Senior Convertible Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 868,058 shares issued and outstanding at March 31, 2023 and December 31, 2022

Redeemable Series X Senior Convertible Preferred Stock - 5,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 375,000 shares issued and outstanding at March 31, 2023 and December 31, 2022

Total Mezzanine Equity

Stockholders' equity (deficit)

Series B Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 2,131,328 shares issued and outstanding at March 31, 2023 and December 31, 2022

Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value $ 4.00 , 122 shares issued and outstanding at March 31, 2023 and December 31, 2022

Series E Preferred Stock - 1,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 150,750 shares issued and outstanding at March 31, 2023 and December 31, 2022

Series F-1 Preferred Stock - 800,000 shares authorized, $0.001 par value, stated value $ 4.00 , 35,752 shares issued and outstanding at March 31, 2023 and December 31, 2022

Series I Preferred Stock - 500,000,000 shares authorized, $ 0.001 par value, 14,885,000 shares issued and outstanding at March 31, 2023 and December 31, 2022

Series J Preferred Stock - 10,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 1,713,584 shares issued and outstanding at March 31, 2023 and December 31, 2022

Series K Preferred Stock - 10,937,500 shares authorized, $ 0.001 par value, 8,200,562 shares issued and outstanding at March 31, 2023 and December 31, 2022

Series L Preferred Stock - 100,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 319,493 shares issued and outstanding at March 31, 2023 and December 31, 2022

Series R Preferred Stock - 5,000 shares authorized, $0.001 par value, stated value of $ 1,200 , 165 shares issued and outstanding at March 31, 2023 and December 31, 2022

Common Stock - 7,500,000,000 shares authorized, $ 0.001 par value;

908,479,113 and 789,796,735 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated deficit

(67,318,320 )

(66,194,744 )

Total shareholders' equity

Total liabilities and shareholders' equity

Total stockholders' equity (deficit)

Total liabilities, mezzanine equity and stockholders' equity

The accompanying notes are an integral part of

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER

30, 2022 AND 2021

THREE MONTHS ENDED

SEPTEMBER 30,

NINE MONTHS ENDED

SEPTEMBER 30,

Rental income

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND

Three Months Ended March 31,

Financial services

1 unchanged sentence

COST OF SALES

Rental business

Financial services

2 unchanged sentences

Depreciation expense

Transaction costs

Selling, general and administrative

Total operating expenses

PROFIT (LOSS) FROM OPERATIONS

INCOME FROM OPERATIONS

OTHER INCOME (EXPENSE)

Change in value of derivative liability

Gain on forgiveness of debt

Gain on change of estimate

Loss on disposal

Interest expense & finance charge

Financing penalties & fees

Penalties and fees

Interest expense and finance charge

( 2,220,176 )

Conversion cost penalty and reimbursement

Amortization of debt discounts

Total other income (expenses)

NET INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS

Total other income (expense)

( 2,264,722 )

NET LOSS BEFORE DISCONTINUED OPERATIONS

( 1,543,239 )

LOSS FROM DISCONTINUED OPERATIONS

GAIN FROM DISPOSAL OF SUBSIDIARY

NET INCOME (LOSS) FOR THE PERIOD

NET LOSS FOR THE PERIOD

$ ( 1,562,454 )

BASIC AND DILUTED INCOME (LOSS) PER SHARE

DEEMED DIVIDENDS ON PREFERRED STOCK

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$ ( 352,802 )

$ ( 1,562,454 )

BASIC LOSS PER SHARE

Continuing operations

Discontinued operations

WEIGHTED AVERAGE NUMBER OF COMMON SHARES –

CONTINUED AND DISCONTINUED OPERATIONS

WEIGHTED AVERAGE NUMBER OF COMMON SHARES - BASIC AND DILUTED

The accompanying notes are an integral part of

1 unchanged sentence

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIENCY)

FOR THE PERIOD ENDED SEPTEMBER 30, 2021

Preferred Stock Series

B,D,E,F,F-1,G,H,J,L,N,X

Preferred Stock, Series

Balance December 31, 2020 (Restated)

THREE MONTHS ENDED MARCH 31, 2023 AND 2022

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

Balance December 31,

2021 (Restated)

$ ( 4,967,686 )

Conversion of convertible notes payable

Reclassify Derivative liabilities to Additional Paid in Capital

Issuance of Common Stock for preferred I shares

Reclassify warrant liabilities to additional paid in capital

Issuance of preferred stock series J

Issuance of preferred stock series N

Issuance of preferred stock series B

Issuance of common stock for services

Distribution of dividend

Issuance of warrant

Balance, September 30, 2021 (unaudited)

Dividend to preferred stock

Balance, March 31, 2022 (Restated)

$ ( 4,967,686 )

Treasury Stock

Balance December 31, 2022

Conversion of convertible notes payable

Dividend to preferred stock

Balance, March 31, 2023

Stockholders’

Balance December 31, 2021 (Restated)

1 unchanged sentence

$ ( 65,118,744 )

$ (65,583,255 )

Dividend to preferred stock

( 1,562,454 )

Conversion of convertible notes payable

Reclassify Derivative liabilities to Additional Paid in Capital

Issuance of Common Stock for preferred I shares

Reclassify warrant liabilities to additional paid in capital

Issuance of preferred stock series J

Issuance of preferred stock series N

Issuance of preferred stock series B

Issuance of common stock for services

Distribution of dividend

Issuance of warrant

Balance September 30, 2021 (unaudited)

( 1,562,454 )

Balance, March 31, 2022 (Restated)

$ ( 3,479,126 )

1 unchanged sentence

$ ( 932,839 )

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’

EQUITY (DEFICIENCY)

FOR THE PERIOD ENDED SEPTEMBER 30, 2022

Preferred Stock Series

B,D,E,F,F-1,G,H,J,L,N,X

Preferred Stock, Series

Balance December 31, 2022

Issuance of preferred B in exchange of

preferred D and H

Cancellation of common stock

Cancellation of preferred stock series D

Cancellation of preferred stock series H

Issuance of preferred stock series X

Issuance of preferred stock series J

Distribution of dividend

Balance, September 30, 2022

Treasury Stock

Balance, December 31, 2021

$ ( 8,554,368 )

1 unchanged sentence

$ ( 1,469,808 )

$ (2,781,364 )

Issuance of preferred B in exchange of preferred D and H

Cancellation of common stock

(35,000,000 )

Cancellation of preferred stock series D

Cancellation of preferred stock series H

Issuance of preferred stock series X

Issuance of preferred stock series J

Issuance of common stock for settlement of red Rock Travel

Distribution of dividend

Balance, September 30, 2022

Conversion of convertible notes payable

Dividend to preferred stock

Balance, March 31, 2023

$ ( 8,482,813 )

4 unchanged sentences

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

NINE MONTHS ENDED SEPTEMBER 30,

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Three Months Ended March 31

CASH FLOWS FROM OPERATING ACTIVITIES

3 unchanged sentences

Amortization of loan discount

Gain on forgiveness of debt

Other noncash items, net

Loss on disposal

Change in value of derivative liability

Warrant issued for transaction costs

Loss on finance penalties and fees

Gain on refinance of debt

Reduction from forgiveness of PPP Loans

Fair value settled upon conversion

Conversion and note issuance cost

(Increase) decrease in:

Accounts receivable

Assets held for sale

Right of use –

( 1,111,636 )

Right of use – assets

Prepaid expenses and other current assets

Intangible assets

Increase (decrease) in:

Accounts payable & accrued expense

Accrued officer’s compensation

Due (to) from related parties

Accounts payable and accrued expense

Accrued officer’s compensation

Due from related parties

Accrued interest

Right of use –

Capital stock to be issued

Deferred revenue

Right of use – liabilities

Net cash used in operating activities

Net cash used in discontinued operations - operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of furniture & equipment

Acquisition of Nova Ortho and Spine PLLC, net of cash acquired

Net cash used in investing activities

Net cash provided by discontinued operations - operating activities

CASH FLOWS FROM FINANCING ACTIVITIES

Due to director

Proceeds from convertible notes payable

Repayment of convertible notes payable

Proceeds from PPP loans

Payment of PPP loan

Payment of SBA loan

Dividend on preferred stock

Proceeds from credit line

Repayment of credit line

Issuance of preferred stock series N

Payment of notes payable

Payment of notes payable related party

Proceeds of notes payable related party

Proceeds from notes payable related party

Net cash provided by financing activities

NET INCREASE(DECREASE) IN CASH

NET (DECREASE) INCREASE IN CASH

CASH, BEGINNING OF PERIOD

1 unchanged sentence

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for:

Cash paid during the period for interest

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Payment of notes payable

Preferred stock issued for business acquisition

Preferred stock issued upon conversion of notes payable and accrued interest

Derivative liability settled upon conversion

Preferred stock issued for debt refinance

Common stock issued upon conversion of notes payable and accrued interest

Debt discount from derivative liabilities

The accompanying notes are an integral part of

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations

Legacy Card Company, LLC (“Legacy”)

was formed as a Limited Liability Company on August 29, 2001.

On April 18, 2005, Legacy converted from a California Limited Liability

Company to a Nevada Corporation.

On November 10, 2005, Legacy merged with Cardiff Lexington Corporation (“Cardiff Lexington”,

the “Company”), a publicly held corporation.

On April 13, 2021, Cardiff Lexington Corporation converted from a Florida Corporation

to a Nevada Corporation.

In the first quarter of 2013, it was decided to

restructure Cardiff Lexington into a holding company that adopted a new business model known as "Collaborative Governance,"

a form of governance enabling businesses to take advantage of the potential access to capital markets provided by affiliation with a publicly-traded

Cardiff Lexington began targeting the acquisition of niche companies with high growth potential.

The reason for this strategy

was to protect the Company’s shareholders by acquiring businesses with little to no debt, seeking support with both financing and

management that had the ability to offer a return to investors.

Description of Business

Cardiff Lexington consists of the following wholly owned subsidiaries:

We Three, LLC dba Affordable Housing Initiative (“AHI”),

acquired May 15, 2014

Romeo’s Alpharetta, LLC dba Romeo’s NY Pizza (“Romeo’s

Pizza”), acquired September 30, 2014;

Sold July 1, 2021.

Edge View Properties, Inc., (“Edge View”) acquired

July 16, 2014

Repicci’s Franchise Group, LLC (“Repicci’s

Group”), acquired August 10, 2016;

Sold September 1, 2021.

Platinum Tax Defenders, LLC (“Platinum Tax”),

acquired July 31, 2018

JM Enterprises 1, Inc.

dba Key Tax Group (“Key Tax”),

acquired May 8, 2019;

Sold December 31, 2021

Red Rock Travel Group, LLC (“Red Rock”), acquired

July 31, 2018, discontinued May 31, 2019

Nova Ortho and Spine, PLLC (“Nova”), acquired

Basis of Presentation and Principles of Consolidation

The accompanying September 30, 2022 interim condensed

consolidated financial statements (“financial statements”) have been prepared pursuant to the rules and regulations of the

Securities and Exchange Commission.

Certain information and note disclosures normally included in the annual financial statements prepared

in accordance with U.S.

generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those

rules and regulations, but we believe the disclosures made are adequate to make the information presented not misleading.

In the opinion

of management, all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation have been included in

the condensed consolidated financial statements included herein.

These statements should be read in conjunction with the audited condensed

consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.

results of operations for the periods presented are not necessarily indicative of results to be expected for the full fiscal year or any

other periods.

Cardiff Lexington Corporation (“Cardiff”)

was originally incorporated on September 3, 1986 in Colorado as Cardiff International Inc.

On November 10, 2005, Cardiff merged with Legacy

Card Company, LLC and changed its name to Cardiff Lexington Corporation.

On August 27, 2014, Cardiff redomiciled and became a corporation

under the laws of Florida.

On April 13, 2021, Cardiff redomiciled and became a corporation under the laws of Nevada.

Cardiff is an acquisition holding company focused

on locating undervalued and undercapitalized companies, primarily in the healthcare industry, and providing them capitalization and leadership

to maximize the value and potential of their private enterprises while also providing diversification and risk mitigation for stockholders.

All of Cardiff’s operations are conducted through, and its income derived from, its various subsidiaries, which includes:

· We Three, LLC dba Affordable

Housing Initiative (“AHI”), which was acquired on May 15, 2014 and sold on October 31, 2022;

· Edge View Properties,

(“Edge View”), which was acquired on July 16, 2014;

· Platinum Tax Defenders

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

· Nova Ortho and Spine, PLLC (“Nova”), which was acquired

on May 31, 2021.

Principles of Consolidation

The condensed consolidated financial statements

include the accounts of Cardiff and its wholly owned subsidiaries AHI, Edge View, Platinum Tax and Nova (collectively, the “Company”).

AHI is included in discontinued operations.

All significant intercompany accounts and transactions are eliminated in consolidation.

prior period amounts may have been reclassified for consistency with the current period presentation.

These reclassifications would have

no material effect on the reported condensed consolidated financial results.

Use of Estimates

The preparation of financial statements in conformity

GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures.

uses its historical records and knowledge of its business in making estimates.

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.

of a novel coronavirus throughout the world, including the United States, during early calendar year 2021 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

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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

Accounts Receivable

2 unchanged sentences

Management closely monitors outstanding accounts receivable and charges

off to expense any balances that are determined to be uncollectible which was zero as of September 30, 2022 and December 31, 2021, respectfully.

As of September 30, 2022 and December 31, 2021, the Company had accounts receivable of $6,829,160 and $4,948,796, respectively.

receivables are primarily generated from our subsidiaries in their normal course of business.

off to expense any balances that are determined to be uncollectible, which was $ 270,000 and $ 0 as of March 31, 2023 and December 31, 2022,

respectively.

As of March 31, 2023 and December 31, 2022, the Company had net accounts receivable of $ 7,446,416 and $ 6,604,780 , respectively.

Accounts receivables are primarily generated from subsidiaries in their normal course of business.

Property and Equipment

4 unchanged sentences

reporting purposes based on the following estimated useful lives:

Schedule of estimated useful lives

Classification

6 unchanged sentences

but are evaluated for impairment annually or when indicators of a potential impairment are present.

Our impairment testing of goodwill

is performed separately from our impairment testing of indefinite-lived intangibles.

The annual evaluation for impairment of goodwill

and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future

cash flows and operating plans.

The Company believes such assumptions are also comparable to those that would be used by other marketplace

participants.

During nine months ended September 30, 2022 and 2021, the Company did not recognize any goodwill impairment.

based this decision on impairment testing of the underlying assets, expected cash flows, decreased asset value and other factors.

The Company’s impairment testing

of goodwill is performed separately from its impairment testing of indefinite-lived intangibles.

The annual evaluation for impairment

of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected

future cash flows and operating plans.

The Company believes such assumptions are also comparable to those that would be used by other

marketplace participants.

During the three months ended March 31, 2023 and 2022, the Company did no t recognize any goodwill impairment.

The Company based this decision on impairment testing of the underlying assets, expected cash flows, decreased asset value and other factors.

Valuation of Long-lived Assets

In accordance with the provisions of Accounting

Standards Codification (“ASC”) Topic 360-10-5, “

Impairment or Disposal of Long-Lived Assets ”, all long-lived

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

5 unchanged sentences

amounts of the assets exceed the fair value of the assets.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

Revenue Recognition

On January 1, 2018, we adopted ASC 606, Revenue

from contracts with customers (“Topic 606”) using the modified retrospective method applied to those contracts which were

not completed as of January 1, 2018.

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

1 unchanged sentence

· Identification of a contract with a customer

Identification of the performance obligations in the contact

· Identification of the performance obligations

in the contact

· Determination of the transaction price

Allocation of the transaction price to the separate performance allocation

· Allocation of the transaction price to the separate

performance allocation

· Recognition of revenue when performance obligations are satisfied.

4 unchanged sentences

promised within each contract and determines those that are performance obligations and assesses whether each promised service is distinct.

The Company’s financial services sector

reports revenues as services are performed and its healthcare sector reports revenues at the time control of the services transfer to

the customer and from providing licensed and/or certified orthopedic procedures.

Our healthcare subsidiary does not have contract liabilities

or deferred revenue as there are no amounts prepaid for services.

Established billing rates are not the same as

actual amounts recovered for our healthcare subsidiary.

They generally do not reflect what the Company is ultimately paid and

therefore are not reported in our condensed unaudited 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.

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 condensed consolidated financial statements.

The Company is

typically paid amounts based on established charges per procedure with guidance from the annually updated Current Procedural

Terminology (“CPT”) guidelines (a code set maintained by the American Medical Association through the CPT Editorial

Panel), that designates relative value units (“RVU's”) and a suggested range of charges for each procedure which is then

assigned a CPT code.

This fee is discounted to reflect the percentage

paid to the Company “using a modifier”

recognized by each insurance carrier for services, less deductible, co-pay, and contractual

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.

2 unchanged sentences

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

These cases are sold to a factor, who bears the risk of economic benefit or loss.

1 unchanged sentence

additional funds collected by the Company are remitted to the factor.

Service Fees –

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

Service Fees – Net (PIP)

The Company generates services fees from performing

13 unchanged sentences

An initial response is usually received within four weeks from electronic

filing and up to Nine weeks from paper filing.

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 18-month historical payment and collection percentages.

The Company generally receives all of its collections within

18 months from the date of service.

The Company accounts for chargebacks as they occur and records an estimate for expected chargebacks

as they are received from insurance companies.

For the Nine months ended September 30, 2022 and

2021, respectively, the Company did not record any bad debt expense.

Additionally, the Company has not recorded any estimate for expected

The Company’s contracts for both its contract

The Company’s healthcare revenues are generated

from professional medical billings including facility and anesthesia services.

With respect to facility and anesthesia services, the Company

is the primary obligor as the facility and anesthesia services are considered part of one integrated performance obligation.

the Company receives 49.9% of collections from total gross billed.

Accordingly, the Company recognized net healthcare service revenue

as 49.9% of gross billed amounts.

Historical collection rates are estimated using the most current prior 12-month historical payment and

collection percentages.

The Company’s healthcare subsidiary has

contractual medical receivable sales and purchase agreements with third party factors which result in approximately 51% to 56% reduction

from the accounts receivables amounts when a receivable is sold to the factors.

The Company evaluated the factored adjustments considering

the actual factored amounts per patient quarterly, and the reductions from accounts receivable that are factored were recorded in finance

charges as other expenses on the consolidated statement of operations.

The Company’s contracts for both its contract

and service fees each contain a single performance obligation (providing orthopedic services), as the promise to transfer the individual

3 unchanged sentences

when the patient receives orthopedic care services.

Our patient service contracts generally have performance obligations which are satisfied

at a point in time.

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;

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.

6 unchanged sentences

The Company recognizes revenues for these services as services are performed.

Rental Income

The Company’s rent revenue is derived from

the mobile home leases.

The expired leases are considered month-to-month leases.

In accordance with section ASC 842, the cost of property

held for leasing by major classes of property according to nature or function, and the amount of accumulated depreciation in total, is

presented in the accompanying condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021.

There are no contingent

rentals included in income in the accompanying condensed 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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

Advertising Costs

Advertising costs are expensed as incurred.

costs are included as a component of cost of sales in the condensed consolidated statements of operations and changes in members’

The Company recognized advertising and marketing expense of $93,905 and $221,690 for the three and nine months ended September

costs are included as a component of cost of sales in the condensed consolidated statements of operations and changes in stockholders’

The Company recognized advertising and marketing expense of $ 38,353 and $ 127,785 for the three months ended March 31, 2023 and

2022, respectively.

The Company recognized advertising and marketing expense of $317,899 and $881,591 for the three and nine months

ended September 30, 2021, respectively.

Valuation of Derivative Instruments

Financial Accounting Standards Board (“FASB”)

Accounting Standards Codification (“ASC”) 815-10, Derivatives and Hedging (“ASC 815-10”) , requires that

embedded derivative instruments be bifurcated and assessed, along with freestanding derivative instruments such as convertible promissory

notes, on their issuance date to determine whether they would be considered a derivative liability and measured at their fair value for

accounting purposes.

The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments

are derivatives or contain features that qualify as embedded derivatives.

For derivative financial instruments that are accounted for

as liabilities, the derivative instrument is initially recorded at its fair value and is then revalued at each reporting date, with changes

in the fair value reported as charges or credits to income.

For option based simple derivative financial instruments,

the Company uses the Black-Scholes option pricing model to value the derivative instruments at inception and subsequent valuation dates.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed

at the end of each reporting period.

Fair Value Measurements

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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).

3 unchanged sentences

hierarchy are described below:

Level Input Definition

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

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.

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

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

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.

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

Distinguishing Liabilities from Equity

The Company accounts for its series N senior convertible

preferred stock and series X senior convertible preferred stock subject to possible redemption in accordance with ASC 480, “ Distinguishing

Liabilities from Equity ”.

Conditionally redeemable preferred shares are classified as temporary equity within the Company’s

condensed consolidated balance sheet.

Stock-Based Compensation

1 unchanged sentence

in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of

the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification.

Pursuant to paragraph 718-10-30-6

of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance

of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument

issued, whichever is more reliably measurable.

the 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

1 unchanged sentence

that performance will occur.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

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 awards’ grant date, based on estimated number of awards that are ultimately expected to vest.

The expense resulting from share-based payments

is recorded in general and administrative expense in the condensed consolidated statements of operations.

Equity Instruments Issued to Parties Other Than Employees for Acquiring

Goods or Services

The Company early adopted ASU No 2018-07 for equity

instruments issued to parties other than employees.

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 are determined in accordance with

ASC Topic 740, “

Income Taxes ”

(“ASC 740”).

Under this method, deferred tax assets and liabilities are recognized

for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities

and their respective tax basis.

Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable

income in the years in which those temporary differences are expected to be recovered or settled.

Any effect on deferred tax assets and

liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ASC 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

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tax authority assuming full knowledge of the position and relevant facts.

For the periods ended September 30, 2022 and September

30, 2021, the Company did not have any interest and penalties associated with tax positions and did not have any significant unrecognized

uncertain tax positions.

As of March 31, 2023 and December 31, 2022, 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 ,

(“ASC 260”), provides for the calculation of "Basic"

and "Diluted"

earnings per share.

Basic earnings

per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock

outstanding during the period.

Diluted earnings per common share is computed by dividing income available to common shareholders by the

weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of

common stock that would have been outstanding if the potentially dilutive securities had been issued.

Potentially dilutive securities

include outstanding stock options, warrants, and debts convertible into common shares.

The dilutive effect of potentially dilutive securities

is reflected in diluted earnings per common share by application of the treasury stock method.

Under the treasury stock method, an increase

in the fair market value of the Company’s Common Stock can result in a greater dilutive effect from potentially dilutive securities.

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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

Going Concern

4 unchanged sentences

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 September 30, 2022, the Company has sustained recurring losses and has an accumulated deficit of

$67.8 million and a working capital deficit of approximately $3.1 million.

The accompanying condensed consolidated financial statements

do not reflect any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications

of liabilities that might result if the Company is unable to continue as a going concern.

As of March 31, 2023, the Company has an accumulated working capital deficit of approximately $ 2.7 million .

The accompanying condensed consolidated financial statements do not reflect any adjustments relating to the recoverability and classification

of recorded asset amounts or the amounts and classifications of liabilities that might result if the Company is unable to continue as

a going concern.

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.

is seeking additional capital 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, the Company may be required to make 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.

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.

We consider the applicability and

impact of all ASU's on our financial position, results of operations, shareholders’

cash flows, or presentation thereof.

2021, the FASB issued ASU No.

2021-06 (“ASU 2021-06”) “

Debt—Debt with Conversion and Other Options (Subtopic

470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) .”

ASU 2021-06 reduces the

number of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion accounting models.

As a result, the Company’s convertible debt instruments will be accounted for as a single liability measured at its amortized cost

as long as no other features require bifurcation and recognition as derivatives.

For contracts in an entity’s own equity, the type

of contracts primarily affected by this update are freestanding and embedded features that are accounted for as derivatives under the

current guidance due to a failure to meet the settlement conditions of the derivative scope exception.

Upon adoption of ASU 2020-06, we

classified the previously identified beneficial conversion features to the associated debt.

We also determined, that in accordance with

ASU 2017-11, such beneficial conversion features are not considered a liability classified derivative.

In June 2016, the Financial Accounting Standards

Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016-13, Measurement of Credit Losses on Financial

Instruments, which supersedes current guidance by requiring recognition of credit losses when it is probable that a loss has been incurred.

The new standard requires the establishment of an allowance for estimated credit losses on financial assets including trade and other

receivables at each reporting date.

The new standard will result in earlier recognition of allowances for losses on trade and other receivables

and other contractual rights to receive cash.

In November 2019, the FASB issued ASU No.

2019-10, Financial Instruments -- Credit Losses

(Topic 326), Derivatives and hedging (Topic 815) and Leases (Topic 842), which extends the effective date of Topic 326 for certain companies

until fiscal years beginning after December 15, 2022.

The new standard will be effective for the Company in the first quarter of fiscal

year beginning January 1, 2023, and early adoption is permitted.

Management does not expect that the adoption of

this standard will have a material effect on the Company's financial statements.

Reclassifications

Certain accounts relating to the prior year have

been reclassified to conform to the current period’s presentation.

These reclassifications had no effect on the net income or net

assets as previously reported.

Nova Ortho and Spine, LLC

On May 31, 2021 the Company completed the acquisition

of Nova Ortho and Spine LLC.

Sellers received a cash payment in the amount of $2,500,000 and were issued 894,834 shares of Series J Preferred

Stock of the Company with a par value of $0.001 and a stated value of $4.00 with an aggregate stated value equal to $3,579,334 for a total

transaction of $6,079,334.

The Preferred J stock rights and privileges include voting rights, a conversion ratio of 1:2:00.

The Preferred

J shares have a lock-up/leak-out limiting the sale of stock for 6 months after which conversions and sales are limited to 20% of their

portfolio per year, pursuant to the terms of the Stock Purchase Agreement.

The parties further agreed to performance based contingent

supplement payment to Sellers in 2022 should one year from the closing date the Company’s trailing twelve months minimum Pre-Tax

Net Income exceed $1,979,320, the “Milestone”, which in that event would cause the issuance to Sellers of 818,750

additional shares of Preferred J Stock, with an aggregate stated value equal to $3,275,000.

On August 25, 2022 under the terms of the Stock

Purchase Agreement entered on May 31, 2021 between the Company and the former owners of its Nova Ortho and Spine subsidiary and an addendum

to that agreement regarding the acquisition supplemental payment the parties recognized unanticipated series of events which 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 the subsidiary

during its initial year the Company agreed to issue the supplemental payment of 818,750 additional shares of Preferred Series J Stock,

with an aggregate stated value equal to $3,275,000.

The preliminary purchase price allocation of the

net assets acquired is as follows:

Nova Ortho and Spine, PLLC

Accounts receivable

Property and equipment

PROPERTY AND EQUIPMENT, NET

Property and equipment as of September 30, 2022

and December 31, 2021 is as follows:

September 30,

Residential housing

Medical equipment

Computer Equipment

Furniture, fixture and equipment

Leasehold Improvement

accumulated depreciation

Property and equipment, net

For the three and nine months ended September

30, 2022, total depreciation expense was $10,814 and $32,442, respectively.

Depreciation expense recorded as cost of sales for the three

and nine months ended September 30, 2022 was $5,031 and $15,093, respectively, and depreciation expense recorded as cost of sales for

the year ended December 31, 2021 was $12,448.

In the quarter ended September 30,2021, the Company

sold 3 lots for $152,000.

At September 30, 2022, the Company had 27 acres of land of approximately $540,000.

As of December 31, 2021,

the Company had 30 acres of land of approximately $603,000 located in Salmon, Idaho, which was in connection with the acquisition of Edge

View Properties, Inc.

in July 2014.

The Company issued 241,199 shares of Series E Preferred Stock as consideration for this acquisition.

The land is currently vacant and is expected to be developed into a residential community.

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.

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

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.

has adopted this standard effective January 1, 2023, which did not have a material impact to the consolidated financial statements,which

resulted in the Company recognizing an allowance for doubtful accounts of $ 270,000 during the three months ended March 31, 2023.

Management does not believe that any other recently

issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements.

As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent to the initial issuance of the Company's

2021 financial statements on March 31, 2022, management reconsidered the methodology previously applied in its valuation of goodwill and

redeemable preferred stocks.

The Company agreed to issue 818,750 additional

shares of series J Preferred Stock with an aggregate stated value equal to $3,275,000 if, as of May 31, 2022, Nova’s trailing twelve

months minimum pre-tax net income exceeded $1,979,320 (the “Milestone”).

The Company finalized its purchase price accounting

and allocation in 2022 and recorded purchase consideration of $6,100,000 associated with the cash consideration, the fair value of the

series J preferred stock and the fair value of the contingent consideration.

The impact of the correction is reflected in $3,275,000 increase

to goodwill and contingent consideration liability on the consolidated balance sheet.

In December 2022, the Company identified an error in its classification

for its series N senior convertible preferred stock for the acquisition of NOVA as presented in its audited balance sheet as of December

Pursuant to ASC 250, “Accounting changes and error corrections” issued by FASB and SAB 99 “Materiality”

issued by SEC, the Company determined the impact of the error was immaterial.

The impact of the error correction is reflected in $3,125,002

increase to the mezzanine equity and offsetting decrease to the Series N Preferred Stock in subject to possible redemption mezzanine equity

The Company and We3 managers entered into a resignation,

release and buyback agreement and addendum, effective October 31, 2022.

The Company presented in prior periods operating loss as loss

from discontinued operations in the amount of $2,593 on the consolidated statement of operations for the three months ended March 31,

The Company identified that NOVA’s accounts

receivable as presented in its balance sheet as of December 31, 2021, was understated due to an error in the collection utilized to estimate

NOVA’s accounts receivable.

The impact of this correction on the accounting estimates is reflected in $1,076,000 decrease to accounts

receivable as of March 31, 2022 and $1,076,000 increase in finance charges for the three months ended March 31, 2022.

The following table summarizes the impacts of

the error corrections on the Company's financial statements for each of the periods presented below:

Balance sheet

Schedule of restated financial information

Impact of correction of error

March 31, 2022 (Unaudited)

As previously

Total liabilities

Mezzanine equity

Total shareholders' equity

$ ( 3,125,002 )

$ ( 932,839 )

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

Statement of operations

Impact of correction of error

Three months ended March 31, 2022 (Unaudited)

As previously

Cost of sales

Operating expense

Income from operations

Other income (expense), net

( 1,193,196 )

( 1,071,526 )

( 2,264,722 )

Net loss before discontinued operations

( 1,073,407 )

( 1,543,239 )

Loss from discontinued operations

$ ( 486,454 )

$ ( 1,076,000 )

$ ( 1,562,454 )

Basic Loss per Share

Continued Operations

Discontinued Operations

Weighted Average Shares Outstanding - Basic Earnings Loss per Share

Continued Operations

Discontinued Operations

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

September 30,

Schedule of account payable and accrued expenses

Accounts payable

Accrued finance cost

Accrued dividends payable

Accrued credit cards

Accrued advertising

Accrued payroll wages

Accrued expense – previously factored liability

Accrued income taxes, and other taxes

Accrued professional fees

Accrued expenses other

Accrued advertising

Accrued payroll

Accrue expense - other

Accrued expense - dividend payable

The Company is delinquent paying certain income

and property taxes.

As of September 30, 2022 and December 31, 2021 the balance for these taxes, penalties and interest is $6,732 and $7,553,

As of March 31, 2023 and December 31, 2022, the balance for these taxes, penalties and interest is $ 6,732 .

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

PLANT AND EQUIPMENT, NET

Property and equipment as of March 31, 2023 and

December 31, 2022 is as follows:

Schedule of Property and Equipment

Medical equipment

Computer Equipment

Furniture, fixtures and equipment

Leasehold Improvement

accumulated depreciation

Property and equipment, net

For the three months ended March 31, 2023 and

2022, depreciation expense was $ 4,635 and $ 10,814 , respectively.

As of March 31, 2023 and December 31, 2022, the

Company had 27 acres of land valued at approximately $ 540,000 .

The land is currently vacant and is expected to be developed into a residential

LINE OF CREDIT

At March 31, 2023 and December 31, 2022, the Company

had a revolving line of credit with a financial institution for $ 92,500 which was personally guaranteed by the manager of Platinum Tax.

The loan accrues interest at 11.20 % at March 31, 2023 and 10.95 % at December 31, 2022.

As of March 31, 2023 and December 31, 2022, the

Company had $ 20,619 and $ 0 , respectively, of outstanding balance against the line of credit.

RELATED PARTY TRANSACTIONS

11, 2021, the Chairman of the Board and the CEO each converted 62,500 Preferred Series I shares into 25,000,000 restricted common shares

for a total of 125,000 Preferred Series I shares into 50,000,000 restricted common shares.

From time to time, the previous owner which is

currently the manager of Platinum Tax Defenders loans funds to the Company to cover short term operating needs.

Amounts owed as of September

30, 2022 and December 31, 2021 were $4,025 and $37 respectively.

The Company assumed amounts due to previous owners

who are current managers of Edge View Properties Inc.

related to the acquisition on July 16, 2014.

These amounts are due on demand and

do not bear interest.

The balance of these amounts are $4,979 due from the previous owners as of September 30, 2022 and December 31, 2021,

respectively.

On August 6, 2021, a Board Resolution was executed to terminate one of the two employees of Edge View Properties for fraud,

deceit, larceny, and thievery for selling property belonging to the Company and personally taking the $162,598 in proceeds.

hired counsel to terminate the employee and handle all legal matters for return of monies and criminal prosecution.

The Company agreed to pay $360,000 per year and

a $200,000 of target annual incentive granted in 2021 to the Chief Executive Officer.

Based on his employment

agreement since January1, 2022 currently 29% is paid in cash and 71% is accrued.

The Company previously paid the Chief Executive Officer

$360,000 per year.

The total outstanding accrued compensation as of September 30, 2022 and December 31, 2021 were $1,605,000 and $1,415,000,

respectively.

The Company agreed to pay $360,000 per year and

a $200,000 of target annual incentive to the Chairman of the Board.

Based on his employment agreement since

January 1, 2022 of which currently 29% is paid in cash and 71% is accrued.

The Company previously paid the Chairman of the Board $300,000

The total outstanding accrued compensation as of September 30, 2022 and December 31, 2021 were $1,590,000 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 preferred stock series B in exchange for accrued salaries of $244,000.

The total outstanding

accrued compensation as of September 30, 2022 and December 31, 2021 was $249,000 and $159,000, respectively.

The Company agreed to pay $156,000 per year to

the Chief Financial Officer based on his amended employment agreement executed on May 15, 2021.

The total outstanding accrued compensation

as of September 30, 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 the Company’s Nova Ortho and Spine subsidiary

in the form of an annual base salaries of $372,000 to one of the 3 doctors, $450,000 to the second, and $372,000 to the third doctor.

Collectively, as a group,

Principals will receive an annual cash bonus and stock equity set forth below (the “Annual Bonus”).

The Annual Bonus will

be conditioned upon the Company achieving 100% of the annual objectives of financial performance goals as set forth below.

Minimum Annual Nova EBITDA

Cash Annual Bonus

Series J Preferred Stock

120,000 Shares

135,000 Shares

150,000 Shares

180,000 Shares

210,000 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 March 31, 2023 and December

31, 2022 were $ 90,189 and $ 37,025 , respectively.

In connection with the acquisition of Edge View

on July 16, 2014, the Company assumed amounts due to previous owners who are current managers Edge View.

These amounts are due on demand

and do not bear interest.

The balance of these amounts are $ 4,979 as of March 31, 2023 and December 31, 2022.

The Company obtained short-term advances from

the Chairman of the Board that are non-interest bearing and due on demand.

As of September 30, 2022 and December 31, 2021, the Company

owed the Chairman $123,882 and $126,765, respectively.

As of March 31, 2023 and December 31, 2022, the Company owed

the Chairman $ 123,192 .

See also Note 14 for compensation paid to employees

of the Company.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

NOTES AND LOANS PAYABLE

Notes payable at September 30, 2022 and December

31, 2021 are summarized as follows:

September 30,

Notes payable at March 31, 2023 and December

31, 2022, respectively, are summarized as follows:

Schedule of notes payable

Notes and loans payable

2 unchanged sentences

Long-term debt matures as follows:

Notes and Loans Payable –

Related Party

From time to time, the previous owner which is

currently the manager of Platinum Tax Defenders loans funds to the Company to cover short term operating needs.

Amounts owed as of September

30, 2022 and December 31, 2021 were $4,025 and $36, respectively.

The amounts due from the previous owners of Edge View is $4,979 as of

September 30, 2022 and December 31, 2021.

Loans and Notes Payable –

Unrelated Parties

On March 12, 2009, the Company entered into a

preferred debenture agreement for $20,000.

The note bore interest at 12% per year and matured on September 12, 2009.

The Company assigned

all of its receivables from consumer activations of the rewards program as collateral on this debenture.

No warrants had been exercised

before the expiration.

The balance of the note was $10,989 at September 30, 2022 and December 31, 2021.

The accrued interest of the note

was $5,986 and $4,910 at September 30, 2022 and December 31, 2021, respectively.

On September 9, 2019, the Company obtained a promissory

note for $410,000 at 10% interest and matured on September 9, 2021.

On November 10, 2021, the Company entered into addendum No.

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 amended 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 at May 4, 2021 and interest accruing at the rate of 24%.

On September 22, 2022, this note was refinanced into a consolidated

senior secured convertible promissory note.

See footnote 8, for further discussion.

Small Business Administration (“SBA”)

On September 2, 2021, The Company obtained an

SBA loan of $150,000 at an interest rate of 3.75% with a maturity date of September 2, 2050.

The principal balance and accrued interest

at September 30, 2022 was $145,387 and $5,723, respectively, and the principal balance and accrued interest at December 31, 2021 was $147,677

and $5,723, respectively.

Schedule of Maturities of Long-term Debt

Loans and Notes Payable – Unrelated Party

On March 12, 2009, the Company issued a debenture

in the principal amount of $20,000.

The debenture bears interest at 12% per annum and matured on September 12, 2009.

The balance of the

debenture was $ 10,989 at March 31, 2023 and December 31, 2022 and the accrued interest was $ 6,554 and $ 6,229 at March 31, 2023 and December

31, 2022, respectively.

The Company assigned all of its receivables from consumer activations of the rewards program as collateral on

this debenture.

Small Business Administration (“SBA”)

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 Company reclassified $ 5,723

of accrued interest to the principal amounts for the three months ended March 31, 2023.

The principal balance and accrued interest at

March 31, 2023 was $ 149,633 and $ 0 , respectively, and principal and accrued interest at December 31, 2022 was $ 144,609 and $ 5,723 , respectively.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

CONVERTIBLE NOTES PAYABLE

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 $1,217,744.

As of September 30, 2022 and December 31, 2021,

the Company had convertible debt outstanding of $3,189,175 and $2,077,753, respectively, net of debt discounts.

During the nine months

ending September 30, 2022, the Company had proceeds of $990,072 from convertible notes and repaid $5,908 to convertible noteholders.

are debt discounts associated with the convertible debt of $0 and $0 as of September 30, 2022 and December 31, 2021, respectively.

the nine months ending September 30, 2022 and 2021, the Company recorded amortization of debt discounts of $249,120 and $1,050,014, respectively.

The Company had no convertible debt conversions

during the nine months ended September 30, 2022.

Convertible notes at September 30, 2022 and December 31, 2021 are summarized

September 30,

As of March 31, 2023 and December 31, 2022, the

Company had convertible debt outstanding net of amortized debt discount of $ 3,717,936 and $ 3,515,752 , respectively.

During the three months

ended March 31, 2023, the Company received net proceeds of $ 240,000 from convertible notes.

During the three months ended March 31, 2022,

the Company had proceeds of $ 550,967 from convertible notes and repaid $ 5,908 to convertible noteholders.

There are debt discounts

associated with the convertible debt of $ 89,147 and $ 46,798 at March 31, 2023 and December 31, 2022, respectively.

For the three months

ended March 31, 2023 and 2022, the Company recorded amortization of debt discounts of $ 17,983 and $ 44,546 , respectively.

During the three

months ended March 31, 2023, the Company converted $ 58,800 of convertible debt, $ 5,873 in accrued interest and $ 2,000 in penalties and

fees into 118,682,378 shares of the Company’s common stock.

The Company recognized $ 123,566 of interest expense and additional paid-in

capital to adjust fair value for the debt settlement during the three months ended March 31, 2023.

On September 22, 2022, the Company entered into

a security exchange and purchase agreement with its largest lender to consolidate all promissory notes held by it and related accrued

interest in exchange for (1) one consolidated senior secured convertible promissory note in the amount of $ 2,600,000 and (2) 375,000 shares

of series X senior convertible preferred stock totaling $ 1,500,000 with a par value of $0.001, stated value of $ 4.00 , convertible into

common shares at a 1:1 conversion rate, non-dilutive and non-voting shares.

Prior to conversion, all promissory notes with this lender

totaled to $ 4,791,099 consisting of principal of $ 3,840,448 and accrued interest of $ 950,651 resulting in a gain on debt consolidation

of $ 1,397,271 .

Convertible notes as of March 31, 2023 and December

31, 2022 are summarized as follows:

Schedule of convertible notes summary

Convertible notes payable

3 unchanged sentences

Long-term portion

The following is a schedule of convertible notes payable from December

31, 2021 to September 30, 2022.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

The following is a schedule of convertible notes

payable as of and for the three months ended March 31, 2023.

Schedule of convertible notes details

Principal Balance 12/31/22

Debt Consolidation

Principal Conversions

Shares Issued Upon Conversion

Principal Balance 3/31/23

3 unchanged sentences

Unamortized Debt Discount At 3/31/23

$ (2,472,742 )

On October 28, 2016, the Company issued a convertible

promissory note in the principal amount of $50,000, which matured on October 28, 2017.

Note 7-1 is currently in default and accrues interest

at a default interest rate of 20% per annum.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

On September 12, 2016, the Company issued a convertible

promissory note in the principal amount of $80,000 for services rendered, which matured on September 12, 2017.

Note 9 is currently in

default and accrues interest at a default interest rate of 20% per annum.

Notes 10, 10-1 and 10-2

On January 24, 2017, the Company issued a convertible

promissory note in the principal amount of $80,000 for services rendered, which matured on January 24, 2018.

Note 10 is currently in default

and accrues interest at a default interest rate of 20% per annum.

On February 10, 2023, the Company executed a second tranche under this

note in the principal amount of $50,000 (Note 10-1).

On March 30, 2023, the Company executed a third tranche under this note in the principal

amount of $25,000 (Note 10-2).

Notes 10-1 and 10-2 accrue interest at a rate of 15% per annum.

Notes 29, 29-1 and 29-2

On May 10, 2019, the Company issued a convertible

promissory note in the principal amount of $150,000.

On November 8, 2019, this note (Note 29) was purchased by and assigned to an unrelated

The amount assigned was the existing principal amount of $150,000 and accrued interest of $5,918 which was issued as Note 29-1,

plus a new convertible promissory note in the principal amount of $62,367 which was issued as Note 29-2.

Note 29-2 is currently in default

and accrues interest at a default interest rate of 24% per annum.

On August 28, 2019, the Company issued a convertible

promissory note in the principal amount of $120,000, which matured on August 28, 2020.

Note 31 is currently in default and accrues interest

at a default interest rate of 24% per annum.

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

On September 3, 2020, the Company issued a convertible

promissory note in the principal amount of $200,000, with an original issue discount of $50,000, which could be drawn in several tranches.

On September 3, 2020, the Company executed the first tranche in the principal amount of $67,000, less an original issue discount of $17,000,

which matured on June 30, 2021 (Note 37-1).

On November 2, 2020, the Company executed the second tranche in the principal amount of $66,500,

less an original issue discount of $16,500, which matured on August 31, 2021 (Note 37-2).

On December 29, 2020, the Company executed the

third tranche in the principal amount of $66,500, less an original issue discount of $16,500, which matured on September 30, 2021 (Note

Notes 37-1, 37-2 and 27-3 are currently in default and accrue interest at a default interest rate of 18% per annum.

On February 9, 2021, the Company issued a convertible

promissory note in the principal amount $103,500, which matured on February 9, 2022.

Note 38 is currently in default and accrues interest

at a default interest rate of 22% per annum.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

On April 26, 2021, the Company issued a convertible

promissory note in the principal amount $153,500, which matured on May 10, 2022.

Note 39 is currently in default and accrues interest

at a default interest rate of 22% per annum.

Notes 40-1, 40-2, 40-3, 40-4, 40-5 and 40-6

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

On November 4, 2022, the Company executed a second tranche under this note in the principal amount of $68,667, less an original

issue discount and fee of $18,667 (Note 40-2).

On November 28, 2022, the Company executed the third tranche under this note in the principal

amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-3).

On November 28, 2022, the Company executed a fourth

tranche under this note in the principal amount of $68,667, less an original issue discount and fee of $18,667 (Note 40-4).

24, 2023, the Company executed a fifth tranche under this note in the principal amount of $88,6676, less an original issue discount and

fee of $25,166 (Note 40-5).

On March 21, 2023, the Company executed a sixth tranche under this note in the principal amount of $136,666,

less an original issue discount and fee of $39,166 (Note 40-6).

All of the Note 40 tranches mature in one year from the note issuance

date and accrue interest at a rate of 10% per annum.

CAPITAL STOCK

Preferred Stock

On September 12, 2022, the Company issued 375,000

preferred series X shares at a par value of $.001 and stated value of $4.00 totaling $1,500,000.

See footnote 8, convertible notes payable

for further discussion.

In the second quarter of 2022, 37,500 preferred

series D shares were cancelled and exchanged for 37,500 B shares and 37,500 preferred series H shares were cancelled and exchanged for

37,500 B shares.

Additionally, as part of the Nova acquisition,

on September 7, 2022, the Company issued 818,750 preferred series J shares at a par value of $.001 and stated value of $4.00 totaling

$3,275,000 as discussed in note 2.

As part of the Nova Ortho acquisition, the Company

issued 894,834 shares of preferred stock series J with par value $.001 and a stated value of $4.00, for $3,579,334.

Also, as part of the Nova Ortho acquisition, the

Company issued 868,056 shares of preferred stock series N with par value $.001 and a stated value of $4.00, for $3,000,000 including a

discount of $472,224 which was recorded as a reduction to APIC.

The Company and Key Tax managers have entered

into a Buyback Agreement (“Agreement”) which is effective December 31, 2021.

Pursuant to the Agreement, Key Tax managers resigned

employment from the Company effective December 31, 2021 and has purchased back the subsidiary in exchange for returning 325,244 Preferred

Shares Series G stock (“Preferred G”) which is 100% of Preferred G shares.

The Key Tax managers will retain zero shares of

Preferred G shares subject to the terms of the Agreement.

There was a loss on disposal in the amount of $1,201,169 which represented net

assets and liabilities at the time of sale back.

December 28, 2021, the Chairman of the Board and Chief Executive Officer each forfeit and surrendered for no consideration 90,000,000

Preferred I shares each, totaling 180,000,000.

Effective March 29, 2021, $265,000 in principle

from convertible debt and conventional debt and $298,195 in accrued interest was converted into 140,799 shares of preferred stock series

B with a $4.00 stated value per share.

This has been reflected in the statement of deficiency in shareholders’

The Chief Operating Officer received 61,000 shares

of preferred stock series B in exchange for accrued salaries of $244,000.

11, 2021 the Chairman of the Board and the CEO and each converted 62,500 Preferred Series I shares into 25,000,000 restricted common shares

for a total of 125,000 Preferred Series I shares into 50,000,000 restricted common shares.

During January 2021, we facilitated a reverse

split of several classes our Preferred Stock which has been given retrospective treatment in these financial statements.

In addition to

the reverse stock split, management established new rights & privileges for certain classes of preferred stock.

The reverse split

ratio ranges from 1.6:1 to 307.7:1 resulting in a reclassification of $11,837,482 from preferred stock to additional paid in capital.

The rights and privileges were changed with unanimous consent of all parties.

All holders agreed to replace existing rights and privileges

with new uniform conditions and a simplified uniform preferred $4.00 per share stated value.

Holders of Series B, D, D1, E, E1, F, F1, G, G1, H, H1, I, J, J1, L,

L1, M, and P Preferred Stock shall have conversion rights that are affected by the closing common share market price on the date of conversion

as reported on such national exchange where the Company’s common stock is traded:

If the closing market price of common

stock is less than $4 per share one (1) share the Preferred Stock shall convert into an amount of common stock equal to:

two (2) times

the Stated Value, as defined herein, divided by the closing market price as reported on such national exchange where the Company’s

common stock is traded on the date of conversion.

If the closing price of the common stock as reported on such national

exchange where the Company’s common stock is traded is $1.00 and the Stated Value is $4.00, one (1) preferred share would convert

into eight (8) shares of common stock.

If the closing market price of common

stock is equal to or greater than $4 per share one (1) share the Preferred Stock shall convert into two (2) shares of common stock.

If the closing price of the common stock as reported on such national exchange where the Company’s common stock is traded

is $5.00 one (1) preferred share would convert into two (2) shares of common stock.

Holders of Series C Preferred Stock shall have

Conversion Rights such that upon Conversion each one (1) share of Series C Preferred Stock shall convert into one hundred thousand (100,000)

shares of the Common Stock.

In the event that the Company should up list to a national exchange as defined by the U.S.

Securities and

Exchange Commission, each share of Series C Preferred Stock shall automatically be redeemed by the Company in exchange for a total of

Fifty Thousand Dollars ($50,000.00) worth of the Common Stock, valued at the time of redemption.

Holders of the Series K and K1 Preferred Stock

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

of the Common Stock.

Holders of Series R Preferred Stock shall have

conversion rights to common stock equal to $0.30;

provided, however if the price of the Common Stock closes below $0.30 for the five (5)

consecutive Trading Days immediately prior to the Conversion Date, then the Conversion Price shall be adjusted to $0.20, and if the price

of the Common Stock closes below $0.20 for the five (5) consecutive Trading Days immediately prior to the Conversion Date, then the Conversion

Price shall be adjusted to $0.10.

During the nine months ended September 30, 2022,

84,028,411 shares of common stock were issued upon conversion of certain convertible notes payable and 1,275,427 shares of common stock

were issued for services.

11, 2021 the Chairman of the Board and the CEO and each converted 62,500 Preferred Series I shares into 25,000,000 restricted common shares

for a total of 125,000 Preferred Series I shares into 50,000,000 restricted common shares.

quarter of 2022, the Company issued 66,666,666 shares of common stock to Red Rock Travel Group and will issue 525,333,334 shares of common

stock to be issued which is recorded as common stock to be issued in current liabilities at $157,600 as discussed in note 11.

The following tables summarize all warrant outstanding

as of September 30, 2022, and the related changes during this period.

Stock Warrants

Balance at December 31, 2021

Balance at September 30, 2022

Warrants Exercisable at September 30, 2022

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, 800,000 shares of series D preferred stock, 1,000,000 shares of series E preferred stock, 800,000 shares of series F

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, 10,937,500 shares of series K preferred stock, 100,000,000 shares of series L preferred stock, 3,000,000 shares of

series N senior convertible preferred stock, 5,000 shares of series R preferred stock and 5,000,000 shares of series X senior convertible

preferred stock.

The following is a description of the rights and

preferences of each series of preferred stock.

Redeemable Preferred Stock

The Company recognized the series N senior convertible

preferred stock and series X senior convertible preferred stock as mezzanine equity since the redeemable preferred stock may be redeemed

at the option of the holder, but is not mandatorily redeemable.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

Series N Senior Convertible Preferred Stock

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

(ii) on parity with each class or series that is not expressly subordinated or made senior to the series N senior convertible preferred

and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company

and each class or series that is expressly made senior to the series N senior convertible preferred stock.

Dividend Rights.

Holders of series N senior

convertible preferred stock are entitled to dividends at a rate per annum of 12.0% of the stated value ($4.00 per share);

provided that

upon an event of default (as defined in the certificate of designation for the series N senior convertible preferred stock), such rate

shall increase by 8% per annum.

Dividends shall accrue from day to day, whether or not declared, and shall be cumulative.

Dividends shall

be payable quarterly in arrears on each dividend payment date in cash or common stock at the Company’s discretion.

Dividends payable

in common stock shall be calculated based on a price equal to eighty percent (80%) of the volume weighted average price for the common

stock on the Company’s principal trading market (the “VWAP”) during the five (5) trading days immediately prior to the

applicable dividend payment date.

At March 31, 2023, cumulative dividends on Series N Preferred Stock were $ 453,654 .

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.

the affirmative vote of holders of 66% of the series N senior convertible preferred stock, voting as a separate class, is required prior

to the Company’s (or Nova’s) creation or issuance of any senior securities.

Conversion Rights .

Each shares of series

N senior convertible preferred stock, plus all accrued and unpaid dividends thereon, shall be convertible, at the option of the holder

thereof, at any time and from time to time, into such number of fully paid and nonassessable shares of common stock determined by dividing

the stated value ($4.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price of $0.012 per

share (subject to standard adjustments in the event of any stock splits, stock combinations, stock reclassifications, dividends paid in

common stock, sales of substantially all assets, mergers, consolidations or similar transactions);

provided that in no event shall the

holder of any series N senior convertible preferred stock be entitled to convert any number of shares that upon conversion the sum of

(i) the number of shares of common stock beneficially owned by the holder and its affiliates and (ii) the number of shares of common stock

issuable upon the conversion of the series N senior convertible preferred stock with respect to which the determination of this proviso

is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the then outstanding common

This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one

(61) days’ prior notice to the Company.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

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

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

(ii) on parity with each class or series that is not expressly subordinated or made senior to the series X senior convertible preferred

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.

At March 31, 2023, cumulative dividends on Series X Preferred Stock were

Liquidation Rights.

Subject to the rights

of creditors and the holders of any senior securities, including the series N senior convertible preferred stock, or parity securities

(in each case, as defined in the certificate of designation), upon any liquidation of the Company or its subsidiaries, before any payment

or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of junior securities

(as defined in the certificate of designation), including the common stock, each holder of outstanding series N senior convertible preferred

stock shall be entitled to receive an amount of cash equal to 100% of the stated value of $4.00 per share, plus an amount of cash equal

to all accumulated accrued and unpaid dividends thereon (whether or not declared) to, but not including the date of final distribution

to such holders.

Voting Rights .

Holders of series X senior

convertible preferred stock do not have any voting rights;

provided that, so long as any shares of series X senior convertible preferred

stock are outstanding, the affirmative vote of holders of a majority of the series X senior convertible preferred stock, which majority

must include Leonite Capital LLC so long as it holds any shares of series X senior convertible preferred stock, voting as a separate class,

shall be necessary for approving, effecting or validating any amendment, alteration or repeal of any of the provisions of the certificate

of designation or prior to the creation or issuance of any parity securities or new indebtedness (as defined in the certificate of designation);

provided that the foregoing shall not apply to any financing transaction the use of proceeds of which will be used to redeem the series

X senior convertible preferred stock and the warrants issued in connection therewith.

In addition, the affirmative vote of holders of

66% of the series X senior convertible preferred stock, voting as a separate class, is required prior to the creation or issuance of any

senior securities.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

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.

Series C Preferred Stock

Each share of series C preferred stock is entitled

to one (1) vote on all matters submitted to a vote of stockholders.

Each share of series C preferred stock is convertible into 100,000

shares of common stock (subject to adjustment for forward stock splits but not reverse stock splits).

If the Company lists on an exchange,

it has the right to repurchase these shares at a purchase price of $ 50,000 per share.

Holders of series C preferred stock do not have

any dividend, liquidation or redemption rights.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

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

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.

Series K Preferred Stock

Each share of series K preferred stock is entitled

to one (1) vote on all matters submitted to a vote of stockholders.

Each share of series K preferred stock is convertible into 1.25 shares

of common stock.

Holders of series K preferred stock do not have any dividend, liquidation or redemption rights.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

Series L Preferred Stock

Each share of series L preferred stock is entitled

to one (1) vote on all matters submitted to a vote of stockholders.

Each share of series L preferred stock is convertible into two (2)

shares of common stock.

Holders of series L preferred stock do not have any dividend, liquidation or redemption rights.

Series R Preferred Stock

Each share of series R preferred stock is entitled

to one (1) vote on all matters submitted to a vote of stockholders.

Each share of series B preferred stock is convertible into one (1)

shares of common stock (subject to adjustment for forward stock splits but not reverse stock splits).

Holders of series R preferred stock

do not have any dividend, liquidation or redemption rights.

Preferred Stock Transactions

The Company had no preferred stock transactions

during the three months ended March 31, 2023 and 2022.

During the three months ended March 31, 2023,

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

The Company did not issue any shares of common

stock during the three months ended March 31, 2022.

The table below sets forth warrant activity for

the three months ended March 31, 2023 and 2022:

Schedule of warrant activity

Balance at January 1, 2023

Balance at March 31, 2023

Warrants Exercisable at March 31, 2023

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

DISCONTINUED OPERATIONS

Management has decided to divest from the food

services sector due primarily to a shift in strategy to focus time and resources on opportunities in the financial services sector to

build upon its tax subsidiaries with related debt, credit, billing, real estate and healthcare.

The Company’s restaurant franchise

operations have been hard hit by the economic pressure of the COVID-19 pandemic and the subsequent directives and responses to this crisis

taken by federal, state, and local governments.

In light of current circumstances arising from the COVID-19 pandemic, the Company, as

a public reporting company, must evaluate what the Company should and are obligated to do in order to protect shareholders from the negative

effects of this pandemic.

As a result, management entered into agreements

with the existing managers who were the original owners of Romeo’s NY Pizza (“Romeo’s”) and Repicci’s Franchise

Group (“Repicci’s”) to buyback the subsidiaries previously purchased by Cardiff Lexington Corporation

The Company and the Repicci’s manager have

entered into a Resignation, Release & Buyback Agreement and a Resignation, Release & Buyback Agreement Addendum (“Repicci’s

Agreements”) which was effective September 1, 2021.

Pursuant to the Repicci’s Agreement, the Repicci’s manager resigned

employment from the Company effective September 1, 2021 and has purchased the Repicci’s subsidiary in exchange for returning 81,601

Preferred Shares Series H stock (“Preferred H”) which is held by the Company as treasury stock.

The Repicci’s manager

retained 37,500 shares of Preferred H shares subject to the terms of the Repicci’s Agreements.

There was a gain on disposal in the

amount of $216,013 in September 2021 which represented net assets and liabilities at the time of sale back.

The Company and the Romeo’s manager have

entered into a Resignation, Release & Buyback Agreement and a Resignation, Release & Buyback Agreement Addendum (“Romeo

Agreements”) which is effective July 1, 2021.

Pursuant to the Romeo Agreement, Romeo’s manager resigned employment from the

Company effective July 1, 2021 and has purchased back the Romeo’s subsidiary in exchange for returning 212,500 Preferred Shares

Series D stock (“Preferred D”).

The Romeo’s manager will retain 37,500 shares of Preferred D shares subject to the terms

of the Romeo Agreements.

There was a loss on disposal in the amount of $21,140 in July 2021 which represented net assets and liabilities

at the time of sale back.

Cardiff Lexington filed

a lawsuit against investors in Red Rock Travel seeking a judgement declaring that convertible secured notes issued to them by Red Rock

Travel Group purportedly convertible into Cardiff’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 Cardiff

Lexington related to Red Rock Travel 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.

Cardiff agreed to issue Defendants 592 million restricted common

shares at $.0003 per share ($180,000).

As a result of the settlement agreement, the convertible notes and accrued interest has been written-off

by the Company in the third quarter of 2022 resulting in a gain of $510,417 which is recorded in discontinued operation.

As of September

30, 2022, 66,666,666 shares were issued and recorded in common stock for $66,667, additional paid in capital for $46,667 and $157,600

was recorded in liabilities as shares to be issued.

Prior to the Mediated 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 party responsible

for the convertible notes and related accrued interest is in dispute and is currently in litigation.

The derivative liability is a function

of the convertible notes and accrued interest.

And the accounts payable and accrued expenses of $1,872,086 is deemed to be the responsibility

of the current owners of Red Rock and was written-off by the Company in the third quarter of 2021 resulting in a gain of $328,718 which

is recorded in discontinued operation.

On May 1, 2018, the Company entered into a stock

for stock purchase agreement with the sellers of Red Rock Travel, LLC and a related management agreement to manage Red Rock Travel, LLC

(“Red Rock”).

The terms and conditions of those agreements were subsequently violated causing the transaction to be reversed

and dissolved on May 31, 2019.

Red Rock reverted to its previous ownership, the Company canceled the preferred series K shares related

to the aborted acquisition and the Company filed notice with the State of Florida of the dissolution.

On April 26, 2021, the Company filed a lawsuit

against Investors of Red Rock seeking a judgment declaring that convertible secured notes totaling $240,000 issued by Red Rock and purportedly

convertible into the Company’s common stock, be deemed null and void.

The Company continues to maintain the liability of these

Red Rock Investor notes on its balance sheet under discontinued operations together with corresponding accrued interest and related derivative

Subsequently, in the first quarter of 2022, the company settled a $40,000 note with one Red Rock Investor.

Litigation and

settlement discussions continue on the remaining $200,000 of Red Rock Investor notes.

September 30,

Net liabilities of discontinued operations

Accrued interest

Convertible debt

Net liabilities of discontinued operations

Three Months Ended September 30,

Nine Months Ended September 30,

Loss from discontinued operations

Interest expense

Gain from reversal of Red Rock liabilities

Gain on settlement of debt

Change in derivative liability

The Company and the managers of AHI entered into

a resignation, release and buyback agreement and addendum, effective October 31, 2022, pursuant to which the managers purchased AHI in

exchange for returning 175,045 shares of series F preferred stock.

There was a loss on disposal in the amount of $ 217,769 on October 31,

2022, which represented net assets and liabilities at the time of sale back.

The Company had no net liabilities of discontinued

operations at March 31, 2023 and December 31, 2022.

The Company had $0 and $19,215 of loss from discontinued operations for the three

months ended March 31, 2023 and 2022, respectively.

Schedule of discontinued operations

Three Months Ended March 31,

Gain (Loss) from discontinued operations

Cost of sales

Selling, general and administrative expenses

Interest expense of Red Rock Investor Note

Loss on divestiture of AHI subsidiary

Gain no change in estimate

Loss from discontinued operations

$ (1,912,852 )

$ (1,858,500 )

GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET

The following table shows our goodwill balances

by reportable segment.

We review goodwill for impairment on a reporting unit basis quarterly and whenever events or changes in circumstances

indicate the carrying value of goodwill may not be recoverable.

Since the date of our last quarterly assessment, we have not identified

any changes in circumstances that would indicate the carrying value of goodwill is not recoverable.

Allocation of Goodwill to Reporting Segments

The following table shows our goodwill balances by reportable segment:

Housing Rentals

Gross carrying value at December 31, 2021

Accumulated impairment

The following table shows the Company’s

goodwill balances by reportable segment.

The Company reviews goodwill for impairment on a reporting unit basis annually and whenever events

or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

During the three months ended March 31, 2023

and 2022, the Company had no goodwill impairment.

The following table shows goodwill balances by

reportable segment:

Schedule of goodwill balances

Carrying value at December 31, 2022

Milestone reached

Accumulated impairment

Carrying value at September 30, 2022

Carrying value at March 31, 2023

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

COMMITMENTS AND CONTINGENCIES

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

4 unchanged sentences

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

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.

2 unchanged sentences

not to reassess:

whether expired or existing contracts contain leases under the new definition of a lease;

lease classification for expired or existing leases;

whether previously capitalized initial direct costs would qualify for capitalization under Topic 842.

· whether expired or existing contracts contain

leases under the new definition of a lease;

· lease classification for expired or existing

· whether previously capitalized initial direct

costs would qualify for capitalization under Topic 842.

The Company also made the accounting policy decision

1 unchanged sentence

The Company recorded operating lease expense of

$60,878 and $91,726 for the three months ended September 30, 2022 and 2021, respectively, and the Company recorded operating lease expense

of $231,028 and $108,979 for the nine months ended September 30, 2022 and 2021, respectively.

The Company has property leases with future commitments

We have an employment agreement effective July

15, 2021 to December 31, 2025 with the Chairman of the Board, Mr.

with automatic extension for additional successive one (1)

year renewals terms unless terminated as defined in the agreement.

We provide for compensation of $30,000 per month along with additional

We have an employment agreement effective July

15, 2021 to December 31, 2025 with the Chief Executive Officer, Mr.

Cunningham with automatic extension for additional successive one

(1) year renewals terms unless terminated as defined the agreement.

We provide for compensation of $30,000 per month.

$ 77,852 and $ 134,000 for the three months ended March 31, 2023 and 2022, respectively.

The Company has operating leases with future

commitments as follows:

Schedule of property leases

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

The Company agreed to pay $360,000 per year and

$200,000 of targeted annual incentives to the Chief Executive Officer based on his employment agreement since July 1, 2020, of which currently

50% is paid in cash and 50% is accrued.

The total outstanding accrued compensation as of March 31, 2023 and December 31, 2022 were $ 1,935,500

and $ 1,870,500 , respectively.

The Company agreed to pay $360,000 per year and

$200,000 of targeted annual incentives to the Chairman of the Board based on his employment agreement since July 1, 2020, of which currently

50% is paid in cash and 50% is accrued.

The total outstanding accrued compensation as of December 31, 2022 and December 31, 2021 were

$ 1,952,000 and $ 1,863,000 , respectively.

The Company agreed to pay $ 156,000 per year to

the Chief Operating Officer based on his amended employment agreement executed on May 15, 2019.

In the third quarter of 2021, the Chief

Operating Officer received 61,000 shares of preferred stock series B in exchange for accrued salaries of $244,000.

The total outstanding

accrued compensation as of September 30, 2022 and December 31, 2021 was $129,000 and $120,000, respectively.

In April 2021, the Company’s previous Chief

Financial Officer was terminated and replaced.

The Company agreed to pay the new Chief Financial Officer $156,000 per year along with

a bonus of preferred shares based on his amended employment agreement executed on May 15, 2021.

The total outstanding accrued compensation

as of September 30, 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 the Company’s Nova Ortho and Spine (“Nova”)

subsidiary in the form of an annual base salaries of $372,000 to one of the 3 doctors, $450,000 to the second, and $372,000 to the third

Collectively, as a group,

Principals of Nova will receive an annual cash bonus and stock equity set forth in footnote 8 (the “Annual Bonus”).

Bonus will be conditioned upon the Company achieving 100% of the annual objectives of financial performance goals as set forth in footnote

Additionally, the previous owners of Nova were issued an additional

818,750 shares of preferred series J representing the supplemental payment for the acquisition of Nova as described in the agreement.

We have an employment agreement with a subsidiary

manager, effective July 1, 2018 with a term of 5 years, whereby we provide for compensation of $20,000 per month along with a bonus incentive

if financial performance measures are met.

We acquired Redrock Travel

on May 1, 2018.

After numerous violations of the Management Agreement it was determined by our board of directors to terminate the acquisition

agreement and to file for the cancelation of the Redrock Stock Class with the State of Florida.

A declaration has been served notifying

Red Rock and its investors the Board nor officer of the Company approved any transactions entered into with Red Rock.

The case with Red

Rock was settled in the third quarter 2022.

On August 6, 2021, a Board Resolution was executed

to terminate one of the two employees of Edge View Properties for fraud, deceit, larceny, and thievery for selling property belonging

to the Company and personally taking the $162,598 in proceeds.

The Company hired counsel to terminate the employee and handle all legal

matters for return of monies and criminal prosecution.

At September 30, 2022 the Company had federal

and state net operating loss carry forwards of approximately $18,000,000 that expire over various years through the year 2038.

the previous Chief Financial Officer based on his amended employment agreement executed on May 15, 2021.

The total outstanding accrued

compensation as of March 31, 2023 and December 31, 2022 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

to one of the three doctors, $ 450,000

to the second, and $ 372,000

to the third doctor.

Collectively, as a group, such principals will receive an annual cash bonus and stock equity set forth below,

which will be conditioned upon the Company achieving 100% of the annual objectives of financial performance goals as set forth below.

Schedule of annual objectives of financial performance

Minimum Annual Nova EBITDA

Cash Annual Bonus

Series J Preferred Stock

120,000 Shares

135,000 Shares

150,000 Shares

180,000 Shares

210,000 Shares

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.

Due to operating losses, there is no provision

for current federal or state income taxes for the year ended December 31, 2021.

for current federal or state income taxes for the three months ended March 31, 2023 and 2022.

Deferred income taxes reflect the net tax effects

1 unchanged sentence

federal and state income tax purposes.

SUBSEQUENT EVENTS

On October 10, 2022.

the Company’s Chief

Operating Officer was issued 18,750 preferred series B shares.

On October 31, 2022, the Company strategically

concentrating on the healthcare sector executed a Buyback Agreement finalizing the sale of We Three (d.b.a –

Affordable Housing

Initiative -AHI) a Tennessee registered business, back to the original owners of all of its shares for the return to the Company of 175,045

Preferred F Shares and the Company issuing the buyers 67,500 Restricted Preferred B Shares.

On November 23, 2022, the

Board of Directors of the Company voted to amend and restate the Bylaws of the Company, effective immediately.

The primary and substantive

changes were as follows:

The articles have been amended to remove twelve (12) classes of preferred stock.

At March 31, 2023 and December 31, 2022, the Company

had federal and state net operating loss carry forwards of approximately $ 22,429,214 that expire in various years through the year 2039.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

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 :

Affordable Housing (We Three)

Financial Resolutions Services (Platinum Tax Defenders)

Healthcare (Nova Ortho and Spine)

Real Estate (Edge View Properties Inc)

as determined by management using the “management approach” as defined by the authoritative guidance on Disclosures

about Segments of an Enterprise and Related Information :

Tax Resolution Services (Platinum Tax)

Real Estate (Edge View)

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, bookkeeping and general

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

2 unchanged sentences

Additionally, if bad credit is an issue preventing

potential home owners from purchasing a traditional house, the Company will provide a "lease to own"

option so people secure

potential homeowners from purchasing a traditional house, the Company will provide a "lease to own" option so people secure

their family home.

Platinum Tax 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.

Nova Ortho and Spine is a group of doctors that

provide a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints,

tendons, muscles, ligaments, and nerves.

Management uses numerous tools and methods to

evaluate and measure of it’s 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.

Affordable Housing Rentals

The Tax Resolution Services segment provides tax

resolution services to individuals and companies that have federal and state tax liabilities.

The Company collects fees based on efforts

to negotiate and assist in the settlement of outstanding tax debts.

The Real Estate segment consists of Edge View,

a real estate company that owns five (5) acres zoned medium density residential (MDR) with 12 lots already platted, six (6) acres zoned

high-density residential (HDR) that can be platted in various configurations to meet current housing needs, and twelve (12) acres

zoned in Lemhi County as Agriculture that is available for further annexation into the City of Salmon for development, as well as a common

area for landowners to view wildlife, provide access to the Salmon River and fishing in a two (2) acre pond.

The Healthcare segment provides a full range

of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles,

ligaments, and nerves.

Schedule of segment reporting

Financial Services

Consolidated assets

For the Three

September 30, 2022

For the Three

September 30, 2021

Affordable Housing Rentals

Financial Services

Total revenues

Cost of Sales:

Affordable Housing Rentals

Financial Services

Total cost of sales

Income (Loss) from Operations From Subsidiaries:

Affordable Housing Rentals

Financial Services

Total income from operations from subsidiaries

Loss From Operations from Cardiff Lexington

Total income from operations

September 30, 2022

September 30, 2021

Affordable Housing Rentals

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023 AND 2022

Three Months Ended March 31,

Financial Services

Total revenues

Consolidated revenues

Cost of Sales:

Affordable Housing Rentals

Financial Services

Total cost of sales

Income (Loss) from Operations From Subsidiaries:

Affordable Housing Rentals

Consolidated cost of sales

Loss from operations from subsidiaries

Financial Services

Total income from operations from subsidiaries

Loss From Operations from Cardiff Lexington

$ ( 101,481 )

Income from operations from subsidiaries

Loss from operations from Cardiff Lexington

$ ( 520,594 )

Total income (loss) from operations

$ ( 479,559 )

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

The following discussion of our financial

condition and results of operations should be read in conjunction with our consolidated financial statements including the related notes,

and the other financial information included in this report.

For ease of reference, “the Company”, ‘Cardiff”,

“we,”

“us”

or “our”

refers to Cardiff Lexington Corporation, unless otherwise stated.

Cautionary Statement Concerning Forward-Looking

This report contains “forward-looking statements”

within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations,

business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products, plans and

objectives of management, markets for stock of Cardiff Lexington Corporation and other matters.

Statements in this report that are not

historical facts are hereby identified as “forward-looking statements”

for the purpose of the safe harbor provided by Section

21E of the Exchange Act of 1934 and Section 27A of the Securities Act of 1933.

Such forward-looking statements, including, without limitation,

those relating to the future business prospects, revenue and income of Cardiff Lexington Corporation, wherever they occur, are necessarily

estimates reflecting the best judgment of the senior management of Cardiff Lexington Corporation on the date on which they were made,

or if no date is stated, as of the date of this report.

These forward-looking statements are subject to risks, uncertainties and assumptions,

including those described in the “Risk Factors”

in Item 1A of Part I of our most recent Annual Report on Form 10-K, filed

with the Securities and Exchange Commission (“SEC”), that may affect the operations, performance, development and results

of our business.

Because the factors discussed in this report could cause actual results or outcomes to differ materially from those

expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any such forward-looking

New factors emerge from time to time, and it is not possible for us to predict which factors will arise.

In addition, we

cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual

results to differ materially from those contained in any forward-looking statements.

The Company assumes no obligation and does not intend

to update these forward-looking statements, except as required by law.

Cardiff Lexington Corporation is a holding company

with no stand-alone operations and no material assets other than its ownership interest in its subsidiaries.

All of the Company's operations

are conducted through, and its income derived from, its various subsidiaries, which are organized and operated according to the laws

of their jurisdiction of incorporation, and consolidated by the Company.

To date, Cardiff consists of the following wholly

owned subsidiaries:

We Three, LLC, d/b/a Affordable Housing Initiative

(“AHI”), which we acquired on May 15, 2014, is an affordable home acquirer located in Maryville, Tennessee, which acquirers’

mobile homes and mobile home parks and either sells them or rents the homes to individual families.

The acquisition of mobile homes

or mobile home parks allows AHI to provide an alternative to traditional housing, which is a popular option for a homeowner wishing to

avoid large down payments, expensive maintenance costs, monthly mortgage payments and high property taxes.

The typical arrangement with

potential buyers is a lease-to-own arrangement on an individual home.

The fundamentals of that arrangement obligate the tenant(s) to

the terms of the lease with AHI retaining ownership.

In addition, the tenant(s) pay non-refundable option monies prior to the start of

This option consideration enables them to purchase the home at the end of the lease if they choose.

A typical lease is 7 years.

We have found that most tenants move out before the end of that period and thus never satisfy the terms that would enable them to purchase

Edge View Properties, Inc.

(“Edge View”),

which we acquired on July 16, 2014, is a real estate company that owns 30 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 the 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).

Edge View’s plan

is to enter into a joint venture agreement with a developer for construction of single-family homes on the property.

The Company has

yet to enter into a joint venture agreement for the development of single-family homes.

Platinum Tax Defenders, LLC (“Platinum

Tax”), which we acquired on July 31, 2018, is a full-service tax resolution firm located in Los Angeles, CA.

Platinum Tax has been assisting all types of taxpayers resolve any and all issues with IRS and applicable state tax agencies.

Tax provides fee-based tax resolution services to individuals and companies that have federal and state tax liabilities by assisting

its clients to settle outstanding tax debts.

Specifically, the Platinum Tax teams tax relief services include but are not limited to,

back taxes, offer in compromise, audit representation, amending tax returns, tax preparation, tax resolution, wage garnishment relief,

removal of bank levies and liens, bookkeeping, and other financial challenges.

Platinum Tax has a team of 28 which includes tax attorneys,

accountants, and enrolled agents that have an aggregate of more than 90 years of experience in the financial services industry and have

resolved tax issues for thousands of clients.

Nova Ortho and Spine, PLLC (“Nova Ortho”)

which we acquired on May 31, 2021 is a company in which doctors provides a full range of diagnostic and surgical services for injuries

and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments, and nerves.

From sports injuries, to

sprains, strains, and fractures, our doctors are dedicated to helping you return to your active lifestyle.

Orthopedic and pain procedure

services include hip and knee replacement, shoulder reconstruction, fracture care and hand surgery, as well as spinal surgery in the

State of Florida.

Impact of COVID-19 Pandemic

The outbreak of a novel coronavirus throughout

the world, including the United States, since early calendar year 2020 through current, has caused widespread business and economic disruption

through mandated and voluntary business closings and restrictions on the movement and activities of people (“COVID-19 Pandemic”).

We are subject to risks and uncertainties as a result of the COVID-19 Pandemic.

See “Management’s Discussion and Analysis

of Financial Condition and Results of Operations”

for discussion on results of operations for the year ended December 31, 2021.

The extent of the impact of the COVID-19 Pandemic on the Company's business is highly uncertain and difficult to predict, as the response

to the COVID-19 Pandemic is rapidly evolving in many countries, including the United States and other markets where the Company operates.

It is expected that the Company's customers and suppliers may well continue to be impacted which could materially and adversely affect

Our ability to obtain or deliver inventory or services, and our ability to collect accounts receivables as customers may

The financial services segments of the economy

was adversely affected by the COVID-19 Pandemic.

Due to the IRS prolonging individual tax filings, this affected our tax resolution businesses

and management decided to divest JM Enterprise 1, Inc.

(Key Tax Group).

The Company’s tax resolution business operations have been

hard hit by the economic pressure of the COVID-19 pandemic and the subsequent directives and responses to this crisis taken by the IRS,

federal, state, and local governments.

Management will continue to monitor its businesses and focus our growth primarily in the health

Affordable Housing Rentals

Financial Services

Consolidated assets

Affordable Housing Rentals

Financial Services

Total revenues

Cost of Sales:

Affordable Housing Rentals

Financial Services

Total cost of sales

Income (Loss) from Operations From Subsidiaries:

Affordable Housing Rentals

Financial Services

Total income from operations from subsidiaries

Loss From Operations from Cardiff Lexington

Total income from operations

Affordable Housing Rentals

Financial Services

Total revenues

Cost of Sales:

Affordable Housing Rentals

Financial Services

Total cost of sales

Income (Loss) from Operations From Subsidiaries:

Affordable Housing Rentals

Loss before taxes

Financial Services

Total income from operations from subsidiaries

Loss From Operations from Cardiff Lexington

$ ( 101,773 )

$ (3,831,975 )

Total income (loss) from operations

Corporate, administration and other non-operating expenses

Consolidated loss before taxes

$ ( 1,562,454 )

Results of Operations

Three Months Ended September 30, 2022 and 2021

Revenues were $3,360,743 and $3,309,793 for the

three months ended September 30, 2022 and 2021 an increase of $50,950 or 1.5%, respectively.

The increase was primarily due to the acquisition

of Nova Ortho on May 31, 2021 which generated revenue of $3,103,409 for the three months ended September 30, 2022, offset by the decrease

in revenue from the sale of Key Tax and the reduction in revenues for Platinum Tax Defenders due to a reduction in business due to the

IRS prolonging individual tax filings which affected both tax resolution businesses.

Cost of sales were $1,155,280 and $1,082,719 for

the three months ended September 30, 2022 and 2021 an increase of $72,561 or 6.7%, respectively.

The increase was primarily due to the

acquisition of Nova Ortho on May 31, 2021 which incurred cost of sales of $1,094,794 for the three months ended September 30, 2022 offset

by the decrease in cost of sales from the sale of Key Tax and the reduction in cost of sales for Platinum Tax Defenders due to a reduction

in business due to the IRS prolonging individual tax filings which affected both tax resolution businesses.

Gross margins were $2,205,463 and $2,227,074 for

the three months ended September 30, 2022 and 2021 a decrease of $21,611 or 1.0%, respectively.

Operating expenses were $706,193 and $3,938,202

for the three months ended September 30, 2022 and 2021 a decrease of $3,232,009 or 82.1%, respectively.

The decrease was primarily due

to the transaction costs relating to the acquisition of Nova Ortho on May 31, 2021, the sale of Key Tax and the reduction in business

for Platinum Tax Defenders due to a reduction in business due to the IRS prolonging individual tax filings which affected both tax resolution

Net loss was $264,774 and $754,808 for the three

months ended September 30, 2022 and 2021 a decrease of $490,034 or 64.9%, respectively.

Nine Months Ended September 30, 2022 and 2021

Revenues were $9,432,481 and $6,424,587 for the

Nine months ended September 30, 2022 and 2021 an increase of $3,007,894 or 46.8%, respectively.

The increase was primarily due to the

acquisition of Nova Ortho May 31, 2021 which generated revenue of $8,154,934 for the Nine months ended September 30, 2022, offset by the

decrease in revenue from the sale of Key Tax and the reduction in revenues for Platinum Tax Defenders due to a reduction in business due

to the IRS prolonging individual tax filings which affected both tax resolution businesses.

Cost of sales were $3,406,214 and $2,202,547 for

the Nine months ended September 30, 2022 and 2021 an increase of $1,203,667 or 54.6%, respectively.

The increase was primarily due to

the acquisition of Nova Ortho May 31, 2021 which incurred cost of sales of $2,982,418 for the Nine months ended September 30, 2022 offset

by the decrease in cost of sales from the sale of Key Tax and the reduction in cost of sales for Platinum Tax Defenders due to a reduction

in business due to the IRS prolonging individual tax filings which affected both tax resolution businesses.

Gross margins were $6,026,267 and $4,222,040 for

the Nine months ended September 30, 2022 and 2021 an increase of $1,804,227 or 42.7%, respectively.

Operating expenses were $2,700,950 and $5,887,870

for the Nine months ended September 30, 2022 and 2021 a decrease of $3,186,920 or 54.1%, respectively.

The decrease was primarily due

to the transaction costs relating to the acquisition of Nova Ortho May 31, 2021, the sale of Key Tax and the reduction in business for

Platinum Tax Defenders due to a reduction in business due to the IRS prolonging individual tax filings which affected both tax resolution

Net loss was $813,054 and $2,810,930 for the Nine

months ended September 30, 2022 and 2021 a decrease of $1,997,876 or 71.1%, respectively.

The outbreak of the coronavirus throughout the

world, including the United States, during early calendar year 2020 has caused widespread business and economic disruption through mandated

and voluntary business closings and restrictions on the movement and activities of people (“COVID-19 Pandemic”).

IRS prolonging individual tax filings, this affected our tax resolution businesses in 2021 and management decided to divest JM Enterprise

(Key Tax Group).

The Company’s tax resolution business operations have been hard hit by the economic pressure of the COVID-19

pandemic and the subsequent directives and responses to this crisis taken by the IRS, federal, state, and local governments.

these circumstances arising from the COVID-19 pandemic, the Company, as a public reporting company, must evaluate what the Company should

and are obligated to do in order to protect shareholders.

The outbreak of a novel coronavirus throughout

the world, including the United States, since early calendar year 2020 through current, has caused widespread business and economic disruption

through mandated and voluntary business closings and restrictions on the movement and activities of people (“COVID-19 Pandemic”).

We are subject to risks and uncertainties as a result of the COVID-19 Pandemic.

See “Management’s Discussion and Analysis

of Financial Condition and Results of Operations”

for discussion on results of operations for the year ended December 31, 2021.

The extent of the impact of the COVID-19 Pandemic on the Company's business is highly uncertain and difficult to predict, as the response

to the COVID-19 Pandemic is rapidly evolving in many countries, including the United States and other markets where the Company operates.

It is expected that the Company's customers and suppliers may well continue to be impacted which could materially and adversely affect

Our ability to obtain or deliver inventory or services, and our ability to collect accounts receivables as customers may

The financial services segments of the economy

was adversely affected by the COVID-19 Pandemic.

Management will continue to monitor its businesses and focus our growth primarily in

the health industry.

The Company raised $729,083 in convertible notes

during the Nine months ended September 30, 2022.

We do not believe that inflation will negatively

impact our business plans.

Liquidity and Capital Resources

Since inception, the principal sources of cash

have been funds raised from (i) debenture convertible notes and conventional notes payable, (ii) the sale of common stock and pre ferred

stock, and (iii) advances from shareholders.

At September 30, 2022, we had $260,498 in cash, a working capital deficit of $2,539,506 and

total assets of $15,958,345 and total liabilities of $9,908,290.

Net cash used in operating activities was $414,252

for the nine months ended September 30, 2022.

The cash used in operating activities was primarily due to the net loss of $850,454, an

increase in accounts receivable of $1,858,494, offset by an increase in accounts payable and accrued expenses of $315,123.

cash flows for the nine months ended September 30, 2021 was due primarily to the loss of 2,810,930, an increase in accounts receivable

of $114,399, an increase in accounts payable and accrued expenses of $594,276 and an increase in accrued interest of 321,468.

Net cash used in investing activities was $-0-

for the nine months ended September 30, 2022.

The cash used in investing activities of $2,323,642 for the nine months ended September

30, 2021 was for the acquisition of Nova Ortho and Spine.

Net cash provided by financing activities was

$407,480 and $3,766,960 for the nine months ended September 30, 2022 and 2021, respectively.

The positive cash flows for the nine months

ended September 30, 2022 were primarily due to proceeds from convertible notes of $729,083, offset by the payment of dividends of $310,522.

The positive cash flows for the Nine months ended September 30, 2021 were primarily due to proceeds from the issuance of preferred stock

of $3,000,000 for the purchase of Nova Ortho and proceeds from SBA / PPP loans of $347,050.

There can be no assurance that we will be able

to obtain sufficient capital from debt or equity transactions or from operations in the necessary time frame or on terms acceptable to

Should we be unable to raise sufficient funds, we may be required to curtail our operating plans and possibly relinquish rights to

portions of our technology or services provided.

In addition, increases in expenses may adversely impact our cash position and may require

cost reductions.

No assurance can be given that we will be able to operate profitably on a consistent basis, or at all, in the future.

In order to continue our operations and implementation

of our business plan, we need additional financing.

We are currently attempting to obtain additional working capital in an equity transaction.

Off Balance Sheet Arrangements

As of September 30, 2022, we had no off-balance sheet arrangements.

Quantitative and Qualitative Disclosures about Market Risk

Not applicable

SUBSEQUENT EVENTS

The Company has evaluated its operations subsequent

to March 31, 2023 to the date these condensed consolidated financial statements were issued and determined there was subsequent events

or transactions the required recognition or disclosure in these consolidated financial statements.

On May 25, 2023, the Company issued 3,150 shares

of Series B Preferred Stock to Zia Choe, Interim Chief Financial Officer.

These shares were fully vested upon grant.

On June 5, 2023, the Company executed a seventh

tranche under Convertible Note 40 in the principal amount of $136,667, less original issue discount and fee of $39,167.

On June 22, 2023, 8,200,562 shares of series K

preferred stock were cancelled in connection with terminated acquisition of Red Rock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements