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Item 1. Financial Statements

2024-05-10 compared with 2023-11-14 · 909 added, 826 removed, 870 unchanged (67% of the section changed)

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022 (Unaudited)

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 (Unaudited) and 2022 (Unaudited and restated)

Condensed Consolidated Statements of Stockholders’ Equity (Deficiency) for the Nine Months Ended September 30, 2023 (Unaudited) and 2022 (Unaudited and restated)

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 (Unaudited) and 2022 (Unaudited and restated)

Condensed Consolidated Balance

Sheets as of March 31, 2024 and December 31, 2023 (Unaudited and restated)

Condensed Consolidated Statements of

Operations for the Three Months Ended March 31, 2024 and 2023 (Unaudited and restated)

Condensed Consolidated Statements of

Stockholders’ Equity (Deficiency) for the Three Months Ended March 31, 2024 and 2023 (Unaudited and restated)

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (Unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022

September 30,

AS OF MARCH 31, 2024 AND DECEMBER 31, 2023

March 31, 2024

December 31, 2023

Current assets

5 unchanged sentences

Due from related party

LIABILITIES, MEZZANINE EQUITY AND DEFICIENCY IN STOCKHOLDERS' EQUITY

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

Current liabilities

2 unchanged sentences

Accrued interest

Right of use - liability

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 $ 11,305 and $ 24,820 , respectively

Net liabilities of discontinued operations

Total current liabilities

Other liabilities

Notes payable

2 unchanged sentences

Mezzanine equity

Redeemable Series N Senior Convertible Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 868,058 shares issued and outstanding at September 30, 2023 and December 31, 2022

Redeemable Series X Senior Convertible Preferred Stock - 5,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 375,000 shares issued and outstanding at September 30, 2023 and December 31, 2022

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 March 31, 2024 and December 31, 2023

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 March 31, 2024 and December 31, 2023

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 March 31, 2024 and December 31, 2023

Total Mezzanine Equity

Stockholders' equity (deficit)

Series B Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 2,134,478 and 2,131,328 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value $ 4.00 , 123 shares issued and outstanding at September 30, 2023 and December 31, 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 September 30, 2023 and December 31, 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 September 30, 2023 and December 31, 2022

Series I Preferred Stock - 15,000,000 shares authorized, $ 0.001 par value, 14,885,000 shares issued and outstanding at September 30, 2023 and December 31, 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 September 30, 2023 and December 31, 2022

Series L Preferred Stock - 400,000 shares authorized, $0.001 par value, stated value $ 4.00 , 319,493 shares issued and outstanding at September 30, 2023 and December 31, 2022

Series R Preferred Stock - 5,000 shares authorized, $0.001 par value, stated value of $ 1,200 , 165 shares issued and outstanding at September 30, 2023 and December 31, 2022

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

1,099,475,613 and 824,793,235 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Stockholders' equity

Series B Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value of $ 4.00 , 1,360,679 and 2,139,478 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value of $ 4.00 , 99 and 123 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Series E Preferred Stock - 1,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 155,750 shares issued and outstanding at March 31, 2024 and December 31, 2023

Series F-1 Preferred Stock - 50,000 shares authorized, $0.001 par value, stated value $ 4.00 , 35,752 shares issued and outstanding at March 31, 2024 and December 31, 2023

Series I Preferred Stock - 15,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 12,089,000 and 14,885,000 issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Series J Preferred Stock - 2,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 171,359 and 1,713,584 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Series L Preferred Stock - 400,000 shares authorized, $0.001 par value, stated value $ 4.00 , 319,493 shares issued and outstanding at March 31, 2024 and December 31, 2023

Common Stock;

300,000,000 shares authorized, $ 0.001 par value;

10,819,995 and 25,121 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

( 7,581,212 )

( 8,581,265 )

Accumulated deficit

1 unchanged sentence

( 68,684,115 )

Total stockholders' equity (deficit)

( 1,469,808 )

Total stockholders’ equity

Total liabilities, mezzanine equity and stockholders’ equity

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER

30, 2023 AND 2022

ENDED SEPTEMBER 30,

Financial Services

Total revenue

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND

Three Months Ended March 31,

COST OF SALES

Financial Services

Total cost of sales

OPERATING EXPENSES

Depreciation expense

Share based compensation

Selling, general and administrative

Total operating expenses

INCOME FROM OPERATIONS

INCOME FROM CONTINUING OPERATIONS

OTHER INCOME (EXPENSE)

Gain on forgiveness of debt

Interest expense and finance charge

( 3,430,785 )

( 1,766,041 )

( 6,686,772 )

Conversion cost

Gain on debt refinance and forgiveness

Penalties and fees

Interest expense

Amortization of debt discounts

Total other expenses, net

( 2,126,384 )

( 1,908,110 )

( 5,538,615 )

NET INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS

( 2,217,407 )

GAIN FROM DISCONTINUED OPERATIONS

NET INCOME (LOSS) FOR THE PERIOD

$ ( 264,774 )

Total other expenses

NET (LOSS) INCOME BEFORE DISCONTINUED OPERATIONS

LOSS FROM DISCONTINUED OPERATIONS

NET LOSS FOR THE PERIOD

$ ( 283,104 )

DEEMED DIVIDENDS ON PREFERRED STOCK

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS

PREFERRED STOCK DIVIDENDS

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$ ( 434,738 )

$ ( 360,938 )

BASIC INCOME (LOSS) PER SHARE

BASIC LOSS PER SHARE

CONTINUING OPERATIONS

DISCONTINUED OPERATIONS

DILUTED INCOME (LOSS) PER SHARE

DILUTED LOSS PER SHARE

CONTINUING OPERATIONS

DISCONTINUED OPERATIONS

BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES – CONTINUED AND DISCONTINUED OPERATIONS

1,008,580,008

DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES – CONTINUED AND DISCONTINUED OPERATIONS

59,608,730,482

67,983,088,742

WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC

WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED

The accompanying notes are an integral part of

3 unchanged sentences

EQUITY (DEFICIENCY)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023

( UNAUDITED )

Preferred Stock Series

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

Preferred Stock

Series C and R

Treasury Stock

Balance December 31, 2021 (Restated)

$ ( 4,967,686 )

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

Issuance of series J preferred stock

Issuance of common stock for settlement of Red Rock Travel

Distribution of dividend

Balance, September 30, 2022 (Restated)

$ ( 4,967,686 )

Balance December 31, 2022

Conversion of convertible notes payable

Distribution of dividend

Issuance of series B preferred stock

Issuance of series E preferred stock

Balance, September 30, 2023

THREE MONTHS ENDED MARCH 31, 2024 AND 2023

E, F-1, J and L

Additional Paid-In

Total Stockholders’

Balance December 31, 2021 (Restated)

$ ( 3,479,126 )

Balance, December 31,

2022 (Restated)

$ ( 10,004,808 )

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

Cancellation of common stock

$ ( 68,684,115 )

Cancellation of series D preferred stock

Cancellation of series H preferred stock

Issuance of series J preferred stock

Issuance of common stock for settlement of Red Rock Travel

Distribution of dividend

$ ( 1,744,791 )

Conversion of convertible notes payable

Preferred stock Dividends

Balance, March

31, 2023 (Restated)

$ ( 9,814,572 )

Balance, September 30, 2022 (Restated)

$ ( 69,045,053 )

$ ( 1,915,491 )

E, F-1, J and L

Additional Paid-In

Stockholders’ (Deficit)

Balance, December 31,

$ ( 8,581,264 )

2023 (Restated)

$ ( 7,581,212 )

1 unchanged sentence

Conversion of convertible notes payable

Accrued dividend

Issuance of series B preferred stock

Issuance of series E preferred stock

Balance, September 30, 2023

Conversion of series B preferred

( 3,115,196 )

Conversion of series C preferred

Conversion of series I preferred

( 2,928,500 )

( 11,714,000 )

Conversion of series J preferred

( 1,542,225 )

( 6,168,900 )

Issuance of series I preferred stock

Cancellation of series C preferred

Common stock issued for services

Common stock issued to board members

Common stock issued in Red Rock settlement

Preferred stock Dividends

Balance, March

$ ( 69,118,853 )

The accompanying notes are an integral part of

1 unchanged sentence

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023

Nine Months Ended September 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss) for the period

Net loss from continuing operations

$ ( 283,104 )

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

Amortization of loan discount

Gain on forgiveness of debt

Gain on refinance of debt

( 1,397,271 )

Loss on finance penalties and fees

Other noncash items, net

Fair value settled upon conversion

Amortization of debt discount

Conversion and note issuance cost

Share issuance for compensations to directors and officers

Share issuance for service rendered

Fair value settled upon conversion

Gain on forgiveness of debt

(Increase) decrease in:

1 unchanged sentence

( 1,684,510 )

( 1,111,317 )

Right of use - assets

Prepaid expenses and other current assets

Prepaids and other current assets

Increase (decrease) in:

Accounts payable and accrued expense

Accrued officer’s compensation

Due from related parties

Due to related party

Accrued officers compensation

Accrued interest

Capital stock to be issued

Right of use - liabilities

Net cash used in operating activities - continuing operations

Net cash used in operating activities - discontinued operations

CASH FLOWS FROM FINANCING ACTIVITIES

Net cash used in operating activities

( 1,187,816 )

Net cash provided by (used in) Discontinued Operations – Operating

FINANCING ACTIVITIES

Proceeds from convertible notes payable

Repayment of convertible notes payable

Payment of SBA loan

Dividend on preferred stock

Repayment of SBA loans

Proceeds from line of credit

Repayment of line of credit

Payment of notes payable related party

Proceeds from notes payable related party

Net cash provided by financing activities

NET (DECREASE) IN CASH

CASH, BEGINNING OF PERIOD

CASH, END OF PERIOD

Net cash provided by Discontinued Operations – Financing

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS, END OF PERIOD

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for interest

Cash paid during the year for Interest

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued upon conversion of notes payable and accrued interest

Preferred stock issued for business acquisition

Preferred stock issued for debt refinance

Common stock issued upon conversion of notes payable

Right of use assets acquired

The accompanying notes are an integral part of

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023

MARCH 31, 2024 AND 2023

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

11 unchanged sentences

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

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

· Edge View Properties, Inc.

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

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

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 10, 2023;

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

Principles of Consolidation

The condensed consolidated financial statements

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

AHI is included in discontinued operations.

All significant intercompany accounts and transactions are eliminated in consolidation.

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

These reclassifications would have

no material effect on the reported condensed consolidated financial results.

The consolidated financial statements include

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

Subsidiaries shown as discontinued operations include 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Use of Estimates

5 unchanged sentences

Accordingly, actual results could differ from those estimates.

Receivable and Credit Losses

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 (CECL).

Accounts receivable is reported on the balance

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

Management closely monitors outstanding accounts receivable and charges

off to expense any balances that are determined to be uncollectible, which was $ 270,000 and $ 0 as of September 30, 2023 and December 31,

2022, respectively.

As of September 30, 2023 and December 31, 2022, the Company had net accounts receivable of $ 11,844,738 and $ 6,604,780 ,

Accounts Receivable

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.

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

Accounts receivable is reported on the balance sheet at the net amounts expected to be collected by the Company.

closely monitors outstanding accounts receivable and recognized an additional allowance for credit losses in the amount of $ 122,190

and $ 270,000

as of March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024 and December 31, 2023, the Company had net accounts receivable of

and $ 13,305,254 ,

respectively.

13 unchanged sentences

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.

1 unchanged sentence

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 nine months ended September 30, 2023 and 2022, the Company did no t recognize any goodwill impairment.

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

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.

During the three months ended March 31, 2024 and 2023, the Company did no t recognize any goodwill impairment.

The Company based this decision

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

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

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

1 unchanged sentence

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 the Company’s patients are satisfied;

generally, at the time of patient care.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Established billing rates are not the same as

actual amounts recovered for the Company’s healthcare subsidiary.

They generally do not reflect what the Company is ultimately

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

The Company is typically paid amounts

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

guidelines (a code set maintained by the American Medical Association through the CPT Editorial Panel), that designates relative value

units (“RVU's”) and a suggested range of charges for each procedure which is then assigned a CPT code.

They generally do not reflect what the Company is

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

at that rate.

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

5 unchanged sentences

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

3 unchanged sentences

except for those remaining insurance carriers requiring paper filing.

An initial response is usually received within four weeks from electronic

filing and up to six weeks from paper filing.

An initial response is usually received within four weeks from

electronic filing and up to six weeks from paper filing.

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

4 unchanged sentences

the Company receives 49% of collections from total gross billed.

Accordingly, the Company recognized net healthcare service revenue

as 49.9% of gross billed amounts.

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

collection percentages.

The Company’s healthcare subsidiary has

contractual medical receivable sales and purchase agreements with third party factors which result in approximately 30% to 56% reduction

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

The Company evaluated the factored adjustments considering

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

charges as other expenses on the consolidated statement of operations.

The Company’s contracts for both its contract

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

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

price is allocated to this single performance obligation.

Accordingly, the Company recognizes revenues (net)

when the patient receives orthopedic care services.

The Company’s patient service contracts generally have performance obligations

which are satisfied at a point in time.

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

Patient service contracts

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

Revenue is recognized when obligations under the terms of the

contract with our patients are satisfied;

generally, at the time of patient care.

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.

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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Advertising Costs

Advertising costs are expensed as incurred.

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

The Company recognized advertising and marketing expenses of $ 71,636 and $ 93,905 for the three months ended September 30, 2023

and 2022, respectively.

The Company recognized advertising and marketing expenses of $ 243,315 and $ 317,899 for the nine months ended September

30, 2023 and 2022, respectively.

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

The Company recognized advertising and marketing expense of $ 82,051 and $ 83,223 for the three months ended March 31, 2024 and 2023, respectively.

Fair Value Measurements

1 unchanged sentence

be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement

Assets and liabilities recorded at fair value in the condensed consolidated balance sheets are categorized based upon the level

of judgment associated with the inputs used to measure their fair value.

The fair value hierarchy distinguishes between (1) market participant

assumptions developed based on market data obtained from independent sources (observable inputs), and (2) an entity’s own assumptions

about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for

identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value

hierarchy are described below:

Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment

associated with the inputs used to measure their fair value.

The fair value hierarchy distinguishes between (1) market participant assumptions

developed based on market data obtained from independent sources (observable inputs), and (2) an entity’s own assumptions about

market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical

assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy

are described below:

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

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

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

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

the measurement date.

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

Distinguishing Liabilities from Equity

The Company accounts for its series N senior convertible

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

Liabilities from Equity ”.

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

condensed consolidated balance sheet.

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

5 unchanged sentences

of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

The measurement date used to determine the fair

5 unchanged sentences

The expense resulting from share-based payments

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

Equity Instruments Issued to Parties Other

Than Employees for Acquiring Goods or Services

FASB ASU No 2018-07 prescribes equity instruments

issued to parties other than employees.

is recorded in the consolidated statements of operations.

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

6 unchanged sentences

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

As of September 30, 2023 and December 31, 2022,

the Company did not have any interest and penalties associated with tax positions and did no t have any significant unrecognized uncertain

tax positions.

As of March 31, 2024 and 2023, the Company did

no t have any interest and penalties associated with tax positions and did not have any significant unrecognized uncertain tax positions.

Income (Loss) per Share

14 unchanged sentences

convertibles is reflected utilizing the if converted method.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Going Concern

The accompanying condensed consolidated financial

statements have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of

assets and liabilities and commitments in the normal course of business.

The accompanying condensed consolidated financial statements

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

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

The accompanying consolidated financial statements

have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets and

liabilities and commitments in the normal course of business.

The Company had sustained recurring operating losses since its inception

and has an accumulated deficit of $ 69,118,853 as of March 31, 2024.

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.

The ability of the Company to continue as a going

concern and the appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusions.

has prospective investors and believes the raising of capital will allow the Company to fund its cash flow shortfalls and pursue new acquisitions.

There can be no assurance that the Company will be able to obtain sufficient capital from debt or equity transactions or from operations

in the necessary time frame or on terms acceptable to it.

Should the Company be unable to raise sufficient funds, it may be required to

curtail its operating plans.

is in continuous discussions with prospective investors and believes the raising of capital will allow the Company to fund its cash flow

shortfalls and pursue new acquisitions.

There can be no assurance that the Company will be able to obtain sufficient capital from debt

or equity transactions or from operations in the necessary time frame or on terms acceptable to it.

Should the Company be unable to raise

sufficient funds, it may be required to curtail its operating plans.

In addition, increases in expenses may require cost reductions.

No assurance can be given that the Company

will be able to operate profitably on a consistent basis, or at all, in the future.

Should the Company not be able to raise sufficient

funds, it may cause cessation of operations.

assurance can be given that the Company will be able to operate profitably on a consistent basis, or at all, in the future.

Company not be able to raise sufficient funds, it may cause cessation of operations.

Recent Accounting Standards

Changes to accounting principles are established

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

The Company considers the applicability

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

In June 2016, the FASB issued ASU No.

2016-13, Measurement of Credit Losses on Financial Instruments , which supersedes current guidance by requiring recognition of

credit losses when it is probable that a loss has been incurred.

The new standard requires the establishment of an allowance for

estimated credit losses on financial assets including trade and other receivables at each reporting date.

The new standard will

result in earlier recognition of allowances for losses on trade and other receivables and other contractual rights to receive cash.

In November 2019, the FASB issued ASU No.

2019-10, Financial Instruments -- Credit Losses (Topic 326), Derivatives and hedging

(Topic 815) and Leases (Topic 842) , which extends the effective date of Topic 326 for certain companies until fiscal years

beginning after December 15, 2022.

The Company has adopted this standard effective January 1, 2023, and it resulted in the Company

recognizing an allowance for doubtful accounts of $ 270,000

during the nine months ended September 30, 2023.

Management does not believe that any other recently

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

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

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent to the initial issuance of the Company's

balance sheet as of December 31, 2021, management reconsidered the methodology previously applied in its valuation of goodwill and redeemable

preferred stock.

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 a $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 a $3,125,002

increase to the mezzanine equity and offsetting decrease to the series N senior convertible preferred stock subject to possible redemption

mezzanine equity line item.

The Company and the managers of AHI entered into

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

The FASB issued ASU 2023-07 on

November 27, 2023.

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 OF FINANCIAL STATEMENTS

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.

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 $274,982 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 March 31, 2023.

In addition, the impact of the unpaid dividend accrual is reflected in $8,136 increase to mezzanine equity

and offsetting decrease to the accumulated deficits as of March 31, 2023.

The impact of the error correction is also reflected $1 decrease

of earnings (loss) per share on the consolidated statement of operations for the three months ended March 31, 2023.

During the preparation of the three months ended March 31, 2024 financial

statements, the Company identified and corrected its classification for its all outstanding common stock amount per par value of $ 0.001

with additional paid-in-capital related with a 1-for-75,000 reverse split executed on January 9, 2024.

The impact of this adjustment decreased

$ 1,804,774 to common stock and offsetting increase to additional paid-in-capital as of December 31, 2023.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

On November 10, 2023, the Company sold Platinum

Tax, which was a full-service tax resolution firm located in Los Angeles, California.

The Company presented in prior periods operating

loss as loss from discontinued operations in the amount of $365 on the consolidated statement of operations for the nine months ended

September 30, 2022.

The Company identified that Nova’s accounts

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

Nova’s accounts receivable.

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

receivable as of September 30, 2022 and a $1,076,000 increase in finance charges for the nine months ended September 30, 2022.

The following table summarizes the impacts of

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

loss as loss from discontinued operations in the amount of $45,490 on the consolidated statement of operations for the three months ended

March 31, 2023.

The following table summarizes the impact of the corrections on the Company’s condensed consolidated statement

of operations for the three months ended March 31, 2023:

Balance sheet

1 unchanged sentence

Impact of correction of error

September 30, 2022 (Unaudited)

March 31, 2023 (Unaudited)

As previously reported

3 unchanged sentences

$ ( 1,632,373 )

Statement of operations

Impact of correction of error

Three months ended September 30, 2022 (Unaudited)

As previously reported

Cost of sales

Operating expense

Income from operations

Other income (expense), net

$ ( 283,118 )

$ ( 1,915,491 )

Net loss before discontinued operations

Loss from discontinued operations

$ ( 264,774 )

Basic Loss per Share

Continued Operations

Discontinued Operations

Weighted Average Shares Outstanding - Basic Earnings Loss per Share

Continued Operations

Discontinued Operations

Statement of operations

Impact of correction of error

Nine months ended September 30, 2022 (Unaudited)

Three months ended March 31, 2023 (Unaudited)

As previously reported

4 unchanged sentences

Other income (expense), net

( 4,467,089 )

( 1,071,526 )

( 5,538,615 )

Net loss before discontinued operations

( 1,141,772 )

( 1,075,635 )

( 2,217,407 )

Loss from discontinued operations

Net loss for the period

Preferred stock dividends

$ ( 336,811 )

$ ( 344,947 )

Net loss attributable to common shareholders

$ ( 352,802 )

Basic Loss per Share

Continued Operations

Discontinued Operations

Weighted Average Shares Outstanding - Basic Earnings Loss per Share

Continued Operations

Discontinued Operations

REVISION OF FINANCIAL STATEMENTS

During the preparation of the financial statements

for the nine months ended September 30, 2023, the Company found that the results of the settlement agreement with Red Rock Travel Group

(“Red Rock”) were incorrectly reflected on the consolidated statement of stockholders’ equity (deficiency) as of December

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 which were originally issued on February 24, 2020 was returned as

part of the 2022 agreement with Red Rock and 3,500 common shares were cancelled, which were equivalent to 35,000,000 shares before the

10,000:1 reverse split on May 12, 2020.

Consequently, the December 31, 2022 financial statements as originally reported were understated

by 34,996,500 common shares.

The impact of the correction is reflected in the $35,097 increase to common stock and decrease the same amount

to additional paid-in-capital on the consolidated statement of stockholders’ equity.

The adjustment had no impact on earnings per

share for any 2022 period.

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

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

The acquisition

was not completed, and Red Rock returned the 8,200,562 shares of series K preferred 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).

$ ( 360,938 )

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Schedule of accounts payable and accrued expenses

September 30,

March 31, 2024

December 31, 2023

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

Accrue expense - other

Accrued expense - dividend payable

The Company is delinquent paying certain income

and property taxes.

As of September 30, 2023 and December 31, 2022, the balance for these taxes, penalties and interest is $ 5,346 and

$ 6,732 , respectively.

The Company is delinquent paying certain property

As of March 31, 2024 and December 31, 2023, the balance for these property taxes, was $ 5,346 .

PLANT AND EQUIPMENT, NET

Property and equipment as of September 30, 2023

and December 31, 2022 is as follows:

Property and equipment as of March 31, 2024 and

December 31, 2023 is as follows:

Schedule of property and equipment

September 30,

March 31, 2024

December 31, 2023

Medical equipment

4 unchanged sentences

Property and equipment, net

For the three and nine months ended September

30, 2023, total depreciation expense was $ 3,365 and $ 11,365 , respectively.

For the three and nine months ended September 30, 2022, total

For the three months ended March 31, 2024 and

2023, depreciation expense was $ 3,365 and $ 4,635 , respectively.

Depreciation expense recorded as cost of sales for the three and nine months

ended September 30, 2022 was $ 5,031 and $ 15,093 , respectively.

As of September 30, 2023 and December 31, 2022,

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

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

residential community.

LINES OF CREDIT

At September 30, 2023 and December 31, 2022, the

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

The loan accrues interest at 11.95 % at September 30, 2023 and 10.95 % at December 31, 2022.

As of September 30, 2023 and December

31, 2022, the Company had $ 8,622 and $ 0 , respectively, of outstanding balance against the 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 Nova’s accounts receivables for a revolving

financing up to a maximum advance amount of $ 4.5 million .

As of September 30, 2023, the Company had no outstanding balance against the

revolving receivable line of credit.

As of March 31, 2024 and December 31, 2023, the

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

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

RELATED PARTY TRANSACTIONS

From time to time, the previous owner who is currently

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

Amounts owed as of September 30, 2023 and

December 31, 2022 were $ 159,662 and $ 37,024 , respectively.

In connection with the acquisition of Edge View

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

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 as of September 30, 2023 and December 31, 2022.

The balance of these amounts are $ 4,979 due from the previous owners as of March 31, 2024 and December 31, 2023.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

The Company obtained short-term advances from

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

As of September 30, 2023 and December 31, 2022, the Company

owed the Chairman $ 123,442 and $ 123,192 , respectively.

As of March 31, 2024 and December 31, 2023, the Company owed

the Chairman $ 45,844 and $ 120,997 , respectively.

During the three months ended March 31, 2024, the Company paid $ 75,153 to the Chairman.

See also Note 8 and the disclosure regarding Note

See also Note 13 for compensation paid to employees

1 unchanged sentence

NOTES AND LOANS PAYABLE

Notes payable at September 30, 2023 and December

31, 2022, respectively, are summarized as follows:

Notes payable at March 31, 2024 and December

31, 2023 are summarized as follows:

Schedule of notes payable

September 30,

March 31, 2024

December 31, 2023

Notes and loans payable

Less current portion

( 3,599,345 )

( 2,136,077 )

Long-term portion

1 unchanged sentence

Schedule of maturities of long-term debt

2024 (remainder of year)

Loans and Notes Payable – Unrelated Party

1 unchanged sentence

in the principal amount of $20,000.

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

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

The balance of the

debenture was $ 10,989 at September 30, 2023 and December 31, 2022 and the accrued interest was $ 7,215 and $ 6,229 at September 30, 2023

debenture was $ 10,989 at March 31, 2024 and December 31, 2023.

The accrued interest of the debenture was $ 7,876 and $ 7,547 at March 31,

2024 and December 31, 2023, respectively.

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

on this debenture.

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

as collateral on this debenture.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Small Business Administration (“SBA”)

1 unchanged sentence

in the principal amount of $ 150,000 with an interest rate of 3.75 % and a maturity date of June 2, 2050.

The Company reclassified $ 5,723

of accrued interest to the principal amounts for the nine months ended September 30, 2023.

The principal balance and accrued interest

at September 30, 2023 was $ 149,655 and $ 0 , respectively, and principal and accrued interest at December 31, 2022 was $ 144,609 and $ 5,723 ,

The principal balance and accrued

interest at March 31, 2024 was $ 149,494 and $ 0 , respectively, and principal and accrued interest at December 31, 2023 was $ 149,655 and

$ 956 , 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 million.

As of March 31, 2024 and December 31, 2023, the Company

had $ 3,583,373 and $ 2,120,100 , respectively, 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 29, 2025 .

CONVERTIBLE NOTES PAYABLE

As of September 30, 2023 and December 31,

As of March 31, 2024 and December 31, 2023,

the Company had convertible debt outstanding net of amortized debt discount of $ 3,820,545

1 unchanged sentence

respectively.

During the nine months ended September 30, 2023, the Company received net proceeds of $ 421,375

During the three months ended March 31, 2024, the Company did not receive any proceeds from convertible notes and

repaid $ 50,000

of accrued interest to convertible noteholder.

During the three months ended March 31, 2023, the Company received net proceeds of

from convertible notes.

During the nine months ended September 30, 2022, the Company had net proceeds of $ 729,083

from convertible notes and repaid $ 5,908

to convertible noteholders.

There are debt discounts associated with the convertible debt of $ 11,305

at September 30, 2023 and December 31, 2022, respectively.

For the three months ending September 30, 2023 and 2022, the Company

recorded amortization of debt discounts of $ 46,048

and $ 92,868 ,

respectively.

For the nine months ending September 30, 2023 and 2022, the Company recorded amortization of debt discounts of $ 94,664

at March 31, 2024 and December 31, 2023, respectively.

For the three months ended March 31, 2024 and 2023, the Company recorded

amortization of debt discounts of $ 13,515

and $ 17,983 ,

respectively.

During the nine months ended September 30, 2023, the Company converted $ 87,460

of convertible debt, $ 12,073

in accrued interest and $ 3,000

in conversion cost into 274,682,378

shares of the Company’s common stock.

During the three months ended March 31, 2024,

the Company converted $ 680 in accrued interest and $ 1,000 in conversion cost into 1,222 shares of common stock.

The Company recognized

of interest expense and additional paid-in capital to adjust fair value for the debt settlement during the nine months ended

September 30, 2023.

The Company had no

convertible debt conversions during the nine months ended September 30, 2022.

On September 22, 2022, the Company entered into

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

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

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

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

Prior to conversion, all promissory notes with this lender

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

of $ 1,397,271 .

Convertible notes as of September 30, 2023 and

December 31, 2022 are summarized as follows:

$ 1,679 of additional paid-in capital to adjust fair value for the debt settlement during the three months ended March 31, 2024.

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

and fees into 1,583 shares of common stock.

Convertible notes as of March 31, 2024 and December

31, 2023 are summarized as follows:

Schedule of convertible notes

September 30,

March 31, 2024

December 31, 2023

Convertible notes payable

3 unchanged sentences

Long-term portion

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

The following is a schedule of convertible notes

payable as of and for the nine months ended September 30, 2023.

payable as of and for the three months ended March 31, 2024.

Schedule of convertible notes

Principal Balance 12/31/22

Principal Conversions

Shares Issued Upon Conversion

Principal Balance 9/30/23

Accrued Interest on Convertible Debt at 12/31/22

Interest Expense On Convertible Debt For the Period Ended 9/30/23

Accrued Interest on Convertible Debt at 9/30/23

Unamortized Debt Discount At 9/30/23

On October 28, 2016, the Company issued a convertible

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

Note 7-1 is currently in default and accrues interest

at a default interest rate of 20% per annum.

Balance 12/31/23

Issued Upon Conversion

Balance 03/31/24

Interest on Convertible Debt at 12/31/23

Expense On Convertible Debt For the Period Ended 03/31/24

Interest on Convertible Debt at 03/31/24

Debt Discount At 03/31/24

On September 12, 2016, the Company issued a convertible

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

Note 9 is currently in

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

Notes 10, 10-1, 10-2 and 10-3

On January 24, 2017, the Company issued a convertible promissory note

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

Note 10 is currently in default and accrues

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

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

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

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

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

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

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

Notes 29, 29-1 and 29-2

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

Note 9 is currently in default

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

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

On January 24, 2017, the Company issued a convertible

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

Note 10 is currently in default

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

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

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

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

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

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

Notes 10-1 and 10-2 are currently in default and accrue interest at a default interest rate of 20% per annum.

accrues interest at a rate of 15% per annum.

On May 10, 2019, the Company issued a convertible

5 unchanged sentences

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

On August 28, 2019, the Company issued a convertible

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

Note 31 is currently in default and accrues interest

at a default interest rate of 24% per annum.

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

8 unchanged sentences

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

On February 9, 2021, the Company issued a convertible

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

Note 38 is currently in default and accrues interest

at a default interest rate of 22% per annum.

On April 26, 2021, the Company issued a convertible

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

Note 39 is currently in default and accrues interest

at a default interest rate of 22% per annum.

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

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

4 unchanged sentences

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

On November 28, 2022, the Company executed a fourth

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).

11 unchanged sentences

less an original issue discount and fee of $3,500 (Note 40-10).

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.

The rate of interest is

10% per annum.

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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

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

4 unchanged sentences

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

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.

The following is a description of the rights and

2 unchanged sentences

The Company recognized the series N senior convertible

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

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

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 September 30, 2023, cumulative dividends on Series N Preferred Stock were $ 662,557 .

At March 31, 2024 and December 31, 2023, cumulative dividends on Series N Preferred Stock were $ 871,462

and $ 766,437 , respectively.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Liquidation Rights.

23 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 .

6 unchanged sentences

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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

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 March 31, 2024 and December 31, 2023, cumulative dividends on

Series R Preferred Stock were $ 119,194 and $ 109,980 , respectively.

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.

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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

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.

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;

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

· 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);

· 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 September 30, 2023, cumulative dividends on Series X Preferred Stock

were $ 152,875 .

At March 31, 2024 and December 31, 2023, cumulative dividends on Series

X Preferred Stock were $ 228,082 and $ 190,685 , respectively.

Liquidation Rights.

7 unchanged sentences

to such holders.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Voting Rights .

48 unchanged sentences

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 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.

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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Dividend Rights.

4 unchanged sentences

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

liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, a merger or consolidation of the 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

29 unchanged sentences

and (iii) junior to the series I preferred

stock, series N senior convertible preferred stock, series R 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.

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.

10 unchanged sentences

B preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Voting Rights .

12 unchanged sentences

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 by dividing the stated value ($4.00 per share) by a conversion price of $2.00.

In addition, upon the earlier

(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, (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 by dividing the stated value ($4.00 per share) by a conversion price of $2.00.

Such conversion price is subject to standard adjustments in the event of any stock dividends, stock splits, stock reclassifications and

similar events.

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 .

9 unchanged sentences

and (iii) junior to the series I preferred

stock, series N senior convertible preferred stock, series R 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.

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.

10 unchanged sentences

C preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Voting Rights .

28 unchanged sentences

Such conversion

price is subject to standard adjustments in the event of any stock dividends, stock splits, stock reclassifications and similar events.

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 .

9 unchanged sentences

and (iii) junior to the series I preferred

stock, series N senior convertible preferred stock, series R 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.

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.

4 unchanged sentences

paid on shares of series E preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Liquidation Rights .

18 unchanged sentences

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 by dividing the stated value ($4.00 per share) by a conversion price of $2.00.

In addition, upon the earlier

(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, (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 by dividing the stated value ($4.00 per share) by a conversion price of $2.00.

Such conversion price is subject to standard adjustments in the event of any stock dividends, stock splits, stock reclassifications and

similar events.

Redemption Rights .

If the Company’s

common stock is listed on a national stock exchange, including without limitation the New York Stock Exchange, NYSE American or the Nasdaq

Stock Market (any tier), the Company shall have the right (but not the obligation) to redeem shares of series E preferred stock at a price

per share of $50,000.

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

6 unchanged sentences

and (iii) junior to the series I

preferred stock, series N senior convertible preferred stock, series R 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.

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.

4 unchanged sentences

paid on shares of series F-1 preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Liquidation Rights .

15 unchanged sentences

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 by dividing the stated value ($4.00 per share) by a conversion price of $2.00.

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 (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, (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 by dividing the stated value ($4.00 per share)

by a conversion price of $2.00.

Such conversion price is subject to standard adjustments in the event of any stock dividends, stock splits,

stock reclassifications and similar events.

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 .

9 unchanged sentences

and (iii) junior to the series

N senior convertible preferred stock, series R 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

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.

5 unchanged sentences

paid on shares of series I preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Liquidation Rights .

18 unchanged sentences

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 by dividing the stated value ($4.00 per share) by a conversion price of $2.00.

In addition, upon the earlier

(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

$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 by dividing the stated value ($4.00 per share) by a conversion price of $2.00.

Such conversion price is subject to standard adjustments in the event of any stock dividends, stock splits, stock reclassifications and

similar events.

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 .

9 unchanged sentences

and (iii) junior to the series I preferred

stock, series N senior convertible preferred stock, series R 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.

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.

4 unchanged sentences

paid on shares of series J preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Liquidation Rights .

18 unchanged sentences

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 by dividing the stated value ($4.00 per share) by a conversion price of $2.00.

In addition, upon the earlier

(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, (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 by dividing the stated value ($4.00 per share) by a conversion price of $2.00.

Such conversion price is subject to standard adjustments in the event of any stock dividends, stock splits, stock reclassifications and

similar events.

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 .

9 unchanged sentences

and (iii) junior to the series I preferred

stock, series N senior convertible preferred stock, series R 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.

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.

4 unchanged sentences

paid on shares of series L preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Liquidation Rights .

18 unchanged sentences

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 by dividing the stated value ($4.00 per share) by a conversion price of $2.00.

In addition, upon the earlier

(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, (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 by dividing the stated value ($4.00 per share) by a conversion price of $2.00.

Such conversion price is subject to standard adjustments in the event of any stock dividends, stock splits, stock reclassifications and

similar events.

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 .

1 unchanged sentence

preferred stock do not have any redemption rights.

Series R Preferred Stock

The series R 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 preferred

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

(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 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 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 R preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series R 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 R preferred

stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series

R 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 R preferred stock shall be entitled to cast one (1) vote per

share of series R preferred stock held.

Except as provided by law, the holders of series R 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 R preferred stock are outstanding, the Company

shall not, without the affirmative vote of the holders of a majority of outstanding series R preferred stock, (a) alter or change adversely

the powers, preferences or rights given to the series R preferred stock or alter or amend the certificate of designation for the series

R 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 R preferred stock.

Conversion Rights .

Each share of series

R 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 of $1,200 by a conversion price of $1,200 (subject to standard adjustments

in the event of any stock dividends, stock splits, stock reclassifications and similar events).

Redemption Rights .

Holders of series R

preferred stock do not have any redemption rights.

Preferred Stock Transactions

During the nine months ended September 30, 2023,

the Company executed the following transactions:

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

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 nine months ended September 30, 2022,

the Company executed the following transactions:

In the second quarter of

shares of series D preferred stock were cancelled and exchanged for 37,500

shares of series B preferred stock and 37,500 shares

of series H preferred stock were cancelled and exchanged for 37,500 shares

of series B preferred stock.

On September 7, 2022, the

Company issued 818,750

shares of series J preferred stock for $ 3,275,000

as part of the Nova acquisition.

On September 12, 2022, the

Company issued 375,000

shares of series X senior convertible preferred stock for $ 1,500,000 .

See footnote 10, convertible notes payable for further discussion.

The Company classified the series X preferred stock and amount of

as mezzanine equity.

During the nine months ended September 30, 2023,

During the three months ended March 31, 2024,

the Company executed the following transactions:

The Company issued 274,682,378 shares of common stock upon the conversion of certain convertible notes.

During the nine months ended September 30, 2022,

· On January 19, 2024, the Company issued 62,500 shares of series I preferred stock to each of Daniel R.

Thompson, the Chairman of the Board, and Alex Cunningham, the Company’s Chief Executive Officer, for $ 250,000 bonus compensation

for the fiscal year of 2023, at the fair value of $4.48 per share.

· On January 31, 2024, the Company issued 5,000 shares of series I preferred stock to Matthrew Shafer, the

Company’s Chief Financial Officer, for $ 20,000 , at the fair value of $4.48 per share.

· On January 31, 2024, the Company issued 2,500 shares of series I preferred stock to Zia Choe, the Company’s

Chief Accounting Officer, for $ 10,000 , at the fair value of $4.48 per share.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

In connection with these aforementioned shares issuances

on January 19, 2024 and January 31, 2024, the Company engaged a valuation specialist to perform a business valuation monte carlo simulation

for the series I preferred stock resulting in those indicated fair values.

· During the three months ended March 31, 2024, an aggregate of 778,799 shares of series B preferred stock

were converted into an aggregate of 1,557,598 shares of common stock.

· During the three months ended March 31, 2024, an aggregate of 22 shares of series C preferred stock were

converted into an aggregate of 220,000 shares of common stock.

· During the three months ended March 31, 2024, an aggregate of 2,928,500 shares of series I preferred stock

were converted into an aggregate of 5,857,000 shares of common stock.

· During the three months ended March 31, 2024, an aggregate of 1,542,225 shares of series J preferred stock

were converted into an aggregate of 3,084,450 shares of common stock.

· During the three months ended March 31, 2024, 2 shares of series C preferred stock were cancelled, which

were issued erroneously.

The Company had no preferred stock transactions

during the three months ended March 31, 2023.

During the three months ended March 31, 2024,

the Company executed the following transactions:

As part of the Red Rock settlement, the Company issued 666,666,666 shares of common stock.

The settlement also required the previous owners to relinquish 35,000,000 shares of common stock resulting in a gain to the Company of $ 35,000

The table below sets forth warrant activity for

the nine months ended September 30, 2023:

· During the three months ended March 31, 2023, the Company issued 1,222 shares of common stock upon conversion

of certain convertible notes.

· During the three months ended March 31, 2024, the Company issued an aggregate of 1,557,598 shares of common

stock upon the conversion of an aggregate of 778,799 shares of series B preferred stock.

· During the three months ended March 31, 2024, the Company issued an aggregate of 220,000 shares of common

stock upon the conversion of an aggregate of 22 shares of series C preferred stock.

· During the three months ended March 31, 2024, the Company issued an aggregate of 5,857,000 shares of common

stock upon the conversion of an aggregate of 2,928,500 shares of series I preferred stock.

· During the three months ended March 31, 2024, the Company issued an aggregate of 3,084,450 shares of common

stock upon the conversion of an aggregate of 1,542,225 shares of series J preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

· On March 5, 2024, the Company issued 7,500

shares of common stock to an investor relation service provider.

The Company recognized the fair value for the issuance of the 7,500

shares at $ 1.55

per share on the closing market price of March 5, 2024 and recorded selling, general and administrative expense of $ 11,617

in the consolidated statement of operations.

· On March 26, 2024, the Company issued an aggregate of 30,000 shares of common stock to three board members.

The Company recognized the fair value for the issuance of 30,500 shares at $ 6.50 per share on the closing market price of March 26, 2024

and recorded share based compensation expense of $ 195,000 in the consolidated statement of operations.

· In February 2024, as part of the Red Rock settlement executed in July 2022, the Company issued an

aggregate of 37,104

shares of common stock to six previous owners.

The Company recognized the fair value for the issuance of 37,104 shares at $ 3

per share on the closing market price of February 4 through February 6, 2024, and recorded share loss from discontinued operations

in the consolidated statement of operations.

· During the three months ended March 31, 2023, the Company issued 1,583 shares of common stock upon conversion

of certain convertible notes.

The table below sets forth warrant activity during

the three months ended March 31, 2024 and 2023:

Schedule of warrant activity

Balance at January 1, 2024

Balance at September 30, 2023

Warrants Exercisable at September 30, 2023

As a result of the settlement agreement with Red

Rock on July 29, 2022, the Company required the previous owners to relinquish warrants for 25,000 shares of common stock.

were returned and cancelled during the second quarter of 2023.

There was no impact on the consolidated financial statements as of December

Balance at March 31, 2024

Warrants Exercisable at March 31, 2024

Balance at January 1, 2023

Balance at March 31, 2023

Warrants Exercisable at March 31, 2023

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

DISCONTINUED OPERATIONS

The Company and the managers of AHI entered into

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

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

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

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

The Company had no net liabilities of discontinued

operations at September 30, 2023 and December 31, 2022.

The Company had $ 0 and $ 363,895 of gain from discontinued operations for the three

months ended September 30, 2023 and 2022, respectively.

The Company had $ 0 and $ 328,353 of gain from discontinued operations for the nine

months ended September 30, and 2022, respectively.

On November 10, 2023, the Company sold Platinum

Tax, which was a full-service tax resolution firm located in Los Angeles, California.

Through this subsidiary the Company provided fee-based

tax resolution services to individuals and companies that have federal and state tax liabilities by assisting clients to settle outstanding

As part of the Asset Purchase Agreement between the Company and the purchaser, the assets that were purchased included substantially

all assets, rights, interests, and licenses except for banks accounts in place prior to the sale for the purchase consideration of 15%

of cash collected by the purchaser within one year following the sale date.

In February 2024, as part of the Red Rock settlement

executed in July 2022, the Company issued an aggregate of 37,104

shares of common stock to six previous owners.

The Company recognized the fair value for the issuance of 37,104

shares at $ 3

per share on the closing market price of February 4 through February 6, 2024, and recorded share loss from discontinued operations

in the consolidated statement of operations.

Schedule of discontinued operations

Three Months Ended September 30,

Gain (Loss) from discontinued operations

Revenue of AHI subsidiary

Cost of sales of AHI subsidiary

Selling, general and administrative expenses of AHI subsidiary

Interest expense of Red Rock Investor Note

Gain from disposal of Red Rock subsidiary

Gain on settlement of debt on Red Rock

Gain from discontinued operations

Nine Months Ended September 30,

Net liabilities of discontinued operations

March 31, 2024

December 31, 2023

Accounts receivable

Accounts payable and accrued expenses

Net liabilities of discontinued operations

$ ( 237,643 )

Three Months Ended March 31,

Gain (Loss) from discontinued operations

Revenue AHI subsidiary

Cost of sales AHI subsidiary

Selling, general and administrative expenses AHI subsidiary

Interest expense of Red Rock Investor Note

Gain no change in estimate of AHI subsidiary

Gain on settlement of debt on Red Rock

Gain from discontinued operations

Cost of sales

Selling, general and administrative expenses

Interest expense

Settlement loss

Loss from discontinued operations

$ ( 111,312 )

GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET

The following table shows the Company’s

goodwill balances by reportable segment.

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

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

During the nine months ended September 30,

2023 and 2022, the Company had no goodwill impairment.

The following table shows goodwill balances by

reportable segment:

Schedule of goodwill balances

Carrying value at December 31, 2022

Accumulated impairment

Carrying value at September 30, 2023

The Company reviews goodwill for impairment on

a reporting unit basis annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

During the three months ended March 31, 2024 and 2023, the Company determined there to be no impairment.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

COMMITMENTS AND CONTINGENCIES

15 unchanged sentences

not to reassess:

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

lease classification for expired or existing leases;

· whether expired or existing contracts contain

leases under the new definition of a lease;

· lease classification for expired or existing

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

1 unchanged sentence

not to recognize lease assets and liabilities for leases with a term of 12 months or less.

The Company recorded operating lease expense

for the three months ended September 30, 2023 and 2022, respectively, and the Company recorded operating lease expense of $ 210,696

and $ 231,028

for the nine months ended September 30, 2023 and 2022, respectively.

The Company has operating leases with future commitments

The Company leases eleven medical facilities and

one vehicle as operating leases as of March 31, 2024.

The Company recorded operating lease expenses of $ 100,362 and $ 77,852 for the three

months ended March 31, 2024 and 2023, respectively.

The Company has operating leases with future

commitments as follows:

Schedule of operating leases

September 30,

2024 (remainder of year)

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

The following table summarizes supplemental information

about the Company’s leases:

Schedule of supplemental information

Weighted-average remaining lease term

Weighted-average discount rate

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

1 unchanged sentence

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

The total outstanding accrued compensation as of September 30, 2023 and December 31, 2022 were

$ 2,115,500 and $ 1,870,500 , respectively.

The total outstanding accrued compensation as of March 31, 2024 and December 31, 2023 was $ 2,365,500 .

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

1 unchanged sentence

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

The total outstanding accrued compensation as of September 30, 2023 and December 31, 2022 were

The total outstanding accrued compensation as of March 31, 2024 and December 31, 2023 was $ 2,440,500

and $ 2,350,500 , respectively.

The Company agreed to pay $ 228,000

per year to the Chief Finance Officer based on his employment agreement effective as of January 2, 2024.

outstanding accrued compensation as of March 31, 2024.

The Company agreed to pay $ 210,000 per year to

the Chief Accounting Officer based on her employment agreement effective as of January 2, 2024.

There was no outstanding accrued compensation as

of March 31, 2024.

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

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

The total outstanding accrued

compensation as of September 30, 2023 and December 31, 2022 was $ 17,057 .

compensation as of March 31, 2024 and December 31, 2023 was $ 17,057 .

The Company entered into a management agreement

4 unchanged sentences

performance goals as set forth below.

Schedule of annual objectives of financial performance

Schedule of annual objectives of financial

Minimum Annual Nova EBITDA

6 unchanged sentences

210,000 Shares

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

LEGAL PROCEEDINGS

6 unchanged sentences

business, financial condition, or operating results.

At March 31, 2024, the Company had federal and

state net operating loss carry forwards of approximately $24 million that expire in various years through the year 2039.

Due to carryforwards

of past net operating losses, there is no provision for current federal or state income taxes for the three months ended March 31, 2024

Deferred income taxes reflect the net tax effects of temporary differences

between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income

tax purposes.

The Company has a deferred tax asset that

consists of net operating loss carry forwards calculated using federal and state effective tax rates.

Because of the Company’s lack

of past earnings history, the deferred tax asset has been fully offset by a valuation allowance.

SEGMENT REPORTING

The Company has three reportable operating segments

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

about Segments of an Enterprise and Related Information :

Tax Resolution Services (Platinum Tax)

Real Estate (Edge View)

As of March 31, 2024, the Company had two reportable

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

Disclosures about Segments of an Enterprise and Related Information .

(1) Healthcare (Nova)

(2) Real Estate (Edge View)

These segments are a result of differences in

4 unchanged sentences

nonrecurring items.

The Affordable Housing segment leases and sells

mobile homes as an option for a homeowner wishing to avoid large down payments, expensive maintenance costs, large monthly mortgage payments

and high property taxes and insurance which is a common trait of brick-and-mortar homes.

Additionally, if bad credit is an issue preventing

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

their family home.

The Tax Resolution Services segment provides tax

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

The Company collects fees based on efforts

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

The healthcare segment provides a full range of

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

The real estate segment consists of Edge View,

3 unchanged sentences

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

The Healthcare segment provides a full range

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

ligaments, and nerves.

Schedule of segment reporting

September 30,

Financial Services

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Management uses numerous tools and methods to

evaluate and measure of its subsidiaries’ success.

To help succeed, management retains the prior owners of the subsidiaries and

allow them to do what they do best is run the business.

Additionally, management monitors key metrics primarily revenues and net income

from operations.

Schedule of revenues and net income

from operations

March 31, 2024

December 31, 2023

Consolidated assets

Three Months Ended September 30,

Financial Services

Three Months Ended March 31,

Consolidated revenues

Cost of sales:

Financial Services

Consolidated cost of sales

Income (Loss) from operations from subsidiaries

Financial Services

Income from operations from subsidiaries

Loss from operations from Cardiff Lexington

$ ( 336,517 )

$ ( 319,812 )

Total income from operations

Income (Loss) before taxes

Financial Services

Corporate, administration and other non-operating expenses

Consolidated income (loss) before taxes

$ ( 264,774 )

Nine Months Ended September 30,

Financial Services

Consolidated revenues

Cost of Sales:

Financial Services

Consolidated cost of sales

Income (Loss) from operations from subsidiaries

Financial Services

Income from operations from subsidiaries

3 unchanged sentences

Total income from operations

Income (Loss) before taxes

Financial Services

Income before taxes

Corporate, administration and other non-operating expenses

( 1,322,202 )

( 2,096,453 )

Consolidated income (loss) before taxes

$ ( 171,792 )

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

SUBSEQUENT EVENTS

The Company has evaluated its operations subsequent

to September 30, 2023 to the date these condensed consolidated financial statements were issued and determined there was subsequent events

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

The Company received the first net cash advance in the amount of $861,071

on October 9, 2023 from DML HC Series, LLC for the sale of accounts receivable and future claims in the amount of $1,428,571.

On October 20, 2023, the Company issued 5,000

shares of series B preferred stock as compensation for the manager of Platinum Tax as bonus compensation.

On November 7, 2023, Platinum Tax was dissolved

due to the significant decline in revenues and recurring operating losses.

On various dates in October and November 2023,

the Company issued 227,000,000 shares of common stock upon the conversion of accrued interest and conversion cost of $17,400 and $1,000,

respectively.

(See Note 10, 37-2, and 40-1)

to March 31, 2024 to the date these consolidated financial statements were available to be issued and determined the following subsequent

events and transactions required disclosure in these consolidated financial statements.

On May 8, 2024, the Company filed the amendment

of Articles of Incorporation.

The total amended authorized shares are 350,000,000 shares of capital stock, consisting of 300,000,000

shares of common stock, $0.001 par value and 50,000,000 shares of preferred stock, $0.001 par value per share.

Subsequent to March 31, 2024, an aggregate of

264,750 shares of series B preferred stock were converted into an aggregate of 529,500 shares of common stock.

Subsequent to March 31, 2024, an aggregate of

29 shares of series C preferred stock were converted into an aggregate of 290,000 shares of common stock.

Subsequent to March 31, 2024, an aggregate of

80,375 shares of series E preferred stock were converted into an aggregate of 160,750 shares of common stock.

Subsequent to March 31, 2024, an aggregate of

438,500 shares of series I preferred stock were converted into an aggregate of 877,000 shares of common stock.

Subsequent to March 31, 2024, an aggregate of

171,359 shares of series J preferred stock were converted into an aggregate of 342,718 shares of common stock.

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

What changed 10-Q

Item 1. Financial Statements