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Item 9A. Controls and Procedures

2024-03-27 compared with 2023-06-06 · 1756 added, 1127 removed, 1082 unchanged (73% of the section changed)

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the process designed by, or under the supervision of, our principal executive officer and principal financial and accounting officer,

and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our

financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies

and procedures that:

and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of

our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those

policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions

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that, as of December 31, 2023, our internal control over financial reporting was not effective due to the following material weaknesses.

· We have not developed and effectively communicated to our employees our accounting policies and procedure,

which has resulted in inconsistent practices.

· We lack formal documentation over internal control procedures and environment.

· We lack proper segregation of duties and multiple level of reviews.

· We lack expertise in accounting of derivative liabilities

· We had not developed and effectively communicated to our employees our accounting policies and procedure,

which had resulted in inconsistent practices.

· We lacked formal documentation over internal control procedures and environment.

· We lacked proper segregation of duties and multiple level of reviews.

· We lacked sufficient process, systems and access to technical accounting

resources to enable appropriate accounting for and reporting on complex and/or non-routine debt and equity financing transactions including

accounting for derivatives, convertible debt, preferred stock.

In order to cure the foregoing material weakness,

we have taken or plan to take the following remediation measures:

· We plan to make necessary changes by providing training to our financial team and our other relevant personnel

we have begun to take the following remediation measures:

· We are making necessary changes by providing training to our financial team and our other relevant personnel

on the GAAP accounting guidelines applicable to financial reporting requirements.

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OTHER INFORMATION.

We have no information to disclose that was required

to be in a report on Form 8-K during the fourth quarter of fiscal year 2023 but was not reported.

None of our directors or executive officers

adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation

S-K) during the fourth quarter of fiscal year 2023.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

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Chief Executive Officer, President, and Director

Senior Vice President and Chief Financial Officer

Chief Accounting Officer

Thompson has been Chairman of our board of directors since May 2014.

Prior to serving as Chairman, Mr.

served Chief Executive Officer from February 2005 to May 2014 and also served as a consultant from January 2001 to February 2005.

served as Chief Executive Officer from February 2005 to May 2014 and also served as a consultant from January 2001 to February 2005.

to joining us, Mr.

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Thompson is well suited to serve as a director because of his previous business management and merger and acquisition experience.

Cunningham has been our Chief Executive Officer and President since June 2015 and has served on our board of directors

since June of 2015.

Prior to joining us in 2015, Mr.

Cunningham founded Francnsult, Inc., a business development company representing

franchise operations, where he was in charge of identifying prospects for franchising, mergers and acquisitions, and was the managing

partner at AH Cunningham & Associates, LLC, a firm which provided financial and operational consulting services to owners of small

and medium-sized businesses, EB-5 immigrant investors, passive investment, franchise owners, and franchisors.

Prior to his employment

at Francnsult, Inc.

and AH Cunningham & Associates, Mr.

Cunningham was the president and chief executive officer of Profit Management

Consulting, a management consulting company that assisted in the management of private and closely held middle-market companies, from

1996 to 2005.

Cunningham has been our Chief Executive Officer and President and has served on our board of directors since June

Prior to joining us, Mr.

Cunningham founded Francnsult, Inc., a business development company representing franchise operations,

where he was in charge of identifying prospects for franchising, mergers, and acquisitions, and was the managing partner at AH Cunningham

& Associates, LLC, a firm which provided financial and operational consulting services to owners of small and medium-sized businesses,

EB-5 immigrant investors, passive investment, franchise owners, and franchisors.

Prior to his employment at Francnsult, Inc.

and AH Cunningham

& Associates, Mr.

Cunningham was the president and chief executive officer of Profit Management Consulting, a management consulting

company that assisted in the management of private and closely held middle-market companies, from 1996 to 2005.

From 1991 to 1996, Mr.

Cunningham was a partner at London Capital Corporation, a company which provides merger and acquisition

services to small and medium-sized businesses.

Cunningham received a BBA-Finance and Administration at the University of Kentucky

and an MBA from Rollins College.

We believe Cunningham is well suited to serve as a director because of his previous business management,

financial, and merger and acquisition experience.

Cunningham was a partner at London Capital Corporation, a company which provides merger and acquisition services to small and medium-sized

Cunningham received a BBA-Finance and Administration at the University of Kentucky and an MBA from Rollins College.

believe Cunningham is well suited to serve as a director because of his previous business management, financial, and merger and acquisition

been our Senior Vice President and Chief Financial Officer since January 2024.

Prior to joining us, Mr.

Shafer served

as strategic executive engagement consultant and advisor for the chief financial officer and chief accounting officer capacities during

rapid growth, change and transitions at Proterra, a publicly traded manufacturer of electric vehicles and provider of related SaaS services,

since March 2023.

Prior to that, he served as vice president of finance at Aspire Technology Partners, a privately owned technology provider

delivering custom digital infrastructures, SaaS solutions and professional services, from May 2022 to February 2023.

From October 2021

to April 2022, he served as a strategic chief financial officer of Tatum, an interim executive consultancy practice of Randstad USA, and

from September 2016 to September 2021, he held the positions of senior vice president, chief financial officer and treasurer of Ocean

Power Technologies, Inc., a publicly traded green technology company providing cost-effective renewable ocean energy solutions.

in his career, Mr.

Shafer held senior finance positions at numerous privately owned and publicly traded companies, including, among others,

business unit chief financial officer – for the Dentistry (OraPharma) division at Bauch Health Companies, a global publicly traded

pharmaceutical company, and numerous executive level positions at Johnson Controls International plc (formerly Tyco International), a

large publicly traded multinational manufacturing company.

Shafer is a certified public accountant with a foundation in Big Four public

accounting, beginning his career at Arthur Andersen LLP.

He received his Bachelor of Science degree in accounting from W.

Paul Stillman

School of Business at Seton Hall University and has an MBA in finance from The Rutgers Business School at Rutgers University.

Choe has been our Chief Accounting Officer since January 2024.

Prior to that, Ms.

Choe served as Interim Chief Financial

Officer from March 2023 to January 2024 and served as an outside accountant from March 2017 to March 2023.

Choe founded STK FINANCIAL

P.C., a California-licensed accounting firm, in June 2021.

As a managing partner, Ms.

Choe has provided financial attestation, managerial

consulting, preparation of 10-Ks and 10-Qs and other high level accounting and financial services to privately and publicly held companies

and internationally.

Prior to her founding of STK FINANCIAL P.C., she was an audit team leader in the accounting and audit

division at JNK Accountancy Group, LLP from September 2014 until June 2021, where she was in charge of financial attestation and due diligence

projects for acquisition deals in various industries for seven years.

Choe also had seven years of operational experience in accounting,

sales and marketing at Hyundai Mobis Parts America, LLC, a subsidiary of Hyundai Motors, from March 2006 to March 2013.

Choe received

in Hospitality Management at Florida International University, and she also has higher education in accounting at Ajou University

Graduate School in South Korea.

Our directors currently have terms which will

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the date of any such amendment to, or waiver from, a provision of our code of ethics.

Insider Trading Policy

We have adopted an insider trading policy which

prohibits our directors, officers, and employees from engaging in transactions in our common stock while in the possession of material

non-public information;

engaging in transactions in the stock of other companies while in possession of material non-public information

that they become aware of in performing their duties;

and disclosing material non-public information to unauthorized persons outside our

Our insider trading policy restricts trading by

directors, officers, and certain key employees during blackout periods, which generally begin 15 calendar days before the end of each

fiscal quarter and end two business days after the issuance of our earnings release for the quarter.

Additional blackout periods may be

imposed with or without notice, as the circumstances require.

Our insider trading policy also prohibits our

directors, officers, and employees from purchasing financial instruments (such as prepaid variable forward contracts, equity swaps, collars

and exchange funds) designed to hedge or offset any decrease in the market value of our common stock they hold, directly or indirectly.

In addition, directors, officers, and employees are expressly prohibited from pledging our common stock to secure personal loans or other

obligations, including by holding their common stock in a margin account, unless such arrangement is specifically approved in advance

by the administrator of our insider trading policy, or making short-sale transactions in our common stock.

A copy of the insider trading policy may be found

on our website.

Section 16(a) Beneficial Ownership Reporting

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We believe, based solely on a review of the copies of such reports furnished

to us and representations of these persons, that all reports were timely filed for the year ended December 31, 2022.

to us and representations of these persons, that none of the reports were timely filed for the year ended December 31, 2023.

delinquent reports were recently filed.

EXECUTIVE COMPENSATION.

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The following table sets forth information concerning

all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the

noted periods.

all cash and non-cash compensation awarded to, earned by, or paid to the named persons for services rendered in all capacities during

the noted periods.

No other executive officers received total annual salary and bonus compensation in excess of $100,000.

Name and Principal Position

Other Compensation

Alex Cunningham,

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Chairman of the Board

Steven Healy,

Chief Financial Officer

former Interim Chief Financial Officer (1)

Choe served as our Interim Chief Financial Officer from March 2023 to January 2024.

to that, she served as our outside accountant from January 2022 to February 2023.

Other Compensation includes consulting fees that Ms.

Choe received prior to her appointment as our Interim Chief Financial Officer.

Employment Agreements

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or customers from us for a period of twenty-four (24) months after termination of his employment for any reason.

On January 2, 2024, we entered into an

employment agreement with Mr.

Shafer setting forth the terms of his employment as Chief Financial Officer.

Pursuant to the

employment agreement, Mr.

Shafer is entitled to an annual base salary of $228,000 and a signing bonus of 5,000 shares of our series

I preferred stock.

He is also eligible for consideration for a one-time achievement bonus equal to 35% of base salary within sixty

(60) days upon our company uplisting to a national securities exchange.

In addition, he is also eligible for an annual target bonus

equal to 25% of base salary based on the achievement of certain performance goals and annual stock option grants.

is also eligible to participate in all employee benefit plans, including health insurance, commensurate with his position.

term of the employment agreement is for one (1) year with automatic extensions for additional successive one (1) year renewal terms

unless terminated by either party no later than thirty (30) days prior to the renewal date.

The employment agreement may be

terminated immediately by us with or without cause (as such term is defined in the employment agreement) or in the event of Mr.

Shafer’s death or disability and may be terminated immediately by Mr.

Shafer upon his voluntary resignation or other voluntary

termination of employment.

In the event of termination by us without cause, Mr.

Shafer is entitled to the compensation and benefits

described above for a period of three (3) months following termination.

In the event of termination by Mr.

Shafer for good reason

(as defined in the employment agreement) or because Mr.

Shafer cannot perform his services as result of physical or mental

incapacitation, he will be eligible to receive three (3) months of base salary and medical and dental benefits under our medical and

dental plans then in effect.

Shafer is not entitled to receive any additional compensation upon termination by us for cause or

upon a voluntary termination by Mr.

The employment agreement also contains customary confidentiality provisions and

restrictive covenants prohibiting Mr.

Shafer from owning or operating a business that competes with our company or soliciting

our employees during the term of his employment and for a period of twelve months following the termination of his employment.

On January 2, 2024, we entered into an employment

agreement with Ms.

Choe setting forth the terms of her employment as Chief Accounting Officer.

Pursuant to the employment agreement,

Choe is entitled to an annual base salary of $210,000 and a signing bonus of 2,500 shares of our series I preferred stock.

also eligible for an annual bonus and annual stock option grants.

Choe is also eligible to participate in all employee benefit

plans, including health insurance, commensurate with her position.

The term of the employment agreement is for one (1) year with automatic

extensions for additional successive one (1) year renewal terms unless terminated by either party no later than thirty (30) days prior

to the renewal date.

The employment agreement may be terminated immediately by us with or without cause (as such term is defined in the

employment agreement) or in the event of Ms.

Choe’s death or disability and may be terminated immediately by Ms.

Choe upon her voluntary

resignation or other voluntary termination of employment.

In the event of termination by us without cause, Ms.

Choe is entitled to the

compensation and benefits described above for a period of one (1) month following termination.

In the event of termination by Ms.

for good reason (as defined in the employment agreement) or because Ms.

Choe cannot perform her services as result of physical or mental

incapacitation, she will be eligible to receive three (3) months of base salary and medical and dental benefits under our medical and

dental plans then in effect.

Choe is not entitled to receive any additional compensation upon termination by us for cause or upon

voluntary termination by Ms.

The employment agreement also contains customary confidentiality provisions and restrictive covenants

prohibiting Ms.

Choe from owning or operating a business that competes with the Company or soliciting our employees during the term of

her employment and for a period of twelve months following the termination of her employment.

Outstanding Equity Awards at Fiscal Year-End

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As described under “—Employment Agreements”

above, Messrs.

Cunningham and Thompson are entitled severance if their employment is terminated without cause.

Cunningham, Mr.

Thompson, Mr.

Shafer, and Ms.

Choe are entitled severance if their employment is terminated without cause.

Director Compensation

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of directors received any compensation for services as a director during the fiscal year ended December 31, 2023.

2024 Equity Incentive Plan

On January 31, 2024, our board of directors and

stockholders adopted the Cardiff Lexington Corporation 2024 Equity Incentive Plan, or Plan.

The following is a summary which describes

the principal features of the Plan, but it is qualified in its entirety by reference to the full text of the Plan.

The purpose of this Plan

is to provide a means whereby employees, directors, consultants of our company and its affiliates develop a sense of proprietorship and

personal involvement in the development and financial success of our company, and to encourage them to devote their best efforts to the

business of our company, thereby advancing the interests of our company and its stockholders.

A further purpose of this Plan is to provide

a means through which we may attract able individuals to provide services to or for the benefit of our company and to provide a means

for such individuals to acquire and maintain share ownership in our company, thereby strengthening their concern for the welfare of our

Types of Awards .

Awards that may

be granted include incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share

awards, and performance compensation awards.

These awards offer our officers, employees, consultants, and directors the possibility of

future value, depending on the long-term price appreciation of our common stock and the award holder’s continuing service with our

Eligible Recipients .

Persons eligible

to receive awards under the Plan will be those officers, employees, directors and consultants of our company and its subsidiaries who

are selected by the administrator.

Administration .

The Plan is administered

by our board of directors;

provided that if and when we establish a compensation committee, the compensation committee will administer

Among other things, the administrator has the authority to select persons who will receive awards, determine the types of awards

and the number of shares to be covered by awards, and to establish the terms, conditions, performance criteria, restrictions, and other

provisions of awards.

The administrator has authority to establish, amend and rescind rules and regulations relating to the Plan.

Shares Available .

The maximum number

of shares of our common stock that may be delivered to participants under the Plan is 2,000,000, subject to adjustment for certain corporate

changes affecting the common stock, such as stock splits.

In addition, the number of shares of common stock available for issuance under

the Plan will automatically increase on January 1 of each calendar year during the term of the Plan by an amount equal five percent (5%)

of the total number of shares of common stock issued and outstanding on December 31 of the immediately preceding calendar year.

subject to an award under the Plan for which the award is canceled, forfeited or expires again become available for grants under the Plan.

Shares subject to an award that is settled in cash will not again be made available for grants under the Plan.

Stock Options .

Share options give the option

holder the right to acquire from us a designated number of common stock at a purchase price that is fixed upon the grant of the option.

Stock options granted may be either tax-qualified stock options (so-called “incentive stock options”) or non-qualified stock

Subject to the provisions of the Plan, the administrator has the authority to determine all grants of stock options.

That determination

will include:

the number of stock subject to any option;

the exercise price per stock;

the expiration date of the option;

time, and date of permitted exercise;

other restrictions, if any, on the option or the stock underlying the option;

and any other terms

and conditions as the administrator may determine.

Option Price .

The exercise price for stock

options will be determined at the time of grant.

Normally, the exercise price will not be less than the fair market value on the date

As a matter of tax law, the exercise price for any incentive share option awarded may not be less than the fair market value

of the shares on the date of grant.

However, incentive stock option grants to any person owning more than 10% of our voting power must

have an exercise price of not less than 110% of the fair market value on the grant date.

Exercise of Options .

An option may

be exercised only in accordance with the terms and conditions for the option agreement as established by the administrator at the time

of the grant.

The option must be exercised by notice to us, accompanied by payment of the exercise price.

Payments may be made either:

(i) in cash or its equivalent;

(ii) by tendering (either by actual delivery or attestation) previously acquired stock having an aggregate

fair market value at the time of exercise equal to the exercise price;

(iii) a cashless exercise (broker-assisted exercise) through a

“same day sale” commitment;

(iv) by a combination of (i), (ii), and (iii);

or (v) any other method approved or accepted by

the administrator in its sole discretion.

Expiration or Termination .

if not previously exercised, will expire on the expiration date established by the administrator at the time of grant.

In the case of

incentive stock options, such term cannot exceed ten years provided that in the case of holders of more than 10% of our voting power,

such term cannot exceed five years.

Options will terminate before their expiration date if the holder’s service with our company

or a subsidiary terminates before the expiration date.

The option may remain exercisable for specified periods after certain terminations

of employment, including terminations as a result of death, disability, or retirement, with the precise period during which the option

may be exercised to be established by the administrator and reflected in the grant evidencing the award.

Incentive and Non-Qualified Options .

described elsewhere in this summary, an incentive share option is an option that is intended to qualify under certain provisions of the

Internal Revenue Code of 1986, as amended, or the Code, for more favorable tax treatment than applies to non-qualified share options.

Any option that does not qualify as an incentive share option will be a non-qualified share option.

Under the Code, certain restrictions

apply to incentive stock options.

For example, the exercise price for incentive stock options may not be less than the fair market value

of the shares on the grant date and the term of the option may not exceed ten years.

In addition, an incentive stock option may not be

transferred, other than by will or the laws of descent and distribution and is exercisable during the holder’s lifetime only by

In addition, no incentive stock options may be granted to a holder that is first exercisable in a single year if that option,

together with all incentive stock options previously granted to the holder that also first become exercisable in that year, relate to

shares having an aggregate fair market value in excess of $100,000, measured at the grant date.

Stock Appreciation Rights .

appreciation rights, or SARs, which may be granted alone or in tandem with options, have an economic value similar to that of options.

When an SAR for a particular number of stock is exercised, the holder receives a payment equal to the difference between the market price

of the stock on the date of exercise and the exercise price of the stock under the SAR.

Again, the exercise price for SARs normally is

the market price of the shares on the date the SAR is granted.

Under the Plan, holders of SARs may receive this payment - the appreciation

value - either in cash or shares valued at the fair market value on the date of exercise.

The form of payment will be determined by us.

Restricted Awards .

Restricted awards

are shares awarded to participants at no cost.

Restricted awards can take the form of awards of restricted stock, which represent issued

and outstanding shares subject to vesting criteria, or restricted share units, which represent the right to receive shares subject to

satisfaction of the vesting criteria.

Restricted stock awards are forfeitable and non-transferable until the shares vest.

date or dates and other conditions for vesting are established when the shares are awarded.

These awards will be subject to such conditions,

restrictions and contingencies as the administrator shall determine at the date of grant.

Those may include requirements for continuous

service and/or the achievement of specified performance goals.

Performance Criteria .

Plan, one or more performance criteria will be used by the administrator in establishing performance goals.

Any one or more of the performance

criteria may be used on an absolute or relative basis to measure the performance of our company, as the administrator may deem appropriate,

or as compared to the performance of a group of comparable companies, or published or special index that the administrator deems appropriate.

Other Material Provisions .

will be evidenced by a written agreement, in such form as may be approved by the administrator.

In the event of various changes to the

capitalization of our company, such as stock splits, stock dividends and similar re-capitalizations, an appropriate adjustment will be

made by the administrator to the number of shares covered by outstanding awards or to the exercise price of such awards.

The administrator

is also permitted to include in the written agreement provisions that provide for certain changes in the award in the event of a change

of control of our company, including acceleration of vesting.

Except as otherwise determined by the administrator at the date of grant,

awards will not be transferable, other than by will or the laws of descent and distribution.

Prior to any award distribution, we are permitted

to deduct or withhold amounts sufficient to satisfy any employee withholding tax requirements.

Our board also has the authority, at any

time, to discontinue the granting of awards.

The board also has the authority to alter or amend the Plan or any outstanding award or may

terminate the Plan as to further grants, provided that no amendment will, without the approval of our stockholders, to the extent that

such approval is required by law or the rules of an applicable exchange, increase the number of shares available under the Plan, change

the persons eligible for awards under the Plan, extend the time within which awards may be made, or amend the provisions of the Plan related

to amendments.

No amendment that would adversely affect any outstanding award made under the Plan can be made without the consent of the

holder of such award.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth information regarding

beneficial ownership of our common stock as of March 31, 2023 by (i) each of our executive officers and directors;

beneficial ownership of our voting stock as of March 22, 2024 by (i) each of our executive officers and directors;

(ii) all of our executive

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and (iii) each person who is known by us to beneficially own more than 5% of our common stock.

otherwise specified, the address of each of the persons set forth below is in care of our company, 3200 Bel Air Drive, Las Vegas, NV 89109.

otherwise specified, the address of each of the persons set forth below is in care of our company, 3753 Howard Hughes Parkway, Suite 200,

Las Vegas, NV 89169.

Name and Address of Beneficial Owner

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Amount and Nature of Beneficial Ownership (1)

Percent of Voting Stock (2)

Daniel Thompson, Chairman of the Board (3)

3,202,228,327

Alex Cunningham, Chief Executive Officer and Director (4)

Rollan Roberts II, Chief Operating Officer (5)

Shafer, Chief Financial Officer (5)

Zia Choe, Chief Accounting Officer (6)

All executive officers and directors (4 persons)

3,239,941,955

___________________

(1) Beneficial Ownership is determined

in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.

Except as otherwise

indicated, each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect

to our common stock.

(2) A total of 789,796,735 shares of

common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of the Record Date.

For each beneficial owner above,

any options exercisable within 60 days have been included in the denominator.

(3) Includes 25,004,127 shares of common

stock, 3,167,023,252 shares of common stock issuable upon the conversion of 1 share of series A preferred stock, 26,124 shares of common

stock issuable upon the conversion of 13,062 shares of series B preferred stock, 100,000 shares of common stock issuable upon the conversion

of 1 share of series C preferred stock and 10,074,824 shares of common stock issuable upon the conversion of 5,037,412 shares of series

I preferred stock.

(4) Includes 25,004,128 shares of common

stock, 12,500 shares of common stock issuable upon the conversion of 6,250 shares of series B preferred stock, 100,000 shares of common

stock issuable upon the conversion of 1 share of series C preferred stock and 12,475,000 shares of common stock issuable upon the conversion

of 6,237,500 shares of series I preferred stock.

(5) Represents 122,000 shares of common

stock issuable upon the conversion of 61,000 shares of series B preferred stock.

* Less than 1%

(1) Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting

or investment power with respect to securities.

Each of the beneficial owners listed above has direct ownership of and sole voting power

and investment power with respect to the shares of our common stock.

(2) Percentage of total voting stock represents total ownership with respect to all

shares of our voting stock, which includes the common stock, series A preferred stock, series B preferred stock, series C preferred stock,

series E preferred stock, series I preferred stock, series J preferred stock, series L preferred stock and series R convertible preferred

stock, voting as a single class.

As of March 22, 2024, there were 8,664,495 shares of common stock, 2 shares of series A preferred stock,

1,451,929 shares of series B preferred stock, 103 shares of series C preferred stock, 155,750 shares of series E preferred stock, 12,999,000

shares of series I preferred stock, 171,359 shares of series J preferred stock, 319,493 shares of series L preferred stock and 165 shares

of series R convertible preferred stock issued and outstanding.

Each share of series A preferred stock is entitled to a number of votes

at any time equal to 25% of the number of votes then held or entitled to be made by all other equity securities of our company, plus one

(equivalent to 18,952,492 votes as of March 22, 2024).

Each share of series B preferred stock, series C preferred stock, series E preferred

stock, series J preferred stock and series L preferred stock is entitled to one (1) vote per share.

Each share of series I preferred stock

is entitled to five (5) votes per share.

Each share of series R convertible preferred stock is entitled to a number of votes equal to

the number of shares into which the series R convertible preferred stock is convertible (estimated to be 51,833 votes per share as of

March 22, 2024).

For each beneficial owner above, any options, warrants or other convertible securities exercisable within 60 days have

been included in the denominator.

(3) Includes (i) 1,000,337 shares of common stock held directly, (ii) 4 shares of common stock held by the

2007 Thompson Family Trust, (iii) 1 share of series A preferred stock held directly, (iv) 26,124 shares of common stock issuable upon

the conversion of 13,062 shares of series B preferred stock held by the 2007 Thompson Family Trust, (v) 100,000 shares of common stock

issuable upon the conversion of 1 share of series C preferred stock held directly and (vi) 5,302,500 shares of series I preferred stock.

Thompson is the Trustee of the 2007 Thompson Family Trust and has voting and dispositive power over the shares held by it.

(4) Includes (i) 1,000,338 shares of common stock, (ii) 1 share of series A preferred stock, (iii) 12,500

shares of common stock issuable upon the conversion of 6,250 shares of series B preferred stock, (iv) 100,000 shares of common stock issuable

upon the conversion of 1 share of series C preferred stock and (v) 5,743,000 shares of series I preferred stock.

(5) Represents 5,000 shares of series I preferred stock.

(6) Includes 6,300 shares of common stock issuable upon the conversion of 3,150 shares of series B preferred

stock and 2,500 shares of series I preferred stock.

We do not currently have any arrangements which

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Independent Auditors’ Fees

The following is a summary of the fees billed to us for professional

services rendered for the fiscal years ended December 31, 2022 and 2021.

Fees for the year ended December 31, 2022 includes fees paid

to Grassi & Co., CPAs, P.C.

and fees for the year ended December 31, 2021 includes $205,500

paid to Grassi & Co., CPAs, P.C.

, $31,255 paid to Rosenberg Rich Baker Berman PA and

$37,806 paid to Daszkal Bolton LLP.

The following is a summary of the fees billed

to us for professional services rendered for the fiscal years ended December 31, 2023 and 2022.

Fees include those paid to Grassi

& Co., CPAs, P.C.

for audit fees.

Year Ended December 31,

Audit-Related Fees

All Other Fees

All Other Audit Fees

“Audit Fees” consisted of fees billed

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Index to Financial Statements:

Report of Independent Registered Public Accounting Firm

(PCAOB ID 606)

Consolidated Balance Sheets as of December 31, 2022 and

Consolidated Statements of Operations for the Years Ended

December 31, 2022 and 2021

Consolidated Statements of Stockholders’ Deficiency

for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the Years Ended

December 31, 2022 and 2021

Report of Independent Registered Public Accounting Firm (PCAOB ID 606)

Consolidated Balance Sheets as of December 31, 2023 and 2022 (restated)

Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022 (restated)

Consolidated Statements of Stockholders’ Equity (Deficiency) for the Years Ended December 31, 2023 and 2022 (restated)

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 (restated)

Notes to Consolidated Financial Statements

Index to Financial Statement Schedules:

All schedules have been omitted because the required information

is included in the financial statements or the notes thereto, or because it is not required.

All schedules have been omitted because the required information is included in the financial statements or the notes thereto, or because it is not required.

Index to Exhibits:

1 unchanged sentence

(b) Exhibits:

Articles of Incorporation Cardiff Lexington Corporation, as amended

and Restated Articles of Incorporation Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.1 to

Amendment No.

1 to the Registration Statement on Form S-1/A filed on August 3, 2023)

of Designation of Series A Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.2 to

Amendment No.

1 to the Registration Statement on Form S-1/A filed on August 3, 2023)

Certificate of Designation of Series B Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.3 to Amendment No.

1 to the Registration Statement on Form S-1/A

filed on August 3, 2023)

Certificate of Correction of Certificate of Designation of Series B Preferred Stock of Cardiff Lexington Corporation

Certificate of Designation of Series C Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.4 to Amendment No.

1 to the Registration Statement on Form S-1/A filed

on August 3, 2023)

Certificate of Correction of Certificate of Designation of Series C Preferred Stock of Cardiff Lexington Corporation

Certificate of Designation of Series E Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.5 to Amendment No.

1 to the Registration Statement on Form S-1/A

filed on August 3, 2023)

Certificate of Correction of Certificate of Designation of Series E Preferred Stock of Cardiff Lexington Corporation

Certificate of Designation of Series F-1 Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.6 to Amendment No.

1 to the Registration Statement on Form S-1/A filed

on August 3, 2023)

Certificate of Correction of Certificate of Designation of Series F-1 Preferred Stock of Cardiff Lexington Corporation

Certificate of Designation of Series I Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.7 to Amendment No.

1 to the Registration Statement on Form S-1/A filed

on August 3, 2023)

Certificate of Correction of Certificate of Designation of Series I Preferred Stock of Cardiff Lexington Corporation

Certificate of Designation of Series J Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.8 to Amendment No.

1 to the Registration Statement on Form

S-1/A filed on August 3, 2023)

Certificate of Correction of Certificate of Designation of Series J Preferred Stock of Cardiff Lexington Corporation

Certificate of Designation of Series L Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.9 to Amendment No.

1 to the Registration Statement on Form S-1/A

filed on August 3, 2023)

Certificate of Correction of Certificate of Designation of Series L Preferred Stock of Cardiff Lexington Corporation

Certificate of Designation of Series N Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K filed on June 6,

Amended and Restated Certificate of Designation of Series R Convertible Preferred Stock of Cardiff Lexington Corporation

Certificate of Designation of Series X Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.12 to Amendment No.

1 to the Registration Statement

on Form S-1/A filed on August 3, 2023)

Amended and Restated Bylaws of Cardiff Lexington Corporation

Certificate of Designation of Series N Senior Convertible Preferred Stock

(incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed on June 6, 2023)

Description of Securities of Cardiff Lexington Corporation

Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to SILAC Insurance Company on May 21, 2021

Management Agreement, dated June 4, 2021, among by Cardiff Lexington Corporation, Nova Ortho and Spine, PLLC and Dr.

Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to SILAC Insurance Company on May 21, 2021 (incorporated by reference to Exhibit 4.2 to the Annual Report on Form 10-K filed on June

Management Agreement, dated June 4, 2021, among by Cardiff Lexington Corporation, Nova Ortho and Spine, LLC and Dr.

Marc D Brodsky, Michael Wycoki, Jr., PA and Dr.

Kevin Fitzgerald (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on June 7, 2021)

Securities Exchange and Purchase Agreement, dated September 22, 2022, among Cardiff Lexington Corporation, We Three, LLC, d/b/a Affordable Housing Initiative, Edge View Properties, Inc., Platinum Tax Defenders, Nova Ortho and Spine, PLLC and Leonite Capital LLC

Consolidated Senior Secured Convertible Promissory Note issued by Cardiff Lexington Corporation to Leonite Capital LLC on September 22, 2022, as amended

Pledge and Security Agreement, dated September 22, 2022, among Cardiff Lexington Corporation, We Three, LLC, d/b/a Affordable Housing Initiative, Edge View Properties, Inc., Platinum Tax Defenders, Nova Ortho and Spine, PLLC and Leonite Fund I, LP

Securities Purchase Agreement, dated June 1, 2021, between Cardiff Lexington Corporation and SILAC Insurance Company

Guaranty, dated June 1, 2021, by Nova Ortho and Spine, PLLC in favor of SILAC Insurance Company

Security Agreement, dated June 1, 2021, between Nova Ortho and Spine, PLLC and SILAC Insurance Company

Security and Stock Pledge Agreement, dated June 1, 2021, between Cardiff Lexington Corporation and SILAC Insurance Company

Securities Purchase Agreement, dated September 3, 2020, between Cardiff Lexington Corporation and GHS Investments, LLC

Senior Secured Convertible Promissory Note issued by Cardiff Lexington Corporation to GHS Investments, LLC on September 3, 2020

Security and Pledge Agreement, dated September 3, 2020, between Cardiff Lexington Corporation and GHS Investments, LLC

Convertible Promissory Note issued by Cardiff Lexington Corporation to Power Up Lending Group Ltd.

on April 26, 2021

Convertible Promissory Note issued by Cardiff Lexington Corporation to Power Up Lending Group Ltd.

on February 9, 2021

Revolving Purchase and Security Agreement, dated September 29, 2023, among Cardiff Lexington Corporation, Nova Ortho and Spine, LLC, Platinum Tax Defenders, Edge View Properties, Inc.

and DML HC Series, LLC Series 308 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on November 14, 2023)

Guaranty and Security Agreement, dated September 29, 2023, among Cardiff Lexington Corporation, Nova Ortho and Spine, LLC and DML HC Series, LLC Series 308 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on November 14, 2023)

(incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K filed on June 6, 2023)

Consolidated Senior Secured Convertible Promissory Note issued by Cardiff Lexington Corporation to Leonite Capital LLC on September 22, 2022, as amended (incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K filed on June 6, 2023)

Securities Purchase Agreement, dated June 1, 2021, between Cardiff Lexington Corporation and SILAC Insurance Company (incorporated by reference to Exhibit 10.5 to the Annual Report on Form 10-K filed on June 6, 2023)

Guaranty, dated June 1, 2021, by Nova Ortho and Spine, LLC in favor of SILAC Insurance Company (incorporated by reference to Exhibit 10.6 to the Annual Report on Form 10-K filed on June 6, 2023)

Security Agreement, dated June 1, 2021, between Nova Ortho and Spine, LLC and SILAC Insurance Company (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K filed on June 6, 2023)

Security and Stock Pledge Agreement, dated June 1, 2021, between Cardiff Lexington Corporation and SILAC Insurance Company (incorporated by reference to Exhibit 10.8 to the Annual Report on Form 10-K filed on June 6, 2023)

Securities Purchase Agreement, dated September 3, 2020, between Cardiff Lexington Corporation and GHS Investments, LLC (incorporated by reference to Exhibit 10.9 to the Annual Report on Form 10-K filed on June 6, 2023)

Senior Secured Convertible Promissory Note issued by Cardiff Lexington Corporation to GHS Investments, LLC on September 3, 2020 (incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K filed on June 6, 2023)

Security and Pledge Agreement, dated September 3, 2020, between Cardiff Lexington Corporation and GHS Investments, LLC (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed on June 6, 2023)

8% Convertible Secured Redeemable Note issued by Cardiff Lexington Corporation to GHS Investments, LLC on November 8, 2019 (incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1 filed on July 19, 2023)

Convertible Promissory Note issued by Cardiff Lexington Corporation to Greentree Financial Group, Inc.

on January 24, 2017

on January 24, 2017 (incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K filed on June 6, 2023)

Convertible Promissory Note issued by Cardiff Lexington Corporation to Greentree Financial Group, Inc.

on September 12, 2016

Agreement, dated July 15, 2020, between the Cardiff Lexington Corporation and Alex Cunningham (incorporated by reference to

Exhibit 10.2 to the Annual Report on Form 10-K filed on March 31, 2021)

Agreement, dated July 15, 2020, between Cardiff Lexington Corporation and Daniel Thompson (incorporated by reference to Exhibit

10.1 to the Annual Report on Form 10-K filed on March 31, 2021)

Code of Business Ethics and Conduct

on September 12, 2016 (incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K filed on June 6, 2023)

Employment Agreement, dated July 15, 2020, between the Cardiff Lexington Corporation and Alex Cunningham (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K filed on March 31, 2021)

Employment Agreement, dated July 15, 2020, between Cardiff Lexington Corporation and Daniel Thompson (incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K filed on March 31, 2021)

Employment Agreement, dated January 2, 2024, between the Cardiff Lexington Corporation and Matthew T.

Employment Agreement, dated January 2, 2024, between the Cardiff Lexington Corporation and Zia Choe

2024 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed on February 6, 2024)

Form of Stock Option Agreement relating to 2024 Equity Incentive Plan

Form of Restricted Stock Award Agreement relating to 2024 Equity Incentive Plan

Form of Restricted Stock Unit Award Agreement relating to 2024 Equity Incentive Plan

Code of Business Ethics and Conduct (incorporated by reference to Exhibit 14.1 to the Annual Report on Form 10-K filed on June 6, 2023)

Insider Trading Policy

List of Subsidiaries of the registrant

Consent of Grassi & Co., CPAs, P.C.

Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certifications of Principal Financial and Accounting Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certifications of Principal Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Certifications of Principal Financial and Accounting Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Certifications of Principal Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

XBRL Instance Document

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Filed herewith

Furnished herewith

Executive compensation plan or arrangement

2 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID 606 )

Consolidated Balance Sheets as of December 31, 2022 and

2021 (Restated)

Consolidated Statements of Operations for the Years

Ended December 31, 2022 and 2021 (Restated)

Consolidated Statements of Stockholders’

Deficiency for the Years Ended December 31, 2022 and 2021 (Restated)

Consolidated Statements of Cash Flows for the Years

Ended December 31, 2022 and 2021 (Restated)

Consolidated Balance Sheets as of December 31, 2023 and 2022 (Restated)

Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022 (Restated)

Consolidated Statements of Stockholders’ Equity (Deficiency) for the Years Ended December 31, 2023 and 2022 (Restated)

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Cardiff Lexington Corp and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance

sheets of Cardiff Lexington Corp and Subsidiaries (the “Company”) as of December 31, 2022 and 2021 (restated), and the related

consolidated statements of operations, stockholders’ equity, and cash flows for the years in the two-year period ended December

31, 2022 and 2021 (restated), and the related notes (collectively referred to as the consolidated financial statements).

In our opinion,

the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31,

2022, and 2021 (restated), and the results of its operations and its cash flows for the years in the two-year period ended December 31,

2022 and 2021 (restated), in conformity with accounting principles generally accepted in the United States of America.

on the Financial Statements

We have audited the accompanying balance sheets

of Cardiff of Lexington Corporation and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated

statements of operations, stockholders’ equity (deficiency), and cash flows for each of the years in the two-year period ended December

31, 2023, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022,

and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity

with accounting principles generally accepted in the United States of America.

Restatement of Financial Statements

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As described in Note 1 to the consolidated financial statements,

the Company has sustained net losses and has accumulated and working capital deficits, which raise substantial doubt about its ability

the Company has sustained an accumulated deficit and negative cash flows from operations, which raise substantial doubt about its ability

to continue as a going concern.

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Basis for Opinion

These consolidated financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements

based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards

of the PCAOB.

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and

the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

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Critical Audit Matters

The critical audit matters communicated below are

matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated

The critical audit matters communicated below

are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated

to the audit committee and that:

4 unchanged sentences

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Goodwill

Critical Audit Matter Description

At December 31, 2022, the Company had approximately

$5.7 million of goodwill.

Additionally, during the year ended December 31, 2022, the Company recorded an impairment of goodwill of approximately

$2.1 million related to its financial services segment goodwill.

As discussed in Note 1 and Note 14 to the consolidated financial statements,

goodwill is tested annually for impairment at the reporting unit level, or more frequently if impairment indicators arise.

In accordance with the FASB revised guidance on “Testing

of Goodwill for Impairment,” a company first has the option to assess qualitative factors to determine whether it is more likely

than not that the fair value of a reporting unit is less than its carrying amount.

If the company decides, as a result of its qualitative

assessment, that it is more-likely-than- not that the fair value of a reporting unit is less than its carrying amount, the quantitative

impairment test is mandatory.

Otherwise, no further testing is required.

The quantitative impairment test consists of a two-step

goodwill impairment test.

The first step compares the fair value of each reporting unit to its carrying amount.

If the fair value of each

reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required.

carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying

value of a reporting unit’s goodwill.

The implied fair value of goodwill is determined in a manner similar to accounting for a business

combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting

The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value

This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry

to adjust the value of any assets or liabilities.

An impairment loss is recognized for any excess in the carrying value of goodwill over

the implied fair value of goodwill.

The principal consideration for our determination

that this was a critical audit matter resulted from the Company’s goodwill impairment analyses being complex and highly judgmental

due to the nature of qualitive assessment and, where necessary, the significant estimation required to determine the fair value of the

reporting units.

In particular, the fair value estimate was sensitive to significant assumptions, such as future operating results, cash

flows and the weighted average cost of capital.

These significant assumptions are forward looking and could be materially affected by

future market or economic conditions.

December 31, 2023, the Company had approximately $5.7 million of goodwill.

As discussed in Note 1 and Note 12 to the consolidated financial

statements, goodwill is tested annually for impairment at the reporting unit level, or more frequently if impairment indicators arise.

principal consideration for our determination that this was a critical audit matter resulted from the material balance of goodwill at

year end and the Company’s goodwill impairment analyses requiring a high degree of management judgement.

There was a high degree

of subjective auditor judgment associated with the evaluation of management’s assertion with respect to the realizability of goodwill.

How we addressed the matter:

We obtained an understanding of the Company’s

goodwill impairment evaluation process, including controls over management’s review of the significant assumptions described above.

We obtained an understanding of the

Company’s goodwill impairment evaluation process, including controls over management’s review of the significant assumptions.

We considered the material weakness relating to management’s internal controls in determining the nature, timing and extent of audit

tests applied in our audit.

Our audit procedures to test the Company’s

goodwill impairment analyses included evaluating the reasonableness of management’s qualitative assessments and in certain instances

the estimated fair value of the Company’s reporting units.

In evaluating estimated fair value of a reporting unit, we evaluated

management’s significant assumptions used within the fair value method, and tested the completeness and accuracy of the underlying

We compared certain significant assumptions to existing market conditions and information and, where relevant, to the plans of the

Company, including management’s expectations with regard to the Company’s business model, customer base and other relevant

We also considered the historical accuracy of management’s projected cash flows.

Finally, we assessed the adequacy of the

disclosures in the consolidated financial statements.

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

Our primary substantive audit procedures

to test the Company’s goodwill impairment analyses included evaluating the completeness and reasonableness of management’s

qualitative assessment.

We obtained management’s qualitative goodwill analysis and compared certain significant assumptions to existing

market conditions and information.

We also compared significant assumptions, where relevant, to the plans of the Company, including management’s

expectations regarding the Company’s business model, customer base and other relevant factors.

Finally, we assessed the adequacy

of the disclosures in the consolidated financial statements.

GRASSI & CO., CPAs, PC

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

Jericho, New York

March 27, 2024

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31,

2022 AND 2021 (Restated)

AS OF DECEMBER 31, 2023 AND 2022

Current assets

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Accrued interest

Right of use - liability

Contingent consideration

Due to director & officer

Right of use - liabilities

Due to director and officer

Notes payable

Notes payable - related party

Convertible notes payable, net of debt discounts of $ 24,820 and $ 46,797 , respectively

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Mezzanine equity

Redeemable Series N Senior Convertible Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value

Redeemable Series N Senior Convertible Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 868,056 shares issued and outstanding at December 31, 2023 and 2022

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

Redeemable Series X Senior Convertible Preferred Stock - 5,000,000 shares authorized, $0.001 par value, stated value of $ 4.00 par value;

375,000 shares issued and outstanding at December 31, 2023 and 2022

Redeemable Series X Senior Convertible Preferred Stock - 5,000,000 shares authorized, $0.001 par value, stated value

of $ 4.00 par value;

375,000 and - 0 - shares issued and outstanding at December 31, 2022 and 2021

Total Mezzanine Equity

1 unchanged sentence

Series B Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value of $ 4.00 , 2,139,478 and 2,131,328 shares issued and outstanding at December 31, 2023 and 2022, respectively

Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value of $ 4.00 , 122 shares issued and outstanding at December 31, 2022 and 2021, respectively

Series D Preferred Stock - 800,000

shares authorized, $0.001 par value, stated value $ 4.00 ,

zero 0 and 37,500 shares issued and outstanding at December 31, 2022 and 2021

Series E Preferred Stock - 1,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 150,750 shares issued and outstanding at December 31, 2022 and 2021, respectively

Series F Preferred Stock - 800,000

shares authorized, $0.001 par value, stated value $ 4.00 ,

zero 0 and 175,045 shares issued and outstanding at December 31, 2022 and 2021, respectively

Series F-1 Preferred Stock - 800,000 shares authorized, $0.001 par value, stated value $ 4.00 , 35,752 shares issued and outstanding at December 31, 2022 and 2021, respectively

Series H Preferred Stock - 4,859,379

shares authorized, $0.001 par value, stated value $ 4.00 ,

zero 0 and 37,500 shares issued and outstanding at December 31, 2022 and 2021, respectively

Series I Preferred Stock - 500,000,000 shares authorized, $ 0.001 par value, 14,885,000 issued and outstanding at December 31, 2022 and 2021, respectively

Series J Preferred Stock - 10,000,000 shares authorized, $0.001 par value, stated value $ 4 , 1,713,584 and 894,834 shares issued and outstanding at December 31, 2022 and 2021

Series K Preferred Stock - 10,937,500 shares authorized, $ 0.001 par value, 8,200,562 shares issued and outstanding at December 31, 2022 and 2021

Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value of $ 4.00 , 123 shares issued and outstanding at December 31, 2023 and 2022

Series E Preferred Stock - 1,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 155,750 and 150,750 shares issued and outstanding at December 31, 2023 and 2022, respectively

Series F-1 Preferred Stock - 50,000 shares authorized, $0.001 par value, stated value $ 4.00 , 35,752 shares issued and outstanding at December 31, 2023 and 2022

Series I Preferred Stock - 15,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 14,885,000 issued and outstanding at December 31, 2023 and 2022

Series J Preferred Stock - 2,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 1,713,584 shares issued and outstanding at December 31, 2023 and 2022

Series L Preferred Stock - 400,000 shares authorized, $0.001 par value, stated value $ 4.00 , 319,493 shares issued and outstanding at December 31, 2023 and 2022

Series R Preferred Stock - 5,000 shares authorized, $0.001 par value, stated value of $ 1,200 , 165 shares issued and outstanding at December 31, 2022 and 2021

Common Stock;

1 unchanged sentence

24,065 and 10,997 shares issued and outstanding at December 31, 2023 and 2022, respectively

Treasury stock;

zero 0 and 619,345 shares of Series H Preferred

stock at December 31, 2022 and 2021

( 4,967,686 )

Additional paid-in capital

4 unchanged sentences

( 70,932,435 )

Total stockholders' equity

Total stockholders' equity (deficit)

( 1,744,791 )

Total liabilities, mezzanine equity and

stockholders' equity

Total liabilities, mezzanine equity and stockholders' equity

The accompanying notes are an integral part of

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FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

2021 (Restated)

Financial services

Total revenue

COST OF SALES

Financial services

Total cost of sales

1 unchanged sentence

Depreciation expense

Goodwill impairment

Selling, general and administrative

Total operating expenses

INCOME (LOSS) FROM OPERATIONS

INCOME FROM CONTINUING OPERATIONS

OTHER INCOME (EXPENSE)

Gain on divestiture

Other (expense) income

Gain on debt refinance and forgiveness

Gain on change of estimate

Penalties and fees

3 unchanged sentences

( 6,387,309 )

Conversion cost penalty and reimbursement

Amortization of debt discounts

Total other expenses

( 2,080,131 )

Total other income (expenses)

( 7,157,527 )

NET INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS

( 3,250,638 )

NET LOSS BEFORE DISCONTINUED OPERATIONS

LOSS FROM DISCONTINUED OPERATIONS

( 2,178,883 )

GAIN FROM DISCONTINUED OPERATIONS

LOSS FROM DISPOSAL OF DISCONTINUED OPERATIONS

LOSS FROM DISCONTINUED OPERATIONS

( 2,178,883 )

INCOME FROM DISCONTINUED OPERATIONS

NET INCOME (LOSS) FOR THE YEAR

$ ( 5,429,521 )

BASIC LOSS PER SHARE

CONTINUED OPERATIONS

PREFERRED STOCK DIVIDENDS

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

$ ( 5,813,691 )

BASIC EARNINGS (LOSS) PER SHARE

CONTINUING OPERATIONS

DISCONTINUED OPERATIONS

WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC

CONTINUED OPERATIONS

DILUTED EARNINGS (LOSS) PER SHARE

CONTINUING OPERATIONS

DISCONTINUED OPERATIONS

WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC

WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED

The accompanying notes are an integral part of

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

DEFICIENCY AND MEZZANINE EQUITY

FOR THE YEARS ENDED

DECEMBER 31, 2022 AND 2021 (Restated)

EQUITY (DEFICIENCY)

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

Preferred Stock Series

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

B, E, F-1,J, and L

Preferred Stock

Series C and R

Treasury Stock

1 unchanged sentence

$ ( 4,967,686 )

$ ( 2,365,864 )

Reclassify derivative liabilities to additional paid in capital

Surrender of series I preferred stock

( 180,000,000 )

( 720,000,000 )

Issuance of common stock in exchange for preferred stock

Issuance of series J preferred stock

Issuance of series N preferred stock

Issuance of series B preferred stock

Divestiture of subsidiary

( 2,561,241 )

( 2,601,822 )

Conversion of convertible notes payable

Reclassify warrant liabilities to additional paid in capital

Reclass of derivative liability due to change in accounting policy

Issuance of common stock for services

Distribution of dividends

Balance December 31, 2021 (Restated)

$ ( 4,967,686 )

Issuance of series B preferred stock for contribution

Issuance of series B preferred stock in exchange for series D and H preferred stock

Issuance of series B preferred stock in exchange of series D preferred stock and series H preferred stock

Cancellation of common stock

Cancellation of series D preferred stock

Cancellation of series H preferred stock

Cancellation of series K preferred stock

( 8,200,562 )

Issuance of series B preferred stock for settlement of employment

2 unchanged sentences

Issuance of series J preferred stock

Issuance of series X preferred stock

Issuance of common stock for settlement of RRT

Issuance of common stock for settlement of Red Rock Travel

Reclassification for cancelled shares

Distribution of dividend

Accrued preferred stock dividends

Balance, December 31, 2022 (Restated)

Conversion of convertible notes payable

Accrued preferred stock dividends

Issuance of series B preferred stock

Issuance of series E preferred stock

Balance, December 31, 2023

3 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

DEFICIENCY (continued)

FOR THE YEARS ENDED

DECEMBER 31, 2022 AND 2021 (Restated)

Paid-in Capital

Shareholders’ Deficit

Convertible Preferred Stock

Mezzanine Equity

EQUITY (DEFICIENCY) (continued)

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

Additional Paid-in

Total Stockholders’

Balance December 31, 2021 (Restated)

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$ ( 65,166,264 )

( 8,872,334 )

Reclassify derivative liabilities

to additional paid in capital

Surrender of series I preferred stock

Issuance of common stock in exchange

for preferred stock

Issuance of series B preferred stock for contribution

Issuance of series B preferred stock in exchange of series D preferred stock and series H preferred stock

Cancellation of common stock

Cancellation of series D preferred stock

Cancellation of series H preferred stock

Cancellation of series K preferred stock

Issuance of series B preferred stock for settlement of employment

Issuance of series B preferred stock in exchange for series F

Cancellation of series F preferred stock

Issuance of series J preferred stock

Issuance of series N preferred stock

Issuance of series B preferred stock

Divestiture of subsidiary

Conversion of convertible notes payable

Reclassify warrant liabilities to

additional paid in capital

Reclass of derivative liability due

to change in accounting policy

Issuance of common stock for services

Distribution of dividends

Balance December 31, 2021 (Restated)

Issuance of common stock for settlement of Red Rock Travel

Reclassification for cancelled shares

( 4,967,686 )

Accrued preferred stock dividends

( 5,429,521 )

Issuance of Series B preferred stock

for contribution

Issuance of series B preferred stock

in exchange for series D and H preferred stock

Cancellation of series D preferred

Cancellation of series H preferred

Issuance of series B preferred stock

for settlement of employment

Issuance of series B preferred stock

in exchange for series F

Cancellation of series F preferred

Issuance of series J preferred stock

Issuance of series X preferred stock

Issuance of common stock for settlement

Prior period adjustment

Reclassification for cancelled shares

( 5,429,521 )

Distribution of dividend

Balance, December 31, 2022 (Restated)

$ ( 8,581,265 )

$ ( 70,932,435 )

Balance, December 31, 2022

$ ( 1,744,791 )

Conversion of convertible notes payable

Accrued preferred stock dividends

Issuance of series B preferred stock

Issuance of series E preferred stock

Balance, December 31, 2023

$ ( 9,365,982 )

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FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

2021 (Restated)

CASH FLOWS FROM OPERATING ACTIVITIES

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Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of loan discount

Amortization of debt discount

Conversion and note issuance cost

Share issuance for service rendered

Other (income) or loss

Goodwill impairment

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Accounts payable and accrued expense

Due to from related party

Due to related party

Accrued officers compensation

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Right of use - liabilities

Deferred revenue

Net cash used in operating activities

( 1,807,987 )

( 1,099,461 )

Net cash used in Discontinued Operations – Operating

INVESTING ACTIVITIES

Purchase of property and equipment

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

Net cash used in operating activities

( 1,721,467 )

Net cash (used in) investing activities

( 1,150,677 )

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Proceeds from convertible notes payable

Proceeds from PPP loan and SBA loans

Repayment of credit line

Repayment of SBA loans

Proceeds from line of credit

Repayment of line of credit

Repayment to convertible notes payable

Payment of notes payable - 3rd party

Dividend on preferred stock

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Net cash provided by financing activities

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

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Common stock issued upon conversion of notes payable

Common stock issued for settlement of accrued expense

Preferred stock issued for business acquisition

Preferred stock issued upon conversion of notes payable and accrued interest

Preferred stock issued upon exchange of defaulted convertible notes payable

Derivative liability settled upon conversion

The accompanying notes are an integral part of

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

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

which was acquired on May 15, 2014 and sold on October 31, 2022;

· Romeo’s Alpharetta, LLC dba Romeo’s NY Pizza (“Romeo’s”),

which was acquired on September 30, 2014 and sold on July 1, 2020;

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

and sold on October 31, 2022;

· Edge View Properties, Inc.

(“Edge View”), which was

acquired on July 16, 2014;

· Repicci’s Franchise Group, LLC (“Repicci’s”),

which was acquired on August 10, 2016 and sold on June 1, 2020;

· Platinum Tax Defenders (“Platinum Tax”), which was acquired

on July 31, 2018;

· JM Enterprises 1, Inc.

dba Key Tax Group (“Key Tax”),

which was acquired on May 8, 2019 and sold on December 31, 2021;

· Red Rock Travel Group, LLC (“Red Rock”), which was acquired

on July 31, 2018 and discontinued on May 31, 2019;

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

on May 31, 2021.

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

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

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

Principles of Consolidation

The consolidated financial statements include the

accounts of Cardiff and its wholly owned subsidiaries AHI, Edge View, Platinum Tax, Nova, Red Rock, Romeo’s, Repicci’s and

Key Tax (collectively, the “Company”).

Subsidiaries shown as discontinued operations include Red Rock, Romeo’s, Repicci’s,

Key Tax and AHI.

All significant intercompany accounts and transactions are eliminated in consolidation.

Certain prior period amounts

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

These reclassifications would have no material effect

on the reported consolidated financial results.

The consolidated financial statements include

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

Subsidiaries shown as discontinued operations include AHI and Platinum Tax.

All significant intercompany accounts and transactions are

eliminated in consolidation.

Subsidiaries discontinued are shown as discontinued operations.

Reverse Stock Split

On January 9, 2024, the Company effected a 1-for-75,000

reverse split of its outstanding common stock.

All outstanding shares of common stock and warrant to purchase common stock were adjusted

to reflect the 1-for-75,000 reverse split, with respective exercise prices of the warrants proportionately increased.

The conversion prices

of the outstanding convertible notes and certain series of preferred stock were adjusted to reflect a proportional decrease in the number

of shares of common stock to be issued upon conversion.

All share and per share data throughout these

consolidated financial statements have been retroactively adjusted to reflect the reverse stock split.

The total number of authorized

shares of common stock did not change.

As a result of the reverse stock split, an amount equal to the decreased value of the common stock

was reclassified from “common stock” to “additional paid-in capital.”

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Use of Estimates

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Accordingly, actual results could differ from those estimates.

COVID-19 Pandemic

of a novel coronavirus throughout the world, including the United States, during early calendar year 2020 has caused widespread business

and economic disruption through mandated and voluntary business closings and restrictions on the movement and activities of people (“COVID-19

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.

Accounts Receivable

Accounts receivable is reported on the balance

sheet at the net amounts expected to be collected by the Company.

Management closely monitors outstanding accounts receivable and charges

off to expense any balances that are determined to be uncollectible which was $ 0 and $ 21,870 as of December 31, 2022 and 2021, respectively.

As of December 31, 2022, and 2021, the Company had accounts receivable of $ 6,604,780 and $ 6,006,399 , respectively.

The Company adopted ASU 2016-13, “Financial

Instruments – Credit Losses.” In accordance with this standard, the Company recognizes an allowance for credit losses for

its trade receivables to present the net amount expected to be collected as of the balance sheet date.

This allowance is based on the

credit losses expected to arise over the life of the asset and are based on Current Expected Credit Losses.

Accounts receivable is reported

on the balance sheet at the net amounts expected to be collected by the Company.

Management closely monitors outstanding accounts receivable

and recognized an additional allowance for credit losses in the amount of $ 122,190 and $ 0 as of December 31, 2023 and 2022, respectively.

As of December 31, 2023 and 2022, the Company had net accounts receivable of $ 13,305,254 and $ 6,603,920 respectively.

Accounts receivables

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

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

Property and Equipment

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Goodwill and Other Intangible Assets

Goodwill and indefinite-lived brands are not amortized

Goodwill and indefinite-lived assets are not amortized

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

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

The annual evaluation for impairment

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

future cash flows and operating plans.

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

marketplace participants.

During the years ended December 31, 2022 and 2021, the Company recognized goodwill impairment in the amount

of $ 2,092,048 and $ 0 , respectively.

The Company based this decision on impairment testing of the underlying assets, expected cash flows,

decreased asset value and other factors.

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

Goodwill is tested first for impairment based on qualitative factors on an annual basis or in between if an event occurs

or circumstances change that indicate the fair value may be below its carrying amount, otherwise known as a ‘triggering event’.

An assessment is made of these qualitative factors as such to determine whether it is more likely than not the fair value is less than

the carry amount, including goodwill.

The annual evaluation for impairment of indefinite-lived intangibles and, if then needed after the

first step, Goodwill, 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.

For the year ended December 31, 2023, the Company determined there to be no impairment.

For the year ended December 31, 2022, the Company

recognized goodwill impairment in the amount of $ 2,092,048 in its former financial services segment, which is now reflected in discontinued

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

and other factors.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Valuation of Long-lived Assets

In accordance with the provisions of Accounting

Standards Codification (“ASC”) Topic 360-10-5, “ Impairment or Disposal of Long-Lived Assets ”, all long-lived

assets such as plant and equipment and construction in progress held and used by the Company are reviewed for impairment whenever events

or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held

and used is evaluated by a comparison of the carrying amount of assets to estimated discounted net cash flows expected to be generated

by the assets.

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying

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

Standards Codification (“ASC”) Topic 360-10-5, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets

such as plant and equipment and construction in progress held and used by the Company are reviewed for impairment whenever events or changes

in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is

evaluated by a comparison of the carrying amount of assets to estimated cash flows expected to be generated by the assets.

If such assets

are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed

the fair value of the assets.

Revenue Recognition

On January 1, 2018, the Company adopted ASC 606,

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

which were not completed as of January 1, 2018.

The Company applies the following five-step model

to determine revenue recognition:

The Company’s primary source of revenue

is its healthcare subsidiary, which records revenues from providing licensed and/or certified orthopedic procedures.

Revenue is recognized

at a point in time in accordance with ASC 606.

The Company’s healthcare subsidiary does not have contract liabilities or deferred

revenue as there are no amounts prepaid for services.

The Company applies the following five-step ASC 606 model to determine revenue recognition:

· Identification of a contract with a customer

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· Determination of the transaction price

· Allocation of the transaction price to the separate performance allocation

· Allocation of the transaction price to the separate performance obligations

· Recognition of revenue when performance obligations are satisfied.

The Company only applies the five-step model when

it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers

The Company applies the five-step model when it

is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers

to the customer.

At contract inception and once the contract is determined to be within the scope of ASC 606, the Company assesses services

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

The Company’s financial services sector

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

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

The Company’s healthcare subsidiary does not have

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

Healthcare Income

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

The Company’s contracts for both its contract

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

services is not separately identifiable from other promises in the contracts and, therefore, not distinct, as a result, the entire transaction

price is allocated to this single performance obligation.

Accordingly, the Company recognizes revenues (net)

when the patient receives orthopedic care services.

The Company’s patient service contracts generally have performance obligations

which are satisfied at a point in time.

The performance obligation is for onsite or off-site care provided.

Patient service contracts

are generally fixed-price, and the transaction price is in the contract.

Revenue is recognized when obligations under the terms of the

contract with our patients are satisfied;

generally, at the time of patient care.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Established billing rates are not the same as

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They generally do not reflect what the Company is ultimately

paid and therefore are not reported in the consolidated financial statements.

The Company is typically paid amounts based on

established charges per procedure with guidance from the annually updated Current Procedural Terminology (“CPT”) guidelines

(a code set maintained by the American Medical Association through the CPT Editorial Panel), that designates relative value units (“RVU's”)

and a suggested range of charges for each procedure which is then assigned a CPT code.

paid by the customer, insurance carriers and other payors, and therefore are not reported in the consolidated financial statements at

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 and a suggested range of charges for each procedure which is then assigned

This fee is discounted to reflect the percentage

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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.

After selling patient cases to the factor, any

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

Historically, these cases were sold to a factor who bears the risk of economic benefit or loss.

After selling patient cases to

the factor, any additional funds collected by the Company were remitted to the factor.

Service Fees – Net (PIP)

6 unchanged sentences

billing rates, less allowances for contractual adjustments and uncollectible amounts.

These contractual adjustments vary by insurance company

and self-pay patients.

These contractual adjustments vary by insurance

company and self-pay patients.

The Company computes these contractual adjustments and collection allowances based on its historical collection

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Responses may be a payment, a denial, or a request for additional information.

Historical collection rates are estimated using the

most current prior 12-month historical payment and collection percentages.

The Company generally receives all of its collections within

12 months from the date of service.

Historically the Company receives 49.9% of collections billed and these net collection receipts represent

The Company recognizes the remaining 51.1% of uncollectible portions as finance charges as other expenses on the Consolidated

Statement of Operations.

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

received from insurance companies.

For the years ended December 31, 2022 and 2021,

the Company recorded $0 bad debt expense.

Additionally, the Company has not recorded any estimate for expected chargebacks.

The Company’s contracts for both its contract

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

services is not separately identifiable from other promises in the contracts and, therefore, not distinct, as a result, the entire transaction

price is allocated to this single performance obligation.

Accordingly, the Company recognizes revenues (net)

when the patient receives orthopedic care services.

The Company’s patient service contracts generally have performance obligations

which are satisfied at a point in time.

The performance obligation is for onsite or off-site care provided.

Patient service contracts

are generally fixed-price, and the transaction price is in the contract.

Revenue is recognized when obligations under the terms of the

contract with our patients are satisfied;

generally, at the time of patient care.

Financial Services Income

The Company generates revenue from providing tax

resolution services to individuals and business owners that have federal and state tax liabilities

by assisting its clients to settle outstanding tax debts.

Additionally, services include back taxes, offer in compromise, audit representation,

amending tax returns, tax preparation, wage garnishment relief, removal of bank levies and liens, and other financial challenges.

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

Rental Income

The Company’s rent revenue is derived from

the mobile home leases.

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

In accordance with section ASC 842, the cost of property

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

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

There are no contingent rentals included in

income in the accompanying consolidated statements of operations.

With the exception of the month-to-month leases, revenue was recognized

on a straight-line basis and amortized into income on a monthly basis, over the lease term.

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% of collections from total gross billed.

Accordingly, the Company recognized net healthcare service revenue as

49% of gross billed amounts.

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

Historically through April 2023, the Company’s

healthcare subsidiary has had contractual medical receivable sales and purchase agreements with third party factors which result in approximately

54% 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 on a quarterly interval, and the reductions from accounts receivable that were factored

were recorded in finance charges as other expenses on the consolidated statement of operations.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Advertising Costs

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Distinguishing Liabilities from Equity

The Company accounts for its Series N Preferred Shares

and Series X Preferred Shares subject to possible redemption in accordance with ASC 480, “Distinguishing Liabilities from Equity”.

Conditionally redeemable preferred shares are classified as temporary equity within the Company’s consolidated balance sheet.

The Company accounts for its series N senior convertible

preferred stock, series R 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 consolidated balance sheet.

Stock-Based Compensation

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that performance will occur.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Generally, all forms of share-based payments,

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

Equity Instruments Issued to Parties Other

Than Employees for Acquiring Goods or Services

FASB ASU No 2018-07 prescribes equity instruments

issued to parties other than employees.

Income taxes are determined in accordance with

ASC Topic 740, “Income Taxes”.

Under this method, deferred tax assets and liabilities are recognized for the future

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

respective tax basis.

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

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

Any effect on deferred tax assets and liabilities

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

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

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 December 31, 2022 and 2021,

For the years ended December 31, 2023 and 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

Income (Loss) per Share

FASB ASC Subtopic 260, Earnings Per Share ,

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warrants, and debts convertible into common stock.

The dilutive effect of potentially dilutive securities is reflected in diluted earnings

The dilutive effect of stock options and warrants are reflected in diluted earnings

per common share by application of the treasury stock method.

1 unchanged sentence

the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities.

The diluted effect of debt

convertibles is reflected utilizing the if converted method.

Going Concern

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liabilities and commitments in the normal course of business.

The Company has sustained operating losses since its inception and has negative

working capital and an accumulated deficit.

These factors raise substantial doubts about the Company’s ability to continue as a

going concern.

As of December 31, 2022, the Company has sustained recurring losses and accumulated a working capital deficit of approximately

$ 3,136,921 .

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

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

a going concern.

The Company had previously sustained operating losses since its inception,

has an accumulated deficit of $ 68,684,115 and $ 70,932,435 , respectively, as of December 31, 2023 and 2022.

We had negative cash flow from

operations of $ 1,807,987 and $ 1,099,461 during the years ended December 31, 2023 and 2022.

These factors raise a substantial doubt about

the Company’s ability to continue as a going concern.

The accompanying consolidated financial statements do not reflect any adjustments

relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might

result if the Company is unable to continue as a going concern.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

The ability of the Company to continue as a going

11 unchanged sentences

Recent Accounting Standards

Changes to accounting principles are established

by the FASB in the form of Accounting Standards Update (“ASU”) to the FASB's Codification.

The Company considers the applicability

and impact of all ASU's on its financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof.

In June 2016, the FASB issued ASU No.

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.

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.

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.

The FASB issued ASU 2023-07 on November

The amendments “improve reportable segment disclosure requirements, primarily through enhanced disclosures about

significant segment expenses.” In addition, the amendments enhance interim disclosure requirements, clarify circumstances in

which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities

with a single reportable segment, and contain other disclosure requirements.

The purpose of the amendments is to enable

“investors to better understand an entity’s overall performance” and assess “potential future cash

flows.” The Management is evaluating the impact of ASU 2023-07 on the consolidated financial statements and does not expect

there to be any changes or impact to the financial statements.

RESTATEMENT AND REVISION OF FINANCIAL STATEMENTS

Restatement of Previously Issued Financial Statements

Subsequent to the initial issuance of the Company's

2021 financial statements on October 26, 2022, management identified certain errors and other items requiring restatement of 2021 amounts.

The Company agreed to issue 818,750 additional shares

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

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

The Company finalized its purchase price accounting and

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

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

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

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

In December 2022, the Company identified an error

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

sheet as of December 31, 2021.

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

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

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

increase to the mezzanine equity and offsetting decrease to the Series N Preferred Stock equity line item.

The Company and We3 managers entered into a resignation,

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

The Company presented in prior periods operating loss as loss

from discontinued operations in the amount of $49,300 on the consolidated statement of operations for the year ended December 31, 2021.

The Company identified that NOVA’s accounts

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

NOVA’s accounts receivable.

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

receivable as of December 31, 2021 and $1,076,000 decrease in finance charges for the year ended December 31, 2021.

The following table summarizes the impacts of the

error corrections on the Company's consolidated financial statements for the year ended December 31, 2021 presented below:

Balance sheet

During the preparation of the year ended December

31, 2023 financial statements, the Company identified and corrected its classification and accounting treatment for its series R convertible

preferred stock and the related dividend accrual in its balance sheet as of December 31, 2022 and 2021.

Pursuant to ASC 250, “Accounting

changes and error corrections” issued by FASB and SAB 99 “Materiality” issued by Securities and Exchange Commission,

the Company determined the impact of the error was immaterial.

The impact of the error correction is reflected in a $198,000 increase

to the mezzanine equity and offsetting decrease to the series R convertible preferred stock and subject to possible redemption mezzanine

equity line item on the consolidated balance sheet as of December 31, 2021.

In addition, the impact of the unpaid dividend accrual is

reflected in $29,462 and $47,520 increase to mezzanine equity and offsetting decrease to the accumulated deficits as of December 31, 2022

and 2021, respectively.

The impact of the error correction is also reflected in $29,462 and $47,520 increase of preferred share dividends

and $28 and $5 decrease of earnings (loss) per share on the consolidated statement of operations for the years ended December 31, 2022

and 2021, respectively.

The following table summarizes the impacts of

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

Consolidated balance sheet

Schedule of restated financial information

2 unchanged sentences

As previously reported

Current liabilities

Net, liabilities of discontinued operations

Non-current liabilities

Total liabilities

Mezzanine equity

Preferred stock

Total stockholders' equity

$ ( 245,520 )

Accumulated deficit

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Impact of correction of error

December 31, 2022

As previously reported

Total liabilities

Mezzanine equity

Total stockholders' equity

$ ( 1,469,809 )

1 unchanged sentence

$ ( 1,744,791 )

Impact of correction of error

March 31, 2023

As previously reported

Total liabilities

Mezzanine equity

Total stockholders' equity

$ ( 1,632,373 )

Total deficiency in shareholders' equity

$ ( 283,118 )

Statement of operations

Impact of correction of error - year

$ ( 1,915,491 )

Impact of correction of error

June 30, 2023

As previously reported

Total liabilities

Mezzanine equity

Total stockholders' equity

$ ( 917,038 )

$ ( 291,345 )

$ ( 1,208,383 )

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Impact of correction of error

September 30, 2023

As previously reported

Total liabilities

Mezzanine equity

Total stockholders' equity

$ ( 299,662 )

Consolidated statement of operations

Impact of correction of error

Year ended December 31, 2021

As previously reported

Net income for the year

Preferred stock dividends

$ ( 201,782 )

Cost of sales

$ ( 249,302 )

Net income attributable to common shareholders

Basic and diluted earnings (loss) per share for continuing operations

Impact of correction of error

Year ended December 31, 2022

As previously reported

Net loss for the year

$ ( 5,429,521 )

Operating expense

$ ( 5,429,521 )

Preferred stock dividends

$ ( 307,188 )

Income from operations

Other income (expense)

$ ( 384,170 )

Net loss attributable to common shareholders

$ ( 5,736,709 )

Net loss before discontinued operations

$ ( 5,813,691 )

Income (loss) from discontinued operations

Net income (loss)

Basic and diluted earnings (loss) per share for continuing operations

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Impact of correction of error

Three months ended March 31, 2023

As previously reported

Net loss for the period

Preferred stock dividends

$ ( 336,811 )

Basic and Diluted Earnings (loss) per Share

Continued Operations

Discontinued Operations

Weighted Average Shares Outstanding - Basic Earnings (loss) per Share

Continued Operations

Discontinued Operations

On May 31, 2021, the Company completed the acquisition

of Nova pursuant to the terms of a securities purchase agreement acquiring 100% of the common shares of NOVA.

The sellers received a cash

payment in the amount of $ 2,500,000 and were issued 894,834 shares of series J preferred stock with an aggregate stated value equal to

In addition, the Company agreed to pay to the sellers 818,750 additional shares of series J preferred stock with an aggregate

stated value equal to $3,275,000 if, as of May 31, 2022, Nova’s trailing twelve months minimum pre-tax net income exceeded $1,979,320

(the “Milestone”).

The Company finalized its purchase price accounting and allocation in 2022 and recorded purchase consideration

of $6,100,000 associated with the cash consideration, the fair value of the series J preferred stock and the fair value of the contingent

consideration.

On August 25, 2022, the parties entered into an addendum

to the securities purchase agreement in which the parties recognized that an unanticipated series of events prevented alternative financing

and equity funding during the initial year that impacted the Milestone outcome, and the parties acknowledged the significant gains and

accomplishments during the initial year.

Based upon those accomplishments and the performance of Nova during its initial year, the Company

agreed to issue the supplemental payment of 818,750 additional shares of series J preferred stock.

The following table summarizes the consideration

transferred to acquire NOVA and the amounts of identified assets acquired and liabilities assumed at the acquisition date:

Schedule of identified assets acquired and liabilities assumed

Nova Ortho and Spine, PLLC

Accounts receivable

Property and equipment

NOVA contributed revenue of $ 5,413,890 and earnings

of $ 638,627 to the Company for the period from June 1, 2021 to December 31, 2021.

The following unaudited pro forma summary presents consolidated

information of the Company as if the business combination had occurred on January 1, 2020.

Schedule of unaudited pro forma information

Pro Forma Years Ended

These pro forma amounts have been calculated after

applying the Company’s accounting policies and adjusting the results of NOVA.

In 2021, the Company

paid legal fees of $ 24,127 and a consulting fee of $ 296,900 of acquisition-related costs.

The legal and consulting fees are included

in general and administrative expenses on the Company’s consolidated statement of operation for the year ended December 31, 2021

and are reflected as an adjustment in computing pro forma earnings for the year ended December 31, 2021 in the table above.

$ ( 344,947 )

Net loss attributable to common shareholders

$ ( 352,802 )

$ ( 360,938 )

Basic and diluted earnings (loss) per share for continuing operations

Impact of correction of error

Three months ended June 30, 2023

As previously reported

Net income for the period

Preferred stock dividends

$ ( 125,744 )

$ ( 133,971 )

Net income attributable to common shareholders

Basic earnings per share for continuing operations

Diluted earnings per share for continuing operations

Impact of correction of error

Six months ended June 30, 2023

As previously reported

Net income for the period

Preferred stock dividends

$ ( 462,555 )

$ ( 478,918 )

Net income attributable to common shareholders

Basic earnings per share for continuing operations

Diluted earnings per share for continuing operations

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Impact of correction of error

Three months ended September 30, 2023

As previously reported

Net income for the period

Preferred stock dividends

$ ( 142,829 )

$ ( 151,146 )

Net income attributable to common shareholders

Basic earnings per share for continuing operations

Diluted earnings per share for continuing operations

Impact of correction of error

Nine months ended September 30, 2023

As previously reported

Net income for the year

Preferred stock dividends

$ ( 605,384 )

$ ( 630,065 )

Net income attributable to common shareholders

Basic earnings per share for continuing operations

Diluted earnings per share for continuing operations

Revision of Financial Statements

During the preparation of the financial statements

for the year ended December 31, 2023, the Company found that the results of the settlement agreement with Red Rock Travel Group (“Red

Rock”) were incorrectly reflected on the consolidated statement of stockholders’ equity (deficiency) as of December 31, 2022.

The Company determined that these errors were immaterial to the previously issued consolidated financial statements, and as such no restatement

was necessary.

The revisions discussed below were made to the December 31, 2022 balance sheet and statement of stockholders’ equity

(deficiency).

As a result of the settlement agreement with Red

Rock on July 29, 2022, the Company reduced 35,000,000 shares of common shares on the consolidated financial statements as of December

The certificate of the common stock for 35,000,000 shares (0.047 shares after 10,000:1 and 75,000:1 reverse split) which were

originally issued on February 24, 2020 was returned as part of the 2022 agreement with Red Rock and 0.047 common shares were cancelled,

which were equivalent to 35,000,000 shares before the 10,000:1 and 75,000:1 reverse split on May 12, 2020 and January 9, 2024, respectively.

Consequently, the December 31, 2022 financial statements as originally reported were understated by 34,996,500 common shares.

of the correction is reflected in the $35,097 increase to common stock and decrease the same amount to additional paid-in-capital on the

consolidated statement of stockholders’ equity.

The adjustment had no impact on earnings per share for any 2022 period.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

On July 31, 2018, the Company issued 8,200,562

shares of series K preferred stock to the prior owners of Red Rock for the consideration of the acquisition of Red Rock.

The acquisition

was not completed, and Red Rock returned the 8,200,562 shares of series K preferred stock during the year ended December 31, 2018.

of 8,200,562 shares of series K preferred stock were cancelled.

The impact of the correction is reflected in the $8,201 decrease to series

K preferred stock and increase the same amount to additional paid-in-capital on the consolidated statement of stockholders’ equity

(deficiency).

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Schedule of accrued expenses

Schedule of accounts payable and accrued expenses

Accounts payable

Accrued credit cards

Accrued expense – previously factored liability

Accrued income taxes, and other taxes

Accrued liability for collections of previously factored receivables

Accrued property taxes

Accrued professional fees

Accrued advertising

Accrued payroll

1 unchanged sentence

Accrued expense - dividend payable

The Company is delinquent paying certain income

and property taxes.

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

The Company is delinquent paying certain property

As of December 31, 2023 and 2022, the balance for these property taxes, was $ 5,346 and $ 6,732 , respectively.

PLANT AND EQUIPMENT, NET

9 unchanged sentences

For the years ended December 31, 2023 and 2022,

depreciation expense was $ 23,132 and $ 13,886 ,

respectively.

For the years end December 31, 2022 and 2021, the Company recorded depreciation expense of $ 23,132

in operations expense, respectively.

depreciation expense was $ 20,777 and $ 23,132 , respectively.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

As of December 31, 2023 and 2022, the Company

had 27 acres of land of approximately $ 540,000 .

During the year ended December 31, 2021, the Company sold 3 lots for $ 152,000 .

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

LINE OF CREDIT

At December 30, 2022 and 2021, the Company had

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

The loan accrues interest at 10.45 % at December 30, 2022 and 6.70 % at December 31, 2021.

As of December 31, 2022 and 2021, there were

no borrowings against the line of credit.

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

RELATED PARTY TRANSACTIONS

On February 11, 2021, the Chairman of the Board

and the Chief Executive Officer each converted 62,500 shares of series I preferred stock into 25,000,000 restricted shares of common stock

for a total of 125,000 shares of series I preferred stock into 50,000,000 restricted shares of common stock.

Effective December 28, 2021, the Chairman of the

Board and Chief Executive Officer each forfeited and surrendered for no consideration 90,000,000 shares of series I preferred stock totaling

180,000,000 shares.

From time to time, the previous owner who is currently

the manager of Platinum Tax loaned funds to Platinum Tax to cover short term operating needs.

Amounts owed as of December 31, 2022 and

2021 were $ 37,025 and $ 37 , respectively.

In connection with the acquisition of Edge View

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

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

These amounts are due on demand

and do not bear interest.

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

On August 6, 2022, Edge View terminated one of its two employees for fraud, deceit, larceny, and thievery for selling property belonging

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

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

matters for return of monies and criminal prosecution.

The balance of these amounts are $ 4,979 due from the previous owners as of December 31, 2023 and 2022.

The Company obtained short-term advances from

2 unchanged sentences

$ 120,997 and $ 123,192 , respectively.

See also Note 8 and the disclosure regarding Note

See also Note 13 for compensation paid to employees

6 unchanged sentences

Less current portion

( 2,136,077 )

Long-term portion

1 unchanged sentence

Schedule of maturities of long-term debt

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Loans and Notes Payable – Unrelated Party

2 unchanged sentences

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

The Company assigned

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

The balance of the debenture

was $ 10,989 at December 31, 2022 and 2021.

The accrued interest of the debenture was $ 6,229 and $ 4,910 at December 31, 2022 and 2021,

respectively.

On September 7, 2011, the Company issued a promissory

note in the principal amount of $50,000.

The note bore interest at 8% per year and matured on September 7, 2016.

Effective March 29, 2021,

the principal balance of $50,000 and accrued interest of $37,282 were converted into 61,830 shares of series B preferred stock.

On November 17, 2011, the Company issued a promissory

note in the principal amount of $50,000.

The note bore interest at 8% per year and matured on November 17, 2016.

Effective March 29, 2021,

the principal balance of $50,000 and accrued interest of $36,505 were converted into 60,606 shares of series B preferred stock.

On March 11, 2009, the Company issued a promissory

note in the principal amount of $15,000.

The note bore interest at 12% per year and matured on April 29, 2014.

Effective March 29, 2021,

the principal balance of $15,000 and accrued interest of $19,465 were converted into 13,860 shares of series B preferred stock.

On September 9, 2019, the Company issued a promissory

note in the principal amount of $410,000.

The note bore interest at 10% per year and matured on September 9, 2020.

On November 10, 2020,

the Company entered into addendum No.

1 to the note extending the maturity date until December 31, 2021.

On May 4, 2021, the Company entered

into addendum No.

2, whereby the maturity date was extended to November 3, 2021 , accrued interest of $ 22,266 was added to the principal

balance of $ 410,000 resulting in a new principal balance of $ 432,266 , and the interest rate was increased to 24 %.

This note was consolidated

to Note 40-1 on September 22, 2022 (see Note 9).

The principal balance of the note was $ 0 and $ 432,266 at December 31, 2022 and 2021,

respectively.

The accrued interest of the note was $ 0 and $ 137,345 at December 31, 2022 and 2021, respectively.

Paycheck Protection Program (“PPP”)

On April 14, 2020, the Company obtained a PPP

loan in the principal amount of $ 127,400 with an interest rate of 1 % and a maturity date of April 14, 2022 .

This loan was forgiven in

2021 as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and was recognized as a gain from forgiveness

of debt in the amount of $128,640 recorded in other income and expenses in the consolidated statement of operations during the year ended

December 31, 2021.

On May 8, 2020, the Company obtained a PPP loan

in the principal amount of $ 257,500 with an interest rate of 1 % and a maturity date of May 8, 2022 .

This loan was forgiven in 2021 as

part of the CARES Act and was recognized as a gain from forgiveness of debt in the amount of $261,675 recorded in other income and expenses

in the consolidated statement of operations during the year ended December 31, 2021.

On February 19, 2021, the Company obtained a PPP

loan in the principal amount of $ 229,500 with an interest rate of 1 % and a maturity date of February 19, 2023 .

This loan was forgiven

in 2021 as part of the CARES Act and was recognized as a gain from forgiveness of debt in the amount of $ 231,374 recorded in other income

and expenses in the consolidated statement of operations during the year ended December 31, 2021.

On February 23, 2021, the Company obtained a PPP

loan in the principal amount of $ 117,550 with an interest rate of 1 % and a maturity date of February 23, 2023 .

This loan was forgiven

in 2021 as part of the CARES Act and was recognized as a gain from forgiveness of debt in the amount of $ 118,130 recorded in other income

and expenses in the consolidated statement of operations during the year ended December 31, 2021.

The balance of the

debenture was $ 10,989 at December 31, 2023 and 2022.

The accrued interest of the debenture was $ 7,547 and $ 6,229 at December 31, 2023

and 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”)

4 unchanged sentences

and $ 5,723 , respectively.

On October 7, 2020, Key Tax obtained an SBA loan

in the principal amount of $ 150,000 with an interest rate of 3.50 % and a maturity date of October 7, 2050 .

On August 31, 2021, this SBA

loan was amended to add an additional $ 200,000 of principal to the original note and the interest rate was increased to 3.75 %.

The principal

and accrued interest at December 31, 2021 was $ 349,900 and $ 9,608 , respectively.

Key Tax was divested on December 31, 2021 and this loan

was eliminated.

On April 12 and June 16, 2020, the Company obtained

SBA loans totaling $ 20,000 with an interest rate of 5 % and maturity dates one year from advance, if not forgiven.

This was the grant a

part of the EIDL loan and was recognized as other income in the amount of $ 10,000 recorded in other income and expenses in the consolidated

statement of operations during the year ended December 31, 2022 and 2021, accordingly.

The principal balance and accrued interest at December

31, 2022 were both $ 0 and principal and accrued interest at December 31, 2021 was $ 10,000 and $ 860 , respectively.

Line of Credit

On September 29, 2023, the Company and Nova

entered into a two-year revolving purchase and security agreement with DML HC Series, LLC to sell, with recourse, Nova’s

accounts receivables for a revolving financing up to a maximum advance amount of $ 4.5

As of December 31, 2023, the Company had $ 2,120,100

outstanding balance against the revolving receivable line of credit.

The revolving purchase and security agreement includes

discounts recorded as interest expense on each funding and matures on September

CONVERTIBLE NOTES PAYABLE

2 unchanged sentences

During the year ending December

31, 2022, the Company received proceeds of $ 1,490,706 from convertible notes and repaid $ 5,908 to convertible noteholders.

year ending December 31, 2021, the Company received proceeds of $ 444,500 from convertible notes and repaid $ 66,315 to convertible noteholders.

31, 2023, the Company received net proceeds of $ 421,375 from convertible notes, repaid $ 175,000 and wrote off $ 12,406 to convertible noteholders.

During the year ending December 31, 2022, the Company received proceeds of $ 1,490,706 from convertible notes and repaid $ 5,908 to convertible

There are debt discounts associated with the convertible debt of $ 24,820 and $ 46,797 at December 31, 2023 and 2022, respectively.

ended December 31, 2022 and 2021, the Company recorded amortization of debt discounts of $ 253,823 and $ 1,051,264 , respectively.

For the years ended December 31, 2023 and 2022, the Company recorded amortization of debt discounts of $ 136,518 and $ 253,823 , respectively.

During the year ended December 31, 2023, the Company

converted $ 87,460 of convertible debt, $ 112,429 in accrued interest and $ 3,000 in conversion cost into 13,068 shares of the Company’s

common stock.

The Company recognized $ 777,217 of additional paid-in capital to adjust fair value for the debt settlement during the year

ended December 31, 2023.

The Company had no convertible debt conversions during the year ended December 31, 2022.

On September 22, 2022, the Company entered into

6 unchanged sentences

in a gain on debt consolidation of $ 1,397,271 .

During the year ended December 31, 2021, the Company

converted $ 885,691 of convertible debt, $ 388,143 in accrued interest and $ 13,000 in penalties and fees into 109,234,241 shares of the

Company’s common stock.

In addition to the conversions of convertible debt into common stock, the Company converted convertible

debt principal of $150,000 and accrued interest of $225,800 into 140,799 shares of series B preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Convertible notes as of December 31, 2023 and

2022 are summarized as follows:

Schedule of convertible notes summary

Schedule of convertible notes

Convertible notes payable

5 unchanged sentences

payable as of and for the year ended December 31, 2023.

Schedule of convertible notes details

Principal Balance 12/31/21

Debt Consolidation

Principal Balance 12/31/22

Accrued Interest on Convertible Debt at 12/31/21

Interest Expense On Convertible Debt For the Period Ended 12/31/22

Accrued Interest on Convertible Debt at 12/31/22

Unamortized Debt Discount At 12/31/22

$ ( 2,492,733 )

Schedule of convertible notes

Balance 12/31/22

Shares Issued

Upon Conversion

Balance 12/31/23

Interest on Convertible Debt at 12/31/22

Expense On Convertible Debt For the Period Ended 12/31/23

Interest on Convertible Debt at 12/31/23

Debt Discount At 12/31/23

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

On October 28, 2016, the Company issued a convertible

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

Note 7-1 is currently in default and accrues at

a default interest rate of 20% per annum.

Note 7-1 was fully converted into common shares

and there was no outstanding balance as of December 31, 2023.

On September 12, 2016, the Company issued a convertible

2 unchanged sentences

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

Note 10, 10-1, 10-2 and 10-3

On January 24, 2017, the Company issued a convertible

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

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 at a default interest rate of 20% per annum.

On March 16, 2017, the Company issued a convertible

promissory note in the principal amount of $40,000, which matured on March 16, 2018.

Note 11-2 was consolidated to Note 40-1 on September

On July 24, 2018, the Company issued a convertible

promissory note in the principal amount of $237,909, which matured on January 24, 2019.

Note 13-2 was consolidated to Note 40-1 on September

Notes 22, 22-1 and 22-3

On July 10, 2018, the Company issued a convertible

promissory note in the principal amount of $1,040,000 with an original issue discount of $103,000.

On February 20, 2019, the Company executed

an addendum to this note, whereby the Company will receive two additional tranches.

On February 20, 2019, the Company received $55,216

less expenses of $5,216 resulting in net cash to the Company of $50,000 and on April 10, 2019, the Company received $55,616 less expenses

of $5,616 resulting in net cash of $50,000, which was paid directly to a certain vendor.

The notes 22, 22-1 and 22-3 matured on January

Note 22, 22-1 and 22-3 were consolidated to Note 40-1 on September 22, 2022.

On August 10, 2017, the Company issued a convertible

promissory note in the principal amount of $20,000, which matured on January 27, 2018.

Note 26 is currently in default and accrues interest

at a default interest rate of 15% per annum.

Note 29, 29 - 1 and 29-2

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).

On August 11, 2023, the Company executed a fourth tranche under this note in the principal amount of $25,000

Notes 10-1, 10-2 and 10-3 accrue interest at a rate of 15% per annum.

On May 10, 2019, the Company issued a convertible

3 unchanged sentences

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

Notes 29-1 and 29-2 are currently

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

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.

On May 22, 2019, the Company issued a convertible

promissory note in the principal amount of $25,000 from a draw on a line of credit, which matured on May 22, 2020.

Note 32 is currently

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

On May 18, 2020, the Company entered into a 6%

Convertible Promissory Note with an unrelated entity in the amount $63,000 and expenses of $3,000 resulting in net cash to the company

Note 34 matured May 18, 2021.

On August 24, 2020, the Company entered into a

6% Convertible Promissory Note with an unrelated entity in the amount $85,000 with expenses of $3,500 resulting in net cash to the company

Note 35 matured August 24, 2021.

Note 36-1, 36-2 and 36-3, 36-4, 36-5, 36-6,

36-7, 36-8, 36-9, 36-10 and 36-11

On September 3, 2020, the Company issued a convertible

promissory note in the principal amount of $733,500, with an original issue discount of $183,500, which could be drawn in several tranches.

On September 3, 2020, the first tranche executed the first tranche in the principal amount of $122,400, less original issue discount of

$30,000, which matured on January 3, 2021 (Note 36-1).

On November 3, 2020, the Company executed the

second tranche in the principal amount of $120,000, less original issue discount of $30,000, which matured on March 3, 2021 (Note 36-2).

On December 29, 2020, the Company executed the third tranche in the principal amount of $120,000, less original issue discount of $30,000,

which matured on April 29, 2021 (Note 36-3).

Note 31 is currently in default and accrues interest

at a default interest rate of 24% per annum.

There was no outstanding principal balance as of December 31, 2023.

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

On September 3, 2020, the Company issued a convertible

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

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

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

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 original issue discount of $16,500, which matured on September 30, 2021 (Note 37-3).

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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

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.

Note 38 was converted into common shares and the

remaining balance was paid in cash.

There was no outstanding balance on Note 38 as of December 31, 2023.

On April 26, 2021, the Company issued a convertible

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

Note 19 is currently in default and accrues interest

at a default interest rate of 22% per annum.

Note 40-1, 40-2, 40-3 and 40-4

Note 39 was paid in cash and there was no outstanding

balance as of December 31, 2023.

Notes 40-1, 40-2, 40-3, 40-4, 40-5, 40-6, 40-7, 40-8, 40-9 and 40-10

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 principal amount of $68,667, less original issue discount and fee of $18,667 (Note 40-2).

On November 28, 2022, the Company executed the

third tranche under this note in the principal amount of $68,667, less original issue discount and fee of $18,667 (Note 40-3).

On November 28, 2022, the Company executed a fourth

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

Notes 40-1, 40-2,

40-3 and 40-4 mature on the first anniversary of issuance and accrued interest at a rate of 10% per annum.

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 December 21, 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 $90,166, less an original issue discount and

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

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

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

On June 5, 2023, the Company executed a seventh tranche under this note

in the principal amount of $136,667, less original issue discount and fee of $39,167 (Note 40-7).

On June 13, 2023, the Company executed

an eighth tranche under this note in the principal amount of $21,167, less original issue discount and fee of $5,167 (Note 40-8).

19, 2023, the Company executed a ninth tranche under this note in the principal amount of $35,500, less an original issue discount and

fee of $8,875 (Note 40-9).

On July 24, 2023, the Company executed a tenth tranche under this note in the principal amount of $14,000,

less an original issue discount and fee of $3,500 (Note 40-10).

On December 1, 2023, the Company executed amendment on Notes series 40

consolidated senior secured convertible promissory note to extend the expired tranche note 40-1 through 40-5’ due date to September

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.

On August 25, 2023, the Company issued a twelve-month

convertible promissory note in the principal amount of $5,000 to the Company’s CEO for the Company’s operating expenses.

rate of interest is 10% per annum.

CAPITAL STOCK

2 unchanged sentences

preferred stock, including 2 shares of series A preferred stock, 3,000,000 shares of series B preferred stock, 500 shares of series C

preferred stock, 1,000,000 shares of series E preferred stock, preferred stock, 800,000 shares of series F-1 preferred stock, 500,000,000

shares of series I preferred stock, 10,000,000 shares of series J preferred stock, 100,000,000 shares of series L preferred stock, 3,000,000

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

convertible preferred stock.

preferred stock, 1,000,000 shares of series E preferred stock, 50,000 shares of series F-1 preferred stock, 15,000,000 shares of series

I preferred stock, 2,000,000 shares of series J preferred stock, 400,000 shares of series L preferred stock, 3,000,000 shares of series

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

preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

The following is a description of the rights and

1 unchanged sentence

Redeemable Preferred Stock

The Company recognized Series N Senior Convertible

Preferred Stock and Series X Senior Convertible Preferred Stock as mezzanine equity since the redeemable preferred stock may be redeemed

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

The Company recognized the series N senior convertible

preferred stock, series R convertible preferred stock and series X senior convertible preferred stock as mezzanine equity in accordance

with ASC 480, “Distinguishing Liabilities from Equity”.

Series N Senior Convertible Preferred Stock

18 unchanged sentences

applicable dividend payment date.

At December 31, 2023, cumulative dividends on Series N Preferred Stock were $ 766,437 .

Liquidation Rights.

19 unchanged sentences

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

2 unchanged sentences

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.

the stated value ($4.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price of $900 per share

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

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

provided that in no event shall the holder

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

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

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

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

limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’

prior notice to the Company.

Redemption Rights .

The Company may redeem the

series N senior convertible preferred stock at any time by paying in cash therefore a sum equal to 115% of the stated value of $4.00 per

share, plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the certificate of designation.

In addition, a ny holder may require the Company to redeem some or all of its shares of series

N senior convertible preferred stock on the same terms after a period of twelve months from the date of issuance;

provided, however, that

such redemption right shall only be exercisable if the Company raises at least $5,000,000 or the

common stock is trading on the Nasdaq Stock Market or the New York Stock Exchange.

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, any 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

Series R Convertible Preferred Stock

The series R convertible preferred

stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock, series

B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series I preferred stock, series J

preferred stock, series L preferred stock and to each other class or series that is not expressly made senior to or on parity with the

series R convertible preferred stock;

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

series R convertible preferred stock;

and (iii) junior to the series N senior convertible preferred stock, series X senior convertible

preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series R convertible

preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

R convertible preferred stock are entitled to receive cumulative dividends in the amount of twelve percent (12%) per annum, payable quarterly.

In addition, holders of series R convertible preferred stock are entitled to receive dividends equal (on an as converted to common stock

basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares

of common stock.

Any dividends that are not paid when due shall continue to accrue and shall entail a late fee, which must be paid in

cash, at the rate of 18% per annum or the lesser rate permitted by applicable law which shall accrue and compound daily from the missed

payment date through and including the date of actual payment in full.

At December 31, 2023, cumulative dividends on Series R Preferred

Stock were $ 109,980 .

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series R convertible preferred stock shall

be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the stated value ($1,200), plus

any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing, for each share of series R convertible

preferred stock before any distribution or payment shall be made to the holders of any junior securities.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Voting Rights .

The holders of series R

convertible preferred stock will vote together with the common stock on an as-converted basis.

However, as long as any shares of series

R convertible preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the

then outstanding shares of the series R convertible preferred stock, directly and/or indirectly (i) alter or change adversely the powers,

preferences or rights given to the series R convertible preferred stock or alter or amend the certificate of designation, (ii) authorize

or create any class of stock ranking as to redemption or distribution of assets upon a liquidation senior to, or otherwise pari passu

with, the series R convertible preferred stock, or authorize or create any class of stock ranking as to dividends senior to, or otherwise

pari passu with, the series R convertible preferred stock, (iii) amend its articles of incorporation or other charter documents

in any manner that adversely affects any rights of the holders of the series R convertible preferred stock, (iv) increase the number of

authorized shares of series R convertible preferred stock, or (v) enter into any agreement with respect to any of the foregoing.

Conversion Rights .

Each shares of series

R convertible preferred stock 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 ($1,200 per share) by a conversion

price equal to the lower of (i) $75.0 and (ii) the lowest daily VWAP during the twenty (20) trading days immediately prior to the applicable

conversion date.

Notwithstanding the foregoing, the Company shall not effect any conversion of the series R convertible preferred stock,

and a holder shall not have the right to convert any portion of the series R convertible preferred stock, to the extent that, after giving

effect to the conversion, such holder (together with such holder’s affiliates, and any persons acting as a group together with such

holder or any of such holder’s affiliates) would beneficially own in excess of 4.99% of the then outstanding common stock.

The conversion

price is subject to adjustment for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately

decreases or increases the common stock, as well as for mergers, business combinations and certain other fundamental transactions.

addition, subject to certain exceptions, upon any issuance by the Company or any of its subsidiaries of common stock or common stock equivalents

for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), the holder may elect, in

its sole discretion, to exchange (in lieu of conversion), if applicable, all or some of the shares of series R convertible preferred stock

then held for any securities or units issued in a Subsequent Financing on a $1.00 for $1.00 basis.

Participation Rights .

Subject to certain

exceptions, upon a Subsequent Financing, a holder of at least 100 shares of series R convertible preferred stock shall have the right

to participate in up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing on the same terms, conditions

and price provided for in the Subsequent Financing.

Company Redemption Rights .

has the right to redeem all (but not less than all), shares of the series R convertible preferred stock issued and outstanding at any

time upon three (3) business days’ notice, at a redemption price per share equal to the product of (i) the Premium Rate multiplied

by (ii) the sum of (x) the stated value ($1,200), (y) all accrued but unpaid dividends, and (z) all other amounts due to the holder.

Rate” means (a) 1.1 if all of the series R convertible preferred stock is redeemed within ninety (90) calendar days from the issuance

date thereof;

(b) 1.2 if all of the series R convertible preferred stock is redeemed after ninety (90) calendar days and within one hundred

twenty (120) calendar days from the issuance date thereof;

one hundred twenty (120) calendar days and within one hundred eighty (180) calendar days from the issuance date thereof;

if all of the series R convertible preferred stock is redeemed after one hundred eighty (180) calendar days.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Redemption Upon Triggering Events .

the occurrence of a Triggering Event (as defined below), each holder of series R convertible preferred stock shall (in addition to all

other rights it may have) have the right, exercisable at the sole option of such holder, to require the Company to (A) redeem all of the

series R convertible preferred stock then held by such holder for a redemption price, in cash, equal to the Triggering Redemption Amount

(as defined below), or (B) at the option of each holder either (i) redeem all of the series R convertible preferred stock then held by

such holder though the issuance to such holder of such number of shares of common stock equal to the quotient of (x) the Triggering Redemption

Amount, divided by (y) the lowest of (1) the conversion price, and (2) 75% of the average of the 10 VWAPs immediately prior to the date

of election, or (ii) increase the dividend rate on all of the outstanding series R convertible preferred stock held by such holder retroactively

to the initial issuance date to 18% per annum thereafter.

“Triggering Redemption Amount” means, for each share of series R

convertible preferred stock, the sum of (a) the greater of (i) 130% of the stated value and (ii) the product of (y) the VWAP on the trading

day immediately preceding the date of the Triggering Event, multiplied by (z) the stated value divided by the then applicable conversion

price, (b) all accrued but unpaid dividends thereon and (c) all liquidated damages, late fees and other costs, expenses or amounts due

in respect of the series R convertible preferred stock including, but not limited to legal fees and expenses of legal counsel to the holder

in connection with, related to and/or arising out of a Triggering Event.

A “Triggering Event” means any of the following events

(whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant

to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

· the Company shall fail to deliver the shares of common stock issuable upon a conversion prior to the fifth

(5 th ) trading day after such shares are required to be delivered, or the Company shall provide written notice to any holder,

including by way of public announcement, at any time, of its intention not to comply with requests for conversion of any shares of series

R convertible preferred stock in accordance with the terms of the certificate of designation;

· the Company shall fail for any reason to pay in full the amount of cash due pursuant to a Buy-In (as defined

in the certificate of designation) within five (5) trading days after notice therefor is delivered;

· the Company shall fail to have available a sufficient number of authorized and unreserved shares of common

stock to issue to such holder upon a conversion;

· unless specifically addressed elsewhere in the certificate of designation as a Triggering Event, the Company

shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of the Transaction

Documents (as defined in the certificate of designation), and such failure or breach shall not, if subject to the possibility of a cure

by the Company, have been cured within five (5) calendar days after the date on which written notice of such failure or breach shall have

been delivered;

· the Company shall redeem junior securities or pari passu securities;

· the Company shall be party to a Change of Control Transaction (as defined in the certificate of designation);

· there shall have occurred a Bankruptcy Event (as defined in the certificate

of designation);

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

· any monetary judgment, writ or similar final process shall be entered or filed against the Company, any

subsidiary or any of their respective property or other assets for more than $50,000 (provided that amounts covered by the Company’s

insurance policies are not counted toward this $50,000 threshold), and such judgment, writ or similar final process shall remain unvacated,

unbonded or unstayed for a period of thirty (30) trading days;

· the electronic transfer by the Company of shares of common stock through the Depository Trust Company

or another established clearing corporation once established subsequent to the date of the certificate of designation is no longer available

or is subject to a ‘freeze” and/or “chill;” or

· any “Event of Default,” as defined in the Purchase Agreement (as defined in the certificate

of designation).

Series X Senior Convertible Preferred Stock

15 unchanged sentences

be payable quarterly in arrears on each dividend payment date.

At December 31, 2023, cumulative dividends on Series X Preferred Stock

were $ 190,685 .

Liquidation Rights.

20 unchanged sentences

senior securities.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

19 unchanged sentences

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.

22, 2023, any 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.

The series A preferred stock ranks,

with respect to 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 A preferred stock;

(ii) on parity with each class or series that is not expressly

subordinated or made senior to the series A preferred stock;

and (iii) junior to the series B preferred stock, series C preferred stock,

series E preferred stock, series F-1 preferred stock, series I preferred stock, series J preferred stock, series L preferred stock, series

N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and each other

series of preferred stock and each class or series that is expressly made senior to the series A preferred stock, as well as to all indebtedness

and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The series A preferred

stock is not entitled to participate in any distributions or payments to the holders of common stock or any other class of stock and shall

have no economic interest in the Company.

Liquidation Rights .

In the event of any

liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, a merger or consolidation of our company wherein

the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company, the holders of each share

of series A preferred stock shall be entitled to receive from any distribution of any of the assets or surplus funds of the Company, before

and in preference of any holder of shares of common stock, an amount equal to the stated value of $250.

Once the holders receive the foregoing

from any such liquidation, dissolution or winding up, the holders shall not participate with the common stock or any other class of stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Voting Rights .

Each share of series A preferred

stock shall have a number of votes at any time equal to (i) 25% of the number of votes then held or entitled to be made by all other equity

securities of the Company, including, without limitation, the common stock, plus (ii) one (1).

The series A preferred stock shall vote

on any matter submitted to the holders of the common stock, or any other class of voting securities, for a vote, and shall vote together

with the common stock, or any class of voting securities, as applicable, on such matter for as long as the shares of series A preferred

stock are issued and outstanding.

Notwithstanding the foregoing, the series A preferred stock shall not have the right to vote on any

matter as to which solely another series of preferred stock is entitled to vote pursuant to the Company’s amended and restated articles

of incorporation or a certificate of designation of such other series of preferred stock.

Upon transfer of any share of

series A preferred stock, except for a transfer by the holder to an affiliate, whether such transfer is voluntary or involuntary, such

share of series A preferred stock shall automatically, and without any action being required by the Company or the holder, be converted

into one (1) share of common stock.

Other Rights .

Holders of series A preferred

stock do not have any conversion (except as set forth above) 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.

The series B preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other

class or series that is not expressly made senior to or on parity with the series B preferred stock;

(ii) on parity with the series C

preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other

class or series that is not expressly subordinated or made senior to the series B preferred stock;

and (iii) junior to the series I preferred

stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock

and to each other series of preferred stock and each class or series that is expressly made senior to the series B preferred stock, as

well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

B preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series B preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series B preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series B preferred

stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series

B preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series B preferred stock shall be entitled to cast one (1) vote per

share of series B preferred stock held.

Except as provided by law, the holders of series B preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series B preferred stock are outstanding, the Company

shall not, without the affirmative vote of the holders of a majority of outstanding series B preferred stock, (a) alter or change adversely

the powers, preferences or rights given to the series B preferred stock or alter or amend the certificate of designation for the series

B preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series B preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

B preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series B preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

B preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series B preferred stock, voting

together as a single class, each share of series B preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

Redemption Rights .

Holders of series B

preferred stock do not have any 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.

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.

The series C preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other

class or series that is not expressly made senior to or on parity with the series C preferred stock;

(ii) on parity with the series B

preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other

class or series that is not expressly subordinated or made senior to the series C preferred stock;

and (iii) junior to the series I preferred

stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock

and to each other series of preferred stock and each class or series that is expressly made senior to the series C preferred stock, as

well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

C preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series C preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series C preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series C preferred

stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series

C preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series C preferred stock shall be entitled to cast one (1) vote per

share of series C preferred stock held.

Except as provided by law, the holders of series C preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series C preferred stock are outstanding, the Company

shall not, without the affirmative vote of the holders of a majority of outstanding series C preferred stock, (a) alter or change adversely

the powers, preferences or rights given to the series C preferred stock or alter or amend the certificate of designation for the series

C preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series C preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

C preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined by dividing the stated value ($4.00 per share) by a conversion price of $0.00004.

In addition, on the date

on which the shares of common stock are listed on a national stock exchange, including without limitation the New York Stock Exchange,

NYSE American or the Nasdaq Stock Market (any tier) (a “Listing Event”), all outstanding shares of series C preferred stock

shall be automatically converted into such number of shares of common stock as is determined by dividing $50,000 by the highest traded

or closing price on such date, which such shares of common stock shall be issued pro rata among the holders of the outstanding series

C preferred stock.

Finally, upon the earlier to occur of:

(a) the closing of the sale of shares of common stock to the public at a price

of at least $3.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar

recapitalization with respect to the common stock) in a public offering pursuant to an effective registration statement or offering statement

under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company or (b) the date and time, or the occurrence

of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series C preferred

stock, voting together as a single class, each share of series C preferred stock shall be automatically converted into such number of

shares of common stock as is determined by dividing the stated value ($4.00 per share) by a conversion price of $0.00004.

Such conversion

price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for

reverse stock splits).

Redemption Rights .

If there is a Listing

Event, the Company shall have the right (but not the obligation) to redeem shares of series C preferred stock at a price per share of

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.

The series E preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other

class or series that is not expressly made senior to or on parity with the series E preferred stock;

(ii) on parity with the series B

preferred stock, series C preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other

class or series that is not expressly subordinated or made senior to the series E preferred stock;

and (iii) junior to the series I preferred

stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock

and to each other series of preferred stock and each class or series that is expressly made senior to the series E preferred stock, as

well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

E preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series E preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series E preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series E preferred

stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series

E preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series E preferred stock shall be entitled to cast one (1) vote per

share of series E preferred stock held.

Except as provided by law, the holders of series E preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series E preferred stock are outstanding, the Company

shall not, without the affirmative vote of the holders of a majority of outstanding series E preferred stock, (a) alter or change adversely

the powers, preferences or rights given to the series E preferred stock or alter or amend the certificate of designation for the series

E preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series E preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

E preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series E preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

E preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series E preferred stock, voting

together as a single class, each share of series E preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

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 H Preferred Stock

Each share of series H preferred stock is entitled

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

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

shares of common stock.

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

The series F-1 preferred stock

ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each

other class or series that is not expressly made senior to or on parity with the series F-1 preferred stock;

(ii) on parity with the series

B preferred stock, series C preferred stock, series E preferred stock, series J preferred stock, series L preferred stock and each other

class or series that is not expressly subordinated or made senior to the series F-1 preferred stock;

and (iii) junior to the series I

preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred

stock and to each other series of preferred stock and each class or series that is expressly made senior to the series F-1 preferred stock,

as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

F-1 preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series F-1 preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series F-1 preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series F-1 preferred

stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series

F-1 preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

Voting Rights .

Except as provided by law,

the holders of series F-1 preferred stock shall have no voting rights.

However, as long as any shares of series F-1 preferred stock are

outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series F-1 preferred stock,

(a) alter or change adversely the powers, preferences or rights given to the series F-1 preferred stock or alter or amend the certificate

of designation for the series F-1 preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or

other charter documents in any manner that adversely affects any rights of the holders of series F-1 preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

F-1 preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares

of common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series F-1 preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

F-1 preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series F-1 preferred stock, voting

together as a single class, each share of series F-1 preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

Redemption Rights .

Holders of series F-1

preferred stock do not have any redemption rights.

Series I Preferred Stock

Each share of series I preferred stock is entitled

to five (5) votes on all matters submitted to a vote of stockholders.

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

shares of common stock.

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

The series I preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock, series B preferred

stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock

and to each other class or series that is not expressly made senior to or on parity with the series I preferred stock;

(ii) on parity

with each class or series that is not expressly subordinated or made senior to the series I preferred stock;

and (iii) junior to the series

N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other

series of preferred stock and each class or series that is expressly made senior to the series I preferred stock, as well as to all indebtedness

and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

I preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series I preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series I preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series I preferred

stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series

I preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series I preferred stock shall be entitled to cast five (5) votes per

share of series I preferred stock held.

Except as provided by law, the holders of series I preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series I preferred stock are outstanding, the Company

shall not, without the affirmative vote of the holders of a majority of outstanding series I preferred stock, (a) alter or change adversely

the powers, preferences or rights given to the series I preferred stock or alter or amend the certificate of designation for the series

I preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series I preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

I preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series I preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

I preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $10,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series I preferred stock, voting

together as a single class, each share of series I preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

Redemption Rights .

Holders of series I

preferred stock do not have any 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.

The series J preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other

class or series that is not expressly made senior to or on parity with the series J preferred stock;

(ii) on parity with the series B

preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series L preferred stock and each other

class or series that is not expressly subordinated or made senior to the series J preferred stock;

and (iii) junior to the series I preferred

stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock

and to each other series of preferred stock and each class or series that is expressly made senior to the series J preferred stock, as

well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

J preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series J preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series J preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series J preferred

stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series

J preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series J preferred stock shall be entitled to cast one (1) vote per

share of series J preferred stock held.

Except as provided by law, the holders of series J preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series J preferred stock are outstanding, the Company

shall not, without the affirmative vote of the holders of a majority of outstanding series J preferred stock, (a) alter or change adversely

the powers, preferences or rights given to the series J preferred stock or alter or amend the certificate of designation for the series

J preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series J preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

J preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series J preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

J preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series J preferred stock, voting

together as a single class, each share of series J preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

Redemption Rights .

Holders of series J

preferred stock do not have any redemption rights.

Series L Preferred Stock

Each share of series L preferred stock is entitled

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

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

shares of common stock.

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

Series R Preferred Stock

Each share of series R preferred stock is entitled

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

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

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

Holders of series R preferred stock

do not have any dividend, liquidation or redemption rights.

The series L preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other

class or series that is not expressly made senior to or on parity with the series L preferred stock;

(ii) on parity with the series B

preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock and each other

class or series that is not expressly subordinated or made senior to the series L preferred stock;

and (iii) junior to the series I preferred

stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock

and to each other series of preferred stock and each class or series that is expressly made senior to the series L preferred stock, as

well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

L preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series L preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series L preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series L preferred

stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series

L preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series L preferred stock shall be entitled to cast one (1) vote per

share of series L preferred stock held.

Except as provided by law, the holders of series L preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series L preferred stock are outstanding, the Company

shall not, without the affirmative vote of the holders of a majority of outstanding series L preferred stock, (a) alter or change adversely

the powers, preferences or rights given to the series J preferred stock or alter or amend the certificate of designation for the series

L preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series L preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

L preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series L preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

L preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series L preferred stock, voting

together as a single class, each share of series L preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

Redemption Rights .

Holders of series L

preferred stock do not have any redemption rights.

Preferred Stock Transactions

1 unchanged sentence

executed the following transactions:

· On May 25, 2023, the Company issued 3,150 shares of series B preferred stock to Zia Choe, Chief Accounting

Officer, for $ 25,000 .

· On July 24, 2023, the Company issued 5,000 shares of series E preferred stock as compensation for the

property manager of Edge View in exchange for a bonus of $ 5,000 .

During the year ended December 31, 2022, the Company

executed the following transactions:

· In the second quarter of 2022, 37,500 shares of series D preferred stock were cancelled and exchanged

3 unchanged sentences

the acquisition of Nova.

What changed 10-K

Item 9A. Controls and Procedures