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Item 9A. Controls and Procedures

2024-07-24 compared with 2022-10-26 · 2953 added, 351 removed, 24 unchanged (99% of the section changed)

CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Disclosure controls and procedures are designed

to ensure that information required to be disclosed in the reports that are filed and submitted under the Exchange Act is recorded, processed,

summarized, and reported, within the time periods specified by the SEC’s rules and forms.

Disclosure controls and procedures include,

without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that are filed

under the Exchange Act are accumulated and communicated to management, including the principal executive officer, as appropriate to allow

timely decisions regarding required disclosure.

Under the supervision of and with the participation of its executive officer, the Company

has evaluated the effectiveness of its disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of

the period covered by this Annual Report.

Based on that evaluation, the executive officers of the Company has concluded that, as of the

end of the period covered in this Annual Report, these disclosure controls and procedures were ineffective.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures

that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed,

summarized and reported within the time periods specified in the SEC’s rules forms, and that such information is accumulated and

communicated to our management, including our principal executive officer (our president) and our principal accounting and financial officer

(our chief financial officer) to allow for timely decisions regarding required disclosure.

In designing and evaluating our disclosure

controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide

only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluation

the cost-benefit relationship of possible controls and procedures.

Our management does not expect that our disclosure

controls or our internal controls over financial reporting will prevent all error and fraud.

A control system, no matter how well conceived

and operated, can provide only reasonable, but no absolute, assurance that the objectives of a control system are met.

Further, any control

system reflects limitations on resources and benefits of a control system must be considered relative to its costs.

These limitations

also include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management

override of a control.

A design of a control system is also based upon certain assumptions about potential future condition;

controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

As of December 31, 2021, the year-end period covered

by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal

executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and

Based on the foregoing, our chief executive officer and chief financial officer have concluded that our disclosure controls

and procedures were not effective as of the end of the period covered by this annual report.

Management’s Report on Internal Control

over Financial Reporting

(as defined in Rule 13a-15(e) under the Exchange Act).

Disclosure controls and procedures refer to controls and other procedures designed

to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized

and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated

to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding

required disclosure.

As required by Rule 13a-15(e) of the Exchange

Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and

chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of December 31,

Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that, because

of the material weaknesses described below, our disclosure controls and procedures were not effective.

Management’s Annual Report on Internal

Control over Financial Reporting

Our management is responsible for establishing

and maintaining adequate internal control over financial reporting as defined in Rule 13a- 15(f) under the Exchange Act, and assessed

the effectiveness of our internal control over financial reporting as of December 31, 2021.

In making this assessment, our management

used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated

A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting, such that

there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not

be prevented or detected on a timely basis.

We have identified the following material weaknesses:

As of December 31, 2021, our controls over the control environment were not effective.

Specifically, we have not developed and effectively

communicated to our employees our accounting policies and procedure.

This has resulted in inconsistent practices.

Further, the Board of

Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined

in Item 407(d)(5)(ii) of Regulation S-K.

Since these entity level programs have a pervasive effect across the organization, management

has determined that these circumstances constitute a material weakness.

As of December 31, 2021, our controls over financial statement disclosure were not effective.

Specifically, controls were not designed

and in place to ensure that all disclosures required were originally addressed in our consolidated financial statements.

management has determined that this deficiency constitutes a material weakness.

of formal documentation over internal control procedures and environment.

of proper segregation of duties and multiple level of reviews.

of expertise in accounting of derivative liabilities.

Because of these material weaknesses, management

has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2021, based on

the criteria established in “2013 Internal Control-Integrated Framework” issued by COSO.

This annual report does not include an attestation

report of the company’s independent registered public accounting firm regarding internal control over financial reporting.

report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit

the Company to provide only management’s report.

Changes in Internal Controls

We had a material weakness in our internal control

over financial reporting during the fiscal year ended December 31, 2021 and 2020 that have affected, or are reasonably likely to affect,

our internal control over financial reporting.

and maintaining adequate internal control over financial reporting for our company.

Internal control over financial reporting refers to

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

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

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

policies and procedures that:

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

and dispositions of our assets;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial

statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of

our management and directors;

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use

or disposition of our assets that could have a material effect on the financial statements.

Our management evaluated the effectiveness of

our internal control over financial reporting as of December 31, 2023.

In making this evaluation, management used the framework established

in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.

COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment,

(ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring.

Based on our evaluation, we determined

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

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

which had resulted in inconsistent practices.

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

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

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

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

accounting for derivatives, convertible debt, preferred stock.

In order to cure the foregoing material weakness,

we have begun to take the following remediation measures:

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

on the GAAP accounting guidelines applicable to financial reporting requirements.

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

our workflows.

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

limited human resources.

We intend to complete the remediation of the material

weaknesses discussed above as soon as practicable but we can give no assurance that we will be able to do so.

Designing and implementing

an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business

and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately

satisfies our reporting obligations.

The remedial measures that we have taken and intend to take may not fully address the material weaknesses

that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future.

discover such conditions, we intend to remediate them as soon as practicable.

We are committed to taking appropriate steps for remediation,

All internal control systems, no matter how well

designed, have inherent limitations.

Therefore, even those systems determined to be effective can provide only reasonable assurance with

respect to financial statement preparation and presentation.

Also, projections of any evaluation of effectiveness to future periods are

subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies

or procedures may deteriorate.

Changes in Internal Controls over Financial

We regularly review our system of internal control

over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that

we maintain an effective internal control environment.

Changes may include such activities as implementing new, more efficient systems,

consolidating activities, and migrating processes.

Except for the matters described above, there

have been no changes in our internal control over financial reporting during the fourth quarter of fiscal year 2023 that have materially

affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION.

DIRECTORS, EXECUTIVE OFFICERS AND

CORPORATE GOVERNANCE.

Officers and Directors

Our directors will serve until successors are

elected and qualified.

Our Chief Executive Officer is appointed by the Board of Directors to a term of one year and serve until a successor

is duly elected and qualified, or until that person resigns or is removed from office.

Our Board of Directors has no nominating, or compensation

Our Board of Directors has two members.

The name, address, age and position of our officers

and directors is set forth below:

Name and Address

We have no information to disclose that was required

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

None of our directors or executive officers

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

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

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Directors and Executive Officers

The following sets forth information about our

directors and executive officers as of the date of this report.

Daniel Thompson

Chairman of the Board of Directors

Chairman of the Board Directors

Alex Cunningham

Chief Executive Officer and President, Director

Rollan Roberts II

Chief Operating Officer

Steven Healy, CPA

Chief Financial Officer

Background of our officers and directors

Daniel Thompson , 73, Chairman of

the Board of Directors.

In June of 2010 Thompson was previously appointed Chairman and CEO of Cardiff Lexington formerly a television

and entertainment industry professional with a 30-year career that embraces network and cable advertising sales programming production

and product placement, Mr.

Thompson was president of Creative Entertainment Services, which he founded and successfully sold in a transaction.

Thompson also co-founded and successfully sold an industry service company – Creative Television Marketing, a producer of short-form

advertising concepts:

Closed- Captioning Sponsorships, 10-Second Promotional Advertising vehicles, and network Game Show Merchandising.

He also oversaw new business for A Creative Group, a full-service entertainment marketing company.

Thompson also founded CableRep

USA, a media sales firm specializing in local market cable advertising, which he sold to Cox Cable in 1981.

Thompson attended Wayne

State University, Bellevue College, and College of Continuing Studies at University of Nebraska at Omaha.

Alex Cunningham, 66, Chief Executive

Officer, President, and Director.

Cunningham has agreed to join the Cardiff Lexington family in June of 2015.

Cunningham's background

is in Business Development.

His focus is on identifying prospects for franchising, mergers and acquisitions specializing in structuring

one or multiple franchise acquisitions;

and/or franchising existing businesses.

He is a founder of Fran Consult, Inc.

a business development

company representing over 300 Franchise operations;

owner, managing partner at AH Cunningham & Associates, LLC 2006 - Present;

Management Consulting, Inc., founder, President & CEO 1996-2005;

managed projects and staff of 85 for 20 years for over 2000 private

or closely held middle-market companies throughout 24 states.

He was a partner at London Capital Corporation 1991 - 1996;

CFO at Vance Communications, Inc.

Honors and Awards:

2010 Consultant of the Year - Franchise, Inc.

National Association of

Franchise Consultants.

MBA - Crummer Graduate School of Business Rollins College - Winter Park, Florida;

BBA's - Finance and Business

Administration University of Kentucky - Lexington, Kentucky.

Rollan Roberts II , 44, Chief

Operating Officer.

Roberts II turned around large, established companies, and has created high growth revenue organizations.

has passionately led with excellence a multi-billion, publicly held database company along with healthcare, technology, manufacturing,

and direct sales companies.

He has led nearly 1,500 employees at a given time servicing clients such as Capital One, IndyMac Bank, State

Farm, Allstate, Nationwide along with federal and state government agencies.

Roberts has authored four business and leadership

books, holds an MBA from Liberty University, a doctorate degree in International Business & Entrepreneurship from California InterContinental

University and was recognized as the “Top 100 Most Influential Floridians” of 2015.

Healy, CPA 60, Chief Financial Officer brings to Cardiff Lexington over 25 years’ progressive public and private company

experience in finance and operations management.

He is familiar with and has been instrumental in numerous levels of consolidations in

manufacturing, distribution, retail, and service industries with start-ups, multi-location and multi-state companies.

founded Dania Solutions (2017–present) a financial and accounting consulting company working closely with the Board of Directors

of public companies providing SEC reporting including 10Qs, 10Ks, and 8Ks services, month end closings and reconciliations, financial

statements and reports, budgets and variance analysis.

He developed and rolled out performance metrics and has designed cash forecasting

and debt covenants sensitivity models.

Healy served as CFO (2014–2016) of NetTalk.COM, Inc., a public telecommunications

company and app developer which provides low cost phone service and business wireless service via devices and mobile apps using VoIP and

other technologies.

He was CFO (2009-2013) of National Molding, LLC, a private injection molding and tooling manufacturing company which

makes small plastic parts using custom molds primarily for the automotive industry and military with plants in South Florida, Pennsylvania,

and Shanghai, China.

Healy was CFO (2005-2008) of Imperial Industries, Inc., a public manufacturer and distributer of building materials

from 15 distribution centers and 2 manufacturing plants throughout Florida and the Southeast United States.

He managed rapid growth from

both organic and acquisitions.

Healy began his career with Deloitte (f/k/a Touche Ross & Co.) as an auditor and subsequently Audit

He holds a Bachelors in Accounting Degree from the University of Florida graduating with honors

Audit Committee Financial Expert

The functions of the Audit Committee are currently

carried out by our Board of Directors.

Our Board of Directors has determined that we do not have an audit committee financial expert on

our Board of Directors carrying out the duties of the Audit Committee.

The Board of Directors has determined that the cost of hiring a

financial expert to act as a director and to be a member of the Audit Committee or otherwise perform Audit Committee functions outweighs

the benefits of having a financial expert on the Audit Committee.

Our Board of Directors has two members.

Chief Executive Officer, President, and Director

Senior Vice President and Chief Financial Officer

Chief Accounting Officer

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

Prior to serving as Chairman, Mr.

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

to joining us, Mr.

Thompson was founder, president and chief executive officer of Creative Entertainment Services, a full-service entertainment

company specializing in Feature Film, Television, Closed Captioning and Game Show fulfilment, from 1982 to December 2001.

also founded CableRep USA, a media sales firm specializing in local market cable advertising, which he sold to Cox Cable in 1981.

Thompson attended Wayne State University, Bellevue College, and College of Continuing Studies at University of Nebraska at Omaha.

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

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

Prior to joining us, Mr.

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

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

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

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

Prior to his employment at Francnsult, Inc.

and AH Cunningham

& Associates, Mr.

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

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

From 1991 to 1996, Mr.

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

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

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

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

Prior to joining us, Mr.

Shafer served

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

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

since March 2023.

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

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

From October 2021

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

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

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

in his career, Mr.

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

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

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

large publicly traded multinational manufacturing company.

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

accounting, beginning his career at Arthur Andersen LLP.

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

Paul Stillman

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

Choe has been our Chief Accounting Officer since January 2024.

Prior to that, Ms.

Choe served as Interim Chief Financial

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

Choe founded STK FINANCIAL

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

As a managing partner, Ms.

Choe has provided financial attestation, managerial

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

and internationally.

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

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

projects for acquisition deals in various industries for seven years.

Choe also had seven years of operational experience in accounting,

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

Choe received

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

Graduate School in South Korea.

Our directors currently have terms which will

end at our next annual meeting of the stockholders or until their successors are elected and qualify, subject to their prior death, resignation,

Officers serve at the discretion of the board of directors.

There is no arrangement or understanding between any director

or executive officer and any other person pursuant to which he was or is to be selected as a director, nominee, or officer.

Family Relationships

There are no family relationships among any of

our officers or directors.

Involvement in Certain Legal Proceedings

To the best of our knowledge, except as described

below, none of our directors or executive officers has, during the past ten years:

convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation, or business association

of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that

subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction or

federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type

of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with

persons engaged in any such activity;

found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading

Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently

reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation

of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance

companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty

or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire

fraud or fraud in connection with any business entity;

the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization

(as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.

78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of

the Commodity Exchange Act (7 U.S.C.

1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary

authority over its members or persons associated with a member.

Governance Structure

We chose to appoint a separate Chairman of the

Board who is not our Chief Executive Officer.

Our board of directors has made this decision based on their belief that a separate Chairman

of the Board can act as a balance to the Chief Executive Officer, who also serves as a non-independent director.

The Board’s Role in Risk Oversight

The board of directors oversees that the assets

of our company are properly safeguarded, that the appropriate financial and other controls are maintained, and that our business is conducted

wisely and in compliance with applicable laws and regulations and proper governance.

Included in these responsibilities is the board’s

oversight of the various risks facing our company.

In this regard, our board seeks to understand and oversee critical business risks.

Our board does not view risk in isolation.

Risks are considered in virtually every business decision and as part of our business strategy.

Our board recognizes that it is neither possible nor prudent to eliminate all risk.

Indeed, purposeful, and appropriate risk-taking is

essential for our company to be competitive on a global basis and to achieve its objectives.

While the board oversees risk management, company

management is charged with managing risk.

Management communicates routinely with the board and individual directors on the significant

risks identified and how they are being managed.

Directors are free to, and indeed often do, communicate directly with senior management.

Our board administers its risk oversight function

as a whole by making risk oversight a matter of collective consideration;

however, much of the work will be delegated to committees, which

will meet regularly and report back to the full board.

We plan to establish a standing audit committee, compensation committee and nominating

and corporate governance committee of our board of directors.

We anticipate that the audit committee will oversee risks related to our

financial statements, the financial reporting process, accounting and legal matters, the compensation committee will evaluate the risks

and rewards associated with our compensation philosophy and programs, and the nominating and corporate governance committee will evaluate

risk associated with management decisions and strategic direction.

Material Changes to Director Nomination Procedures

There have been no material changes to the procedures

by which stockholders may recommend nominees to our board of directors since such procedures were last disclosed.

Code of Ethics

We have not adopted a code of ethics that applies

to our President, Chief Executive Officer, Secretary, Treasurer, Chief Financial Officer, or persons performing similar functions, because

of the small number of persons involved in the management of the Company.

Compliance with Section 16 (a) of the Exchange Act

Under Section 16(a) of the Exchange Act, requires

that our directors and executive officers and persons who beneficially own more than 10% of our Common Stock (referred to herein as the

“Reporting Persons”) file with the SEC various reports as to their ownership of and activities relating to our Common Stock.

Such Reporting Persons are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file.

upon our review of the copies of the forms we have received and representations that no other reports were required, we believe that all

Reporting Persons complied on a timely basis with all filing requirements applicable to them with respect to transactions during fiscal

year ended December 31, 2021 except as stated below.

We have adopted a code of ethics that applies

to all of our directors, officers, and employees, including our principal executive officer, principal financial officer and principal

accounting officer.

Such code of ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance

with laws, regulations, and policies, including disclosure requirements under the federal securities laws, and reporting of violations

We are required to disclose any amendment to,

or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer, principal

accounting officer, controller, or persons performing similar functions.

We intend to use our website as a method of disseminating this

disclosure, as permitted by applicable SEC rules.

Any such disclosure will be posted to our website within four (4) business days following

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

Insider Trading Policy

We have adopted an insider trading policy which

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

non-public information;

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

that they become aware of in performing their duties;

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

Our insider trading policy restricts trading by

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

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

Additional blackout periods may be

imposed with or without notice, as the circumstances require.

Our insider trading policy also prohibits our

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

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

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

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

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

A copy of the insider trading policy may be found

on our website.

Section 16(a) Beneficial Ownership Reporting

Section 16(a) of the Exchange Act requires our

directors and executive officers and beneficial holders of more than 10% of our common stock to file with the SEC initial reports of ownership

and reports of changes in ownership of our equity securities.

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

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

delinquent reports were recently filed.

EXECUTIVE COMPENSATION.

Summary Compensation Table

Daniel Thompson

Chairman of the Board of Directors

Summary Compensation Table - Years Ended December 31, 2023 and 2022

The following table sets forth information concerning

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

the noted periods.

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

Name and Principal Position

Other Compensation

Alex Cunningham,

President and Chief Executive Officer

Rollan Roberts II

Chief Operating Officer

Chief Financial Officer

Chief Executive Officer

Daniel Thompson,

Chairman of the Board

former Interim Chief Financial Officer (1)

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

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

Other Compensation includes consulting fees that Ms.

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

Employment Agreements

The Company has an employment agreement with Mr.

Thompson whereby the Company provides for compensation of $360,000 per year plus additional performance bonus incentives with a term of

July 15, 2020 to December 31, 2025 with automatic extension for additional successive one (1) year renewals terms unless terminated as

defined in the agreement.

The Company has an employment agreement with Mr.

Cunningham whereby the Company provides for compensation of $360,000 per year plus additional performance bonus incentives with a term

of July 15, 2020 to December 31, 2025 with automatic extension for additional successive one (1) year renewals terms unless terminated

as defined in the agreement.

The Company has an employment agreement, with

the Chief Operating Officer, whereby the Company provides for compensation of $120,000 per year plus additional incentives with a term

of June 13, 2016 to December 31, 2021 with automatic extension for additional successive one (1) year renewals terms unless terminated

as defined in the agreement.

The Company has an employment agreement, with

the Chief Financial Officer, whereby the Company provides for compensation of $156,000 per year plus additional incentives with a term

of June 13, 2016 to December 31, 2021 with automatic extension for additional successive one (1) year renewals terms unless terminated

as defined in the agreement.

There are no other stock option plans, retirement,

pension, or profit-sharing plans for the benefit of our sole officer and director other than as described herein.

Long-Term Incentive Plan Awards

We do not have any long-term incentive plans that

provide compensation intended to serve as incentive for performance.

Compensation of Directors

Our directors do not receive any compensation

for serving as members of the Board of Directors.

Indemnification

Under our Articles of Incorporation and Bylaws,

we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted

in good faith and in a manner he reasonably believed to be in our best interest.

We may advance expenses incurred in defended a proceeding.

To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify

him against all expenses incurred, including attorney's fees.

With respect to a derivative action, indemnity may be made only for expenses

actually and reasonably incurred in defended the proceeding, and if the officer or director is judged liable, only by a court order.

indemnification is intended to be to the fullest extent permitted by the laws of the State of Florida.

Regarding indemnification for liabilities arising

under the Securities Act of 1933, which may be permitted to directors or officers under Florida law, we are informed that, in the opinion

of the SEC, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information

regarding our shares of common stock beneficially owned as of March 31, 2021 for (i) each shareholder known to be the beneficial owner

of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers

and directors as a group.

A person is considered to beneficially own any shares:

(i) over which such person, directly or indirectly, exercises

sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within

60 days through an exercise of stock options or warrants.

Unless otherwise indicated, voting and investment power relating to the shares

shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the

owner’s spouse or children.

Name of Beneficial Owner and Address (1)

Effective July 15, 2020, we entered into an employment

agreement with Alex Cunningham, pursuant to which Mr.

Cunningham agreed to serve as President and Chief Executive Officer.

the employment agreement, Mr.

Cunningham will earn $360,000 per year as his base salary.

Cunningham is eligible for an annual bonus

with respect to each fiscal year ending during his employment.

Cunningham is also eligible to receive compensation in shares of preferred

stock in the event that we are unable to pay his base salary in dollars.

The term of employment agreement is from July 15, 2020 to December

31, 2025 with automatic extensions for additional successive one (1) year renewals terms unless terminated by notice of at least three

(3) months from us or Mr.

Cunningham of the termination.

The employment agreement may be terminated immediately for cause (as such term

is defined in the employment agreement), which would cause no severance payment obligations to Mr.

In the event of termination

without cause or for good reason, we must provide Mr.

Cunningham with thirty (30) days prior written notice and would be required to pay

all accrued payments, base salary and $200,000, Mr.

Cunningham’s maximum target bonus amount for the twelve months after the termination.

In the event of termination of employment without cause or for good reason following a change-in-control of our company, Mr.

would be entitled to all accrued payments, a lump sum separation allowance equal to two times the sum of his then base salary and then

target bonus, any annual incentive bonuses, payment of benefits until the earlier of twenty-four months after termination or receipt of

comparable benefits from subsequent employment and all then-outstanding equity awards under any equity plan will vest in full.

The employment

agreement also provides that Mr.

Cunningham may not compete against us for a period of twelve (12) months after termination of his employment

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

Effective July 15, 2020, we entered into an employment

agreement with Daniel Thompson, pursuant to which Mr.

Thompson agreed to serve as Chairman of the Board.

Pursuant to the employment agreement,

Thompson will earn $360,000 per year as his base salary.

Thompson is eligible for an annual bonus with respect to each fiscal

year ending during his directorship.

Thompson is also eligible to receive compensation in shares of preferred stock in the event that

we are unable to pay his base salary in dollars.

The term of agreement is from July 15, 2020 to December 31, 2025 with automatic extensions

for additional successive one (1) year renewals terms unless terminated by notice of at least three (3) months from us or Mr.

of the termination.

The employment agreement may be terminated immediately for cause (as such term is defined in the employment agreement),

which would cause no severance payment obligations to Mr.

In the event of termination without cause or for good reason, we must

Thompson with thirty (30) days prior written notice and would be required to pay all accrued payments, base salary and $200,000,

Thompson’s maximum target bonus amount for the twelve months after the termination.

In the event of termination of employment

without cause or for good reason following a change-in-control of our company, Mr.

Thompson would be entitled to all accrued payments,

a lump sum separation allowance equal to two times the sum of his then base salary and then target bonus, any annual incentive bonuses,

payment of benefits until the earlier of twenty-four months after termination or receipt of comparable benefits from subsequent employment

and all then-outstanding equity awards under any equity plan will vest in full.

The employment agreement also provides that Mr.

may not compete against us for a period of twelve (12) months after termination of his employment for any reason or solicit employees

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

On January 2, 2024, we entered into an

employment agreement with Mr.

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

Pursuant to the

employment agreement, Mr.

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

I preferred stock.

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

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

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

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

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

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

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

The employment agreement may be

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

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

Shafer upon his voluntary resignation or other voluntary

termination of employment.

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

Shafer is entitled to the compensation and benefits

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

In the event of termination by Mr.

Shafer for good reason

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

Shafer cannot perform his services as result of physical or mental

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

dental plans then in effect.

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

upon a voluntary termination by Mr.

The employment agreement also contains customary confidentiality provisions and

restrictive covenants prohibiting Mr.

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

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

On January 2, 2024, we entered into an employment

agreement with Ms.

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

Pursuant to the employment agreement,

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

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

Choe is also eligible to participate in all employee benefit

plans, including health insurance, commensurate with her position.

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

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

to the renewal date.

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

employment agreement) or in the event of Ms.

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

Choe upon her voluntary

resignation or other voluntary termination of employment.

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

Choe is entitled to the

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

In the event of termination by Ms.

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

Choe cannot perform her services as result of physical or mental

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

dental plans then in effect.

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

voluntary termination by Ms.

The employment agreement also contains customary confidentiality provisions and restrictive covenants

prohibiting Ms.

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

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

Outstanding Equity Awards at Fiscal Year-End

No executive officer named above had any unexercised

options, stock that has not vested or equity incentive plan awards outstanding as of December 31, 2023.

Additional Narrative Disclosure

Retirement Benefits

We have not maintained, and do not currently maintain,

a defined benefit pension plan, nonqualified deferred compensation plan or 401(k) plan.

Potential Payments Upon Termination or Change

As described under “—Employment Agreements”

Cunningham, Mr.

Thompson, Mr.

Shafer, and Ms.

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

Director Compensation

Except for our Chairman, no member of our board

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

2024 Equity Incentive Plan

On January 31, 2024, our board of directors and

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

The following is a summary which describes

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

The purpose of this Plan

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

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

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

A further purpose of this Plan is to provide

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

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

Types of Awards .

Awards that may

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

awards, and performance compensation awards.

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

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

Eligible Recipients .

Persons eligible

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

are selected by the administrator.

Administration .

The Plan is administered

by our board of directors;

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

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

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

provisions of awards.

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

Shares Available .

The maximum number

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

changes affecting the common stock, such as stock splits.

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

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

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

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

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

Stock Options .

Share options give the option

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

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

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

That determination

will include:

the number of stock subject to any option;

the exercise price per stock;

the expiration date of the option;

time, and date of permitted exercise;

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

and any other terms

and conditions as the administrator may determine.

Option Price .

The exercise price for stock

options will be determined at the time of grant.

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

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

of the shares on the date of grant.

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

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

Exercise of Options .

An option may

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

of the grant.

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

Payments may be made either:

(i) in cash or its equivalent;

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

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

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

“same day sale” commitment;

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

or (v) any other method approved or accepted by

the administrator in its sole discretion.

Expiration or Termination .

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

In the case of

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

such term cannot exceed five years.

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

or a subsidiary terminates before the expiration date.

The option may remain exercisable for specified periods after certain terminations

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

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

Incentive and Non-Qualified Options .

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

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

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

Under the Code, certain restrictions

apply to incentive stock options.

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

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

In addition, an incentive stock option may not be

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

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

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

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

Stock Appreciation Rights .

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

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

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

Again, the exercise price for SARs normally is

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

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

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

The form of payment will be determined by us.

Restricted Awards .

Restricted awards

are shares awarded to participants at no cost.

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

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

satisfaction of the vesting criteria.

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

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

These awards will be subject to such conditions,

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

Those may include requirements for continuous

service and/or the achievement of specified performance goals.

Performance Criteria .

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

Any one or more of the performance

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

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

Other Material Provisions .

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

In the event of various changes to the

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

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

The administrator

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

of control of our company, including acceleration of vesting.

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

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

Prior to any award distribution, we are permitted

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

Our board also has the authority, at any

time, to discontinue the granting of awards.

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

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

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

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

to amendments.

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

holder of such award.

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

The following table sets forth information regarding

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

(ii) all of our executive

officers and directors as a group;

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

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

Las Vegas, NV 89169.

Name and Address of Beneficial Owner

Title of Class

Amount and Nature of Beneficial Ownership (1)

Percent of Voting Stock (2)

Daniel Thompson, Chairman of the Board (3)

Alex Cunningham, Chief Executive Officer and Director (4)

Shafer, Chief Financial Officer (5)

Zia Choe, Chief Accounting Officer (6)

All executive officers and directors (4 persons)

* Less than 1%

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

or investment power with respect to securities.

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

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

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

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

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

stock, voting as a single class.

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

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

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

of series R convertible preferred stock issued and outstanding.

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

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

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

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

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

Each share of series I preferred stock

is entitled to five (5) votes per share.

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

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

March 22, 2024).

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

been included in the denominator.

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

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

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

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

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

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

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

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

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

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

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

We do not currently have any arrangements which

if consummated may result in a change of control of our company.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Transactions with Related Persons

The following includes a summary of transactions

since the beginning of our 2022 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the

amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last

two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation

described under Item 11 “ Executive Compensation ” above).

We believe the terms obtained or consideration that we paid

or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that

would be paid or received, as applicable, in arm’s-length transactions.

We have obtained short-term advances from Daniel

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

As of December 31, 2023 and 2022, we owed the Chairman

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

Director Independence

We do not have any independent directors within

the meaning of the rules of the Nasdaq Stock Market.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

Independent Auditors’ Fees

The following is a summary of the fees billed

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

Fees include those paid to Grassi

& Co., CPAs, P.C.

for audit fees.

Year Ended December 31,

Audit-Related Fees

All Other Audit Fees

“Audit Fees” consisted of fees billed

for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial

statements included in our Form 10-K and 10-Q or services that are normally provided by the accountant in connection with statutory and

regulatory filings or engagements.

“Audit-Related Fees” consisted of

fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit

or review of our financial statements and are not reported under the paragraph captioned “Audit Fees” above.

“Tax Fees” consisted of fees billed

for professional services rendered by the principal accountant for tax returns preparation.

“All Other Fees” consisted of fees

billed for products and services provided by the principal accountant, other than the services reported above under other captions of

this Item 14.

Pre-Approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002, all audit

and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such services do

not impair the auditors’ independence from us.

In accordance with its policies and procedures, our board of directors pre-approved

the audit service performed by Grassi & Co., CPAs, P.C.

for our financial statements

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

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.

List of Documents Filed as a Part of This Report:

Index to Financial Statements:

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

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

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

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

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

Notes to Consolidated Financial Statements

Index to Financial Statement Schedules:

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

Index to Exhibits:

See exhibits listed under Part (b) below.

(b) Exhibits:

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

Amendment No.

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

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

Amendment No.

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

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

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

filed on August 3, 2023)

of Correction of Certificate of Designation of Series B Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.4 to the Annual Report on Form 10-K filed on March 27, 2024)

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

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

on August 3, 2023)

of Correction of Certificate of Designation of Series C Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.6 to the Annual Report on Form 10-K filed on March 27, 2024)

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

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

filed on August 3, 2023)

of Correction of Certificate of Designation of Series E Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.8 to the Annual Report on Form 10-K filed on March 27, 2024)

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

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

on August 3, 2023)

of Correction of Certificate of Designation of Series F-1 Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.10 to the Annual Report on Form 10-K filed on March 27, 2024)

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

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

on August 3, 2023)

of Correction of Certificate of Designation of Series I Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.12 to the Annual Report on Form 10-K filed on March 27, 2024)

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

1 to the Registration Statement on Form

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

of Correction of Certificate of Designation of Series J Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.14 to the Annual Report on Form 10-K filed on March 27, 2024)

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

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

filed on August 3, 2023)

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

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

and Restated Certificate of Designation of Series R Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.18 to the Annual Report on Form 10-K filed on March 27, 2024)

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

1 to the Registration Statement

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

Amended and Restated Bylaws of Cardiff Lexington Corporation

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

of Securities of Cardiff Lexington Corporation (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K filed on March 27, 2024)

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

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

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

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

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

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

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

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

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

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

Pledge and Security Agreement, dated September 22, 2022, among Cardiff Lexington Corporation, We Three, LLC, d/b/a Affordable Housing Initiative, Edge View Properties, Inc., Platinum Tax Defenders, Nova Ortho and Spine, LLC and Leonite Fund I, LP (incorporated by reference to Exhibit 10.4 to the Annual Report on Form 10-K filed on June 6, 2023)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Shafer (incorporated by reference to Exhibit 10.19 to the Annual Report on Form 10-K filed on March 27, 2024)

Agreement, dated January 2, 2024, between the Cardiff Lexington Corporation and Zia Choe (incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K filed on March 27, 2024)

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

of Stock Option Agreement relating to 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K filed on March 27, 2024)

of Restricted Stock Award Agreement relating to 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.23 to

the Annual Report on Form 10-K filed on March 27, 2024)

of Restricted Stock Unit Award Agreement relating to 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K filed on March 27, 2024)

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

Insider Trading Policy (incorporated by reference to Exhibit 19.1 to the Annual Report on Form 10-K filed on March 27, 2024)

of Subsidiaries of the registrant (incorporated by reference to Exhibit 21.1 to the Annual Report on Form 10-K filed on March 27, 2024)

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

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

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

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

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

XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Filed herewith

Furnished herewith

Executive compensation plan or arrangement

FORM 10-K SUMMARY.

FINANCIAL STATEMENTS

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

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

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

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

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

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Cardiff Lexington Corporation and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying balance sheets

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

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

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

In our opinion, the consolidated

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

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

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

Restatement of Financial Statements

As discussed in Note 2 to the consolidated financial

statements, the Company’s consolidated financial statements as of and for the years ended December 31, 2023 and 2022 have been restated

to correct certain misstatements.

Substantial Doubt Regarding the Company’s

Ability to Continue as a Going Concern

The accompanying consolidated financial statements

have been prepared assuming that the Company will continue as a going concern.

As described in Note 1 to the consolidated financial statements,

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

to continue as a going concern.

Management’s plans in regard to these matters are described in Note 1.

The consolidated financial

statements do not include any adjustments that might result from the outcome of this uncertainty.

Our opinion is not modified with respect

to this matter.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

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

statements based on our audits.

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

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

federal securities laws and

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

We conducted our audits in accordance with the

standards of the PCAOB.

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

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding

of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below

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

to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter

in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit

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

Valuation of Goodwill

Critical Audit Matter Description

As of December 31, 2023, the Company

had approximately $5.7 million of goodwill.

As discussed in Note 1 and Note 12 to the consolidated financial statements, goodwill is tested

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

The principal consideration for our

determination that this was a critical audit matter resulted from the material balance of goodwill at year end and the Company’s

goodwill impairment analyses requiring a high degree of management judgement.

There was a high degree of subjective auditor judgment associated

with the evaluation of management’s assertion with respect to the realizability of goodwill.

How we addressed the matter:

We obtained an understanding of the

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

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

tests applied in our audit.

Our primary substantive audit procedures

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

qualitative assessment.

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

existing market conditions and information.

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

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

Finally, we assessed

the adequacy of the disclosures in the consolidated financial statements.

& CO., CPAs, PC

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

Jericho, New York

2024, except for Notes 1, 2 and 17, as to which date is July 23, 2024

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2023 AND 2022

Current assets

Accounts receivable-net

Prepaid and other current assets

Total current assets

Property and equipment, net

Right of use - assets

Due from related party

LIABILITIES, MEZZANINE EQUITY AND DEFICIENCY IN STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable and accrued expense

Accrued expenses - related parties

Accrued interest

Right of use - liabilities

Due to director and officer

Notes payable

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

Net liabilities of discontinued operations

Total current liabilities

Other liabilities

Notes payable

Operating lease liability – long term

Total liabilities

Mezzanine equity

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

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

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

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

Total Mezzanine Equity

Stockholders' equity (deficit)

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

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

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

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

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

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

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

Common Stock;

Daniel Thompson

401 East Las Olas Blvd.

Lauderdale, Florida

Alex Cunningham

401 East Las Olas Blvd.

Lauderdale, Florida

All directors and officers and 5% shareholders as a group

(1) Based on 166,130,069 shares of common stock issued and outstanding

as of December 31, 2021.

(2) The above table does not include 27,488,862

of shares of series A, B, C, D, E, F, F-1, I, J, K, K-1, L, N, and R preferred stock which are convertible into 49,558,962 shares of common

(3) Daniel Thompson owns 1 share of Preferred

“A”, 13,062 shares of Preferred “B”, 1 share of Preferred “C” and 5,037,412 shares of Preferred “I”

and Alex Cunningham 6,250 shares of Preferred “B”, 1 share of Preferred “C” and 6,237,500 shares of Preferred

CERTAIN RELATIONSHIPS AND RELATED

TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

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

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

Additional paid-in capital

( 9,365,982 )

( 8,581,265 )

Accumulated deficit

( 68,684,115 )

( 70,932,435 )

Total stockholders' equity (deficit)

( 1,744,791 )

Total liabilities, mezzanine equity and stockholders' equity

The accompanying notes are an integral part of

these consolidated financial statements

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

Total revenue

COST OF SALES

Total cost of sales

OPERATING EXPENSES

Depreciation expense

Selling, general and administrative

Total operating expenses

INCOME FROM CONTINUING OPERATIONS

OTHER INCOME (EXPENSE)

Other (expense) income

Gain on debt refinance and forgiveness

Penalties and fees

( 2,063,916 )

Interest expense

( 1,956,266 )

( 6,387,309 )

Amortization of debt discounts

Total other expenses

( 2,080,131 )

( 7,157,527 )

NET INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS

( 3,250,638 )

LOSS FROM DISCONTINUED OPERATIONS

( 2,178,883 )

LOSS FROM DISPOSAL OF DISCONTINUED OPERATIONS

LOSS FROM DISCONTINUED OPERATIONS

( 2,178,883 )

NET INCOME (LOSS) FOR THE YEAR

$ ( 5,429,521 )

PREFERRED STOCK DIVIDENDS

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

$ ( 5,813,691 )

BASIC EARNINGS (LOSS) PER SHARE

CONTINUING OPERATIONS

DISCONTINUED OPERATIONS

DILUTED EARNINGS (LOSS) PER SHARE

CONTINUING OPERATIONS

DISCONTINUED OPERATIONS

WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC

WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED

The accompanying notes are an integral part of

these consolidated financial statements

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIENCY)

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

Preferred Stock Series

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

Preferred Stock

Treasury Stock

Balance December 31, 2021 (Restated)

$ ( 4,967,686 )

Issuance of series B preferred stock for contribution

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

Cancellation of common stock

Cancellation of series D preferred stock

Cancellation of series H preferred stock

Cancellation of series K preferred stock

( 8,200,562 )

Issuance of series B preferred stock for settlement of employment

Issuance of series B preferred stock in exchange for series F

Cancellation of series F preferred stock

Issuance of series J preferred stock

Issuance of common stock for settlement of Red Rock Travel

Reclassification for cancelled shares

Accrued preferred stock dividends

Balance, December 31, 2022 (Restated)

Conversion of convertible notes payable

Accrued preferred stock dividends

Issuance of series B preferred stock

Issuance of series E preferred stock

Balance, December 31, 2023

The accompanying notes are an integral part of

these consolidated financial statements

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIENCY) (continued)

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

Additional Paid-in

Total Stockholders’

Balance December 31, 2021 (Restated)

$ ( 3,479,128 )

$ ( 65,166,264 )

Issuance of series B preferred stock for contribution

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

Cancellation of common stock

Cancellation of series D preferred stock

Cancellation of series H preferred stock

Cancellation of series K preferred stock

Issuance of series B preferred stock for settlement of employment

Issuance of series B preferred stock in exchange for series F

Cancellation of series F preferred stock

Issuance of series J preferred stock

Issuance of common stock for settlement of Red Rock Travel

Reclassification for cancelled shares

( 4,967,686 )

Accrued preferred stock dividends

( 5,429,521 )

Balance, December 31, 2022 (Restated)

$ ( 8,581,265 )

$ ( 70,932,435 )

$ ( 1,744,791 )

Conversion of convertible notes payable

Accrued preferred stock dividends

Issuance of series B preferred stock

Issuance of series E preferred stock

Balance, December 31, 2023

$ ( 9,365,982 )

$ ( 68,684,115 )

The accompanying notes are an integral part of

these consolidated financial statements

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss) from continuing operations

$ ( 5,429,521 )

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

Amortization of debt discount

Conversion and note issuance cost

Share issuance for service rendered

Other (income) or loss

Goodwill impairment

Loss on finance penalties and fees

Gain on refinance of debt

( 1,397,271 )

Gain on forgiveness of debt

(Increase) decrease in:

Accounts receivable

( 6,833,615 )

Right of use - assets

Prepaids and other current assets

Increase (decrease) in:

Accounts payable and accrued expense

Due to related party

Accrued officers compensation

Accrued interest

Right of use - liabilities

Net cash used in operating activities

( 1,807,987 )

( 1,099,461 )

Net cash used in Discontinued Operations – Operating

Net cash used in operating activities

( 1,721,467 )

( 1,150,677 )

FINANCING ACTIVITIES

Repayments to directors and officers

Proceeds from convertible notes payable

Repayment of SBA loans

Proceeds from line of credit

Repayment of line of credit

Repayment to convertible notes payable

Dividend on preferred stock

Issuance of preferred stock

Net cash provided by financing activities

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS, END OF YEAR

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for Interest

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued upon conversion of notes payable

Preferred stock issued for business acquisition

Preferred stock issued upon exchange of defaulted convertible notes payable

The accompanying notes are an integral part of

these consolidated financial statements

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations

Cardiff Lexington Corporation (“Cardiff”)

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

On November 10, 2005, Cardiff merged with Legacy

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

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

under the laws of Florida.

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

Cardiff is an acquisition holding company focused

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

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

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

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

and sold on October 31, 2022;

· Edge View Properties, Inc.

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

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

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

Principles of Consolidation

The consolidated financial statements include

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

Subsidiaries shown as discontinued operations include AHI and Platinum Tax.

All significant intercompany accounts and transactions are

eliminated in consolidation.

Subsidiaries discontinued are shown as discontinued operations.

Reverse Stock Split

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

reverse split of its outstanding common stock.

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

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

The conversion prices

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

of shares of common stock to be issued upon conversion.

All share and per share data throughout these

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

The total number of authorized

shares of common stock did not change.

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

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Use of Estimates

The preparation of financial statements in conformity

with United States generally accepted accounting principles (“U.S.

GAAP”) requires management to make estimates and assumptions

that affect certain reported amounts and disclosures.

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

Accordingly, actual results could differ from those estimates.

Accounts Receivable

In the normal course of business, the Company

is in the lien based medical industry providing orthopedic healthcare servicing an uninsured market insulated by a letter of protection

which insulates the Company and insures payment in full from insurance settlements.

A letter of protection is a legally binding contract

between the patient (i.e., the Company’s customer), the patient’s law firm and the Company, as a medical provider.

as a critical legal agreement between an experienced personal injury attorney and the Company, as a medical provider, allowing an injured

victim to receive vital medical treatment needed after an accident without paying exorbitant out-of-pocket medical expenses prior to

For medical professionals, letters of protection provide guaranteed payment out of settlement proceeds for services rendered

as the provider does not have to attempt collection from an uninsured or underinsured injured patient.

The medical provider knows that

payment will come directly from the law firm out of the settlement.

This legally binding contract offers crucial protection when someone

is hurt due to another party’s negligence but lacks sufficient health insurance or faces denial of claim payments from insurance

Medical bills may not be paid for six months to two or more years until case resolution.

Providers must be willing to wait

Some complex cases settle in increments over several years instead of one lump payment at the end.

A letter of protection

enables injured clients to obtain essential care, avoid collections, restore their credit, and focus wholly on recovery.

Attorneys utilize

letters of protection to construct stronger injury claims, while medical professionals gain guaranteed payment out of settlement proceeds

even if treatment is lengthy or ongoing.

In a personal injury case, the at-fault party

is responsible for paying the medical bills of the injured person.

However, insurance companies will often refuse to pay these medical

expenses until liability has been determined.

This can leave an injured person unable to get the medical treatment needed, especially

if they do not have health insurance.

A letter of protection allows an accident victim to receive medical care while the personal injury

case is being resolved.

An attorney sends a letter of protection to the Company, as a medical provider, on behalf of the client patient.

This letter states that the attorney is responsible for paying the client’s medical bills when the case is fully developed and

The medical professional agrees to provide treatment to the injured person and refrain from attempting to collect payment as

it is developing and until the case is resolved.

Once the personal injury case is finalized with the insurance company, the attorney

pays the outstanding medical bills from the settlement.

The letter of protection is fulfilled.

If no settlement is reached with the defendant’s

insurance company and the plaintiff (the patient) loses the case at trial, or the case is abandoned, then the Company will not be able

to collect on its letter of protection and its receivable will not be collected.

In the case of a partial settlement or award at trial,

the Company might only be able to collect a portion of its receivable.

The Company has a 99% collection rate based on

net settlements recorded to its accounts receivable and revenue.

Collection rates are estimated considering the Company’s 48-month

historical collections with primary emphasis to the most current prior 12-month trailing payment and collection percentage rates.

method the Company uses to measure expected credit losses is the loss rate method, and in addition the Company qualitatively evaluates

on an ongoing basis various factors, which include market conditions in which the Company operates, and the status of claims being settled.

The Company has established billing rates, which are not the same as actual amounts recovered.

These rates generally do not

reflect what is ultimately paid by the customer, insurance carriers, law firms and other payors, which is typically received eighteen

to twenty-four months later, and are not reported in the consolidated financial statements at those established billing rates.

Company’s customers, its patients, typically pay 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 paid to the Company “using a modifier” recognized by each insurance

carrier for services, less deductible, co-pay, and contractual adjustments which are deducted from the calculated fee.

The net revenue

is recorded at the time the services are rendered.

Collection of that revenue typically occurs eighteen to twenty-four months later and

after the patient claim develops and settles.

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

payment and collection percentages.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

The Company had 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

$ 0 as of December 31, 2023 and

2022, respectively.

As of December 31, 2023 and 2022, the Company had net accounts receivable of $ 13,305,254 and

$ 6,603,920 , respectively.

receivables are primarily generated from its healthcare subsidiary in its normal course of business.

The Company calculates a forward-looking collectability

rate which it then applies to its gross billings.

The amount recorded in accounts receivables approximates the amount expected to actually

be collected.

The allowance for credit losses represents any adjustments deemed necessary to the collectability rate based upon an annual

review of both actual collections, as well as any changes in industry billing and collection, and/or legal practices.

The following table

is the rollforward of allowance for credit losses.

Schedule of credit losses

Beginning Balance January 1, 2023

Current period provision

Write off charged against allowance

Balance at December 31, 2023

Property and Equipment

Property and equipment are carried at cost.

for renewals and betterments that extend the useful lives of property, equipment or leasehold improvements are capitalized.

for maintenance and repairs are charged to expense as incurred.

Depreciation is calculated using the straight-line method for financial

reporting purposes based on the following estimated useful lives:

Schedule of estimated useful lives

Classification

Equipment, furniture, and fixtures

Medical equipment

Leasehold improvements

10 years or lease term, if shorter

Goodwill and Other Intangible Assets

Goodwill and indefinite-lived assets are not amortized

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

The Company’s impairment testing

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

The Company reviews goodwill for impairment

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

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

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

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

the carry amount, including goodwill.

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

first step, Goodwill, is based on valuation models that incorporate assumptions and internal projections of expected future cash flows

and operating plans.

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

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

For the year ended December 31, 2022, the Company

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

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

and other factors.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Valuation of Long-lived Assets

In accordance with the provisions of Accounting

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

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

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

Recoverability of assets to be held and used is

evaluated by a comparison of the carrying amount of assets to estimated 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’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

· Identification of the performance obligations in the contact

· Determination of the transaction price

· Allocation of the transaction price to the separate performance obligations

· Recognition of revenue when performance obligations are satisfied.

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 a performance obligation and assesses whether each promised service is distinct.

The Company’s contracts for both its contract

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

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

price is allocated to this single performance obligation.

Accordingly, the Company recognizes revenues (net)

when the patient receives orthopedic care services.

The Company’s patient service contracts generally have performance obligations

which are satisfied at a point in time.

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

Patient service contracts

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

Revenue is recognized when obligations under the terms of the

contract with our patients are satisfied;

generally, at the time of patient care.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Established billing rates are not the same

as actual amounts recovered for the Company’s healthcare subsidiary.

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 CPT guidelines that designates relative value units and a suggested range of charges

for each procedure which is then assigned a CPT code.

This fee is discounted to reflect the percentage

paid to the Company “using a modifier” recognized by each insurance carrier for services, less deductible, co-pay, and contractual

adjustments which are deducted from the calculated fee.

The net revenue is recorded at the time the services are rendered.

Contract Fees (Non-PIP)

The Company has contract fees for amounts earned

from its Non-Personal Injury Protection (“PIP”) related procedures, typically car accidents, and are collected on a contingency

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)

The Company generates services fees from performing

various procedures on the date the services are performed.

These services primarily include slip and falls as well as smaller nominal

Non-PIP services.

Fees are collected primarily from third party insurance providers.

These revenues are based on established insurance

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

These contractual adjustments vary by insurance

company and self-pay patients.

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

Completing the paperwork for each case and preparing

it for billing takes approximately ten business days after a procedure is performed.

The majority of claims are then filed electronically

except for those remaining insurance carriers requiring paper filing.

An initial response is usually received within four weeks from electronic

filing and up to six weeks from paper filing.

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

The Company’s healthcare revenues are generated

from professional medical billings including facility and anesthesia services.

With respect to facility and anesthesia services, the Company

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

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

Accordingly, the Company recognized net healthcare service revenue as

49% of gross billed amounts.

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

Historically through April 2023, the Company’s

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

54% reduction from the accounts receivables amounts when a receivable is sold to the factors.

The Company evaluated the factored adjustments

considering the actual factored amounts per patient on a quarterly interval, and the reductions from accounts receivable that were factored

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Advertising Costs

Advertising costs are expensed as incurred.

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 $ 126,670 and $ 233,798 for the years ended December 31, 2023 and 2022, respectively.

Fair Value Measurements

Fair value is defined as the price that would

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

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.

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, 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

The Company accounts for its stock-based compensation

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

the fair value recognition provisions of section 718-10-30 of the FASB ASC.

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

in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value

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

The measurement date used to determine the fair

value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable

that performance will occur.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Generally, all forms of share-based payments,

including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on

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

The expense resulting from share-based payments

is recorded in general and administrative expense 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

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

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

Any effect on deferred tax assets and liabilities of a change

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

ASC 740 prescribes a comprehensive model for how

companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to

be taken on a tax return.

Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely

than not the position will be sustained upon examination by the tax authorities.

Such tax positions must initially and subsequently be

measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the

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

For the years ended December 31, 2023 and 2022,

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

tax positions.

Income (Loss) per Share

FASB ASC Subtopic 260, Earnings Per Share ,

provides for the calculation of “Basic” and “Diluted” earnings per share.

Basic earnings per common share is computed

by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings per common share is computed by dividing income available to common stockholders by the weighted-average number of shares

of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been

outstanding if the potentially dilutive securities had been issued.

Potentially dilutive securities include outstanding stock options,

warrants, and debts convertible into common stock.

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

per common share by application of the treasury stock method.

Under the treasury stock method, an increase in the fair market value of

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

The diluted effect of debt

convertibles is reflected utilizing the if converted method.

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 previously sustained operating losses since its inception,

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

We had negative cash flow from

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

These factors raise a substantial doubt about

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

The accompanying consolidated financial statements do not reflect any adjustments

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

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

The ability of the Company to continue as a going

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.

In addition, increases in expenses may require cost reductions.

No assurance can be given that the Company

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

Should the Company not be able to raise sufficient

funds, it may cause cessation of operations.

Recent Accounting Standards

The FASB issued ASU 2023-07 on November

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

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

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

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

The purpose of the amendments is to enable

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

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

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

RESTATEMENT AND REVISION OF FINANCIAL STATEMENTS

Restatement of Previously Issued Financial Statements

During a review of the year ended December 31,

2023 financial statements, the Company identified and corrected its classification of bad debt expense in its consolidated statements

of cash flows.

Bad debt expense was previously included as part of the change in accounts receivable in the consolidated statements of

Bad debt expense is now disclosed as a separate line on the consolidated statements of cash flows.

During the preparation of the year ended December

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

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

Pursuant to ASC 250, “Accounting

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

the Company determined the impact of the error was immaterial.

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

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

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

In addition, the impact of the unpaid dividend accrual is

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

and 2021, respectively.

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

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

and 2021, respectively.

The following table summarizes the impacts of

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

Consolidated balance sheet

Schedule of restated financial information

Impact of correction of error

December 31, 2021

As previously reported

Total liabilities

Mezzanine equity

Total stockholders' equity

$ ( 245,520 )

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Impact of correction of error

December 31, 2022

As previously reported

Total liabilities

Mezzanine equity

Total stockholders' equity

$ ( 1,469,809 )

$ ( 274,982 )

$ ( 1,744,791 )

Impact of correction of error

March 31, 2023

As previously reported

Total liabilities

Mezzanine equity

Total stockholders' equity

$ ( 1,632,373 )

$ ( 283,118 )

$ ( 1,915,491 )

Impact of correction of error

June 30, 2023

As previously reported

Total liabilities

Mezzanine equity

Total stockholders' equity

$ ( 917,038 )

$ ( 291,345 )

$ ( 1,208,383 )

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Impact of correction of error

September 30, 2023

As previously reported

Total liabilities

Mezzanine equity

Total stockholders' equity

$ ( 299,662 )

Consolidated statement of operations

Impact of correction of error

Year ended December 31, 2021

As previously reported

Net income for the year

Preferred stock dividends

$ ( 201,782 )

$ ( 249,302 )

Net income attributable to common shareholders

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

Impact of correction of error

Year ended December 31, 2022

As previously reported

Net loss for the year

$ ( 5,429,521 )

Preferred stock dividends

$ ( 307,188 )

$ ( 384,170 )

Net loss attributable to common shareholders

$ ( 5,736,709 )

$ ( 5,813,691 )

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Impact of correction of error

Three months ended March 31, 2023

As previously reported

Net loss for the period

Preferred stock dividends

$ ( 336,811 )

$ ( 344,947 )

Net loss attributable to common shareholders

$ ( 352,802 )

$ ( 360,938 )

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

Impact of correction of error

Three months ended June 30, 2023

As previously reported

Net income for the period

Preferred stock dividends

$ ( 125,744 )

$ ( 133,971 )

Net income attributable to common shareholders

Basic earnings per share for continuing operations

Diluted earnings per share for continuing operations

Impact of correction of error

Six months ended June 30, 2023

As previously reported

Net income for the period

Preferred stock dividends

$ ( 462,555 )

$ ( 478,918 )

Net income attributable to common shareholders

Basic earnings per share for continuing operations

Diluted earnings per share for continuing operations

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Impact of correction of error

Three months ended September 30, 2023

As previously reported

Net income for the period

Preferred stock dividends

$ ( 142,829 )

$ ( 151,146 )

Net income attributable to common shareholders

Basic earnings per share for continuing operations

Diluted earnings per share for continuing operations

Impact of correction of error

Nine months ended September 30, 2023

As previously reported

Net income for the year

Preferred stock dividends

$ ( 605,384 )

$ ( 630,065 )

Net income attributable to common shareholders

Basic earnings per share for continuing operations

Diluted earnings per share for continuing operations

Revision of Financial Statements

During the preparation of the financial statements

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

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

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

was necessary.

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

(deficiency).

As a result of the settlement agreement with Red

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

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

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

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

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

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

consolidated statement of stockholders’ equity.

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

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

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

The acquisition

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

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

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

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

(deficiency).

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Schedule of accounts payable and accrued expenses

Accounts payable

Accrued credit cards

Accrued liability for collections of previously factored receivables

Accrued property taxes

Accrued professional fees

Accrued payroll

Accrue expense - other

Accrued expense - dividend payable

The Company is delinquent paying certain property

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

PLANT AND EQUIPMENT, NET

Property and equipment as of December 31, 2023

and 2022 is as follows:

Schedule of property and equipment

Medical equipment

Computer Equipment

Furniture, fixtures and equipment

Leasehold Improvement

accumulated depreciation

Property and equipment, net

For the years ended December 31, 2023 and 2022,

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

As of December 31, 2023 and 2022, the Company

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

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

RELATED PARTY TRANSACTIONS

In connection with the acquisition of Edge View

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

These amounts are due on demand

and do not bear interest.

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

The Company obtained short-term advances from

2 unchanged sentences

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

Blank Check Preferred Stock

As of December 31, 2021, the Company has designated

1,000,000,000 shares of Blank Check Preferred Stock zero of which have been issued.

2021 Preferred Stock Activity:

Series J Preferred Stock

On May 31, 2021 as part of the Nova Ortho acquisition,

the Company issued 894,834 shares of preferred stock series J with par value $.001 and a stated value of $4.00, for $3,579,336.

Series N Preferred Stock

On May 31, 2021 and also as part of the Nova Ortho

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

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

Series Preferred B Stock

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

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

B with a $4.00 stated value per share.

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

Onn July 22, 2021, the Chief Operating Officer

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

See also Note 8 and the disclosure regarding Note

See also Note 13 for compensation paid to employees

of the Company.

NOTES AND LOANS PAYABLE

Notes payable at December 31, 2023 and 2022,

respectively, are summarized as follows:

Schedule of notes payable

Notes and loans payable

Less current portion

( 2,136,077 )

Long-term portion

Long-term debt matures as follows:

Schedule of maturities of long-term debt

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Loans and Notes Payable – Unrelated Party

On March 12, 2009, the Company issued a debenture

in the principal amount of $20,000.

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

The balance of the

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

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

and 2022, respectively.

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

this debenture.

Small Business Administration (“SBA”)

On June 2, 2020, the Company obtained an SBA loan

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

The principal balance and accrued

interest at December 31, 2023 was $ 149,655 and $ 956 , respectively, and principal and accrued interest at December 31, 2022 was $ 144,609

and $ 5,723 , respectively.

Line of Credit

On September 29, 2023, the Company and Nova

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

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

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

outstanding balance against the revolving receivable line of credit.

The revolving purchase and security agreement includes

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

CONVERTIBLE NOTES PAYABLE

As of December 31, 2023 and 2022, the Company

had convertible debt outstanding net of amortized debt discount of $ 3,807,030 and $ 3,515,752 , respectively.

During the year ending December

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

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

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

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

During the year ended December 31, 2023, the Company

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

common stock.

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

ended December 31, 2023.

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

On September 22, 2022, the Company entered into

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

interest in exchange for (1) one consolidated senior secured convertible promissory note (“New Promissory Note”) in the amount

of $ 2,600,000 and (2) 375,000 shares of series X senior convertible preferred stock totaling $ 1,500,000 with a par value of $0.001, stated

value of $4.00, convertible into common shares at a 1:1 conversion rate, non-dilutive and non-voting shares.

Prior to conversion, all

promissory notes with this lender totaled to $ 4,791,099 consisting of principal of $ 3,840,448 and accrued interest of $ 950,651 resulting

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Convertible notes as of December 31, 2023 and

2022 are summarized as follows:

Schedule of convertible notes

Convertible notes payable

Discounts on convertible notes payable

Total convertible debt less debt discount

Current portion

Long-term portion

The following is a schedule of convertible notes

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

Schedule of convertible notes

Balance 12/31/22

Shares Issued

Upon Conversion

Balance 12/31/23

Interest on Convertible Debt at 12/31/22

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

Interest on Convertible Debt at 12/31/23

Debt Discount At 12/31/23

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

On October 28, 2016, the Company issued a convertible

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

Note 7-1 was fully converted into common shares

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

On September 12, 2016, the Company issued a convertible

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

Note 9 is currently in default

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

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

On May 10, 2019, the Company issued a convertible

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

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

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

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

Note 29-2 is currently in default

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

On August 28, 2019, the Company issued a convertible

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

Note 31 is currently in default and accrues interest

at a default interest rate of 24% per annum.

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

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

On September 3, 2020, the Company issued a convertible

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

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

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

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

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

On December 29, 2020, the Company executed the

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

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

On February 9, 2021, the Company issued a convertible

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

Note 38 was converted into common shares and the

remaining balance was paid in cash.

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

On April 26, 2021, the Company issued a convertible

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

Note 39 was paid in cash and there was no outstanding

balance as of December 31, 2023.

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

On September 22, 2022, the Company issued a convertible

promissory note in the principal amount of $2,600,000 in exchange for total of $4,791,099 of defaulted promissory notes balances (Note

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

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

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

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

On December 21, 2022, the Company executed a fourth

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

24, 2023, the Company executed a fifth tranche under this note in the principal amount of $90,166, less an original issue discount and

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

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

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

On June 5, 2023, the Company executed a seventh tranche under this note

in the principal amount of $136,667, less original issue discount and fee of $39,167 (Note 40-7).

On June 13, 2023, the Company executed

an eighth tranche under this note in the principal amount of $21,167, less original issue discount and fee of $5,167 (Note 40-8).

19, 2023, the Company executed a ninth tranche under this note in the principal amount of $35,500, less an original issue discount and

fee of $8,875 (Note 40-9).

On July 24, 2023, the Company executed a tenth tranche under this note in the principal amount of $14,000,

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

On December 1, 2023, the Company executed amendment on Notes series 40

consolidated senior secured convertible promissory note to extend the expired tranche note 40-1 through 40-5’ due date to September

All of the Note 40 tranches mature in one year from the note issuance date and accrue interest at a rate of 10% per annum.

On August 25, 2023, the Company issued a twelve-month

convertible promissory note in the principal amount of $5,000 to the Company’s CEO for the Company’s operating expenses.

rate of interest is 10% per annum.

CAPITAL STOCK

Preferred Stock

The Company has designated multiple series of

preferred stock, including 2 shares of series A preferred stock, 3,000,000 shares of series B preferred stock, 500 shares of series C

preferred stock, 1,000,000 shares of series E preferred stock, 50,000 shares of series F-1 preferred stock, 15,000,000 shares of series

I preferred stock, 2,000,000 shares of series J preferred stock, 400,000 shares of series L preferred stock, 3,000,000 shares of series

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

preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

The following is a description of the rights and

preferences of each series of preferred stock.

Redeemable Preferred Stock

The Company recognized the series N senior convertible

preferred stock, series R convertible preferred stock and series X senior convertible preferred stock as mezzanine equity in accordance

with ASC 480, “Distinguishing Liabilities from Equity”.

Series N Senior Convertible Preferred Stock

The series N senior convertible

preferred stock ranks, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common

stock and each other class or series that is not expressly made senior to or on parity with the series N senior convertible preferred

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

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

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

Dividend Rights.

Holders of series N senior

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

provided that

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

shall increase by 8% per annum.

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

Dividends shall

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

Dividends payable

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

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

applicable dividend payment date.

At December 31, 2023, cumulative dividends on Series N Preferred Stock were $ 766,437 .

Liquidation Rights.

Subject to the rights

of creditors and the holders of any senior securities or parity securities (in each case, as defined in the certificate of designation),

upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital

or surplus) shall be made to or set apart for the holders of junior securities (as defined in the certificate of designation), including

the common stock, each holder of outstanding series N senior convertible preferred stock shall be entitled to receive an amount of cash

equal to 115% of the stated value of $4.00 per share, plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon

(whether or not declared) to, but not including the date of final distribution to such holders.

Voting Rights .

Holders of series N senior

convertible preferred stock do not have any voting rights;

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

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

must include SILAC Insurance Company so long as it holds any shares of series N senior convertible preferred stock, voting as a separate

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

of designation or prior to the Company’s (or Nova’s) creation or issuance of any parity securities or new indebtedness (as

defined in the certificate of designation);

provided that the foregoing shall not apply to any financing transaction the use of proceeds

of which will be used to redeem the series N senior convertible preferred stock and the warrants issued in connection therewith.

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

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each shares of series

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

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

the stated value ($4.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price of $900 per share

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

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

provided that in no event shall the holder

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

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

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

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

limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’

prior notice to the Company.

Redemption Rights .

The Company may redeem

the series N senior convertible preferred stock at any time by paying in cash therefore a sum equal to 115% of the stated value of $4.00

per share, plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the certificate of designation.

In addition, any holder may require the Company to redeem some or all of its shares of series N senior convertible preferred stock on

the same terms after a period of twelve months from the date of issuance;

provided, however, that such redemption right shall only be

exercisable if the Company raises at least $5,000,000 or the common stock is trading on the Nasdaq Stock Market or the New York Stock

Series R Convertible Preferred Stock

The series R convertible preferred

stock ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock, series

B preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series I preferred stock, series J

preferred stock, series L preferred stock and to each other class or series that is not expressly made senior to or on parity with the

series R convertible preferred stock;

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

series R convertible preferred stock;

and (iii) junior to the series N senior convertible preferred stock, series X senior convertible

preferred stock and to each other series of preferred stock and each class or series that is expressly made senior to the series R convertible

preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

R convertible preferred stock are entitled to receive cumulative dividends in the amount of twelve percent (12%) per annum, payable quarterly.

In addition, holders of series R convertible preferred stock are entitled to receive dividends equal (on an as converted to common stock

basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares

of common stock.

Any dividends that are not paid when due shall continue to accrue and shall entail a late fee, which must be paid in

cash, at the rate of 18% per annum or the lesser rate permitted by applicable law which shall accrue and compound daily from the missed

payment date through and including the date of actual payment in full.

At December 31, 2023, cumulative dividends on Series R Preferred

Stock were $ 109,980 .

Liquidation Rights .

Upon any liquidation,

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

be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the stated value ($1,200), plus

any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing, for each share of series R convertible

preferred stock before any distribution or payment shall be made to the holders of any junior securities.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Voting Rights .

The holders of series R

convertible preferred stock will vote together with the common stock on an as-converted basis.

However, as long as any shares of series

R convertible preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the

then outstanding shares of the series R convertible preferred stock, directly and/or indirectly (i) alter or change adversely the powers,

preferences or rights given to the series R convertible preferred stock or alter or amend the certificate of designation, (ii) authorize

or create any class of stock ranking as to redemption or distribution of assets upon a liquidation senior to, or otherwise pari passu

with, the series R convertible preferred stock, or authorize or create any class of stock ranking as to dividends senior to, or otherwise

pari passu with, the series R convertible preferred stock, (iii) amend its articles of incorporation or other charter documents

in any manner that adversely affects any rights of the holders of the series R convertible preferred stock, (iv) increase the number of

authorized shares of series R convertible preferred stock, or (v) enter into any agreement with respect to any of the foregoing.

Conversion Rights .

Each shares of series

R convertible preferred stock shall be convertible, at the option of the holder thereof, at any time and from time to time, into such

number of fully paid and nonassessable shares of common stock determined by dividing the stated value ($1,200 per share) by a conversion

price equal to the lower of (i) $75.0 and (ii) the lowest daily VWAP during the twenty (20) trading days immediately prior to the applicable

conversion date.

Notwithstanding the foregoing, the Company shall not effect any conversion of the series R convertible preferred stock,

and a holder shall not have the right to convert any portion of the series R convertible preferred stock, to the extent that, after giving

effect to the conversion, such holder (together with such holder’s affiliates, and any persons acting as a group together with such

holder or any of such holder’s affiliates) would beneficially own in excess of 4.99% of the then outstanding common stock.

The conversion

price is subject to adjustment for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately

decreases or increases the common stock, as well as for mergers, business combinations and certain other fundamental transactions.

addition, subject to certain exceptions, upon any issuance by the Company or any of its subsidiaries of common stock or common stock equivalents

for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), the holder may elect, in

its sole discretion, to exchange (in lieu of conversion), if applicable, all or some of the shares of series R convertible preferred stock

then held for any securities or units issued in a Subsequent Financing on a $1.00 for $1.00 basis.

Participation Rights .

Subject to certain

exceptions, upon a Subsequent Financing, a holder of at least 100 shares of series R convertible preferred stock shall have the right

to participate in up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing on the same terms, conditions

and price provided for in the Subsequent Financing.

Company Redemption Rights .

has the right to redeem all (but not less than all), shares of the series R convertible preferred stock issued and outstanding at any

time upon three (3) business days’ notice, at a redemption price per share equal to the product of (i) the Premium Rate multiplied

by (ii) the sum of (x) the stated value ($1,200), (y) all accrued but unpaid dividends, and (z) all other amounts due to the holder.

Rate” means (a) 1.1 if all of the series R convertible preferred stock is redeemed within ninety (90) calendar days from the issuance

date thereof;

(b) 1.2 if all of the series R convertible preferred stock is redeemed after ninety (90) calendar days and within one hundred

twenty (120) calendar days from the issuance date thereof;

one hundred twenty (120) calendar days and within one hundred eighty (180) calendar days from the issuance date thereof;

if all of the series R convertible preferred stock is redeemed after one hundred eighty (180) calendar days.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Redemption Upon Triggering Events .

the occurrence of a Triggering Event (as defined below), each holder of series R convertible preferred stock shall (in addition to all

other rights it may have) have the right, exercisable at the sole option of such holder, to require the Company to (A) redeem all of the

series R convertible preferred stock then held by such holder for a redemption price, in cash, equal to the Triggering Redemption Amount

(as defined below), or (B) at the option of each holder either (i) redeem all of the series R convertible preferred stock then held by

such holder though the issuance to such holder of such number of shares of common stock equal to the quotient of (x) the Triggering Redemption

Amount, divided by (y) the lowest of (1) the conversion price, and (2) 75% of the average of the 10 VWAPs immediately prior to the date

of election, or (ii) increase the dividend rate on all of the outstanding series R convertible preferred stock held by such holder retroactively

to the initial issuance date to 18% per annum thereafter.

“Triggering Redemption Amount” means, for each share of series R

convertible preferred stock, the sum of (a) the greater of (i) 130% of the stated value and (ii) the product of (y) the VWAP on the trading

day immediately preceding the date of the Triggering Event, multiplied by (z) the stated value divided by the then applicable conversion

price, (b) all accrued but unpaid dividends thereon and (c) all liquidated damages, late fees and other costs, expenses or amounts due

in respect of the series R convertible preferred stock including, but not limited to legal fees and expenses of legal counsel to the holder

in connection with, related to and/or arising out of a Triggering Event.

A “Triggering Event” means any of the following events

(whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant

to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

· the Company shall fail to deliver the shares of common stock issuable upon a conversion prior to the fifth

(5 th ) trading day after such shares are required to be delivered, or the Company shall provide written notice to any holder,

including by way of public announcement, at any time, of its intention not to comply with requests for conversion of any shares of series

R convertible preferred stock in accordance with the terms of the certificate of designation;

· the Company shall fail for any reason to pay in full the amount of cash due pursuant to a Buy-In (as defined

in the certificate of designation) within five (5) trading days after notice therefor is delivered;

· the Company shall fail to have available a sufficient number of authorized and unreserved shares of common

stock to issue to such holder upon a conversion;

· unless specifically addressed elsewhere in the certificate of designation as a Triggering Event, the Company

shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of the Transaction

Documents (as defined in the certificate of designation), and such failure or breach shall not, if subject to the possibility of a cure

by the Company, have been cured within five (5) calendar days after the date on which written notice of such failure or breach shall have

been delivered;

· the Company shall redeem junior securities or pari passu securities;

· the Company shall be party to a Change of Control Transaction (as defined in the certificate of designation);

· there shall have occurred a Bankruptcy Event (as defined in the certificate

of designation);

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

· any monetary judgment, writ or similar final process shall be entered or filed against the Company, any

subsidiary or any of their respective property or other assets for more than $50,000 (provided that amounts covered by the Company’s

insurance policies are not counted toward this $50,000 threshold), and such judgment, writ or similar final process shall remain unvacated,

unbonded or unstayed for a period of thirty (30) trading days;

· the electronic transfer by the Company of shares of common stock through the Depository Trust Company

or another established clearing corporation once established subsequent to the date of the certificate of designation is no longer available

or is subject to a ‘freeze” and/or “chill;” or

· any “Event of Default,” as defined in the Purchase Agreement (as defined in the certificate

of designation).

Series X Senior Convertible Preferred Stock

The series X senior convertible

preferred stock ranks, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common

stock and each other class or series that is not expressly made senior to or on parity with the series X senior convertible preferred

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

and (iii) junior to the series N senior convertible preferred stock, all indebtedness and other liabilities with respect to assets

available to satisfy claims against the Company and each class or series that is expressly made senior to the series X senior convertible

preferred stock.

Dividend Rights.

Holders of series X senior

convertible preferred stock are entitled to dividends at a rate per annum of 10.0% of the stated value ($4.00 per share);

provided that

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

shall increase by 5% per annum.

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

Dividends shall

be payable quarterly in arrears on each dividend payment date.

At December 31, 2023, cumulative dividends on Series X Preferred Stock

were $ 190,685 .

Liquidation Rights.

Subject to the rights

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

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

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

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

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

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

to such holders.

Voting Rights .

Holders of series X senior

convertible preferred stock do not have any voting rights;

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

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

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

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

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

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

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

In addition, the affirmative vote of holders of

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

senior securities.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each shares of series

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

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

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

of (i) the lowest VWAP during the five (5) trading days immediately prior to the applicable conversion date and (ii) the price per share

paid in any subsequent financing (the “Fixed Price”).

The Fixed Price is subject to standard adjustments in the event of any

stock splits, stock combinations, stock reclassifications, dividends paid in common stock, sales of substantially all assets, mergers,

consolidations or similar transactions, as well as a price based antidilution adjustment, pursuant to which, subject to certain exceptions,

if the Company issues common stock at a price lower than the Fixed Price, the Fixed Price shall decrease to such lower price.

Notwithstanding

the foregoing, in no event shall the holder of any series X senior convertible preferred stock be entitled to convert any number of shares

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

the number of shares of common stock issuable upon the conversion of the series X senior convertible preferred stock with respect to which

the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99%

of the then outstanding common stock.

This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion,

upon not less than sixty-one (61) days’ prior notice to the Company.

Redemption Rights .

Commencing on September

22, 2023, any holder may require the Company to redeem its shares by the payment in cash therefore of a sum equal to 100% of the stated

value of $4.00 per share, plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the certificate

of designation;

provided however, that in the event that the Company completes a public offering prior to the redemption date, then any

holder may only cause the Company to redeem any outstanding series X senior convertible preferred stock by paying such redemption price

in twelve (12) equal monthly installments with the first such payment due on the date that is six (6) months following the date that the

Company completes such public offering.

Non-redeemable Preferred Stock

Series A Preferred Stock

The series A preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock and each other class or series that is not

expressly made senior to or on parity with the series A preferred stock;

(ii) on parity with each class or series that is not expressly

subordinated or made senior to the series A preferred stock;

and (iii) junior to the series B preferred stock, series C preferred stock,

series E preferred stock, series F-1 preferred stock, series I preferred stock, series J preferred stock, series L preferred stock, series

N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and each other

series of preferred stock and each class or series that is expressly made senior to the series A preferred stock, as well as to all indebtedness

and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The series A preferred

stock is not entitled to participate in any distributions or payments to the holders of common stock or any other class of stock and shall

have no economic interest in the Company.

Liquidation Rights .

In the event of any

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

the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company, the holders of each share

of series A preferred stock shall be entitled to receive from any distribution of any of the assets or surplus funds of the Company, before

and in preference of any holder of shares of common stock, an amount equal to the stated value of $250.

Once the holders receive the foregoing

from any such liquidation, dissolution or winding up, the holders shall not participate with the common stock or any other class of stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Voting Rights .

Each share of series A preferred

stock shall have a number of votes at any time equal to (i) 25% of the number of votes then held or entitled to be made by all other equity

securities of the Company, including, without limitation, the common stock, plus (ii) one (1).

The series A preferred stock shall vote

on any matter submitted to the holders of the common stock, or any other class of voting securities, for a vote, and shall vote together

with the common stock, or any class of voting securities, as applicable, on such matter for as long as the shares of series A preferred

stock are issued and outstanding.

Notwithstanding the foregoing, the series A preferred stock shall not have the right to vote on any

matter as to which solely another series of preferred stock is entitled to vote pursuant to the Company’s amended and restated articles

of incorporation or a certificate of designation of such other series of preferred stock.

Upon transfer of any share of

series A preferred stock, except for a transfer by the holder to an affiliate, whether such transfer is voluntary or involuntary, such

share of series A preferred stock shall automatically, and without any action being required by the Company or the holder, be converted

into one (1) share of common stock.

Other Rights .

Holders of series A preferred

stock do not have any conversion (except as set forth above) or redemption rights.

Series B Preferred Stock

The series B preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other

class or series that is not expressly made senior to or on parity with the series B preferred stock;

(ii) on parity with the series C

preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other

class or series that is not expressly subordinated or made senior to the series B preferred stock;

and (iii) junior to the series I preferred

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

and to each other series of preferred stock and each class or series that is expressly made senior to the series B preferred stock, as

well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

B preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series B preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series B preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series B preferred

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

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

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series B preferred stock shall be entitled to cast one (1) vote per

share of series B preferred stock held.

Except as provided by law, the holders of series B preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series B preferred stock are outstanding, the Company

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

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

B preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series B preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

B preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series B preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

B preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series B preferred stock, voting

together as a single class, each share of series B preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

Redemption Rights .

Holders of series B

preferred stock do not have any redemption rights.

Series C Preferred Stock

The series C preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other

class or series that is not expressly made senior to or on parity with the series C preferred stock;

(ii) on parity with the series B

preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other

class or series that is not expressly subordinated or made senior to the series C preferred stock;

and (iii) junior to the series I preferred

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

and to each other series of preferred stock and each class or series that is expressly made senior to the series C preferred stock, as

well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

C preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series C preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series C preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series C preferred

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

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

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series C preferred stock shall be entitled to cast one (1) vote per

share of series C preferred stock held.

Except as provided by law, the holders of series C preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series C preferred stock are outstanding, the Company

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

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

C preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series C preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

C preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined by dividing the stated value ($4.00 per share) by a conversion price of $0.00004.

In addition, on the date

on which the shares of common stock are listed on a national stock exchange, including without limitation the New York Stock Exchange,

NYSE American or the Nasdaq Stock Market (any tier) (a “Listing Event”), all outstanding shares of series C preferred stock

shall be automatically converted into such number of shares of common stock as is determined by dividing $50,000 by the highest traded

or closing price on such date, which such shares of common stock shall be issued pro rata among the holders of the outstanding series

C preferred stock.

Finally, upon the earlier to occur of:

(a) the closing of the sale of shares of common stock to the public at a price

of at least $3.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar

recapitalization with respect to the common stock) in a public offering pursuant to an effective registration statement or offering statement

under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company or (b) the date and time, or the occurrence

of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series C preferred

stock, voting together as a single class, each share of series C preferred stock shall be automatically converted into such number of

shares of common stock as is determined by dividing the stated value ($4.00 per share) by a conversion price of $0.00004.

Such conversion

price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for

reverse stock splits).

Redemption Rights .

If there is a Listing

Event, the Company shall have the right (but not the obligation) to redeem shares of series C preferred stock at a price per share of

Series E Preferred Stock

The series E preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other

class or series that is not expressly made senior to or on parity with the series E preferred stock;

(ii) on parity with the series B

preferred stock, series C preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock and each other

class or series that is not expressly subordinated or made senior to the series E preferred stock;

and (iii) junior to the series I preferred

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

and to each other series of preferred stock and each class or series that is expressly made senior to the series E preferred stock, as

well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

E preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series E preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series E preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series E preferred

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

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

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series E preferred stock shall be entitled to cast one (1) vote per

share of series E preferred stock held.

Except as provided by law, the holders of series E preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series E preferred stock are outstanding, the Company

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

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

E preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series E preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

E preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series E preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

E preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series E preferred stock, voting

together as a single class, each share of series E preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

Series F-1 Preferred Stock

The series F-1 preferred stock

ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each

other class or series that is not expressly made senior to or on parity with the series F-1 preferred stock;

(ii) on parity with the series

B preferred stock, series C preferred stock, series E preferred stock, series J preferred stock, series L preferred stock and each other

class or series that is not expressly subordinated or made senior to the series F-1 preferred stock;

and (iii) junior to the series I

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

stock and to each other series of preferred stock and each class or series that is expressly made senior to the series F-1 preferred stock,

as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

F-1 preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series F-1 preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series F-1 preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series F-1 preferred

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

F-1 preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

Voting Rights .

Except as provided by law,

the holders of series F-1 preferred stock shall have no voting rights.

However, as long as any shares of series F-1 preferred stock are

outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series F-1 preferred stock,

(a) alter or change adversely the powers, preferences or rights given to the series F-1 preferred stock or alter or amend the certificate

of designation for the series F-1 preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or

other charter documents in any manner that adversely affects any rights of the holders of series F-1 preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

F-1 preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares

of common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series F-1 preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

F-1 preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series F-1 preferred stock, voting

together as a single class, each share of series F-1 preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

Redemption Rights .

Holders of series F-1

preferred stock do not have any redemption rights.

Series I Preferred Stock

On December 31, 2021 Daniel Thompson and Alex

Cunningham Shareholders and officers of the Company each forfeited and surrendered for no consideration 90,000,000 Preferred Class I Shares

resulting in aggregate of 180,000,000 outstanding Preferred Class I Shares returned to the Treasury.

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

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

Stock Issuances:

9, 2021 - the Company issued 351,604 shares of common stock in connection with a service agreement.

28, 2021 – 180,000,000 shares were surrendered back to the treasury.

29, 2021 - the Company issued 1,275,427 shares of common stock in connection with a service agreement.

Effective May 12, 2020 the Company completed a

reverse stock split of 10,000:1 for common shares.

In conjunction with the reverse stock split, the Company canceled 826 partial rounding

shares to balance the shares outstanding.

During the years ended December 31, 2021 and 2020,

respectively, the Company converted $855,691 and $196,291 of convertible debt and $208,143 and $74,866 in interest, penalties, and fees

into 109,234,241 and 5,014,696 shares of the Company’s commons stock.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

The aggregate fees billed for the years ended

December 31, 2021 and 2020 for professional services rendered by the principal accountant for the audit of its annual financial statements

included in Form 10-K/A (“Audit Fees”), (2) tax compliance, advice, and planning (“Tax Fees”), and (3) other professional

services rendered by the Company’s principal accountant (“Other Fees”):

Daszkal Bolton

Rosenberg Rich Baker Berman & Company

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Description 1

Articles of Incorporation , (incorporated by reference to the Company’s Form 10 filed with the SEC on March 27, 2002

Articles of Amendment , (incorporated by reference to the Company’s Form 10 filed with the SEC on March 27, 2002

Articles of Amendment adopted July 18, 2012 , (incorporated by reference to the Company’s Form 8-K/A filed with the SEC on August 9, 2012

Articles of Incorporation dated August 22, 2014 , (incorporated by reference to the Company’s Form 8-K filed with the SEC on September 15, 2014

Bylaws , filed with the Company’s Form 8-K on September 15, 2014

Description of Cardiff Lexington Corp.

Employment Agreement by and between the Company and Daniel Thompson

Employment Agreement by and between the Company and Alex Cunningham

Employment Agreement by and between the Company and Dr.

Rollan Roberts

Employment Agreement by and between the Company and Patrick Lambert

List of Subsidiaries of the Company

Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

XBRL Instance Document

XBRL Taxonomy Schema

XBRL Taxonomy Calculation Linkbase

XBRL Taxonomy Definition Linkbase

XBRL Taxonomy Label Linkbase

XBRL Taxonomy Presentation Linkbase

The series I preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock, series B preferred

stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock, series L preferred stock

and to each other class or series that is not expressly made senior to or on parity with the series I preferred stock;

(ii) on parity

with each class or series that is not expressly subordinated or made senior to the series I preferred stock;

and (iii) junior to the series

N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and to each other

series of preferred stock and each class or series that is expressly made senior to the series I preferred stock, as well as to all indebtedness

and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

I preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series I preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series I preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series I preferred

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

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

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series I preferred stock shall be entitled to cast five (5) votes per

share of series I preferred stock held.

Except as provided by law, the holders of series I preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series I preferred stock are outstanding, the Company

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

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

I preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series I preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

I preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series I preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

I preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $10,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series I preferred stock, voting

together as a single class, each share of series I preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

Redemption Rights .

Holders of series I

preferred stock do not have any redemption rights.

Series J Preferred Stock

The series J preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other

class or series that is not expressly made senior to or on parity with the series J preferred stock;

(ii) on parity with the series B

preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series L preferred stock and each other

class or series that is not expressly subordinated or made senior to the series J preferred stock;

and (iii) junior to the series I preferred

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

and to each other series of preferred stock and each class or series that is expressly made senior to the series J preferred stock, as

well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

J preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series J preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series J preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series J preferred

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

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

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series J preferred stock shall be entitled to cast one (1) vote per

share of series J preferred stock held.

Except as provided by law, the holders of series J preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series J preferred stock are outstanding, the Company

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

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

J preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series J preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

J preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series J preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

J preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series J preferred stock, voting

together as a single class, each share of series J preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

Redemption Rights .

Holders of series J

preferred stock do not have any redemption rights.

Series L Preferred Stock

The series L preferred stock ranks,

with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other

class or series that is not expressly made senior to or on parity with the series L preferred stock;

(ii) on parity with the series B

preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock and each other

class or series that is not expressly subordinated or made senior to the series L preferred stock;

and (iii) junior to the series I preferred

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

and to each other series of preferred stock and each class or series that is expressly made senior to the series L preferred stock, as

well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

Dividend Rights.

The holders of series

L preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends

actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock.

No other dividends shall be

paid on shares of series L preferred stock.

Liquidation Rights .

Upon any liquidation,

dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series L preferred stock shall be entitled

to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series L preferred

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

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

Voting Rights .

On any matter presented

to stockholders for their action or consideration, each holder of series L preferred stock shall be entitled to cast one (1) vote per

share of series L preferred stock held.

Except as provided by law, the holders of series L preferred stock shall vote together with the

holders of shares of common stock as a single class.

However, as long as any shares of series L preferred stock are outstanding, the Company

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

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

L preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner

that adversely affects any rights of the holders of series L preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Conversion Rights .

Each share of series

L preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of

common stock as is determined as follows:

(i) if the closing market price of the common stock on the principal trading market on which

the common stock is then traded or quoted is less than $4.00 per share, then each share of series L preferred stock shall be convertible

into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price

on the date of conversion;

or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series

L preferred stock shall be convertible into two (2) shares of common stock.

In addition, upon the earlier to occur of:

(a) the closing

of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective

registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,

(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation

the New York Stock Exchange, NYSE American or the Nasdaq Stock Market (any tier), or (c) the date and time, or the occurrence of an event,

specified by vote or written consent of the holders of at least 67% of the then outstanding shares of series L preferred stock, voting

together as a single class, each share of series L preferred stock shall be automatically converted into such number of shares of common

stock as is determined in accordance with the provisions above.

Such conversion price is subject to standard adjustments in the event

of any stock dividends, stock reclassifications and similar events (but not for reverse stock splits).

Redemption Rights .

Holders of series L

preferred stock do not have any redemption rights.

Preferred Stock Transactions

During the year ended December 31, 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, Chief Accounting

Officer, for $ 25,000 .

· On July 24, 2023, the Company issued 5,000 shares of series E preferred stock as compensation for the

property manager of Edge View in exchange for a bonus of $ 5,000 .

During the year ended December 31, 2022, the Company

executed the following transactions:

· In the second quarter of 2022, 37,500 shares of series D preferred stock were cancelled and exchanged

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

of series B preferred stock.

· On September 7, 2022, the Company issued 818,750 shares of series J preferred stock in connection with

the acquisition of Nova.

· On September 12, 2022, the Company issued 375,000 shares of series X senior convertible preferred stock

for $ 1,500,000 .

See Note 9 for further discussion.

· On October 10, 2022, the Chief Operating Officer received 18,750 shares of series B preferred stock in

exchange for the settlement of employment at the fair value of $1 per share.

· On October 31, 2022, the Company entered into a buyback agreement, pursuant to which the managers of AHI

purchased back AHI and returned 175,045 shares of series F preferred stock issued to them, which were remitted to treasury, in exchange

for 67,500 shares of series B preferred stock.

There was a loss on disposal in the amount of $ 217,769 which represented net assets and

liabilities at the time of sale back.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

· On November 11, 2022, the Company issued 15,000 shares of series B preferred stock to a third party in

exchange for $ 15,000 at the fair value of $1 per share.

· On December 15, 2022, the Company issued 10,000 shares of series B preferred stock to a third party in

exchange for $ 10,000 at the fair value of $1 per share.

During the year ended December 31, 2023, the Company

issued 13,068 shares of common stock upon the conversion of certain convertible notes.

During the year ended December 31, 2022, as part

of the Red Rock settlement, the Company issued 8,782 shares of common stock.

The settlement also required the previous owners to relinquish

3,500 shares of common stock before a 1 for 75,000 reverse split resulting in a gain to the Company of $35,097.

The Red Rock settlement

also required the previous owners to relinquish warrants for 25,000 shares of common stock.

What changed 10-K/A

Item 9A. Controls and Procedures