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Item 1. Financial Statements

2025-08-19 compared with 2024-10-17 · 818 added, 831 removed, 1105 unchanged (60% of the section changed)

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance

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

Condensed Consolidated Statements of

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

Condensed Consolidated Statements of

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

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of March 31, 2025 (Unaudited) and December 31, 2024

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2025 (Unaudited) and 2024 (Unaudited and Restated)

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2025 (Unaudited) and 2024 (Unaudited and Restated)

Condensed Consolidated Statements

of Cash Flows for the Three Months Ended March 31, 2025 (Unaudited and Restated) and 2024 (Unaudited and Restated)

Notes to Condensed Consolidated Financial Statements (Unaudited and Restated)

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2024 AND DECEMBER 31, 2023

AS OF MARCH 31, 2025 (UNAUDITED) AND DECEMBER

March 31, 2025

December 31, 2024

Current assets

Accounts receivable-net

other current assets

Total current

Prepaid and other current assets

Total current assets

Property and equipment, net

Right of use - assets

Right of use - assets, net

Due from related party

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Accrued interest

Right of use - liabilities

Due to director and officer

Notes payable

Convertible notes payable, net

of debt discounts of $ 11,305

and $ 24,820 ,

Net liabilities

of discontinued operations

Total current

Right of use – lease liabilities

Notes payable – current portion

Line of credit

Convertible notes payable

Net liabilities of discontinued operations

Total current liabilities

Notes payable

lease liability – long term

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 March 31, 2024 and December 31, 2023

Redeemable Series R Senior Convertible

Preferred Stock - 5,000

shares authorized, $0.001 par value, stated value of $ 1,200 ,

shares issued and outstanding at March 31, 2024 and December 31, 2023

Series X Senior Convertible Preferred Stock - 5,000,000

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

shares issued and outstanding at March 31, 2024 and December 31, 2023

Total Mezzanine

Redeemable Series N Senior Convertible Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 948,907 and 921,636 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

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

407,184 and 397,464 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Total Mezzanine Equity

Stockholders' equity

Series B Preferred Stock - 3,000,000

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

and 2,139,478

shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Series C Preferred Stock - 500

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

shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Series E Preferred Stock - 1,000,000

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

shares issued and outstanding at March 31, 2024 and December 31, 2023

Series F-1 Preferred Stock - 50,000

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

shares issued and outstanding at March 31, 2024 and December 31, 2023

Series I Preferred Stock - 15,000,000

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

and 14,885,000

issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Series J Preferred Stock - 2,000,000

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

and 1,713,584

shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Series L Preferred Stock - 400,000

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

shares issued and outstanding at March 31, 2024 and December 31, 2023

Series B Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value of $ 4.00 , 1,267,467 and 1,279,867 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value of $ 4.00 , 74 shares issued and outstanding at March 31, 2025 and December 31, 2024

Series E Preferred Stock - 1,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 175,375 shares issued and outstanding at March 31, 2025 and December 31, 2024

Series F-1 Preferred Stock - 50,000 shares authorized, $0.001 par value, stated value $ 4.00 , 3,875 shares issued and outstanding at March 31, 2025 and December 31, 2024

Series I Preferred Stock - 15,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 10,466,592 and 10,469,092 issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Series L Preferred Stock - 400,000 shares authorized, $0.001 par value, stated value $ 4.00 , 319,493 shares issued and outstanding at March 31, 2025 and December 31, 2024

Series Y Senior Convertible Preferred Stock - 1,250,000 shares authorized, $0.001 par value, stated value of $ 4.00 , 990,900 and 979,125 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Common Stock;

shares authorized, $ 0.001

shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

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

15,330,275 and 15,300,475 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital

( 7,581,212 )

Accumulated deficit

( 73,645,307 )

( 72,949,085 )

Total stockholders’

Total liabilities,

mezzanine equity and stockholders’ equity

Total stockholders’ equity

Total liabilities, mezzanine equity and stockholders’ equity

The accompanying notes are an integral part of

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FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND

Three Months Ended March 31,

Ended March 31,

COST OF SALES

1 unchanged sentence

Depreciation expense

Loss on disposal of fixed assets

Share based compensation

1 unchanged sentence

Total operating expenses

INCOME FROM CONTINUING OPERATIONS

OTHER INCOME (EXPENSE)

Gain on debt refinance and forgiveness

INCOME FROM OPERATIONS

OTHER (EXPENSE) INCOME

Other expense

Penalties and fees

1 unchanged sentence

Amortization of debt discounts

Total other expenses

NET (LOSS) INCOME BEFORE DISCONTINUED OPERATIONS

Total other expense

LOSS FROM CONTINUING OPERATIONS

LOSS FROM DISCONTINUED OPERATIONS

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$ ( 450,777 )

$ ( 283,104 )

PREFERRED STOCK DIVIDENDS

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$ ( 434,738 )

BASIC LOSS PER SHARE

CONTINUING OPERATIONS

DISCONTINUED OPERATIONS

DILUTED LOSS PER SHARE

BASIC AND DILUTED LOSS PER SHARE

CONTINUING OPERATIONS

DISCONTINUED OPERATIONS

WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC

WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED

WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED

The accompanying notes are an integral part of

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIENCY)

THREE MONTHS ENDED MARCH 31, 2025 AND 2024

E, F-1, J and L

Preferred Stock Series

B, E, F-1, and L

Preferred Stock Series C

Additional Paid-In

Total Stockholders’

Stockholders’

Balance, December 31, 2024

2022 (Restated)

$ 45,792,868 –

1 unchanged sentence

$ ( 72,949,085 )

Conversion of convertible notes payable

Conversion of series B preferred stock

Conversion of series I preferred stock

Issuance of series Y preferred stock

Preferred stock Dividends

Balance, March 31, 2025

31, 2023 (Restated)

$ 45,829,968 –

1 unchanged sentence

$ ( 73,645,307 )

Preferred Stock Series

E, F-1, J and L

Preferred Stock

Additional Paid-In

Stockholders’ (Deficit)

Balance, December 31,

2023 (Restated)

Stockholders’

Balance, December 31, 2023 (Restated)

$ ( 7,581,212 )

1 unchanged sentence

Conversion of convertible notes payable

Conversion of series B preferred

Conversion of series B preferred stock

( 3,115,196 )

Conversion of series C preferred

Conversion of series I preferred

Conversion of series C preferred stock

Conversion of series I preferred stock

( 2,928,500 )

( 11,714,000 )

Conversion of series J preferred

Conversion of series J preferred stock

( 1,542,225 )

( 6,168,900 )

Issuance of series I preferred stock

Cancellation of series C preferred

Issuance of series I preferred stock to officers

Cancellation of series C preferred stock

Common stock issued for services

4 unchanged sentences

$ ( 69,118,853 )

The accompanying notes are an integral part of

these condensed consolidated financial statements

The accompanying notes are an integral part

of these condensed consolidated financial statements

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

3 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss from continuing operations

$ ( 450,777 )

$ ( 283,104 )

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

Amortization of debt discount

Provision for credit losses

Conversion and note issuance cost

Share issuance for compensations to directors and officers

Loss on disposal of assets

Interest included in line of credit

Share issuance for compensation to directors and officers

Share issuance for service rendered

Fair value settled upon conversion

Gain on forgiveness of debt

(Increase) decrease in:

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( 1,035,021 )

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

Net cash provided by discontinued operations – operating

FINANCING ACTIVITIES

Proceeds from convertible notes payable

Repayment of SBA loans

Proceeds from line of credit

Net proceeds from line of credit

Payment of note payable

Payment of dividends on preferred stock

Net cash provided by financing activities

Net cash provided by Discontinued Operations – Financing

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS, END OF PERIOD

NET (DECREASE) INCREASE IN CASH

CASH, BEGINNING OF PERIOD

CASH, END OF PERIOD

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION

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Common stock issued upon conversion of notes payable

Right of use assets acquired

Common stock issued upon conversion of preferred stock

Dividends on preferred stock, including accrued dividends on preferred stock

*For the three months ended March 31, 2025, a lease modification recorded

during the first quarter of 2025 increased right of use assets and right of use liabilities by $83,669.

For the three months ended

March 31, 2024, a lease modification recorded during the first quarter of 2024 increased right of use assets and right of use liabilities

The accompanying notes are an integral part of

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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:

All of Cardiff’s operations are predominantly conducted through, and its income derived from, its Nova Ortho and Spine, LLC (“Nova”)

Its subsidiaries include:

Nova, which was acquired on May 31, 2021;

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 10, 2023;

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

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

Principles of Consolidation

The consolidated financial statements include

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

Subsidiaries shown as discontinued operations include Platinum Tax.

All significant intercompany accounts and transactions are eliminated

in consolidation.

Subsidiaries discontinued are shown as discontinued operations.

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

All significant

intercompany accounts and transactions are eliminated in consolidation.

The loss from discontinued operations presented in the condensed

consolidated statement of operations is a part of the execution of a settlement during the three months ended March 31, 2024 that was

previously reached in July 2022 with six previous owners of Red Rock Travel Group, LLC (“Red Rock”), an entity that was discontinued

by the Company in May 2019.

Net liabilities from discontinued operations on the condensed consolidated balance sheets as of March 31,

2025 and December 31, 2024 include the residual liabilities related to the sale of Platinum Tax Defenders (“Platinum Tax”),

a business previously owned by the Company, which was sold in November 2023.

Please refer to Note 11.

Discontinued Operations for

further detail.

Reclassifications

Certain amounts and items have been reclassified

in the prior year presentation in the consolidated financial statements to conform to the current presentation in these financial statements.

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.

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

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Use of Estimates

11 unchanged sentences

and insurance providers for services provided to patients under the letter of protection.

The accounts receivable are recorded at the

expected settlement realization amount, which is less contractual adjustments and an allowance for credit losses.

The Company recognizes

an allowance for credit losses for its accounts receivable to present the net amount expected to be collected as of the balance sheet

This allowance is determined based on the history of net settlements received, where the net settlement amount is not collected.

No collection can happen 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.

Additionally, the Company considers economic factors and events or trends expected to affect future collections

The no collection history of the Company’s customers is considered in future assessments of collectability as these

patterns are established over a longer period.

The Company uses the term collection and collection rate in its disclosures to describe

the historical less than 1% occurrence of not collecting under a contract, which aligns with the Company’s credit loss accounting

under ASC 326.

The Company does not have a significant exposure

to credit losses as it has historically had a less than 1.0% loss rate where the Company received no settlement amount for its outstanding

accounts receivable.

Although possible, claims resulting in zero collection upon settlement are rare based on the Company’s historical

experience and has historically been 0.5% to 1.0% of its outstanding accounts receivable, thereby resulting in a collection rate of 99%.

Accounts receivable are recorded at the expected

settlement realization amount, which is less contractual adjustments and an allowance for credit losses.

The Company recognizes an allowance

for credit losses for its accounts receivable to present the net amount expected to be collected as of the balance sheet date.

This allowance

is determined based on the history of net settlements received, where the net settlement amount is not collected.

No collection can happen

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.

The Company monitors outstanding cases as they develop through ongoing discussions with attorneys, doctors and third-party medical billing

company and additionally monitors settlement realization rates over time.

Additionally, the Company considers economic factors and events

or trends expected to affect future collections experience.

The no collection history of the Company’s customers is considered in

future assessments of collectability as these patterns are established over a longer period.

The Company uses the term collection and

collection rate in its disclosures to describe the historical less than 1% occurrence of not collecting under a contract, which aligns

with the Company’s credit loss accounting under ASC 326.

The Company does not have a significant

exposure to credit losses as it has historically had a less than 1.0% loss rate where the Company received no settlement amount for

its outstanding accounts receivable.

Although possible, claims resulting in zero collection upon settlement are rare based on the

Company’s historical experience and has historically been less than 1.0% of its outstanding accounts receivable, thereby

resulting in a collection rate of 99%.

The Company uses the loss rate method to record its allowance for credit losses.

The Company applies the loss rate method by reviewing

its zero collection history on a regular basis and updating its estimates of credit losses to adjust for changes in loss data.

typically collects on its accounts receivable between eighteen and twenty-four months after recording.

The Company does not record an

allowance for credit losses based on an aging of its accounts receivable as the aging of the Company’s receivables do not influence

the credit loss rate due to the nature of its business and the letter of protection.

The Company does not adjust its receivables for

the effects of a significant financing component at contract inception as the timing of variable consideration is determined by the settlement,

which is outside of the Company’s control.

As of March 31, 2024 and December 31, 2023, the Company’s allowance for credit

losses was $ 122,190 .

recognized $ 270,000 of credit loss

expense during the three months ended March 31, 2023, which is included in selling, general and administrative expenses in the condensed

consolidated statement of operations.

The Company did not recognize any credit loss expense during the three months ended March 31, 2024.

applies the loss rate method by reviewing its zero collection history on a quarterly basis and updating its estimates of credit

losses to adjust for changes in loss data.

The Company typically collects on its accounts receivable between eighteen and

twenty-four months after recording.

The Company does not record an allowance for credit losses based on an aging of its accounts

receivable as the aging of the Company’s receivables do not influence the credit loss rate due to the nature of its business

and the letter of protection.

The Company does not adjust its receivables for the effects of a significant financing component at

contract inception as the timing of variable consideration is determined by the settlement, which is outside of the Company’s

As of March 31, 2025 and December 31, 2024, the Company’s allowance for credit losses was $ 249,799

and $ 255,215 ,

respectively.

As of March 31, 2024 and December 31, 2023, the Company’s allowance for credit losses was $ 122,190

for each period, respectively.

The Company recognized $ 112,727

of credit loss expense during the three months ended March 31, 2025 and 2024, respectively, which is included in selling, general

and administrative expenses in the condensed consolidated statement of operations.

The balance of accounts receivable, net as of

January 1, 2024 was $ 13,305,254 .

The following table shows the allowance for credit

losses activity:

Schedule of allowance for credit

losses activity

Balance at January 1

$ ( 255,215 )

$ ( 122,190 )

Current period provision

Write off charged against the allowance

Balance at March 31

$ ( 249,799 )

$ ( 122,190 )

Property and Equipment

10 unchanged sentences

10 years or lease term, if shorter

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

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.

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

The Company based this decision

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

Goodwill is not amortized but is evaluated for

impairment annually or when indicators of a potential impairment are present.

The Company reviews goodwill for impairment on a reporting

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

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

The annual evaluation is based on valuation models that incorporate assumptions and internal projections of expected future

cash flows and operating plans.

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

participants.

During the three months ended March 31, 2025 and 2024, the Company did no t recognize any goodwill impairment and noted there

were no such triggering events.

Valuation of Long-lived Assets

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Recognition of revenue when performance obligations are satisfied.

The Company applies the five-step model when it

is probable that the Company will settle 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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

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.

At contract inception, 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 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 net revenue

5 unchanged sentences

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

Revenue is recognized when obligations under the terms of the

contract with the Company’s patients are satisfied;

generally, at the time of patient care.

In determining net revenue to record under ASC

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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 gross charge 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.

These adjustments are considered variable consideration under ASC 606 and are deducted from

the calculated fee to arrive at the net transaction price.

The Company also estimates changes in the contract price as a result of price

concessions, changes to deductibles, co-pays and other contractual adjustments to determine the eventual settlement amount the Company

expects to receive.

The Company uses the term settlement realization in its disclosures to describe the amount of cash the company expects

to receive based on its estimate of the transaction price under the expected value method of ASC 606.

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

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

This gross charge 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.

These adjustments are considered variable consideration under

ASC 606 and are deducted from the calculated fee to arrive at the net transaction price.

The Company also estimates changes in the contract

price as a result of price concessions, changes to deductibles, co-pays and other contractual adjustments to determine the eventual settlement

amount the Company expects to receive.

The Company uses the term settlement realization in its disclosures to describe the amount of cash

the Company expects to receive based on its estimate of the transaction price under the expected value method of ASC 606.

Where appropriate, the Company utilizes the expected

value method to determine the appropriate amount for estimates of variable consideration, which is based on a historical 12-month lookback

of its actual settlement realization rates.

The estimates of reserves established for variable consideration reflect current contractual

requirements, the Company’s historical experience, specific known market events and trends, industry data and forecasted patient

data and settlement patterns.

value method to determine the appropriate amount for estimates of variable consideration, which has been based on a historical 24-month

lookback of its actual settlement realization rates.

The estimates of reserves established for variable consideration reflect current

contractual requirements, the Company’s historical experience, specific known market events and trends, industry data and forecasted

patient data and settlement patterns.

Settlement realization patterns are assessed based on actual settlements and based on expected settlement

5 unchanged sentences

The Company obtains information about expected settlement realization trends from discussions

with doctors and attorneys and its third party medical billing company, which handles settlement claims and negotiations.

Settlement amounts

are presented to the Company’s third party medical billing company.

Settlement rates of 49% or higher based on gross billed amounts

are typically accepted without further negotiation.

Proposed settlement rates below 49% are negotiated and longer negotiations typically

result in higher settlement rates.

If the Company accepts a lower settlement realization rate in order to receive payments more quickly,

the Company considers that a price concession and estimates these concessions at contract inception.

The various forms of variable consideration

described above included in the transaction price may be constrained and are included in net revenue only to the extent that it is probable

that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

The Company has not

constrained any of its estimates of variable consideration for any of the periods presented.

with doctors and attorneys and its third-party medical billing company vendor, which handles settlement claims and negotiations.

amounts are presented to the Company’s third-party medical billing company vendor.

Settlement rates of 49% or higher based on gross

billed amounts are typically accepted without further negotiation.

Proposed settlement rates below 49% are negotiated when possible and

longer negotiations typically result in higher settlement rates.

If the Company accepts a lower settlement realization rate in order to

receive payments more quickly, the Company considers that a price concession and estimates these concessions at contract inception.

various forms of variable consideration described above included in the transaction price may be constrained and are included in net revenue

only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in

a future period.

The Company has not constrained any of its estimates of variable consideration for any of the periods presented.

Service Fees – Net (PIP)

2 unchanged sentences

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

Non-PIP services.

As described above, 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 and other adjustments based on its historical settlement realization experience.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

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.

Non Personal Injury Protection (“PIP”) services.

As described above, 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 and other adjustments based on its historical settlement realization experience.

Completing the paperwork for each case and preparing it for billing takes approximately ten business days after a procedure is performed.

The majority of claims are then filed electronically except for those remaining insurance carriers requiring paper filing.

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 satisfies performance obligations

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Once the personal injury case is finalized with the insurance company, the attorney pays the outstanding medical bills from the settlement.

Prior to its fiscal year 2024, the

Company has historically had a 49% settlement realization rate from its total gross billed charges.

Accordingly, the Company has historically

recognized net healthcare service revenue as 49% of gross billed charges.

However, during the three months ended March 31, 2024, the Company

underwent efforts to accelerate cash settlements by accepting lower settlement realization rates in order to settle outstanding accounts

receivable more quickly.

As a result of the new effort, during the three months ended March 31, 2024 the Company realized a 42.9% average

settlement rate of its gross billed charges during this time frame, which were historically recorded in accounts receivable and revenue

at 49% of gross billings.

As a result of this reduced settlement realization percentage, the Company recorded a reduction to net revenue

of $ 339,834 for the three months ended March 31, 2024.

The Company will continue to reassess

its settlement realization rate in the future and incorporate changes in settlement realization in its estimate of variable consideration

due under its contracts.

See additional disclosure in Note 17.

Subsequent Events regarding the Company’s review of its settlement

realization percentage subsequent to the quarter ended March 31, 2024.

Settlement Rates

Prior to fiscal year 2024, the Company historically

realized a 49% settlement rate from total gross billed charges.

Accordingly, the Company had historically recognized net healthcare service

revenue as 49% of gross billed amounts.

During the three months ended March 31, 2024, the Company underwent efforts to accelerate cash

settlement of its accounts receivable to generate cash flow for operations.

The Company did this by shortening its settlement negotiations

with insurance companies and accepting lower settlement amounts.

Additionally, during 2024, the Company completed a thorough review of

its third-party billing data, including reviewing historical reports and new reporting methods as a part of its updated analysis.

upon this review, it was determined that a 24-month lookback period should be used in the analysis of the Company’s historical settlement

realization rates.

As a result of the new efforts to accelerate cash settlement during the three months ended March 31, 2024, the Company

realized a 42.9% average settlement rate of its gross billed charges during this time frame, which were historically recorded in accounts

receivable and revenue at 49% of gross billings.

Accordingly, the Company recorded reductions to net revenue of $ 339,834 for the three

months ended March 31, 2024.

The Company will continue to evaluate its estimate of its settlement realization rates in the future, which

will include a monthly review of the Company’s trailing 24-month historical settlement realization rate, along with estimates of

current and pending settlements through ongoing discussions with attorneys, doctors and the Company’s third-party medical billing

company in order to determine its variable consideration under ASC 606 and the net transaction price.

The Company will update its settlement

realization rate estimate used in determining its accounts receivable and revenue each quarter based on this review.

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 settled on a contingency

Prior to April 2023, these cases were sold to a factor who bears the risk of economic benefit or loss.

Generally, the sale of

these cases to a third party factor resulted in an approximate 54% reduction from the accounts receivables amounts.

After selling patient

cases to the factor, any additional funds settled by us were remitted to the factor.

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.

As a result of the Company’s eighteen

to twenty-four month settlement realization timeframe, the Company has an accrued liability resulting from the settlement of receivables

sold to the third party factors which fluctuates as settlements are made and remitted to those third party factors.

These accounts receivables

sold to these third party factors are not included in the Company’s financial statements accounts receivable balance once sold

and therefore are not part of the assessment of the net realizable value of accounts receivable.

For the three months ended March 31,

2023, the Company factored a total of $ 544,196 of its accounts receivable in exchange for cash of $ 253,750 .

The Company ceased factoring

of accounts receivable in the first quarter of 2023.

from its Non PIP related procedures, typically car accidents, and are settled on a contingency basis.

Prior to April 2023, these cases

were sold to a factor who bears the risk of economic benefit or loss.

Generally, the sale of these cases to a third-party factor resulted

in an approximate 54% reduction from the accounts receivables amounts.

After selling patient cases to the factor, any additional funds

settled by the Company were remitted to the factor.

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.

As a result of the Company’s eighteen to twenty-four month settlement

realization timeframe, the Company has an accrued liability resulting from the settlement of receivables sold to the third-party factors

which fluctuates as settlements are made and remitted to those third-party factors.

These accounts receivables sold to these third-party

factors are not included in the Company’s financial statements accounts receivable balance once sold and therefore are not part

of the assessment of the net realizable value of accounts receivable.

The Company ceased factoring of accounts receivable in the first

quarter of 2023.

Advertising Costs

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

The Company recognized advertising and marketing expense of $ 82,051

and $ 83,223 for the three

months ended March 31, 2024 and 2023, respectively.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

The Company recognized advertising and marketing expense of $ 90,169 and $ 82,051 for the for the three months ended March 31, 2025 and

2024, respectively.

Fair Value Measurements

11 unchanged sentences

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

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

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

Distinguishing Liabilities from Equity

7 unchanged sentences

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 fair value recognition provisions of section 718-10-30 of the Financial Accounting Standards Board (“FASB”) ASC.

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

5 unchanged sentences

The expense resulting from share-based payments

is recorded in the consolidated statements of operations.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

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

Income taxes are determined in accordance with

24 unchanged sentences

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.

Income available to common stockholders consists of net (loss) income

less any preferred stock dividends.

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

9 unchanged sentences

the Company is unable to continue as a going concern.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

The ability of the Company to continue as a going

6 unchanged sentences

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

In addition, increases in expenses may require cost reductions.

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

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

Recent Accounting Standards

The FASB issued ASU 2023-07 on

November 27, 2023.

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

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

circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure

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

The purpose of the amendments

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

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

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

In addition, if overall Company expenses increase, the Company may

need to implement 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.

Recently Adopted Accounting Standards

The FASB issued Accounting Standards Update (“ASU”)

2023-07, “Segment Reporting:

Improvements to Reportable Segment Disclosures” (“Topic 280”) in November 2023.

amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December

15, 2024, with early adoption permitted.

Topic 280 improves “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.” There were no

material impacts on the consolidated financial statements at adoption.

The FASB issued ASU 2020-06, “Debt—Debt

with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

81540).” The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity.

amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within that period.

The FASB also specified

that an entity must adopt the guidance as of the beginning of its annual fiscal year and is not permitted to adopt the guidance in an

interim period, other than the first interim period of their fiscal year.

ASU 2020-06 reduces the number of accounting models for convertible

debt and convertible preferred stock instruments and makes certain disclosure amendments to improve the information provided to users.

There was no impact to the consolidated financial statements at adoption.

RESTATEMENT OF FINANCIAL STATEMENTS

The Company restated its financial statements

for the three months ended March 31, 2024 as a result of a change in classification of credit loss expense to net revenue.

to the preparation of the financial statements for the three month ended March 31, 2024, the Company identified and corrected its accounting

for its credit loss expense of $339,834, which was reclassified to net revenue as variable consideration accounted for under ASC 606.

The following tables summarize the impact of the

corrections on the Company’s condensed consolidated statement of operations for the three months ended March 31, 2024.

These adjustments

has no effect on the Company’s condensed consolidated balance sheet, reported (loss) income from operations, net loss or cash used

in operating activities for the periods adjusted.

During the three months ended June 30, 2025, as part

of the Company’s ongoing enhancements to internal controls over financial reporting, a detailed review of its interest expense-related

cash flow classification was performed.

As a result, the Company restated certain amounts within the condensed consolidated statement

of cash flows for the three months ended March 31, 2025 and 2024.

These were reclassified to correct the presentation of $ 1,137,308 and

$ 152,795 of non-cash interest accrual adjustments related to the Company’s line of credit as of March 31, 2025 and 2024, respectively.

These amounts, previously presented within net proceeds from the line of credit in financing activities, are now presented within operating

This change in presentation has no impact on the Company’s condensed consolidated balance sheets, condensed consolidated

statements of operations, or total cash flows for any related period.

The following tables summarize the impact of the correction

on the Company’s condensed consolidated statement of cash flows for the periods ending March 31, 2025 and 2024.

Restatement of financial statements

Impact of correction of error

Three months ended March 31, 2025 (Unaudited)

As previously reported

For the three months ended March 31, 2024 (unaudited)

Net cash used in operating activities of continuing operations

$ ( 1,628,728 )

Selling, general and administrative

$ ( 491,420 )

During the preparation of the year ended December

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

preferred stock and the related dividend accrual.

Pursuant to ASC 250, “Accounting changes and error corrections” issued

by FASB and SAB 99 “Materiality” issued by Securities and Exchange Commission, the Company determined the impact of the error

was immaterial.

The impact of the error correction is reflected in a $274,982 increase to the mezzanine equity and offsetting decrease

to the series R convertible preferred stock and subject to possible redemption mezzanine equity line item on the consolidated balance

sheet as of March 31, 2023.

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

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

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

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

During the preparation of the three months ended

March 31, 2024 financial statements, the Company identified and corrected its classification for its all outstanding common stock amount

per par value of $0.001 with additional paid-in-capital related with a 1-for-75,000 reverse split executed on January 9, 2024.

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

On November 10, 2023, the Company sold Platinum

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

The Company presented in prior periods operating

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

March 31, 2023.

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

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

Balance sheet

Schedule of restated financial information

Net cash provided by financing activities of continuing operations

$ ( 1,137,308 )

Impact of correction of error

March 31, 2023 (Unaudited)

Three months ended March 31, 2024 (Unaudited)

As previously reported

Total liabilities

Mezzanine equity

Total stockholders' equity

Net cash used in operating activities of continuing operations

$ ( 1,187,816 )

$ ( 1,035,021 )

Net cash provided by financing activities of continuing operations

$ ( 152,795 )

Statement of operations

Impact of correction of error

Three months ended March 31, 2023 (Unaudited)

As previously reported

$ ( 154,399 )

Cost of sales

Operating expense

Income from operations

Other income (expense), net

Net loss before discontinued operations

Loss from discontinued operations

Net loss for the period

Preferred stock dividends

Three months ended March 31, 2025 (unaudited)

Net cash used in operating activities of continuing operations

$ (1,628,728 )

Net cash provided by financing activities of continuing operations

$ (1,137,308 )

Net loss attributable to common shareholders

The Company restated its financial statements

for the three months ended March 31, 2024 as a result of a change in classification of credit loss expense to net revenue.

to the preparation of the financial statements for the three months ended March 31, 2024, the Company identified and corrected its accounting

for its credit loss expense of $ 339,834 , which was reclassified to net revenue as variable consideration accounted for under ASC 606.

The following table summarizes the impact of

the correction on the Company’s condensed consolidated statement of operations for the three months ended March 31, 2024.

adjustment had no effect on the Company’s condensed consolidated balance sheet, reported loss from operations, net loss, or cash

used in operating activities for the period adjusted.

Schedule of restated financial information

Impact of correction of error

As previously reported

For the three months ended March 31, 2024 (unaudited)

$ ( 339,834 )

Selling, general and administrative

$ ( 339,834 )

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

5 unchanged sentences

Accrued liability for settlements of previously factored receivables

Accrued property taxes

Accrued income and property taxes

Accrued professional fees

Accrued payroll

The Company is delinquent paying certain property

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

Accrued board fees

Accrued expense – dividend payable

Accrued public company fees

Accrued payroll and bonuses

Accrued expense – medical procedures

PLANT AND EQUIPMENT, NET

11 unchanged sentences

For the three months ended March 31, 2025 and

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

2024, depreciation expense was $ 3,365 .

At March 31, 2025, the Company identified assets that were no longer functional in its medical

As such, the Company has recorded a reduction in medical equipment and the related depreciation which resulted in a loss from

the disposal of $ 12,593 in the condensed consolidated statement of operations for the three months ended March 31, 2025.

As of March 31, 2025 and December 31, 2024, the

3 unchanged sentences

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 March 31, 2024 and December 31, 2023.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

The Company obtained short-term advances from

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

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

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

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

See also Note 8 and the disclosure regarding Note

See also Note 13 for compensation paid to employees

of the Company.

on July 16, 2014, the Company assumed amounts due from 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 is $ 4,979 due from the previous owners as of March 31, 2025 and December

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.

In August of 2024, the remaining outstanding principal and interest of $ 5,501 was paid in full.

See also Note 7.

Notes and Loans Payable .

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

stock ranked, 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

6 unchanged sentences

preferred stock, as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Dividend Rights .

The holders of series

R convertible preferred stock are entitled to receive cumulative dividends in the amount of twelve percent (12%) per annum, payable quarterly.

In addition, holders of series R convertible preferred stock are entitled to receive dividends equal (on an as converted to common stock

R convertible preferred stock were 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 were entitled to receive dividends equal (on an as converted to common stock

basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares

of common stock.

Any dividends that are not paid when due shall continue to accrue and shall entail a late fee, which must be paid in

cash, at the rate of 18% per annum or the lesser rate permitted by applicable law which shall accrue and compound daily from the missed

payment date through and including the date of actual payment in full.

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

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

Any dividends that were not paid when due were to continue to accrue and entailed 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 was to accrue and compound daily from the missed payment

date through and including the date of actual payment in full.

There were no cumulative dividends at December 31, 2024.

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.

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

to receive out of the assets, whether capital or surplus, of the Company an amount equal to the stated value ($1,200), plus any accrued

and unpaid dividends thereon and any other fees or liquidated damages then due and owing, for each share of series R convertible preferred

stock before any distribution or payment shall be made to the holders of any junior securities.

Voting Rights .

The holders of series R

convertible preferred stock will vote together with the common stock on an as-converted basis.

However, as long as any shares of series

R convertible preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the

convertible preferred stock voted together with the common stock on an as-converted basis.

However, as long as any shares of series R

convertible preferred stock were 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,

6 unchanged sentences

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

Each share of series

R convertible preferred stock was 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.

4 unchanged sentences

The conversion

price is subject to adjustment for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately

price was 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.

for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), the holder could have elected,

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

exceptions, upon a Subsequent Financing, a holder of at least 100 shares of series R convertible preferred stock were to have the right

to participate in up to an amount of the Subsequent Financing equal to 100% of the Subsequent Financing on the same terms, conditions

and price provided for in the Subsequent Financing.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Company Redemption Rights .

has the right to redeem all (but not less than all), shares of the series R convertible preferred stock issued and outstanding at any

had 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

8 unchanged sentences

Redemption Upon Triggering Events .

the occurrence of a Triggering Event (as defined below), each holder of series R convertible preferred stock shall (in addition to all

other rights it may have) have the right, exercisable at the sole option of such holder, to require the Company to (A) redeem all of the

series R convertible preferred stock then held by such holder for a redemption price, in cash, equal to the Triggering Redemption Amount

(as defined below), or (B) at the option of each holder either (i) redeem all of the series R convertible preferred stock then held by

such holder though the issuance to such holder of such number of shares of common stock equal to the quotient of (x) the Triggering Redemption

Amount, divided by (y) the lowest of (1) the conversion price, and (2) 75% of the average of the 10 VWAPs immediately prior to the date

of election, or (ii) increase the dividend rate on all of the outstanding series R convertible preferred stock held by such holder retroactively

to the initial issuance date to 18% per annum thereafter.

“Triggering Redemption Amount” means, for each share of series R

convertible preferred stock, the sum of (a) the greater of (i) 130% of the stated value and (ii) the product of (y) the VWAP on the trading

day immediately preceding the date of the Triggering Event, multiplied by (z) the stated value divided by the then applicable conversion

price, (b) all accrued but unpaid dividends thereon and (c) all liquidated damages, late fees and other costs, expenses or amounts due

in respect of the series R convertible preferred stock including, but not limited to legal fees and expenses of legal counsel to the holder

in connection with, related to and/or arising out of a Triggering Event.

A “Triggering Event” means any of the following events

(whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant

to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

· the Company shall fail to deliver the shares of common stock issuable upon a conversion prior to the fifth

(5 th ) trading day after such shares are required to be delivered, or the Company shall provide written notice to any holder,

including by way of public announcement, at any time, of its intention not to comply with requests for conversion of any shares of series

R convertible preferred stock in accordance with the terms of the certificate of designation;

· the Company shall fail for any reason to pay in full the amount of cash due pursuant to a Buy-In (as defined

in the certificate of designation) within five (5) trading days after notice therefor is delivered;

· the Company shall fail to have available a sufficient number of authorized and unreserved shares of common

stock to issue to such holder upon a conversion;

· unless specifically addressed elsewhere in the certificate of designation as a Triggering Event, the Company

shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of the Transaction

Documents (as defined in the certificate of designation), and such failure or breach shall not, if subject to the possibility of a cure

by the Company, have been cured within five (5) calendar days after the date on which written notice of such failure or breach shall have

been delivered;

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

the occurrence of a Triggering Event (as defined below), each holder of series R convertible preferred stock had (in addition to all other

rights it may 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 therefore 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;

1 unchanged sentence

there shall have occurred a Bankruptcy Event (as defined in the certificate of designation);

· any monetary judgment, writ or similar final process shall be entered or filed against the Company, any

subsidiary or any of their respective property or other assets for more than $50,000 (provided that amounts covered by the Company’s

insurance policies are not counted toward this $50,000 threshold), and such judgment, writ or similar final process shall remain unvacated,

unbonded or unstayed for a period of thirty (30) trading days;

· the electronic transfer by the Company of shares of common stock through the Depository Trust Company

or another established clearing corporation once established subsequent to the date of the certificate of designation is no longer available

or is subject to a ‘freeze” and/or “chill;” or

· any “Event of Default,” as defined in the Purchase Agreement (as defined in the certificate

of designation).

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

11 unchanged sentences

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

shall increase by 5% per annum.

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

Dividends shall

be payable quarterly in arrears on each dividend payment date.

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

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

was to increase by 5% per annum.

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

Dividends are payable

quarterly in arrears on each dividend payment date.

For the three months ended March 31, 2025, cumulative dividends earned on the series

X senior convertible preferred stock were $ 38,880 .

The cumulative accrued dividends as of March 31, 2025 were paid by the Company via

the issuance of 9,720 shares of series X senior convertible preferred stock.

Liquidation Rights.

2 unchanged sentences

(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

or distribution of the assets of the Company (whether capital or surplus) are to 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.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

stock is 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

Voting Rights .

4 unchanged sentences

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

is 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 does not apply to any financing transaction the use of proceeds of which were to be used to redeem the series

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

3 unchanged sentences

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

Each share of series

X senior convertible preferred stock, plus all accrued and unpaid dividends thereon, are 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

12 unchanged sentences

upon not less than sixty-one (61) days’ prior notice to the Company.

Redemption Rights .

Commencing on September

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

17 unchanged sentences

and other liabilities with respect to assets available to satisfy claims against the Company.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Dividend Rights.

51 unchanged sentences

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Voting Rights .

29 unchanged sentences

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).

of any stock splits, stock combinations, stock dividends, stock reclassifications and similar events.

Redemption Rights .

24 unchanged sentences

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Voting Rights .

28 unchanged sentences

Such conversion

price is subject to standard adjustments in the event of any stock dividends, stock reclassifications and similar events (but not for

reverse stock splits).

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

and similar events.

Redemption Rights .

18 unchanged sentences

paid on shares of series E preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Liquidation Rights .

35 unchanged sentences

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).

of any stock splits, stock combinations, stock dividends, stock reclassifications and similar events.

Series F-1 Preferred Stock

15 unchanged sentences

paid on shares of series F-1 preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Liquidation Rights .

53 unchanged sentences

paid on shares of series I preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Liquidation Rights .

35 unchanged sentences

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).

of any stock splits, stock combinations, stock dividends, stock reclassifications and similar events.

Redemption Rights .

18 unchanged sentences

paid on shares of series J preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Liquidation Rights .

56 unchanged sentences

paid on shares of series L preferred stock.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Liquidation Rights .

39 unchanged sentences

preferred stock do not have any redemption rights.

Series Y Senior Preferred Stock

On May 15, 2024, in conjunction with the exchange

of certain senior secured convertible promissory notes, 938,908 shares of series Y preferred senior convertible preferred stock were issued

with an aggregate value of $ 3,755,632 .

The series Y 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 series of preferred stock, and to each other class or series that is not expressly made senior to or on parity with the

series Y senior convertible preferred stock;

(ii) on parity with each class or series that is not expressly subordinated or made senior

to the series Y senior convertible preferred stock;

and (iii) junior to each class or series that is expressly made senior to the series

Y senior convertible preferred stock.

Dividend Rights .

Holders of series Y 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 Y 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 and may be paid in cash or common stock at our discretion;

provided that

the Company may only pay dividends in common stock if such common stock is free-trading, freely transferable, and does not contain a legend

(or be subject to stop transfer or similar instructions) restricting the resale or transferability thereof.

Dividends payable in common

stock shall be calculated based on a price equal to eighty percent (80%) of the VWAP during the five (5) trading days immediately prior

to the applicable payment date.

For the three months ended March 31, 2025, cumulative dividends earned on the series Y senior convertible

preferred stock were $ 97,487 .

The cumulative accrued dividends as of March 31, 2025, were paid by the Company via the issuance of 11,775

shares of series Y senior convertible preferred stock and $ 50,000 in cash.

At March 31, 2025, the total dividends payable was $ 32,578 .

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 event (as defined in the certificate of designation), 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 Y senior convertible preferred stock shall be entitled to receive an amount

of cash equal to the greater of (i) 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 or (ii) such

amount per share as would have been payable had all shares of series Y senior convertible preferred stock been converted into common stock

immediately prior to such liquidation event.

Voting Rights .

Holders of series Y senior

convertible preferred stock do not have any voting rights;

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

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

must include Leonite Capital LLC so long as it holds any shares of series Y 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, prior to the Company’s issuance of additional shares of series Y senior convertible preferred stock or prior to

the creation or issuance of any securities that are not subordinate to the series Y senior convertible preferred stock 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 Y senior convertible preferred stock in full.

Conversion Rights .

Commencing on the first

anniversary of the date on which the Company’s common stock begins trading on the Nasdaq Stock Market, each share of series Y 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 lowest

VWAP during the five (5) trading days immediately prior to the applicable conversion date.

Such conversion price is subject to adjustment

if the Company issues common stock at a price lower than such conversion price, subject to certain exceptions.

Notwithstanding the foregoing,

in no event shall the holder of any series Y 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 Y 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.

Preferred Stock Transactions

1 unchanged sentence

the Company executed the following transactions:

An aggregate of 12,400 shares of series B preferred stock were converted into an aggregate of 24,800 shares of common stock.

An aggregate of 2,500 shares of series I preferred stock were converted into an aggregate of 5,000 shares of common stock.

An aggregate of 11,775 shares of series Y senior convertible preferred stock were issued with an aggregate value of $ 47,100 .

An aggregate of 27,271 shares of series N senior convertible preferred stock were issued with an aggregate value of $ 109,081 .

An aggregate of 9,720 shares of series X senior convertible preferred stock were issued with an aggregate value of $ 38,880 .

During the three months ended March 31, 2024,

the Company executed the following transactions:

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

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

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

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

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

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

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

In connection with these aforementioned shares issuances

Thompson, the Chairman of the Board, and Alex Cunningham, the Company’s Chief Executive Officer, for $ 250,000 bonus compensation for the fiscal year of 2023, at the fair value of $4.48 per share.

On January 31, 2024, the Company issued 5,000 shares of series I preferred stock to Matthew Shafer, the Company’s Chief Financial Officer, for $ 20,000 , at the fair value of $4.48 per share.

On January 31, 2024, the Company issued 2,500 shares of series I preferred stock to Zia Choe, the Company’s Chief Accounting Officer, for $ 10,000 , at the fair value of $4.48 per share.

An aggregate of 778,799 shares of series B preferred stock were converted into an aggregate of 1,557,598 shares of common stock.

An aggregate of 22 shares of series C preferred stock were converted into an aggregate of 220,000 shares of common stock.

An aggregate of 2,928,500 shares of series I preferred stock were converted into an aggregate of 5,857,000 shares of common stock.

An aggregate of 1,542,225 shares of series J preferred stock were converted into an aggregate of 3,084,450 shares of common stock.

2 shares of series C preferred stock were cancelled, which were issued erroneously.

In connection with the aforementioned share issuances

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

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

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

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

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

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

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

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

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

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

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

were issued erroneously.

The Company had no preferred stock transactions

During the three months ended March 31, 2025,

During the three months ended March 31, 2024,

the Company executed the following transactions:

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

of certain convertible notes.

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

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

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

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

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

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

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

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

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

shares of common stock to an investor relation service provider.

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

shares at $ 1.55

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

in the consolidated statement of operations.

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

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

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

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

aggregate of 37,104

shares of common stock to six previous owners.

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

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

in the consolidated statement of operations.

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

of certain convertible notes.

there were no additional issuances of common stock except from the conversions of preferred stock noted above.

During the three months ended March 31, 2024, in addition to the conversions

of preferred stock noted above, the Company issued common stock as part of the following transactions:

Company issued 1,222 shares of common stock upon conversion of certain convertible notes.

February 2024, as part of the Red Rock settlement executed in July 2022, the Company issued an aggregate of 37,104 shares of

common stock to six previous owners.

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

the closing market price of February 4 through February 6, 2024, and recorded share loss from discontinued operations of $ 111,312 in

the consolidated statement of operations.

March 5, 2024, the Company issued 7,500 shares of common stock to an investor relation service provider.

The Company recognized the fair

value for the issuance of the 7,500 shares at $ 1.55 per share on the closing market price of March 5, 2024 and recorded selling, general

and administrative expense of $ 11,617 in the consolidated statement of operations.

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

The Company recognized the fair

value for the issuance of 30,000 shares at $ 6.50 per share on the closing market price of March 26, 2024 and recorded share-based compensation

expense of $ 195,000 in the consolidated statement of operations.

The table below sets forth warrant activity during

7 unchanged sentences

Warrants Exercisable at March 31, 2024

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

DISCONTINUED OPERATIONS

On November 10, 2023, the Company sold Platinum

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

Through this subsidiary the Company provided fee-based

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

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

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

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

In February 2024, as part of the Red Rock settlement

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

shares of common stock to six previous owners.

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

Net liabilities from discontinued operations

on the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024 include residual liabilities related to the

sale of Platinum Tax which was sold in November 2023.

The loss from discontinued operations presented in the condensed consolidated

statement of operations for the three months ended March 31, 2024 is a part of the execution of a settlement reached in July 2022

with six previous owners of Red Rock, an entity that was discontinued by the Company in May 2019.

As a result, the Company

recognized the fair value for the issuance of 37,104

shares at $ 3

15 unchanged sentences

Interest expense

Settlement loss

Loss on settlement

Loss from discontinued operations

$ ( 111,312 )

GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET

The Company reviews goodwill for impairment on

1 unchanged sentence

During the three months ended March 31, 2025 and 2024, the Company determined there to be no impairment.

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

COMMITMENTS AND CONTINGENCIES

ASC 842, “Leases”, requires that a

lessee recognize the assets and liabilities that arise from operating leases, A lessee should recognize in the statement of financial

lessee recognize the assets and liabilities that arise from operating leases.

A lessee should recognize in the statement of financial

position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying

2 unchanged sentences

class of underlying asset not to recognize lease assets and lease liabilities.

In transaction, lessees and lessors are required to recognize

and measure leases at either the effective date (the “effective date method”) or the beginning of the earliest period presented

(the “comparative method”) using a modified retrospective approach.

Under the effective date method, the Company’s comparative

period reporting is unchanged.

In contrast, under the comparative method, the Company’s date of initial application is the beginning

of the earliest comparative period presented, and the Topic 842 transition guidance is then applied to all comparative periods presented.

Further, under either transition method, the standard includes certain practical expedients intended to ease the burden of adoption.

Company adopted ASC 842, January 1, 2020, using the effective date method and elected certain practical expedients allowing the Company

not to reassess:

· whether expired or existing contracts contain

leases under the new definition of a lease;

· lease classification for expired or existing

The Company adopted ASC 842, January 1, 2020, using the

effective date method and elected certain practical expedients allowing the Company not to reassess:

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

lease classification for expired or existing leases;

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

1 unchanged sentence

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

The Company leases eleven medical facilities and

The Company leases twelve medical facilities and

one vehicle as operating leases as of March 31, 2025.

1 unchanged sentence

months ended March 31, 2025 and 2024, respectively.

The Company has operating leases with future

commitments as follows:

Schedule of operating leases

2024 (remainder of year)

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

The Company has operating leases with future commitments

Schedule of operating leases with future commitments

April 2025 – March 2026

April 2026 – March 2027

April 2027 – March 2028

Total Future Undiscounted Lease Payments

Less imputed interest

Total lease obligations

The following table summarizes supplemental information

about the Company’s leases:

Schedule of supplemental information

Schedule of supplemental information about the Company’s leases

Weighted-average remaining lease term

Weighted-average discount rate

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

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

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

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

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

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

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

Effective January 1, 2025, the Company entered

into an employment agreement with Alex Cunningham, the Company’s President and Chief Executive Officer.

Pursuant to the employment

agreement, Mr.

Cunningham is entitled to an initial base salary of $ 885,000 per year and is eligible for an annual bonus.

The base salary

shall be increased by a minimum of 10% per year beginning on January 1, 2026.

Cunningham’s base salary shall be automatically

and permanently increased by $100,000 upon the successful acquisition of certain companies in 2025.

His base salary will also be automatically

and permanently increased by $100,000 following the Company’s successful listing on Nasdaq and a corresponding $4 million dollar

capital raise beginning the month after the uplisting and commensurate close of the equity raise.

Cunningham is entitled to a one-time

performance bonus of $100,000 following the Company’s successful listing on Nasdaq with a corresponding $4 million dollar capital

Cunningham shall also earn a one-time performance bonus of $100,000 following each future successful acquisition.

that the Company is unable to pay his base salary or bonus in dollars, a portion of, or all compensation due to Mr.

Cunningham, may be

converted to a promissory note bearing an annual interest rate of 5.00% with interest to be paid quarterly.

In addition, effective as

of January 1, 2025, all past due amounts owed to Mr.

Cunningham shall earn interest at a rate of 5% with interest paid quarterly.

the year ended December 31, 2024, the Company agreed to pay $360,000 per year and $250,000 of targeted annual incentives to Mr.

based on his prior employment agreement and its related amendments since July 1, 2020, of which 75% was being paid in cash and 25% was

accrued as of December 31, 2024.

The total outstanding accrued compensation as of March 31, 2025 and December 31, 2024 was $ 2,215,500 .

and $ 2,350,500 , respectively.

The Company agreed to pay $ 228,000

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

outstanding accrued compensation as of March 31, 2024.

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

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

There was no outstanding accrued compensation as

of March 31, 2024.

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

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

The total outstanding accrued

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

The total interest accrued for the three months ended March 31, 2025 was $ 27,314 .

Effective July 15, 2020, the Company entered into

an employment agreement with Daniel Thompson, the Company’s Chairman, which was amended January 1, 2025.

Pursuant to the employment

agreement, Mr.

Thompson is entitled to a base salary of $ 360,000 per year through 2024 and $ 700,000 for calendar year 2025.

is eligible for an incentive annual bonus, for a one-time performance bonus of $200,000 following the Company’s successful listing

on Nasdaq with a corresponding $4 million dollar capital raise and for a one-time performance bonus of $250,000 upon the successful closing

of any acquisition in 2025.

Through calendar year 2024, Mr.

Thompson was also eligible to receive compensation in shares of preferred

stock in the event that the Company was unable to pay his base salary in dollars.

For calendar year 2025, in the event that the Company

is unable to pay his base salary or bonus in dollars, a portion of or all compensation due to Mr.

Thompson may be converted to a promissory

note bearing an annual interest rate of 5.00% with interest to be paid quarterly.

In addition, effective as of January 1, 2025, all past

due amounts owed to Mr.

Thompson shall earn interest at a rate of 5% with interest paid quarterly.

For the year ended December 31, 2024,

the Company agreed to pay $360,000 per year and $250,000 of targeted annual incentives to the Mr.

Thompson based on his employment agreement

and its related amendments since July 15, 2020, of which 56% was paid in cash and 44% was accrued at December 31, 2024.

The total outstanding

accrued compensation as of March 31, 2025 and December 31, 2024 was $ 2,320,500 .

The total interest paid for the three months ended March

31, 2025 was $ 28,609 .

On January 2, 2024, the Company entered into an

employment agreement with Matthew T.

Shafer, the Company’s Chief Financial Officer.

Pursuant to the employment agreement, Mr.

is entitled to an annual base salary of $ 228,000 , which may be increased from time to time;

provided that the base salary shall increase

by a minimum of 10% after each of the first two years of service.

Accordingly, Mr.

Shafer’s base salary was increased to $250,800

effective as of January 1, 2025.

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.

There was no outstanding

accrued compensation as of March 31, 2025 and December 31, 2024.

The Company entered into a management agreement

4 unchanged sentences

performance goals as set forth below.

Schedule of annual objectives of financial

The Company did not record an accrual for the bonus for the three months ended March 31, 2025 and

the year ended December 31, 2024, as the financial performance objectives were not expected to be met.

Schedule of annual objectives of financial performance goals

Minimum Annual Nova EBITDA

6 unchanged sentences

210,000 Shares

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

LEGAL PROCEEDINGS

8 unchanged sentences

state net operating loss carry forwards of approximately $ 21.2 million that expire in various years through the year 2040.

Due to carryforwards

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

Deferred income taxes reflect the net tax effects of temporary differences

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

tax purposes.

The Company has a deferred tax asset that

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

Because of the Company’s lack

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

Due to current

period losses and carryforwards of past net operating losses, there is no provision for current federal or state income taxes for the

three months ended March 31, 2025 and 2024.

Deferred income taxes reflect the net tax effects

of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for

federal and state income tax purposes.

The Company has a deferred tax asset that consists of net operating loss carry forwards calculated

using federal and state effective tax rates.

Because of the Company’s lack of past earnings history, the deferred tax asset has

been fully offset by a valuation allowance.

SEGMENT REPORTING

6 unchanged sentences

the nature of the products and services sold.

Corporate administration costs, which include, but are not limited to, general accounting,

human resources, legal and credit and collections, are partially allocated to the three operating segments.

Other revenue consists of

nonrecurring items.

Their operating results are regularly reviewed by the Company’s chief operating decision

maker group, which consists of the Chairman of the Board, the Chief Executive Officer and the Chief Financial Officer.

Corporate administration

costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated

to the two operating segments.

The healthcare segment provides a full range of

5 unchanged sentences

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

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

Management uses numerous tools and methods to

evaluate and measure of its subsidiaries’ success.

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

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

Additionally, management monitors key metrics primarily revenues and net income

from operations.

Schedule of revenues and net income

from operations

The accounting policies of the segments are the

same as those described in Note 1.

Summary of Significant Accounting Policies.

Management uses revenues, cost of sales, operating

expenses, income (loss) from subsidiaries and income (loss) before taxes to evaluate and measure its subsidiaries’ success.

the segments achieve optimal operating performance, management retains the prior owners of the subsidiaries and allows them to do what

they do best, which is run the business.

Additionally, management monitors key metrics primarily revenues and income from operations in

order to allocate resources accordingly.

Schedule of revenues and net income from operations

March 31, 2025

December 31, 2024

Corporate, administration and other

Consolidated assets

3 unchanged sentences

Consolidated cost of sales

Income from operations from subsidiaries

Operating Expenses:

Depreciation expense

Loss on disposal of fixed assets

Selling, general and administrative

Total Healthcare

Corporate, administration and other expenses (a)

Consolidated operating expenses

Income (loss) from operations from subsidiaries:

Income from operations from subsidiaries

Loss from operations from Cardiff Lexington

Total income from operations

Income (loss) before taxes

Corporate, administration and other non-operating expenses (b)

( 1,892,751 )

( 1,322,202 )

Total income from operations

Income before taxes

Corporate, administration and other non-operating expenses

Consolidated loss before taxes

$ ( 450,777 )

Consolidated income (loss) before taxes

$ ( 171,792 )

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024 AND 2023

(a) Corporate, administration and other operating expenses includes

payroll, management fees, stock compensation, legal fees, accounting fees and public company/investor relations fees.

(b) Corporate, administration and other non-operating expenses includes

corporate selling, general and administrative expenses such as noted above as well as interest, amortization of notes payable discount

and gain on settlement of debt.

SUBSEQUENT EVENTS

2 unchanged sentences

events and transactions required disclosure in these consolidated financial statements.

On May 8, 2024, the Company filed the amendment

of Articles of Incorporation.

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

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

Subsequent to March 31, 2025, an aggregate of

391,500 shares of series I preferred stock were exchanged for an aggregate of 300,000 shares of series B preferred stock, 6 shares of

series C preferred stock and 54,000 shares of series E preferred stock.

Subsequent to March 31, 2025, an aggregate of

1,567,467 shares of series B preferred stock were converted into an aggregate of 3,134,936 shares of common stock.

Following such conversions,

no shares of series B preferred stock remain outstanding.

Subsequent to March 31, 2025, an aggregate of

80 shares of series C preferred stock were converted into an aggregate of 800,000 shares of common stock.

Following such conversions,

no shares of series C preferred stock remain outstanding.

Subsequent to March 31, 2025, an aggregate of

229,375 shares of series E preferred stock were converted into an aggregate of 458,750 shares of common stock.

Subsequent to March 31, 2024, an aggregate of

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

Subsequent to March 31, 2024, an aggregate of

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

Subsequent to June 30, 2024, the Company identified

a reduction in the settlement realization rate of its gross contractual billings as a result of increasing its lookback period and refreshing

its data obtained from its third party billing company.

The Company completed a thorough review of its third party billing data, including

reviewing historical reports and new reporting methods as a part of its updated analysis.

Based on the new data analysis of its historical

settlement realization rates, using a 24-month lookback analysis the Company determined its estimate of its settlement realization rate

was reduced from 49% to 44.2%.

The Company applied this reduced settlement realization rate against its accounts receivable balance resulting

in a $1.7 million reduction in its accounts receivable and revenue in the third quarter 2024.

The Company will continue to evaluate its

estimate of its settlement realization rates in the future, which will include a monthly review of the Company’s trailing 24-month

historical settlement realization rate, along with estimates of current and pending settlements through ongoing discussions with attorneys,

doctors and the Company’s third party medical billing company in order to determine its variable consideration under ASC 606 and

the net transaction price.

Following such conversions,

no shares of series E preferred stock remain outstanding.

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

What changed 10-Q/A

Item 1. Financial Statements