CDIX filing — read by section

Item 9A. Controls and Procedures

ITEM 9A. 
 CONTROLS AND PROCEDURES. 

 Evaluation of Disclosure Controls and Procedures 

 We maintain disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed
to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated
to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding
required disclosure.

 As required by Rule 13a-15(e) of the Exchange
Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and
chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of December 31,
2025. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that our disclosure
controls and procedures were effective.

 Management’s Annual Report on Internal
Control over Financial Reporting 

 Our management is responsible for establishing
and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting refers to
the process designed by, or under the supervision of, our principal executive officer and principal financial and accounting officer,
and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of
our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those
policies and procedures that:

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

 (2) 
 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and 

 (3) 
 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. 

 Our management evaluated the effectiveness of
our internal control over financial reporting as of December 31, 2025. In making this evaluation, management used the framework established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The
COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment,
(ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on our evaluation, we determined
that, as of December 31, 2025, our internal control over financial reporting was effective.

 51 

 We reinforce both the importance of effective
controls through ongoing communication with staff across the organization and compensating controls and oversight controls to improve
the design of the current process with limited human resources on an ongoing basis to ensure a culture of awareness towards a strengthened
internal control environment.

 We believe designing and implementing effective
disclosure controls and procedures is a continuous ongoing effort that requires us to anticipate and react to changes in our business
and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately
satisfies our reporting obligations. As such, there can be no assurance a material weakness in our disclosure controls and procedures
may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed
to taking appropriate steps for remediation, as needed when needed.

 Changes in Internal Controls over Financial
Reporting 

 In connection with the preparation of our financial
statements for the quarter ended June 30, 2025, management identified a classification error in the presentation of noncash interest expense
within the consolidated statements of cash flows, which resulted in the restatement of certain prior-period financial statements presented
in this report. While this classification error did not result in a material weakness in internal control over financial reporting, we
have further enhanced our review procedures for the statement of cash flows, including additional cross-checks between the disclosure
checklist, supporting schedules, and the general ledger.

 We regularly review our system of internal control
over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that
we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems,
consolidating activities, and migrating processes.

 Remediation of Previously Reported Material
Weakness in Internal Control over Financial Reporting 

 As originally described in our Annual Report on
Form 10-K for the year ended December 31, 2024, we identified material weakness in internal control over financial reporting and have
devoted substantial resources to the implementation of remediation efforts as described below. During the fourth quarter of 2025, we successfully
completed our assessment and evaluation to conclude that, as of December 31, 2025, the previously identified material weaknesses noted
below have been remediated.

 Remediated material weakness:

 · 
 We had not developed and effectively communicated to our employees our accounting policies and procedure, which had resulted in inconsistent practices. 

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

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

 · 
 We lacked sufficient process, systems and access to technical accounting resources to enable appropriate accounting for and reporting on complex and/or non-routine debt and equity financing transactions including accounting for derivatives, convertible debt, preferred stock. 

 52 

 In order to cure this material weakness, we have
completed the implementation of significant new and enhanced processes, policies and procedures to our control environment, which we believe
address both the identified material weakness and strengthens our overall financial control environment, including the following completed
remediation measures:

 · 
 
 We made strategic
hiring decisions and provided, and will continue to provide, technical training to our financial team, and other relevant operations
personnel, on appropriate GAAP accounting guidelines applicable to financial reporting requirements and internal controls and operating
procedures. 
 
 · 
 We implemented consistent application of new and existing policies and procedures across the organization that address technical, financial
 and operational controls and the forgoing weaknesses identified. We have developed and formally approved accounting policies and procedures
 aligned with applicable standards and clearly define roles, responsibilities, and standardized workflows. These policies and procedures
 have been communicated to all relevant staff and shared ongoing, and have been embedded into daily operation, system-based controls, and
 month-end checklists. Compliance is monitored through periodic and multiple level reviews, with deviations corrected immediately through
 root cause analysis, targeted retraining and process updates, ensuring consistent accounting practices and a strengthened internal control
 environment. 

 · 
 We implemented high quality proper documentation procedures for key functional areas, control objectives and workflows. We significantly
 improved and continuously enhance processes, routine and non-routine, debt and equity financing transactions including accounting for
 derivatives, convertible debt, preferred stock, and on occasion management has hired external experts to augment technical and valuation
 work in order to ensure technical accuracy and timeliness. On an ongoing basis we assess processes to ensure workflows encompass segregation
 of duties as well as oversight of secondary independent reviews. 

 We reinforce both the importance of effective
controls through ongoing communication with staff across the organization and compensating controls and oversight controls in order to
improve the design of the current process with limited human resources on an ongoing basis to ensure a culture of awareness towards a
strengthened internal control environment. 

 Based on the results of our assessment and evaluation
of these new and enhanced controls, we have determined that the updated controls and procedures are effective as of December 31, 2025.
As a result, we believe these material weaknesses have been remediated. We believe designing and implementing an effective disclosure
controls and procedures is a continuous ongoing effort that requires us to anticipate and react to changes in our business and the economic
and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our
reporting obligations. As such, however, there can be no assurance a material weakness in our disclosure controls and procedures may be
identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to
taking appropriate steps for remediation, as needed when needed. The remedial measures that we have taken have addressed the material
weaknesses that were identified.

 Except for the matters described above, there
have been no changes in our internal control over financial reporting during the fourth quarter of fiscal year 2025 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 53 

 ITEM 9B. 
 OTHER INFORMATION. 

 On December 21, 2025, in connection with bonuses
earned by certain employees, we issued promissory notes in the aggregate principal amount of $1,085,703 (representing bonuses earned of
$593,450 and $492,253 for the years ended December 31, 2025 and 2024, respectively), in lieu of cash payment, including a promissory note
in the principal amount of $460,000 to Alex Cunningham, our Chairman and Chief Executive Officer, a promissory note in the principal amount
of $122,550 to Matthew T. Shafer, our Chief Financial Officer, and a promissory note in the principal amount of $460,000 to Daniel Thompson,
our Chairman at such time. These notes bear interest of 5% per annum and mature on June 30, 2026.

 Except for the foregoing, we have no information
to disclose that was required to be in a report on Form 8-K during the fourth quarter of fiscal year 2025 but was not reported.

 None of our directors or executive
officers adopted 
or terminated 
a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the
fourth quarter of fiscal year 2025.

 ITEM 9C. 
 DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. 

 Not applicable.

 54 

 PART III 

 ITEM 10. 
 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. 

 Directors and Executive Officers 

 The following sets forth information about our
directors and executive officers as of the date of this report.

 Name 
 
 Age 
 
 Position 

 Alex Cunningham 
 
 70 
 
 Chairman, Chief Executive Officer and President 

 Matthew T. Shafer 
 
 55 
 
 Senior Vice President and Chief Financial Officer 

 Gillard B. Johnson, III 
 
 77 
 
 Director 

 Cathy Pennington 
 
 67 
 
 Director 

 L. Jack Staley 
 
 79 
 
 Director 

 Alex
Cunningham . Mr. Cunningham has been our Chief Executive Officer and President and has served on our board of directors since June
2015 and was appointed as Chairman in December 2025. Prior to joining us, Mr. Cunningham founded Francnsult, Inc., a business development
company representing franchise operations, where he was in charge of identifying prospects for franchising, mergers, and acquisitions,
and was the managing partner at AH Cunningham & Associates, LLC, a firm which provided financial and operational consulting services
to owners of small and medium-sized businesses, EB-5 immigrant investors, passive investment, franchise owners, and franchisors. Prior
to his employment at Francnsult, Inc. and AH Cunningham & Associates, Mr. Cunningham was the president and chief executive officer
of Profit Management Consulting, a management consulting company that assisted in the management of private and closely held middle-market
companies, from 1996 to 2005. From 1991 to 1996, Mr. Cunningham was a partner at London Capital Corporation, a company which provides
merger and acquisition services to small and medium-sized businesses. Mr. Cunningham received a BBA-Finance and Administration at the
University of Kentucky and an MBA from Rollins College. We believe Cunningham is well suited to serve as a director because of his previous
business management, financial, and merger and acquisition experience. 

 Matthew T. Shafer . Mr. Shafer has
been our Senior Vice President and Chief Financial Officer since January 2024. Prior to joining us, Mr. Shafer served
as strategic executive engagement consultant and advisor for the chief financial officer and chief accounting officer capacities during
rapid growth, change and transitions at Proterra, a publicly traded manufacturer of electric vehicles and provider of related SaaS services,
since March 2023. Prior to that, he served as vice president of finance at Aspire Technology Partners, a privately owned technology provider
delivering custom digital infrastructures, SaaS solutions and professional services, from May 2022 to February 2023. From October 2021
to April 2022, he served as a strategic chief financial officer of Tatum, an interim executive consultancy practice of Randstad USA, and
from September 2016 to September 2021, he held the positions of senior vice president, chief financial officer and treasurer of Ocean
Power Technologies, Inc., a publicly traded green technology company providing cost-effective renewable ocean energy solutions. Earlier
in his career, Mr. Shafer held senior finance positions at numerous privately owned and publicly traded companies, including, among others,
business unit chief financial officer – for the Dentistry (OraPharma) division at Bauch Health Companies, a global publicly traded
pharmaceutical company, and numerous executive level positions at Johnson Controls International plc (formerly Tyco International), a
large publicly traded multinational manufacturing company. Mr. Shafer is a certified public accountant with a foundation in Big Four public
accounting, beginning his career at Arthur Andersen LLP. He received his Bachelor of Science degree in accounting from W. Paul Stillman
School of Business at Seton Hall University and has an MBA in finance from The Rutgers Business School at Rutgers University. 

 55 

 Gillard
B. Johnson, III. Mr. Johnson has served as a member of our board of directors since April 2024 .
Mr. Johnson has more than 47 years of experience in experience in public financings as a bond counsel, underwriter’s counsel, issuer’s
counsel, and trustee’s counsel, as well as mergers, acquisitions, tax-free reorganizations, commercial/corporate litigation. Since
1978, Mr. Johnson has practiced law as a member of several firms. Since 2007, he has been the managing member and owner of GBJ & Associates,
PLLC, where he provides legal services to Kentucky’s counties, cities, taxing districts, and not-for-profit organizations in public
and private financing of public and economic development projects. He previously worked at McBrayer, McGinnis, Leslie & Kirkland,
Bowling, Johnson & Lycan (where he was Managing Member), Steptoe & Johnson PLLC and McNair Law Firm PA. Mr. Johnson was a law
clerk for Chief Judge William Drennon from 1972 to 1973 with U.S. Tax Court and served as tax attorney with Ashland Oil, Inc. from 1973
to 1979. Mr. Johnson is a licensed member of the Kentucky Bar Association, Supreme Court of United States of America, U.S. Second, Sixth,
and Ninth Circuit Court of Appeal, U.S. District Court for the Eastern and Western Districts of Kentucky, U.S. Bankruptcy Court for the
Eastern District of Kentucky, U.S. Tax Court, and a Member National Association of Bond Lawyers. Mr. Johnson is a graduate of Western
Kentucky University, where he is a former member of the Board of Regents from 2013-2019, serving as the Board’s Chair, Vice-Chair,
and Chair of the University’s Finance and Budget Committee. Mr. Johnson is a graduate of the University of Louisville Brandis School
of Law earning a J.D., cum laude degree. We believe Mr. Johnson is well suited to serve as a director because of his extensive experience
working with public companies and assisting with their financings. 

 Cathy
Pennington. Ms. Pennington has served as a member of our board of directors since April 2024 .
Ms. Pennington has more than 30 years of experience in human resources, sales and executive management, mergers and acquisitions, and
team leadership for both national and international based public companies. Since February 2019, she has been the HR leader at Hyster-Yale
Group, which designs, engineers, manufactures, sells, and services a comprehensive line of lift trucks and aftermarket parts marketed
globally. From March of 2013 to June 2018, Ms. Pennington served as senior director at Galls, LLC the largest public safety uniform and
equipment distributor in the United States, where she led a national team responsible for development and execution of all human resource,
training, and payroll services. She has also served as vice president of human resources for Verst Group Logistics from 2008 to 2015.
Ms. Pennington served as global business manager in sales management for Lexmark International from 1999 to 2006. She also previously
served in human resource management for Valvoline Corporate and Valvoline Instant Oil Change for Ashland, Inc. and worked for the Marathon-Ashland
joint venture. Ms. Pennington received her BA Degree concentration in Human Resource Management from the University of Kentucky. We believe
Ms. Pennington is well suited to serve as a director because of her global business management experience and experience in human resources
and acquisitions. 

 L.
Jack Staley . Mr. Staley has served as a member of our board of directors since April 2024 .
Mr. Staley has more than 35 years of experience in the banking, financial services, and investment banking industries, leveraging extensive
global experience with banking regulators in international companies. Since May 2020, he has been the board chairman and capital acquisition
advisor at AlgiSys, LLC, an ESG company working on the production of fish oil without using fish. He also serves as an independent consultant
to the chief executive officers of ClearIt, an early-stage medical device company in Boston, and Tolomeo Bank, a bank located in Puerto
Rico focused exclusively on private banking for international clients. Since January 2020, Mr. Staley has also consulted with Axial Family
Advisors and Maclendon Wealth Management regarding potential acquisitions. He serves as a board member of Tufts Medical Center, Prescribers
Choice, vice chairman of The Children’s Diagnostic and Treatment Center, a private equity board member of two companies, and other
charity boards. Prior to his current corporate roles, Mr. Staley served as chairman of SGS AG Wealth Management Company, Zurich, a financial
planning and wealth management group comprised of professional financial consultants. Mr. Staley has also served as executive director
of Prudential Financial and Dryden Wealth Management, Zurich and London and Asia, general manager of Bankers Trust New York Corporation,
Zurich, The Boston Company in Boston and London and Chase-Lincoln First Bank. Mr. Staley holds an MBA in Finance from Wharton School,
University of Pennsylvania and a BA in Economics and Political Science from Gettysburg College. Mr. Staley holds professional including
US securities licenses 3, 7, 63, 7,8, (now the 24). We believe Mr. Staley is well suited to serve as a director because of his previous
experience as business executive and a board member and in banking, financial services, investment banking and medical industries. 

 Our directors currently have terms which will
end at our next annual meeting of the stockholders or until their successors are elected and qualify, subject to their prior death, resignation,
or removal. Officers serve at the discretion of the board of directors. There is no arrangement or understanding between any director
or executive officer and any other person pursuant to which he was or is to be selected as a director, nominee, or officer.

 56 

 Family Relationships 

 There are no family relationships among any of
our officers or directors.

 Involvement in Certain Legal Proceedings 

 To the best of our knowledge, none of our directors
or executive officers has, during the past ten years:

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

 · 
 had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation, or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; 

 · 
 been subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; 

 · 
 been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; 

 · 
 been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or 

 · 
 been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. 

 Corporate Governance 

 Governance Structure 

 Currently, our Chief Executive Officer is also
our Chairman of the Board. Our board believes that, at this time, having a combined Chief Executive Officer and Chairman is the appropriate
leadership structure for our company. In making this determination, the board considered, among other matters, Mr. Cunningham’s
experience and tenure with our company and believed that Mr. Cunningham is highly qualified to act as both Chairman and Chief
Executive Officer due to his experience, knowledge, and personality. Among the benefits of a combined Chairman/Chief Executive Officer
considered by the board is that such structure promotes clearer leadership and direction for us and allows for a single, focused chain
of command to execute our strategic initiatives and business plans.

 57 

 The Board’s Role in Risk Oversight 

 The board of directors oversees that the assets
of our company are properly safeguarded, that the appropriate financial and other controls are maintained, and that our business is conducted
wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the board’s
oversight of the various risks facing our company. In this regard, our board seeks to understand and oversee critical business risks.
Our board does not view risk in isolation. Risks are considered in virtually every business decision and as part of our business strategy.
Our board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, purposeful, and appropriate risk-taking is
essential for our company to be competitive on a global basis and to achieve its objectives.

 While the board oversees risk management, company
management is charged with managing risk. Management communicates routinely with the board and individual directors on the significant
risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management.

 Our board administers its risk oversight function
as a whole by making risk oversight a matter of collective consideration; however, much of the work is delegated to committees, which
will meet regularly and report back to the full board. We have established a standing audit committee, compensation committee and nominating
and corporate governance committee of our board of directors. The audit committee will oversee risks related to our financial statements,
the financial reporting process, accounting and legal matters, the compensation committee will evaluate the risks and rewards associated
with our compensation philosophy and programs, and the nominating and corporate governance committee will evaluate risks associated with
management decisions and strategic direction.

 Independent Directors 

 Our board of directors has determined that all
of our directors, other than Mr. Cunningham, qualify as “independent” directors in accordance with the rules and regulations
of The Nasdaq Stock Market, or Nasdaq.

 Committees of the Board of Directors 

 We have established a standing audit committee,
compensation committee and nominating and corporate governance committee of our board of directors, each with its own charter approved
by the board, which are available on our website at www.cardifflexington.com.

 In addition, our board of directors may, from
time to time, designate one or more additional committees, which shall have the duties and powers granted to it by our board of directors.

 Audit Committee 

 Gillard B. Johnson, III, Cathy Pennington and
L. Jack Staley, each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act, have been
appointed to serve on our audit committee, with Mr. Johnson serving as the chair. Mr. Johnson qualifies as “audit committee financial
expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements
of our company.

 The audit committee is responsible for, among
other things: (i) retaining and overseeing our independent accountants; (ii) assisting the board in its oversight of the integrity of
our financial statements, the qualifications, independence and performance of our independent auditors and our compliance with legal and
regulatory requirements; (iii) reviewing and approving the plan and scope of the internal and external audit; (iv) pre-approving any audit
and non-audit services provided by our independent auditors; (v) approving the fees to be paid to our independent auditors; (vi) reviewing
with our chief executive officer and chief financial officer and independent auditors the adequacy and effectiveness of our internal controls;
(vii) reviewing hedging transactions; (viii) reviewing and approving related party transactions; (ix) evaluating enterprise risk issues,
including those related to cybersecurity, and (x) reviewing and assessing annually the audit committee’s performance and the adequacy
of its charter.

 58 

 Compensation Committee 

 Gillard B. Johnson, III, Cathy Pennington and
L. Jack Staley, each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act, have been
appointed to serve on our compensation committee, with Mr. Staley serving as the chair. The members of the compensation committee will
also be “non-employee directors” within the meaning of Section 16 of the Exchange Act. The compensation committee assists
the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive
officers.

 The compensation committee is responsible for,
among other things: (i) reviewing and approving the remuneration of our executive officers; (ii) determining the compensation of our independent
directors; (iii) making recommendations to the board regarding equity-based and incentive compensation plans, policies and programs; and
(iv) reviewing and assessing annually the compensation committee’s performance and the adequacy of its charter.

 Nominating and Corporate Governance Committee
 
 Gillard B. Johnson, III, Cathy Pennington and
L. Jack Staley, each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act, have been
appointed to serve on our nominating and corporate governance committee, with Ms. Pennington 
serving as the chair. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified
to become our directors and in determining the composition of the board and its committees.

 The nominating and corporate governance committee
is responsible for, among other things: (i) recommending the number of directors to comprise our board; (ii) identifying and evaluating
individuals qualified to become members of the board and soliciting recommendations for director nominees from our Chief Executive Officer
and Board Chair; (iii) recommending to the board the director nominees for each annual stockholders’ meeting; (iv) recommending
to the board the candidates for filling vacancies that may occur between annual stockholders’ meetings; (v) reviewing independent
director compensation and board processes, self-evaluations and policies; (vi) overseeing compliance with our code of ethics; and (vii)
monitoring developments in the law and practice of corporate governance.

 The nominating and corporate governance committee’s
methods for identifying candidates for election to our board of directors (other than those proposed by our stockholders, as discussed
below) include the solicitation of ideas for possible candidates from a number of sources - members of our board of directors, our executives,
individuals personally known to the members of our board of directors, and other research. The nominating and corporate governance committee
may also, from time-to-time, retain one or more third-party search firms to identify suitable candidates.

 In making director recommendations, the nominating
and corporate governance committee may consider some or all of the following factors: (i) the candidate’s judgment, skill, experience
with other organizations of comparable purpose, complexity and size, and subject to similar legal restrictions and oversight; (ii) the
interplay of the candidate’s experience with the experience of other board members; (iii) the extent to which the candidate would
be a desirable addition to the board and any committee thereof; (iv) whether or not the person has any relationships that might impair
his or her independence; and (v) the candidate’s ability to contribute to the effective management of our company, taking into account
the needs of our company and such factors as the individual’s experience, perspective, skills and knowledge of the industry in which
we operate.

 A stockholder may nominate one or more persons
for election as a director at an annual meeting of stockholders if the stockholder complies with the notice and information provisions
contained in our amended and restated bylaws. Such notice must be in writing to our company not less than 90 days and not more than
120 days prior to the anniversary date of the preceding year’s annual meeting of stockholders or as otherwise required by requirements
of the Exchange Act. In addition, stockholders furnishing such notice must be a holder of record on both (i) the date of delivering
such notice and (ii) the record date for the determination of stockholders entitled to vote at such meeting.

 59 

 Code of Ethics 

 We have adopted a code of ethics that applies
to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal
accounting officer. Such code of ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance
with laws, regulations and policies, including disclosure requirements under the federal securities laws, and reporting of violations
of the code.

 We are required to disclose any amendment to,
or waiver from, a provision of our code of ethics applicable to our principal executive officer, principal financial officer, principal
accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of disseminating this
disclosure, as permitted by applicable SEC rules. Any such disclosure will be posted to our website within four (4) business days following
the date of any such amendment to, or waiver from, a provision of our code of ethics.

 Insider Trading Policy 

 We have adopted an insider trading policy which
prohibits our directors, officers, and employees from engaging in transactions in our common stock while in the possession of material
non-public information; engaging in transactions in the stock of other companies while in possession of material non-public information
that they become aware of in performing their duties; and disclosing material non-public information to unauthorized persons outside our
company.

 Our insider trading policy restricts trading by
directors, officers, and certain key employees during blackout periods, which generally begin 15 calendar days before the end of each
fiscal quarter and end two business days after the issuance of our earnings release for the quarter. Additional blackout periods may be
imposed with or without notice, as the circumstances require.

 Our insider trading policy also prohibits our
directors, officers, and employees from purchasing financial instruments (such as prepaid variable forward contracts, equity swaps, collars
and exchange funds) designed to hedge or offset any decrease in the market value of our common stock they hold, directly or indirectly.
In addition, directors, officers, and employees are expressly prohibited from pledging our common stock to secure personal loans or other
obligations, including by holding their common stock in a margin account, unless such arrangement is specifically approved in advance
by the administrator of our insider trading policy, or making short-sale transactions in our common stock.

 A copy of the insider trading policy may be found
on our website.

 Delinquent Section 16(a) Reports 

 Section 16(a) of the Exchange Act requires our
directors and executive officers and beneficial holders of more than 10% of our common stock to file with the SEC initial reports of ownership
and reports of changes in ownership of our equity securities. We believe, based solely on a review of the copies of such reports furnished
to us and representations of these persons, that most of the reports were not timely filed for the year ended December 31, 2025. All of
the delinquent reports were recently filed.

 60 

 ITEM 11. 
 EXECUTIVE COMPENSATION. 

 Summary Compensation Table - Years Ended December 31, 2025 and 2024 

 The following table sets forth information concerning
all cash and non-cash compensation awarded to, earned by, or paid to the named persons for services rendered in all capacities during
the noted periods.

 Name and Principal Position 
 Year 
 
 Salary 

 ($) 
 
 Bonus 

 ($) 
 
 Stock 

 Awards 

 ($) (1) 
 
 Total 

 ($) 
 
 Alex Cunningham, Chief Executive Officer (2) 
 2025 
 885,000 
 250,000 
 242,760 
 1,377,760 

 2024 
 360,000 
 200,000 
 280,000 
 840,000 

 Daniel Thompson, former Chairman of the Board (3) 
 2025 
 700,000 
 250,000 
 242,760 
 1,192,760 

 2024 
 360,000 
 200,000 
 280,000 
 840,000 

 Matthew T. Shafer, Chief Financial Officer (4) 
 2025 
 250,800 
 62,700 
 264,667 
 578,167 

 2024 
 228,000 
 57,000 
 22,400 
 307,400 

 (1) 
 The amount is equal to the aggregate grant-date fair value with respect to the awards, computed in accordance with ASC Topic 718. 

 (2) 
 For the year ended December 31, 2025, Mr. Cunningham was paid salary of $737,500, with the remaining salary and bonus amounts accrued, and for the year ended December 31, 2024, Mr. Cunningham was paid salary of $360,000, with the remaining salary and bonus amounts accrued. As of December 31, 2025, the total outstanding accrued compensation owed to Mr. Cunningham was $2,163,000. See also Item 7 “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Related Party Loans ” and Item 7 “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments—Conversion of Deferred Compensation .” 

 (3) 
 Mr. Thompson served as our Chairman from May 2024 to December 2025. For the year ended December 31, 2025, Mr. Thompson was paid salary of $583,333, with the remaining salary and bonus amounts accrued, and for the year ended December 31, 2024, Mr. Thompson was paid salary of $240,000, with the remaining salary and bonus amounts accrued. As of December 31, 2025, the total outstanding accrued compensation owed to Mr. Thompson was $2,237,167. See also Item 7 “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Related Party Loans .” 

 (4) 
 For the year ended December 31, 2025, Mr. Shafer was paid salary of $250,800, with the bonus amounts accrued, and for the year ended December 31, 2024, Mr. Shafer was paid salary of $228,000, with the bonus amounts accrued. As of December 31, 2025, the total outstanding accrued bonus and stock compensation owed to Mr. Shafer was $406,767. See also Item 7 “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Related Party Loans .” 

 61 

 Employment Agreements 

 Effective January 1, 2025, we entered into an
employment agreement with Alex Cunningham, pursuant to which Mr. Cunningham agreed to serve as 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. Mr. 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 our 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. Mr. Cunningham is
entitled to a one-time performance bonus of $100,000 following our successful listing on Nasdaq with a corresponding $4 million dollar
capital raise. Mr. Cunningham shall also earn a one-time performance bonus of $100,000 following each future successful acquisition. In
the event that we are 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. Mr.
Cunningham is eligible to participate in and receive equity incentive compensation as may be granted by the board pursuant to our equity
incentive plans. The term of the employment agreement is from January 1, 2025 to December 31, 2029 with automatic extensions for additional
successive one (1) year renewals terms unless terminated by us or Mr. Cunningham upon at least three (3) months’ notice. The employment
agreement may be terminated by us immediately for cause (as such term is defined in the employment agreement), in which case Mr. Cunningham
would be entitled to receive payment of any accrued payments due and outstanding. The employment agreement may also be terminated by us
without cause or by Mr. Cunningham for good reason (as defined in the employment agreement) upon ninety (90) days’ notice, in which
case Mr. Cunningham would be entitled to (i) all accrued payments outstanding, (ii) a separation allowance equal to three (3) times the
sum of the base salary and the target bonus (as defined in the employment agreement), payable in equal installments over a twelve (12)
month period, (iii) any annual incentive bonuses earned but not yet paid for any completed full fiscal year immediately preceding the
termination date, (iv) a pro rata annual incentive bonus if termination occurs prior to the end of any fiscal year, (v) payment of benefits
until the earlier of twelve (12) months after termination or receipt of comparable benefits from subsequent employment, and (vi) all then-outstanding
equity awards in any equity incentive plans. Mr. Cunningham will also be entitled to the compensation described in the preceding sentence
in the event of termination of employment without cause or for good reason following a change-in-control of our company (as defined in
the employment agreement); provided that the payment of benefits in this case shall be until the earlier of twenty-four (24) months after
termination or receipt of comparable benefits from subsequent employment. The employment agreement contains customary confidentiality
provisions and also provides that Mr. Cunningham may not compete against us for a period of twelve (12) months after termination of his
employment for any reason or solicit employees or customers from us for a period of twenty-four (24) months after termination of his employment
for any reason.

 Effective July 15, 2020, we entered into an employment
agreement with Daniel Thompson, which was amended January 1, 2025, pursuant to which Mr. Thompson agreed to serve as Chairman of the Board.
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. Mr. Thompson is eligible for an incentive annual bonus, for a one-time performance bonus of $200,000 following our 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 we were unable to pay his base salary in dollars. For calendar year 2025, in the event that we are 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. The term of the employment agreement is from July
15, 2020 to December 31, 2025, which is the expected retirement date for Mr. Thompson. Following his retirement Mr. Thompson is eligible
to receive annual compensation to be paid in accordance with our normal payroll practices over a three (3) year term as follows: $700,000
for 2026; $400,000 for 2024; and $250,000 for 2028. The employment agreement may be terminated immediately for cause (as such term is
defined in the employment agreement), which would cause no severance payment obligations to Mr. Thompson. In the event of termination
without cause or for good reason, we must provide Mr. Thompson with thirty (30) days prior written notice and would be required to pay
all accrued payments, base salary and $200,000, Mr. Thompson’s maximum target bonus amount for the twelve months after the termination.
In the event of termination of employment without cause or for good reason following a change-in-control of our company, Mr. Thompson
would be entitled to all accrued payments, a lump sum separation allowance equal to two times the sum of his then base salary and then
target bonus, any annual incentive bonuses, payment of benefits until the earlier of twenty-four (24) months after termination or receipt
of comparable benefits from subsequent employment and all then-outstanding equity awards under any equity plan will vest in full. The
employment agreement also provides that Mr. Thompson may not compete against us for a period of twelve (12) months after termination of
his employment for any reason or solicit employees or customers from us for a period of twenty-four (24) months after termination of his
employment for any reason.

 62 

 On January 2, 2024, we entered into an employment
agreement with Mr. Shafer setting forth the terms of his employment as Chief Financial Officer. Pursuant to the employment agreement,
Mr. Shafer is entitled to an annual base salary of $228,000 and a signing bonus of 5,000 shares of our series I preferred stock. He is
also eligible for consideration for a one-time achievement bonus equal to 35% of base salary within sixty (60) days upon our company uplisting
to a national securities exchange. In addition, he is also eligible for an annual target bonus equal to 25% of base salary based on the
achievement of certain performance goals and annual stock option grants. Mr. Shafer is also eligible to participate in all employee
benefit plans, including health insurance, commensurate with his position. The term of the employment agreement is for one (1) year with
automatic extensions for additional successive one (1) year renewal terms unless terminated by either party no later than thirty (30)
days prior to the renewal date. The employment agreement may be terminated immediately by us with or without cause (as such term is defined
in the employment agreement) or in the event of Mr. Shafer’s death or disability and may be terminated immediately by Mr. Shafer
upon his voluntary resignation or other voluntary termination of employment. In the event of termination by us without cause, Mr. Shafer
is entitled to the compensation and benefits described above for a period of three (3) months following termination. In the event of termination
by Mr. Shafer for good reason (as defined in the employment agreement) or because Mr. Shafer cannot perform his services as result of
physical or mental incapacitation, he will be eligible to receive three (3) months of base salary and medical and dental benefits under
our medical and dental plans then in effect. Mr. Shafer is not entitled to receive any additional compensation upon termination by us
for cause or upon a voluntary termination by Mr. Shafer. The employment agreement also contains customary confidentiality provisions
and restrictive covenants prohibiting Mr. Shafer from owning or operating a business that competes with our company or soliciting
our employees during the term of his employment and for a period of twelve months following the termination of his employment.

 Retirement and Healthcare Benefits 

 We have not maintained, and do not currently maintain,
a defined benefit pension plan or a nonqualified deferred compensation plan. During 2024, we established a tax qualified 401(k) plan for
our employees, including the named executive officers. We currently do not contribute to this plan.

 Our named executive officers are eligible to participate
in the same medical, life and disability insurance programs and other welfare plans as the rest of our employees.

 Potential Payments Upon Termination or Change
in Control 

 As described under “—Employment Agreements”
above, Messrs. Cunningham and Shafer are entitled severance if their employment is terminated without cause or for good reason.

 Outstanding Equity Awards at Fiscal Year-End
 
 The following table includes certain information
with respect to the value of all unexercised options and unvested shares of restricted stock previously awarded to the executive officers
named above at the fiscal year ended December 31, 2025.

 Name 
 Stock Awards 

 Number of shares or units of stock that have not vested

(#) 
 Market value of shares of units of stock that have not vested

($) 
 Equity

incentive

plan awards: Number of

unearned

shares, units or other rights that have not vested

(#) 
 Equity

incentive

plan awards: Market or payout value of

unearned

shares, units or other rights that have not vested

($) 

 Matthew T. Shafer (1) 
 8,334 
 $43,228.46 
 - 
 - 

 (1) On December 11, 2025, Mr. Shafer was granted a restricted stock award for 8,334 shares of common stock,
which shall vest in full on December 11, 2026. 

 63 

 Director Compensation 

 The table below sets forth the compensation paid
to our independent directors during the fiscal years ended December 31, 2025.

 Name 
 Fees Earned or Paid in Cash

($) 
 
 Stock 

 Awards 

 ($) (1) 
 
 Option 

 Awards 

 ($) (2) 
 
 Total

($) 

 Gillard B. Johnson, III 
 42,500 
 15,300 
 85,786 
 143,586 

 Cathy Pennington 
 42,500 
 15,300 
 85,786 
 143,586 

 L. Jack Staley 
 42,500 
 15,300 
 85,786 
 143,586 

 (1) 
 On September 26, 2025, we granted to each independent director (i) a restricted stock award for 1,667 shares of common stock, which vested in full on the date of grant (as compensation for service in 2024) and (ii) a restricted stock award for 1,667 shares of common stock, with 556 shares vesting immediately and the remaining shares vesting in three (3) quarterly installments commencing on October 1, 2025. The amount is equal to the aggregate grant-date fair value with respect to the awards, computed in accordance with ASC Topic 718. 

 (2) 
 On December 11, 2025, we granted to each independent director a stock option for the purchase of 16,667 shares of common stock at an exercise price of $5.187, which vests quarterly over one year commencing on January 1, 2026. The amount is equal to the aggregate grant-date fair value with respect to the awards, computed in accordance with ASC Topic 718. 

 Effective as of April 1, 2024, we entered into
independent director agreements with each of our independent directors, Gillard B. Johnson, III, Cathy Pennington and L. Jack Staley,
pursuant to which we agreed to pay to each independent director (i) an annual fee of $20,000 for the first year of service, which increased
to $40,000 commencing in the second year of service, which annual fee will be paid quarterly, and (ii) an attendance fee of $2,500 for
each in person board meeting attended and $1,000 for each virtual board meeting attended. Upon appointment, we also issued 3,334 shares
of common stock to each independent director and we have also agreed to grant to each independent director 1,667 shares of restricted
stock under our 2024 Equity Incentive Plan for the first year of service and each subsequent year of service, which shares will vest in
four (4) quarterly installments, subject to the director’s continuing service on the board. To the extent services require out-of-town
travel, we have agreed to reimburse each independent director up to $1,000 per trip. We also agreed to reimburse each independent director
for pre-approved reasonable business-related expenses incurred in good faith in connection with the performance of the director’s
duties.

 2024 Equity Incentive Plan 

 On January 31, 2024, our board of directors and
stockholders adopted the Cardiff Lexington Corporation 2024 Equity Incentive Plan, or the Plan. The following is a summary which describes
the principal features of the Plan, but it is qualified in its entirety by reference to the full text of the Plan.

 Purposes . The purpose of this Plan
is to provide a means whereby employees, directors, consultants of our company and its affiliates develop a sense of proprietorship and
personal involvement in the development and financial success of our company, and to encourage them to devote their best efforts to the
business of our company, thereby advancing the interests of our company and its stockholders. A further purpose of this Plan is to provide
a means through which we may attract able individuals to provide services to or for the benefit of our company and to provide a means
for such individuals to acquire and maintain share ownership in our company, thereby strengthening their concern for the welfare of our
company.

 Types of Awards . Awards that may
be granted include incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share
awards, and performance compensation awards. These awards offer our officers, employees, consultants, and directors the possibility of
future value, depending on the long-term price appreciation of our common stock and the award holder’s continuing service with our
company.

 64 

 Eligible Recipients . Persons eligible
to receive awards under the Plan will be those officers, employees, directors and consultants of our company and its subsidiaries who
are selected by the administrator.

 Administration . The Plan is administered
by our board of directors; provided that if and when we establish a compensation committee, the compensation committee will administer
the Plan. Among other things, the administrator has the authority to select persons who will receive awards, determine the types of awards
and the number of shares to be covered by awards, and to establish the terms, conditions, performance criteria, restrictions, and other
provisions of awards. The administrator has authority to establish, amend and rescind rules and regulations relating to the Plan.

 Shares Available . As of December
31, 2025, pursuant to the Plan, the maximum number of shares of our common stock that could be issued to participants under the Plan was
921,675 (subject to adjustment for certain corporate changes affecting the common stock, such as stock splits); provided that the number
of shares of common stock available for issuance under the Plan will automatically increase on January 1 of each calendar year during
the term of the Plan by an amount equal five percent (5%) of the total number of shares of common stock issued and outstanding on December 31
of the immediately preceding calendar year. Shares subject to an award under the Plan for which the award is canceled, forfeited or expires
again become available for grants under the Plan. Shares subject to an award that is settled in cash will not again be made available
for grants under the Plan. On January 1, 2026, the number of shares increased to 1,606,718.

 Stock Options .

 General . Share options give the option
holder the right to acquire from us a designated number of common stock at a purchase price that is fixed upon the grant of the option.
Stock options granted may be either tax-qualified stock options (so-called “incentive stock options”) or non-qualified stock
options. Subject to the provisions of the Plan, the administrator has the authority to determine all grants of stock options. That determination
will include: the number of stock subject to any option; the exercise price per stock; the expiration date of the option; the manner,
time, and date of permitted exercise; other restrictions, if any, on the option or the stock underlying the option; and any other terms
and conditions as the administrator may determine.

 Option Price . The exercise price for stock
options will be determined at the time of grant. Normally, the exercise price will not be less than the fair market value on the date
of grant. As a matter of tax law, the exercise price for any incentive share option awarded may not be less than the fair market value
of the shares on the date of grant. However, incentive stock option grants to any person owning more than 10% of our voting power must
have an exercise price of not less than 110% of the fair market value on the grant date.

 Exercise of Options . An option may
be exercised only in accordance with the terms and conditions for the option agreement as established by the administrator at the time
of the grant. The option must be exercised by notice to us, accompanied by payment of the exercise price. Payments may be made either:
(i) in cash or its equivalent; (ii) by tendering (either by actual delivery or attestation) previously acquired stock having an aggregate
fair market value at the time of exercise equal to the exercise price; (iii) a cashless exercise (broker-assisted exercise) through a
“same day sale” commitment; (iv) by a combination of (i), (ii), and (iii); or (v) any other method approved or accepted by
the administrator in its sole discretion.

 Expiration or Termination . Options,
if not previously exercised, will expire on the expiration date established by the administrator at the time of grant. In the case of
incentive stock options, such term cannot exceed ten years provided that in the case of holders of more than 10% of our voting power,
such term cannot exceed five years. Options will terminate before their expiration date if the holder’s service with our company
or a subsidiary terminates before the expiration date. The option may remain exercisable for specified periods after certain terminations
of employment, including terminations as a result of death, disability, or retirement, with the precise period during which the option
may be exercised to be established by the administrator and reflected in the grant evidencing the award.

 65 

 Incentive and Non-Qualified Options . As
described elsewhere in this summary, an incentive share option is an option that is intended to qualify under certain provisions of the
U.S. Internal Revenue Code of 1986, as amended, or the Code, for more favorable tax treatment than applies to non-qualified share options.
Any option that does not qualify as an incentive share option will be a non-qualified share option. Under the Code, certain restrictions
apply to incentive stock options. For example, the exercise price for incentive stock options may not be less than the fair market value
of the shares on the grant date and the term of the option may not exceed ten years. In addition, an incentive stock option may not be
transferred, other than by will or the laws of descent and distribution and is exercisable during the holder’s lifetime only by
the holder. In addition, no incentive stock options may be granted to a holder that is first exercisable in a single year if that option,
together with all incentive stock options previously granted to the holder that also first become exercisable in that year, relate to
shares having an aggregate fair market value in excess of $100,000, measured at the grant date.

 Stock Appreciation Rights . Stock
appreciation rights, or SARs, which may be granted alone or in tandem with options, have an economic value similar to that of options.
When an SAR for a particular number of stock is exercised, the holder receives a payment equal to the difference between the market price
of the stock on the date of exercise and the exercise price of the stock under the SAR. Again, the exercise price for SARs normally is
the market price of the shares on the date the SAR is granted. Under the Plan, holders of SARs may receive this payment - the appreciation
value - either in cash or shares valued at the fair market value on the date of exercise. The form of payment will be determined by us.

 Restricted Awards . Restricted awards
are shares awarded to participants at no cost. Restricted awards can take the form of awards of restricted stock, which represent issued
and outstanding shares subject to vesting criteria, or restricted share units, which represent the right to receive shares subject to
satisfaction of the vesting criteria. Restricted stock awards are forfeitable and non-transferable until the shares vest. The vesting
date or dates and other conditions for vesting are established when the shares are awarded. These awards will be subject to such conditions,
restrictions and contingencies as the administrator shall determine at the date of grant. Those may include requirements for continuous
service and/or the achievement of specified performance goals.

 Performance Criteria . Under the
Plan, one or more performance criteria will be used by the administrator in establishing performance goals. Any one or more of the performance
criteria may be used on an absolute or relative basis to measure the performance of our company, as the administrator may deem appropriate,
or as compared to the performance of a group of comparable companies, or published or special index that the administrator deems appropriate.

 Other Material Provisions . Awards
will be evidenced by a written agreement, in such form as may be approved by the administrator. In the event of various changes to the
capitalization of our company, such as stock splits, stock dividends and similar re-capitalizations, an appropriate adjustment will be
made by the administrator to the number of shares covered by outstanding awards or to the exercise price of such awards. The administrator
is also permitted to include in the written agreement provisions that provide for certain changes in the award in the event of a change
of control of our company, including acceleration of vesting. Except as otherwise determined by the administrator at the date of grant,
awards will not be transferable, other than by will or the laws of descent and distribution. Prior to any award distribution, we are permitted
to deduct or withhold amounts sufficient to satisfy any employee withholding tax requirements. Our board also has the authority, at any
time, to discontinue the granting of awards. The board also has the authority to alter or amend the Plan or any outstanding award or may
terminate the Plan as to further grants, provided that no amendment will, without the approval of our stockholders, to the extent that
such approval is required by law or the rules of an applicable exchange, increase the number of shares available under the Plan, change
the persons eligible for awards under the Plan, extend the time within which awards may be made, or amend the provisions of the Plan related
to amendments. No amendment that would adversely affect any outstanding award made under the Plan can be made without the consent of the
holder of such award.

 66 

 ITEM 12. 
 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. 

 Security Ownership of Certain Beneficial Owners
and Management 

 The following table sets forth certain information
regarding beneficial ownership of our voting stock as of March 9, 2026 by (i) each of our executive officers and directors; (ii) all
of our executive officers and directors as a group; and (iii) each person who is known by us to beneficially own more than 5% of our
outstanding common stock. Unless otherwise specified, the address of each of the persons set forth below is in care of our company, 710
East Main Street, Lexington, KY 40502.

 Name and Address of Beneficial Owner 
 Title of Class 
 Amount and Nature of Beneficial Ownership (1) 
 
 Percent of 

 Voting Stock (2) 
 
 Alex Cunningham, Chairman Chief Executive Officer (3) 
 Common Stock 
 8,673,353 
 37.36% 

 Matthew T. Shafer, Chief Financial Officer 
 Common Stock 
 74,168 
 * 

 Gillard B. Johnson, III, Director (4) 
 Common Stock 
 15,002 
 * 

 Cathy Pennington, Director (5) 
 Common Stock 
 15,002 
 * 

 L. Jack Staley, Director (6) 
 Common Stock 
 15,002 
 * 

 All executive officers and directors (5 persons above) 
 Common Stock 
 8,792,527 
 37.86% 

 Daniel Thompson (7) 
 Common Stock 
 8,415,954 
 36.25% 

 * Less than 1%

 (1) Beneficial ownership is determined in accordance with SEC rules and generally
includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to
have “beneficial ownership” of any shares that such person or any member of such group has the right to acquire within sixty
(60) days. For purposes of computing the percentage of outstanding shares of common stock held by each person or group of persons named
above, any shares that such person or persons has the right to acquire within sixty (60) days of March 9, 2026 are deemed to be outstanding
for such person, but not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion
herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership by any person. 

 (2) 
 Percentage of total voting stock represents total ownership with respect
 to all shares of our voting stock, which includes our common stock, series A preferred stock and series L preferred stock, voting
 as a single class. As of March 9, 2026, there were 15,159,403 shares of common stock, 2 shares of series A preferred stock and 319,493
 shares of series L preferred stock issued and outstanding. Each share of common stock and series L preferred stock is entitled to
 one (1) vote per share. Each share of series A preferred stock is entitled to a number of votes at any time equal to 25% of the number
 of votes then held or entitled to be made by all other equity securities of our company, plus one (equivalent to 3,869,725 votes
 as of March 9, 2026). For each beneficial owner above, any options, warrants or other convertible securities exercisable within 60
 days have been included in the denominator. 

 (3) 
 Includes (i) 3,914,230 shares of common stock held directly, (ii) 889,398 shares of common stock held by Alexander Hunt Cunningham, Sr. Revocable Trust and (iii) 1 share of series A preferred stock held directly. Mr. Cunningham is the Trustee of Alexander Hunt Cunningham, Sr. Revocable Trust and has voting and dispositive power over the shares held by it. 

 (4) 
 Includes 6,668 shares of common stock and 4,167 shares of common stock which Mr. Johnson has the right to acquire within 60 days through the exercise of vested stock options. 

 (5) 
 Includes 6,668 shares of common stock and 4,167 shares of common stock which Ms. Pennington has the right to acquire within 60 days through the exercise of vested stock options. 

 (6) 
 Includes 6,668 shares of common stock and 4,167 shares of common stock which Mr. Staley has the right to acquire within 60 days through the exercise of vested stock options. 

 (7) 
 Includes (i) 4,477,063 shares of common stock held directly, (ii) 69,166 shares of common stock held by the 2007 Thompson Family Trust and (iii) 1 share of series A preferred stock held directly. Mr. Thompson is the Trustee of the 2007 Thompson Family Trust and has voting and dispositive power over the shares held by it. 

 67 

 Changes in Control 

 We do not currently have any arrangements which
if consummated may result in a change of control of our company.

 Securities Authorized for Issuance Under Equity
Compensation Plans 

 The following table sets forth certain information
about the securities authorized for issuance under our incentive plans as of December 31, 2025.

 Plan Category 
 
 Number of securities to be issued upon exercise
 of outstanding options, warrants and rights 

 (a) 
 
 Weighted-average exercise price of outstanding
 options, warrants and rights 

 (b) 
 
 Number of securities remaining available for
 future issuance under equity compensation plans (excluding securities reflected in column (a)) 

 (c) 
 
 Equity compensation plans approved by security holders 
 90,002 
 $5.19 
 709,997 

 Equity compensation plans not approved by security holders 
 - 
 - 
 - 

 Total 
 90,002 
 - 
 709,997 

 ITEM 13. 
 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. 

 Transactions with Related Persons 

 The following includes a summary of transactions
since the beginning of our 2024 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the
amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last
two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation
described under Item 11 “ Executive Compensation ” above). We believe the terms obtained or consideration that we paid
or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that
would be paid or received, as applicable, in arm’s-length transactions.

 On December 21, 2025, we issued promissory notes
to certain employees in settlement of bonuses earned for services rendered, including a promissory note in the principal amount of $460,000
to Alex Cunningham, our Chairman and Chief Executive Officer, a promissory note in the principal amount of $122,550 to Matthew T. Shafer,
our Chief Financial Officer, and a promissory note in the principal amount of $460,000 to Daniel Thompson, our Chairman at such time.
These notes accrue interest at a rate of 5.00% per year and mature on June 30, 2026.

 We have obtained short-term advances from Daniel
Thompson, the former Chairman of the Board, that are non-interest bearing and due on demand. As of December 31, 2023, we owed the Chairman
$120,997, which was repaid in full during the year ended December 31, 2024.

 Director Independence 

 Our board of directors has determined that all
of our directors, other than Mr. Cunningham, qualify as “independent” directors in accordance with the rules and regulations
of Nasdaq.

 68 

 ITEM 14. 
 PRINCIPAL ACCOUNTING FEES AND SERVICES. 

 Independent Auditors’ Fees 

 The following is a summary of the fees billed
to us for professional services rendered for the fiscal years ended December 31, 2025 and 2024. Fees include those paid to GBQ Partners,
LLC and Grassi & Co., CPAs, P.C. for audit fees. 

 Year Ended December 31, 

 2025 
 2024 

 Audit Fees* 
 $ 165,000 
 $ 180,628 

 Audit-Related Fees 
 – 
 2,569 

 Tax Fees 
 6,950 
 6,950 

 All Other Audit Fees 
 10,275 
 59,081 

 TOTAL 
 $ 182,225 
 $ 249,228 

 “Audit Fees” consisted of fees billed
for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial
statements included in our Form 10-K and 10-Q or services that are normally provided by the accountant in connection with statutory and
regulatory filings or engagements.

 “Audit-Related Fees” consisted of
fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit
or review of our financial statements and are not reported under the paragraph captioned “Audit Fees” above.

 “Tax Fees” consisted of fees billed
for professional services rendered by our external tax accountant for tax returns preparation.

 “All Other Fees” consisted of fees
billed for products and services provided by the principal accountant, other than the services reported above under other captions of
this Item 14.

 Pre-Approval Policies and Procedures 

 Our audit committee charter provides that the
audit committee must pre-approve all audit and permissible non-audit services to be provided by the independent registered public accounting
firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval would generally
be requested annually, with any pre-approval detailed as to the particular service, which must be classified in one of the four categories
of services listed above. The audit committee may also, on a case-by-case basis, pre-approve particular services that are not contained
in the annual pre-approval request. In connection with this pre-approval policy, the audit committee also considers whether the categories
of pre-approved services are consistent with the rules on accountant independence of the SEC and the Public Company Accounting Oversight
Board. The audit committee has pre-approved all services performed since our policy on pre-approval of audit and non-audit services was
adopted and pre-approved the audit service performed by GBQ Partners, LLC for our financial statements as of and for the year ended December
31, 2025.

 69 

 PART IV 

 ITEM 15. 
 EXHIBIT AND FINANCIAL STATEMENT SCHEDULES. 

 (a) 
 List of Documents Filed as a Part of This Report: 

 (1) 
 Index to Financial Statements: 

 Report of Independent Registered Public Accounting Firm (PCAOB ID 1808) 

 Consolidated Balance Sheets as of December 31, 2025 and 2024 

 Consolidated Statements of Operations for the Years Ended December 31, 2025 and 2024 

 Consolidated Statements of Stockholders’ (Deficit) Equity for the Years Ended December 31, 2025 and 2024 

 Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 (Restated) 

 Notes to Consolidated Financial Statements 

 (2) 
 Index to Financial Statement Schedules: 

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

 (3) 
 Index to Exhibits: 

 See exhibits listed under Part (b) below. 

 (b) 
 Exhibits: 

 Exhibit No. 
 
 Description 

 3.1 
 
 Amended and Restated Articles of Incorporation Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023) 

 3.2 
 
 Certificate of Amendment to Amended and Restated Articles of Incorporation Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q filed on May 10, 2024) 

 3.3 
 
 Certificate of Amendment to Amended and Restated Articles of Incorporation
Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.3 to Amendment No. 1 to the Registration Statement on Form S-1/A
filed on January 20, 2026) 

 3.4 
 
 Certificate of Designation of Series A Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023) 

 3.5 
 
 Certificate
of Designation of Series F-1 Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.6 to Amendment
No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023) 

 3.6 
 
 Certificate
of Correction of Certificate of Designation of Series F-1 Preferred Stock of Cardiff Lexington Corporation (incorporated by reference
to Exhibit 3.10 to Annual Report on Form 10-K filed on March 27, 2024) 

 3.7 
 
 Certificate
of Designation of Series L Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.9 to Amendment
No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023) 

 3.8 
 
 Certificate
of Correction of Certificate of Designation of Series L Preferred Stock of Cardiff Lexington Corporation (incorporated by reference
to Exhibit 3.16 to Annual Report on Form 10-K filed on March 27, 2024) 

 70 

 Exhibit No. 
 
 Description 

 3.9 
 
 Certificate of Designation of Series N Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K filed on June 6, 2023) 

 3.10 
 
 Certificate of Amendment to Certificate of Designation of Series N
Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.2 to the Current Report
on Form 8-K filed on February 3, 2026) 

 3.11 
 
 Certificate of Designation of Series X Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.12 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on August 3, 2023) 

 3.12 
 
 Certificate of Designation of Series Y Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on May 14, 2024) 

 3.13 
 
 Certificate of Amendment to Certificate of Designation of Series Y Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.5 to Annual Report on Form 10-K filed on December 4, 2024) 

 3.14 
 
 Certificate of Amendment to Certificate of Designation of Series Y
Senior Convertible Preferred Stock of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.24 to Quarterly Report on
Form 10-Q filed on November 12, 2025) 

 3.15 
 
 Amended and Restated Bylaws of Cardiff Lexington Corporation (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed on June 6, 2023) 

 4.1* 
 
 Description of Securities of Cardiff Lexington Corporation 

 4.2 
 
 Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to L&H, Inc. on January 14, 2026 (incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) 

 4.3 
 
 Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to Greentree Financial Group, Inc. on December 29, 2025 (incorporated by reference to Exhibit 4.3 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) 

 4.4 
 
 Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to James F. Sullivan on December 23, 2025 (incorporated by reference to Exhibit 4.4 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) 

 4.5 
 
 Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to Odile Viviane Kaye on December 22, 2025 (incorporated by reference to Exhibit 4.5 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) 

 4.6 
 
 Common Stock Purchase Warrant issued by Cardiff Lexington Corporation to Greentree Financial Group, Inc. on October 31, 2025 (incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q filed on November 12, 2025) 

 4.7 
 
 Common Stock Purchase
 Warrant issued by Cardiff Lexington Corporation to SILAC Insurance Company on May 21, 2021 (incorporated by reference to Exhibit 4.2
 to the Annual Report on Form 10-K filed on June 6, 2023) 

 4.7 
 
 Common Stock Purchase
 Warrant issued by Cardiff Lexington Corporation to Leonite Capital LLC on July 10, 2018 (incorporated by reference to Exhibit
 4.3 to Quarterly Report on Form 10-Q filed on November 12, 2025) 

 10.1 
 
 Management Agreement, dated June 4, 2021, among by Cardiff Lexington Corporation, Nova Ortho and Spine, LLC and Dr. Marc D Brodsky, Michael Wycoki, Jr., PA and Dr. Kevin Fitzgerald (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on June 7, 2021) 

 10.2* 
 
 Lock-Up and Compensation Resolution Agreement, dated March 6, 2026, between Cardiff Lexington Corporation and Daniel Thompson 

 10.3 
 
 Loan Agreement, dated January 14, 2026, between Cardiff Lexington Corporation
and L&H, Inc. (incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January
20, 2026) 

 10.4 
 
 Convertible Promissory Note issued by Cardiff Lexington Corporation to L&H, Inc. on January 14, 2026 (incorporated by reference to Exhibit 10.3 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) 

 10.5 
 
 Loan Agreement, dated December 29, 2025, between Cardiff Lexington Corporation and Greentree Financial Group, Inc. (incorporated by reference to Exhibit 10.4 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) 

 10.6 
 
 Convertible Promissory Note issued by Cardiff Lexington Corporation to Greentree Financial Group, Inc. on December 29, 2025 (incorporated by reference to Exhibit 10.5 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) 

 71 

 Exhibit No. 
 
 Description 

 10.7 
 
 Loan Agreement, dated
 December 23, 2025, between Cardiff Lexington Corporation and James F. Sullivan (incorporated by reference to Exhibit 10.6 to
 Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) 

 10.8 
 
 Convertible Promissory Note issued by Cardiff Lexington Corporation to James F. Sullivan on December 23, 2025 (incorporated by reference to Exhibit 10.7 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) 

 10.9 
 
 Loan Agreement, dated December 22, 2025, between Cardiff Lexington Corporation and Odile Viviane Kaye on December 22, 2025 (incorporated by reference to Exhibit 10.8 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) 

 10.10 
 
 Convertible Promissory Note issued by Cardiff Lexington Corporation to Odile Viviane Kaye on December 22, 2025 (incorporated by reference to Exhibit 10.9 to Amendment No. 1 to the Registration Statement on Form S-1/A filed on January 20, 2026) 

 10.11* 
 
 Promissory Note issued by Cardiff Lexington Corporation to Alex Cunningham on December 21, 2025 (2024 Bonus) 

 10.12 * 
 
 Promissory Note issued by Cardiff Lexington Corporation to Alex Cunningham on December 21, 2025 (2025 Bonus) 

 10.13 * 
 
 Promissory Note issued by Cardiff Lexington Corporation to Matthew T. Shafer on December 21, 2025 (2024 Bonus) 

 10.14 * 
 
 Promissory Note issued by Cardiff Lexington Corporation to Matthew T. Shafer on December 21, 2025 (2025 Bonus) 

 10.15 * 
 
 Promissory Note issued by Cardiff Lexington Corporation to Daniel Thompson on December 21, 2025 (2024 Bonus) 

 10.16 * 
 
 Promissory Note issued by Cardiff Lexington Corporation to Daniel Thompson on December 21, 2025 (2025 Bonus) 

 10.17 
 
 Fixed Amount Settlement Promissory Note issued by Cardiff Lexington Corporation to GHS Investments, LLC on June 11, 2024 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on June 11, 2024) 

 10.18 
 
 Securities Exchange Agreement, dated May 13, 2024, between Cardiff Lexington Corporation and Leonite Capital LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 14, 2024) 

 10.19 
 
 Security and Pledge Agreement, dated May 13, 2024, among Cardiff Lexington Corporation, Nova Ortho and Spine, LLC, Edge View Properties, Inc. and Leonite Capital LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on May 14, 2024) 

 10.20 
 
 Revolving Purchase and Security Agreement, dated September 29, 2023, among Cardiff Lexington Corporation, Nova Ortho and Spine, LLC, Platinum Tax Defenders, Edge View Properties, Inc. and DML HC Series, LLC Series 308 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on November 14, 2023) 

 10.21 
 
 Guaranty and Security Agreement, dated September 29, 2023, among Cardiff Lexington Corporation, Nova Ortho and Spine, LLC and DML HC Series, LLC Series 308 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on November 14, 2023) 

 10.22 
 
 Securities Purchase Agreement, dated June 1, 2021, between Cardiff Lexington Corporation and SILAC Insurance Company (incorporated by reference to Exhibit 10.5 to the Annual Report on Form 10-K filed on June 6, 2023) 

 10.23 
 
 Guaranty, dated June 1, 2021, by Nova Ortho and Spine, LLC in favor of SILAC Insurance Company (incorporated by reference to Exhibit 10.6 to the Annual Report on Form 10-K filed on June 6, 2023) 

 10.24 
 
 Security Agreement, dated June 1, 2021, between Nova Ortho and Spine, LLC and SILAC Insurance Company (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K filed on June 6, 2023) 

 10.25 
 
 Security and Stock Pledge Agreement, dated June 1, 2021, between Cardiff Lexington Corporation and SILAC Insurance Company (incorporated by reference to Exhibit 10.8 to the Annual Report on Form 10-K filed on June 6, 2023) 

 10.26 
 
 Convertible Promissory Note issued by Cardiff Lexington Corporation to Greentree Financial Group, Inc. on January 24, 2017 (incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K filed on June 6, 2023) 

 10.27† 
 
 Employment Agreement, dated January 1, 2025, between the Cardiff Lexington
Corporation and Alex Cunningham (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed on March 14, 2025) 

 10.28† 
 
 Employment Agreement, dated January 2, 2024, between the Cardiff Lexington Corporation and Matthew T. Shafer (incorporated by reference to Exhibit 10.19 to the Annual Report on Form 10-K filed on March 27, 2024) 

 10.29 
 
 Form of Independent Director Agreement between Cardiff Lexington Corporation independent directors (incorporated by reference to Exhibit 10.21 to Amendment No. 3 to the Registration Statement on Form S-1/A filed on April 5, 2024) 

 72 

 Exhibit No. 
 
 Description 

 10.30 
 
 Form of Indemnification Agreement between Cardiff Lexington Corporation directors and officers (incorporated by reference to Exhibit 10.22 to Amendment No. 3 to the Registration Statement on Form S-1/A filed on April 5, 2024) 

 10.31† 
 
 2024 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed on February 6, 2024) 

 10.32† 
 
 Form of Stock Option Agreement relating to 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K filed on March 27, 2024) 

 10.33† 
 
 Form of Restricted Stock Award Agreement relating to 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K filed on March 27, 2024) 

 10.34† 
 
 Form of Restricted Stock Unit Award Agreement relating to 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K filed on March 27, 2024) 

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

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

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

 23.1* 
 
 Consent of GBQ Partners, LLC 

 31.1* 
 
 Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 

 31.2* 
 
 Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 

 32.1** 
 
 Certifications of Principal Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

 32.2** 
 
 Certifications of Principal Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

 97.1 
 
 Clawback Policy 
 (incorporated by reference to Exhibit 97.1 to the Annual Report on Form 10-K filed on March 14, 2025) 

 101* 
 
 Inline XBRL Document Set for the consolidated financial statements and accompanying notes included in this Annual Report on Form 10-K 

 104* 
 
 Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set 

 __________

 * 
 Filed herewith 

 ** 
 Furnished herewith 

 † 
 Executive compensation plan or arrangement 

 ITEM 16. 
 FORM 10-K SUMMARY. 

 None.

 73 

 FINANCIAL STATEMENTS 

 Page 

 Report of Independent Registered Public Accounting Firm (PCAOB ID 1808 ) 
 
 F-2 

 Consolidated
 Balance Sheets as of December 31, 2025 and 2024 
 
 F-4 

 Consolidated
 Statements of Operations for the Years Ended December 31, 2025 and 2024 
 
 F-5 

 Consolidated
 Statements of Stockholders’ (Deficit) Equity for the Years Ended December 31, 2025 and 2024 
 
 F-6 

 Consolidated
 Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 (Restated) 
 
 F- 8 

 Notes
 to Consolidated Financial Statements 
 
 F-9 

 F- 1 

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM 

 Stockholders and Board of Directors

 Cardiff Lexington Corporation

 Lexington, Kentucky

 Opinion on the Consolidated
Financial Statements 

 We have audited the accompanying
consolidated balance sheets of Cardiff Lexington Corporation (the “Company”) as of December 31, 2025 and 2024, the related
consolidated statements of operations, stockholders’ (deficit) equity, and cash flows for the years then ended, and the related
notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its
operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States
of America.

 Continuation as a Going Concern
 
 The accompanying consolidated
financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the consolidated
financial statements, the Company has experienced recurring losses from operations and negative cash flows from operations that raise
substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described
in the notes. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 Basis for Opinion 

 These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.

 F- 2 

 Our audits included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.

 Critical Audit Matter 

 The critical audit matter communicated below is
a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated
to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and
(2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

 Estimates of Variable Consideration Related to Healthcare Revenue 

 Description of the Matter 

 As described in the notes to the consolidated
financial statements, the Company recognizes revenue, net that includes estimates of variable consideration. For the year ended December
31, 2025, the Company recorded healthcare revenue, net of $11.5 million. The components of variable consideration include (a) settlement
discounts relative to gross billings for procedures performed, and (b) price concessions to generate settlements and cash inflows. These
estimates take into consideration established billing rates (gross charges); historical collection rates, including established 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, modifiers recognized by each insurance
carrier for services, less deductible, co-pay, and contractual adjustments, as well as current settlement realization rates with payors
based on discussions with doctors and attorneys and the third-party medical billing company vendor.

 Auditing management's estimates for variable consideration
required subjective auditor judgment and evaluation of the reasonableness of significant assumptions used in developing the estimates
as detailed above, as well as the inputs and related calculations related to current contracts.

 How We Addressed the Matter in Our Audit 

 We obtained an understanding and evaluated the
design of internal controls over the Company's calculations to estimate variable consideration, including management's assessment of the
assumptions and data underlying the reserve calculation.

 Our substantive audit procedures included, among
others, (i) testing management’s process for developing the estimates of variable consideration, (ii) testing the completeness and
accuracy of underlying data used in the method on a sample basis, and (iii) evaluating the reasonableness of management’s significant
assumption related to the period of historical experience. Evaluating the reasonableness of the assumption related to the period of historical
experience involved considering the historical relationships of revenue recognized and subsequently collected, and whether this assumption
was consistent with evidence obtained in other areas of the audit. Further, we evaluated the appropriateness of classification and disclosure
of the Company’s reserves for variable consideration in the consolidated financial statements.

 /s/ GBQ Partners, LLC 

 We have served as the Company's auditor since
2024.

 Columbus, Ohio 

 March 10, 2026

 F- 3 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 

 CONSOLIDATED BALANCE SHEETS 

 AS OF DECEMBER 31, 2025 AND 2024 

 December 31, 

 2025 
 2024 

 ASSETS 
 
 Current assets 
 
 Cash 
 $ 318,535 
 $ 1,188,185 

 Accounts receivable, net 
 22,070,954 
 15,934,490 

 Prepaid and other current assets 
 203,876 
 89,901 

 Total current assets 
 22,593,365 
 17,212,576 

 Property and equipment, net 
 2,953 
 21,198 

 Land 
 540,000 
 540,000 

 Goodwill 
 5,666,608 
 5,666,608 

 Right of use – assets, net 
 214,858 
 406,950 

 Due from related party 
 4,979 
 4,979 

 Other assets 
 64,182 
 73,368 

 Total assets 
 $ 29,086,945 
 $ 23,925,679 

 LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' (DEFICIT)/EQUITY 
 
 Current liabilities 
 
 Accounts payable and accrued expense 
 $ 1,760,765 
 $ 1,379,760 

 Accrued expenses - related parties 
 4,645,826 
 4,553,057 

 Accrued interest 
 707,574 
 429,200 

 Right of use – operating lease liabilities 
 178,524 
 223,330 

 Notes payable – current portion 
 125,774 
 312,180 

 Notes payable related parties 
 1,085,703 
 – 

 Line of credit 
 17,209,908 
 8,645,991 

 Convertible notes payable, net of debt discounts of $ 131,705 and $ 0 , respectively 
 118,295 
 105,000 

 Net liabilities of discontinued operations 
 – 
 238,285 

 Total current liabilities 
 25,832,369 
 15,886,803 

 Other liabilities 
 
 Notes payable 
 138,773 
 251,725 

 Operating lease liability – long term 
 42,976 
 185,877 

 Total liabilities 
 26,014,118 
 16,324,405 

 Mezzanine equity 
 
 Redeemable Series N Senior Convertible Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 1,037,311 and 921,636 shares issued and outstanding at December 31, 2025 and 2024, respectively 
 3,802,010 
 3,339,317 

 Redeemable Series X Senior Convertible Preferred Stock - 5,000,000 shares authorized, $0.001 par value, stated value of $ 4.00 par value; 438,388 and 397,464 shares issued and outstanding at December 31, 2025 and 2024, respectively 
 1,740,478 
 1,576,788 

 Total Mezzanine Equity 
 5,542,488 
 4,916,105 

 Stockholders' (deficit)/equity 
 
 Series B Preferred Stock - 3,000,000 shares authorized, $0.001 par value, stated value of $ 4.00 , 0 and 1,279,867 shares issued and outstanding at December 31, 2025 and 2024, respectively 
 – 
 5,119,468 

 Series C Preferred Stock - 500 shares authorized, $0.001 par value, stated value of $ 4.00 , 0 and 74 shares issued and outstanding at December 31, 2025 and 2024, respectively 
 – 
 296 

 Series E Preferred Stock - 1,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 0 and 175,375 shares issued and outstanding at December 31, 2025 and 2024, respectively 
 – 
 701,500 

 Series F-1 Preferred Stock - 50,000 shares authorized, $0.001 par value, stated value $ 4.00 , 3,875 shares issued and outstanding at December 31, 2025 and 2024 
 15,500 
 15,500 

 Series I Preferred Stock - 15,000,000 shares authorized, $0.001 par value, stated value $ 4.00 , 0 and 10,469,092 issued and outstanding at December 31, 2025 and 2024, respectively 
 – 
 41,876,368 

 Series L Preferred Stock - 400,000 shares authorized, $0.001 par value, stated value $ 4.00 , 319,493 shares issued and outstanding at December 31, 2025 and 2024 
 1,277,972 
 1,277,972 

 Series Y Senior Convertible Preferred Stock – 1,500,000 shares authorized, $0.001 par value, stated value $ 4.00 , 1,067,878 and 979,125 shares issued and outstanding at December 31, 2025 and 2024, respectively 
 4,271,512 
 3,916,500 

 Common Stock; 300,000,000 shares authorized, $ 0.001 par value; 13,701,698 and 5,100,971 shares issued and outstanding at December 31, 2025 and 2024, respectively 
 13,702 
 5,101 

 Additional paid-in capital 
 72,021,848 
 22,721,549 

 Unearned stock-based compensation 
 ( 579,215 ) 
 – 

 Accumulated deficit 
 ( 79,490,980 ) 
 ( 72,949,085 ) 

 Total stockholders' (deficit)/equity 
 ( 2,469,661 ) 
 2,685,169 

 Total liabilities, mezzanine equity and stockholders' (deficit)/equity 
 $ 29,086,945 
 $ 23,925,679 

 The accompanying notes are an integral part of
these consolidated financial statements

 F- 4 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 

 CONSOLIDATED
STATEMENTS OF OPERATIONS 

 FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024 

 December 31, 

 2025 
 2024 

 REVENUE 
 $ 11,535,577 
 $ 8,270,126 

 COST OF SALES 
 4,329,330 
 3,841,628 

 GROSS PROFIT 
 7,206,247 
 4,428,498 

 OPERATING EXPENSES 
 
 Depreciation expense 
 5,652 
 13,461 

 Loss on disposal of fixed assets 
 12,593 
 – 

 Share based compensation 
 754,475 
 544,725 

 Selling, general and administrative 
 5,332,941 
 4,063,816 

 Total operating expenses 
 6,105,661 
 4,622,002 

 INCOME (LOSS) FROM CONTINUING OPERATIONS 
 1,100,586 
 ( 193,504 ) 

 OTHER (EXPENSE) INCOME 
 
 Other expense 
 ( 22,147 ) 
 ( 5,362 ) 

 Gain on debt refinance and forgiveness 
 – 
 78,834 

 Penalties and fees 
 ( 1,500 ) 
 ( 1,330 ) 

 Interest expense 
 ( 6,822,816 ) 
 ( 3,045,504 ) 

 Amortization of notes payable discount 
 – 
 ( 24,821 ) 

 Total other expenses 
 ( 6,846,463 ) 
 ( 2,998,183 ) 

 NET LOSS BEFORE DISCONTINUED OPERATIONS 
 ( 5,745,877 ) 
 ( 3,191,687 ) 

 INCOME (LOSS) FROM DISCONTINUED OPERATIONS 
 238,285 
 ( 111,312 ) 

 NET LOSS FOR THE YEAR 
 $ ( 5,507,592 ) 
 $ ( 3,302,999 ) 

 PREFERRED STOCK DIVIDENDS 
 ( 1,034,303 ) 
 ( 962,169 ) 

 NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS 
 $ ( 6,541,895 ) 
 $ ( 4,265,168 ) 

 BASIC (LOSS) EARNINGS PER SHARE 
 
 CONTINUING OPERATIONS 
 $ ( 0.98 ) 
 $ ( 1.09 ) 

 DISCONTINUED OPERATIONS 
 $ 0.03 
 $ ( 0.03 ) 

 DILUTED (LOSS) EARNINGS PER SHARE 
 
 CONTINUING OPERATIONS 
 $ ( 0.98 ) 
 $ ( 1.09 ) 

 DISCONTINUED OPERATIONS 
 $ 0.03 
 $ ( 0.03 ) 

 WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC * 
 6,928,357 
 3,815,067 

 WEIGHTED AVERAGE SHARES OUTSTANDING – DILUTED * 
 8,499,307 
 3,815,067 

 * 
 Shares outstanding have been restated for the 1-for-3 reverse stock split
 effective January 12, 2026. See Note 1. Summary of Significant Accounting Policies . 

 The accompanying notes are an integral part of
these consolidated financial statements

 F- 5 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
(DEFICIT) EQUITY * 

 FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024 

 Preferred Stock 
 Series A, I and Y 
 Preferred Stock
 Series B, E, F-1, J and L 
 Preferred Stock Series C 

 Shares 
 Amount 
 Shares 
 Amount 
 Shares 
 Amount 

 Balance, December 31, 2023 (restated) 
 14,885,002 
 $ 59,540,000 
 4,364,057 
 $ 17,456,228 
 123 
 $ 492 

 Conversion of convertible notes payable 
 – 
 – 
 – 
 – 
 – 
 – 

 Conversion of series B preferred stock 
 – 
 – 
 ( 1,609,611 ) 
 ( 6,438,444 ) 
 – 
 – 

 Conversion of series C preferred stock 
 – 
 – 
 – 
 – 
 ( 96 ) 
 ( 384 ) 

 Conversion of series E preferred stock 
 – 
 – 
 ( 80,375 ) 
 ( 321,500 ) 
 – 
 – 

 Conversion of series F-1 preferred stock 
 – 
 – 
 ( 31,877 ) 
 ( 127,508 ) 
 – 
 – 

 Conversion of series I preferred stock 
 ( 3,527,000 ) 
 ( 14,108,000 ) 
 – 
 – 
 – 
 – 

 Conversion of series J preferred stock 
 – 
 – 
 ( 1,713,584 ) 
 ( 6,854,336 ) 
 – 
 – 

 Issuance of series I preferred stock to officers 
 132,500 
 530,000 
 – 
 – 
 – 
 – 

 Issuance of series Y preferred stock 
 979,125 
 3,916,500 
 – 
 – 
 – 
 – 

 Exchange of series I for series B, C and E 
 ( 1,021,408 ) 
 ( 4,085,632 ) 
 850,000 
 3,400,000 
 49 
 196 

 Cancellation of series C preferred stock 
 – 
 – 
 – 
 – 
 ( 2 ) 
 ( 8 ) 

 Common stock issued for services 
 – 
 – 
 – 
 – 
 – 
 – 

 Common stock issued to board members 
 – 
 – 
 – 
 – 
 – 
 – 

 Common stock issued in Red Rock settlement 
 – 
 – 
 – 
 – 
 – 
 – 

 Common stock issued in legal settlement 
 – 
 – 
 – 
 – 
 – 
 – 

 Preferred stock Dividends 
 – 
 – 
 – 
 – 
 – 
 – 

 Net loss 
 – 
 – 
 – 
 – 
 – 
 – 

 Balance, December 31, 2024 
 11,448,219 
 $ 45,792,868 
 1,778,610 
 $ 7,114,440 
 74 
 $ 296 

 Conversion of convertible notes payable 
 – 
 – 
 – 
 – 
 – 
 – 

 Conversion of series B preferred stock 
 – 
 – 
 ( 1,579,867 ) 
 ( 6,319,468 ) 
 – 
 – 

 Conversion of series C preferred stock 
 – 
 – 
 – 
 – 
 ( 80 ) 
 ( 320 ) 

 Conversion of series E preferred stock 
 – 
 – 
 ( 229,375 ) 
 ( 917,500 ) 
 – 
 – 

 Conversion of series I preferred stock 
 ( 10,077,592 ) 
 ( 40,310,368 ) 
 – 
 – 
 – 
 – 

 Issuance of series Y preferred stock 
 88,753 
 355,012 
 – 
 – 
 – 
 – 

 Issuance of B, C and E preferred stock in exchange for series I preferred stock 
 ( 391,500 ) 
 ( 1,566,000 ) 
 354,000 
 1,416,000 
 6 
 24 

 Issuance of common stock to correct series I surrender 
 – 
 – 
 – 
 – 
 – 
 – 

 Issuance of common shares related to bridge loans 
 – 
 – 
 – 
 – 
 – 
 – 

 Common stock issued for services 
 – 
 – 
 – 
 – 
 – 
 – 

 Common stock cancelled for legal settlement 
 – 
 – 
 – 
 – 
 – 
 – 

 Stock compensation expense 
 – 
 – 
 – 
 – 
 – 
 – 

 Preferred stock dividends 
 – 
 – 
 – 
 – 
 – 
 – 

 Net loss 
 – 
 – 
 – 
 – 
 – 
 – 

 Balance, December 31, 2025 
 1,067,880 
 $ 4,271,512 
 323,368 
 $ 1,293,472 
 – 
 $ – 

 (Continued)

 F- 6 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
(DEFICIT) EQUITY * 

 FOR THE YEARS ENDED DECEMBER 31, 2025 AND
2024 (Continued) 

 Common Stock 
 Additional Paid-In 
 Unearned Stock-Based 
 Accumulated 
 Total Stockholders’ 

 Shares 
 Amount 
 Capital 
 Compensation 
 Deficit 
 Equity 

 Balance, December 31, 2023 (restated) 
 9,067 
 $ 9 
 $ ( 7,581,196 ) 
 $ – 
 $ ( 68,684,115 ) 
 $ 731,418 

 Conversion of convertible notes payable 
 408 
 1 
 1,679 
 – 
 – 
 1,680 

 Conversion of series B preferred stock 
 1,073,105 
 1,073 
 6,437,371 
 – 
 – 
 – 

 Conversion of series C preferred stock 
 320,062 
 320 
 64 
 – 
 – 
 – 

 Conversion of series E preferred stock 
 53,584 
 54 
 321,446 
 – 
 – 
 – 

 Conversion of series F-1 preferred stock 
 21,256 
 21 
 127,487 
 – 
 – 
 – 

 Conversion of series I preferred stock 
 2,351,347 
 2,351 
 14,105,649 
 – 
 – 
 – 

 Conversion of series J preferred stock 
 1,142,391 
 1,143 
 6,853,193 
 – 
 – 
 – 

 Issuance of series I preferred stock to officers 
 – 
 – 
 63,600 
 – 
 – 
 593,600 

 Issuance of series Y preferred stock 
 – 
 – 
 – 
 – 
 – 
 3,916,500 

 Exchange of series I for series B, C and E 
 – 
 – 
 685,436 
 – 
 – 
 – 

 Cancellation of series C preferred stock 
 – 
 – 
 8 
 – 
 – 
 – 

 Common stock issued for services 
 4,334 
 4 
 28,121 
 – 
 – 
 28,125 

 Common stock issued to board members 
 10,002 
 10 
 194,990 
 – 
 – 
 195,000 

 Common stock issued in Red Rock settlement 
 12,370 
 12 
 111,300 
 – 
 – 
 111,312 

 Common stock issued in legal settlement 
 24,742 
 25 
 ( 25 ) 
 – 
 – 
 – 

 Preferred stock Dividends 
 78,303 
 78 
 1,372,426 
 – 
 ( 961,971 ) 
 410,533 

 Net loss 
 – 
 – 
 – 
 – 
 ( 3,302,999 ) 
 ( 3,302,999 ) 

 Balance, December 31, 2024 
 5,100,971 
 $ 5,101 
 $ 22,721,549 
 $ – 
 $ ( 72,949,085 ) 
 $ 2,685,169 

 Conversion of convertible notes payable 
 64,165 
 64 
 145,807 
 – 
 – 
 145,871 

 Conversion of series B preferred stock 
 1,053,248 
 1,053 
 6,318,415 
 – 
 – 
 – 

 Conversion of series C preferred stock 
 266,668 
 267 
 53 
 – 
 – 
 – 

 Conversion of series E preferred stock 
 152,917 
 153 
 917,347 
 – 
 – 
 – 

 Conversion of series I preferred stock 
 6,718,395 
 6,718 
 40,303,650 
 – 
 – 
 – 

 Issuance of series Y preferred stock 
 – 
 – 
 – 
 – 
 – 
 355,012 

 Issuance of B, C and E preferred stock in exchange for series I preferred stock 
 – 
 – 
 149,976 
 – 
 – 
 – 

 Issuance of common stock to correct series I surrender 
 114,240 
 114 
 ( 114 ) 
 – 
 – 
 – 

 Issuance of common shares related to bridge loans 
 6,667 
 7 
 131,699 
 – 
 – 
 131,706 

 Common stock issued for services 
 244,177 
 245 
 1,176,158 
 ( 579,215 ) 
 – 
 597,188 

 Common stock cancelled for legal settlement 
 ( 19,750 ) 
 ( 20 ) 
 20 
 – 
 – 
 – 

 Stock compensation expense 
 – 
 – 
 157,288 
 – 
 – 
 157,288 

 Preferred stock dividends 
 – 
 – 
 – 
 – 
 ( 1,034,303 ) 
 ( 1,034,303 ) 

 Net loss 
 – 
 – 
 – 
 – 
 ( 5,507,592 ) 
 ( 5,507,592 ) 

 Balance, December 31, 2025 
 13,701,698 
 $ 13,702 
 $ 72,021,848 
 $ ( 579,215 ) 
 $ ( 79,490,980 ) 
 $ ( 2,469,661 ) 

 *Shares outstanding have been restated for the 1-for-3 reverse stock
split effective January 12, 2026. See Note 1. Summary of Significant Accounting Policies .

 The accompanying notes are an integral part of
these consolidated financial statements

 F- 7 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024 

 December 31, 

 2025 
 2024 

 CASH FLOWS FROM OPERATING ACTIVITIES 
 
 Net loss from operations 
 $ ( 5,507,592 ) 
 $ ( 3,302,999 ) 

 Adjustments to reconcile net loss to net cash used in operating activities: 
 
 Depreciation 
 5,652 
 13,461 

 Credit losses 
 262,928 
 266,000 

 Change in estimate for settlement realization rate 
 – 
 1,650,474 

 Amortization of debt discount 
 – 
 24,821 

 Gain on resolution and disposition of discontinued operations claims 
 ( 238,285 ) 
 – 

 Conversion and note issuance cost 
 1,500 
 1,000 

 Loss on disposal of assets 
 12,593 
 – 

 Interest included in line of credit 
 6,421,521 
 3,092,350 

 Share issuance and compensation expense 
 754,475 
 544,725 

 Bonus expense settled with promissory notes 
 593,450 
 – 

 Gain on settlement or forgiveness of debt 
 – 
 ( 78,834 ) 

 (Increase) decrease in: 
 
 Accounts receivable 
 ( 6,399,392 ) 
 ( 4,545,068 ) 

 Right of use – assets 
 275,761 
 ( 117,888 ) 

 Prepaids and other current assets 
 ( 104,789 ) 
 ( 124,964 ) 

 Increase (decrease) in: 
 
 Accounts payable and accrued expense 
 459,766 
 ( 699,559 ) 

 Accrued officers compensation 
 512,769 
 92,000 

 Accrued interest 
 367,745 
 286,202 

 Right of use – liabilities 
 ( 271,376 ) 
 132,482 

 Net cash used in operating activities 
 ( 2,853,274 ) 
 ( 2,765,797 ) 

 Net cash provided by Discontinued Operations – Operating 
 – 
 111,312 

 FINANCING ACTIVITIES 
 
 Payments to director 
 – 
 ( 120,997 ) 

 Proceeds from convertible notes payable 
 200,000 
 – 

 Payments on convertible notes payable 
 – 
 ( 105,079 ) 

 Repayment on SBA loans 
 ( 8,772 ) 
 ( 6,739 ) 

 Payments on note payable 
 ( 300,000 ) 
 ( 125,000 ) 

 Net proceeds from line of credit 
 2,142,396 
 3,433,542 

 Payment of dividends on preferred stock 
 ( 50,000 ) 
 ( 100,000 ) 

 Net cash provided by financing activities 
 1,983,624 
 2,975,727 

 NET (DECREASE) INCREASE IN CASH 
 ( 869,650 ) 
 321,242 

 CASH, BEGINNING OF YEAR 
 1,188,185 
 866,943 

 CASH, END OF YEAR 
 $ 318,535 
 $ 1,188,185 

 SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION 
 
 Cash paid during the year for interest 
 $ 9,414 
 $ 126,732 

 NON-CASH INVESTING AND FINANCING ACTIVITIES*: 
 
 Common stock issued upon conversion of notes payable 
 $ 145,871 
 $ 1,680 

 Common stock issued upon conversion of preferred stock 
 $ 8,191 
 $ 4,963 

 Series Y preferred stock issued in exchange of convertible notes payable 
 $ – 
 $ 3,755,632 

 Dividends on preferred stock, including accrued dividends on preferred stock 
 $ 1,129,763 
 $ 1,016,264 

 Promissory note payable issued in settlement agreement 
 $ – 
 $ 535,000 

 Promissory notes payable issued in settlement of bonuses 
 $ 1,085,703 
 $ – 

 Discount on convertible notes payable 
 $ 131,705 
 $ – 

 Unearned compensation on restricted common stock grant 
 $ 579,215 
 $ – 

 *For the year ended December 31, 2025 and 2024, lease modifications
recorded increased right of use assets and right of use liabilities by $83,669 and $139,232, respectively. For the year ended December
31, 2024, two new leases recorded during the period increased right of use assets and right of use liabilities by a total of $224,179.

 The accompanying notes are an integral part of
these consolidated financial statements

 F- 8 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

 DECEMBER 31, 2025 AND 2024 

 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

 Organization and Nature of Operations 

 Cardiff Lexington Corporation (“Cardiff”)
was originally incorporated on September 3, 1986 in Colorado as Cardiff International Inc. On November 10, 2005, Cardiff merged with Legacy
Card Company, LLC and changed its name to Cardiff Lexington Corporation. On August 27, 2014, Cardiff redomiciled and became a corporation
under the laws of Florida. On April 13, 2021, Cardiff redomiciled and became a corporation under the laws of Nevada.

 Cardiff is an acquisition holding company focused
on locating undervalued and undercapitalized companies, primarily in the healthcare industry, and providing them capitalization and leadership
to maximize the value and potential of their private enterprises while also providing diversification and risk mitigation for stockholders.
All of Cardiff’s operations are predominantly conducted through, and its income derived from, its Nova Ortho and Spine, LLC (“Nova”)
subsidiary. Its subsidiaries include:

 · 
 Nova, which was acquired on May 31, 2021; and 

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

 Basis of Presentation and Principles of Consolidation 

 The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include
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 income from discontinued operations presented in the consolidated
statement of operations for the year ended December 31, 2025 is the release of residual obligations which were reported as net liabilities
from discontinued operations on the consolidated balance sheet as of December 31, 2024, related to the sale of Platinum Tax Defenders
(“Platinum Tax”), a business previously owned by the Company, which was sold in November 2023. The loss from discontinued
operations presented in the consolidated statement of operations for year ended December 31, 2024 is a part of the execution of a settlement
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. Please refer to Note 11. Discontinued Operations for further detail.

 Reverse Stock Splits 

 On January 12, 2026, we implemented a 1-for-3 reverse
split of our outstanding shares of common stock. All share and per share data throughout these consolidated financial statements have
been retroactively adjusted to reflect the reverse stock split. The total number of authorized shares of common stock did not change.
As a result of the reverse stock split, an amount equal to the decreased value of the common stock was reclassified from “common
stock” to “additional paid-in capital.” In addition, 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 fractional shares were rounded up.

 F- 9 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Use of Estimates 

 The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Management
uses its historical records and knowledge of its business in making estimates. Accordingly, actual results could differ from those estimates.

 Accounts Receivable 

 In the normal course of business, the Company
is in the lien based medical industry providing orthopedic healthcare servicing an uninsured market insulated by a letter of protection
which insulates the Company and insures payment in full from insurance settlements. Accounts receivable consists of amounts due from attorneys
and insurance providers for services provided to patients under the letter of protection. 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 1.0% 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 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 twelve 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 December 31, 2025 and 2024, the Company’s allowance for credit losses was
$ 400,000 and $ 255,215 ,
respectively. The Company recognized $ 262,928 
and $ 266,000 of credit loss expense
during the years ended December 31, 2025 and 2024, respectively, which is included in selling, general and administrative expenses in
the consolidated statement of operations. The balance of accounts receivable, net as of January 1, 2024 was $ 13,305,254 .
The balance of the allowance for credit losses was $ 122,190 
as of January 1, 2024.

 Schedule of allowance for credit
losses activity 
 
 The following table shows the allowance for credit losses activity: 
 
 2025 
 2024 

 Balance at January 1 
 $ ( 255,215 ) 
 $ ( 122,190 ) 

 Current period provision 
 ( 262,928 ) 
 ( 266,000 ) 

 Write off charged against the allowance 
 118,143 
 132,975 

 Balance at December 31 
 $ ( 400,000 ) 
 $ ( 255,215 ) 

 F- 10 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Property and Equipment 

 Property and equipment are carried at cost. Expenditures
for renewals and betterments that extend the useful lives of property, equipment or leasehold improvements are capitalized. Expenditures
for maintenance and repairs are charged to expense as incurred. Depreciation is calculated using the straight-line method for financial
reporting purposes based on the following estimated useful lives:

 Schedule of estimated useful lives 
 
 Classification 
 Useful Life 

 Equipment, furniture, and fixtures 
 5 - 7 years 

 Medical equipment 
 10 years 

 Leasehold improvements 
 10 years or lease term, if shorter 

 Goodwill 

 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. 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 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 Goodwill is based on valuation models that incorporate assumptions and internal projections of
expected future cash flows and operating plans. The Company believes such assumptions are also comparable to those that would be used
by other marketplace participants. For the years ended December 31, 2025 and 2024, the Company determined there to be no impairment and
noted no triggering events. The Company based this decision on impairment testing of the underlying assets, expected cash flows, decreased
asset value and other factors.

 Valuation of Long-lived Assets 

 In accordance with the provisions of Accounting
Standards Codification (“ASC”) Topic 360-10-35, “Impairment or Disposal of Long-Lived Assets”, all long-lived
assets such as plant and equipment held and used by the Company are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison
of the carrying amount of assets to estimated cash flows expected to be generated by the assets. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.

 Revenue Recognition 

 The Company’s primary source of revenue
is its healthcare subsidiary, which records revenues from providing licensed and/or certified orthopedic procedures. Revenue is recognized
at a point in time in accordance with ASC 606 and at an estimated net settlement realization rate based on gross billed charges. The Company’s
healthcare subsidiary does not have contract liabilities or deferred revenue as there are no amounts prepaid for services. The Company
applies the following five-step ASC 606 model to determine revenue recognition:

 · 
 Identification of a contract with a customer 

 · 
 Identification of the performance obligations in the contract 

 F- 11 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 · 
 Determination of the transaction price 

 · 
 Allocation of the transaction price to the separate performance obligations 

 · 
 Recognition of revenue when performance obligations are satisfied. 

 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
when the patient receives orthopedic care services. The Company’s patient service contracts generally have performance obligations
which are satisfied at a point in time. The performance obligation is for onsite or off-site care provided. Patient service contracts
are generally fixed-price, and the transaction price is in the contract.

 In determining net revenue to record under ASC
606, the Company must estimate the transaction price, including estimates of variable consideration in the contract at inception. In order
to estimate variable consideration, the Company uses established billings rates (also described as “gross charges”) for the
procedures being performed, however, the billing rates are not the same as actual amounts recovered for the Company’s healthcare
subsidiary. They generally do not reflect what the Company is ultimately paid by the customer, insurance carriers and other payors,
and therefore are not reported in the consolidated financial statements at that rate. The Company is typically paid amounts based on established
charges per procedure with guidance from the annually updated 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 has been based on a historical 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
realization trends obtained from discussions with attorneys, doctors and our third-party medical billing company. Settlement amounts are
negotiated, and prolonged settlement negotiations are not indicative of a greater likelihood of reduced settlement realization or zero
settlement.

 The Company may accept a lower settlement realization
rate in order to receive faster payment. The Company obtains information about expected settlement realization trends from discussions
with doctors and attorneys and its third-party medical billing company vendor, which handles settlement claims and negotiations. Settlement
amounts are presented to the Company’s third-party medical billing company vendor.

 F- 12 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 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. 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.

 Service Fees – Net (PIP) 

 The Company generates services fees from performing
various procedures on the date the services are performed. These services primarily include slip and falls as well as smaller nominal
Non 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. An initial
response is usually received within four weeks from electronic filing and up to six weeks from paper filing. Responses may be a payment,
a denial, or a request for additional information. The Company’s healthcare revenues are generated from professional medical billings
including facility and anesthesia services. With respect to facility and anesthesia services, the Company is the primary obligor as the
facility and anesthesia services are considered part of one integrated performance obligation. 

 The Company satisfies performance obligations
as services are performed and then billed to the patient. Payment in most cases is made by an attorney for such services to our patients
which are due upon final settlement of patients’ claims. During the claims process, legal counsel warranties such claim through
the letter of protection, which is sent to the Company, as a medical provider, on behalf of the client patient. This letter states that
the attorney is responsible for paying the client’s medical bills when the case is fully developed and settles. The medical professional
agrees to provide treatment to the injured person and refrain from attempting to collect payment as it is developing and until the case
is resolved. Once the personal injury case is finalized with the insurance company, the attorney pays the outstanding medical bills from
the settlement.

 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 year ended December 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 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 the updated analysis. Based upon this review,
it was determined that a 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, and establishing a periodic lookback analysis, during the year ended December
31, 2024, the Company realized a 44% average settlement rate of its gross billed charges during this time frame, which were historically
recorded in revenue at 49% of gross billings. The Company continues to periodically evaluate this estimated settlement realization rate
in accordance with ASC 606. This includes a monthly review of historical data and settlement realization rates, along with estimates of
current and pending settlements through ongoing discussions with attorneys, doctors and third-party medical billing company in order to
determine the variable consideration under ASC 606 and the net transaction price. During 2025, the Company continued expanding the historical
lookback period to 36 months based on the ongoing expanding data history and the timeframe in which collections have recently been occurring.
The Company updates the settlement realization rate estimate used in determining revenue periodically based on these reviews. As of December
31, 2025, the settlement realization rate at which revenue is recorded was at 41%.

 F- 13 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Contract Fees (Non-PIP) 

 The Company has contract fees for amounts earned
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 twelve 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 

 Advertising costs are expensed as incurred. Advertising
costs are included as a component of cost of sales in the consolidated statements of operations. The Company recognized advertising and
marketing expense of $ 370,330 and $ 366,637 for the years ended December 31, 2025 and 2024, respectively.

 Fair Value Measurements 

 Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment
associated with the inputs used to measure their fair value. The fair value hierarchy distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources (observable inputs), and (2) an entity’s own assumptions about
market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair
value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy
are described below:

 Level 1 
 Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. 

 Level 2 
 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. 

 Level 3 
 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 

 The Company accounts for its series N senior convertible
preferred stock and series X senior convertible preferred stock subject to possible redemption in accordance with ASC 480, “Distinguishing
Liabilities from Equity”. Conditionally redeemable preferred shares are classified as temporary equity within the Company’s
consolidated balance sheet.

 F- 14 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Stock-Based Compensation 

 The Company accounts for its stock-based compensation
in which the Company obtains employee/non-employee services in share-based payment transactions under the recognition and measurement
principles of the fair value recognition provisions of section 718-10-30 of the FASB ASC. Pursuant to paragraph 718-10-30-6 of the FASB
ASC, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

 The measurement date used to determine the fair
value of equity-classified awards is the grant date, which is the date on which the Company and the grantee reach a mutual understanding
of the award’s key terms and conditions. Generally, all forms of share-based payments, including stock option grants, warrants,
restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated
number of awards that are ultimately expected to vest. The Company has elected to account for forfeitures as they occur and expense is
recognized over the requisite service period.

 The expense resulting from share-based payments
is recorded in general and administrative expense in the consolidated statements of operations.

 Income Taxes 

 Income taxes are determined in accordance with
ASC Topic 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date. The Company evaluates both positive and negative
evidence in assessing the realizability of its net deferred tax assets and records a valuation allowance when it is more likely than not
that some or all of the deferred tax assets will not be realized. The One Big Beautiful Bill Act (the “OBBBA”), which was
enacted on July 4, 2025, makes numerous tax changes. The tax provisions of the OBBBA did not have a material impact on the Company’s
effective tax rate and it also did not impact the Company’s net deferred tax assets, as the Company continues to maintain a full
valuation allowance against that balance.

 ASC 740 prescribes a comprehensive model for how
companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to
be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely
than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be
measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the
tax authority assuming full knowledge of the position and relevant facts.

 For the years ended December 31, 2025 and 2024,
the Company did no t have any interest and penalties associated with tax positions and did not have any significant unrecognized uncertain
tax positions.

 Income (Loss) per Share 

 FASB ASC Subtopic 260, Earnings Per Share ,
provides for the calculation of “Basic” and “Diluted” earnings per share. Basic earnings per common share is computed
by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period.
Diluted earnings per common share is computed by dividing income available to common stockholders by the weighted-average number of shares
of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been
outstanding if the potentially dilutive securities had been issued. 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.

 F- 15 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Going Concern 

 The accompanying consolidated financial statements
have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets and
liabilities and commitments in the normal course of business. The Company had previously sustained operating losses since its inception
and has an accumulated deficit of $ 79,490,980 and $ 72,949,085 as of December 31, 2025 and 2024, respectively. The Company has a stockholders’
deficit of $ 2,469,661 and stockholders’ equity of $ 2,685,169 as of December 31, 2025 and 2024, respectively. The Company had negative
cash flow from operations of $ 2,853,274 and $ 2,765,797 during the years ended December 31, 2025 and 2024, respectively. These factors
raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements
do not reflect any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications
of liabilities that might result if the Company is unable to continue as a going concern.

 The ability of the Company to continue as a going
concern and the appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusions. Management
has prospective investors and believes the raising of capital will allow the Company to fund its cash flow shortfalls and pursue new acquisitions.
There can be no assurance that the Company will be able to obtain sufficient capital from debt or equity transactions or from operations
in the necessary time frame or on terms acceptable to it. Should the Company be unable to raise sufficient funds, it may be required to
curtail its operating plans. In addition, increases in expenses may require cost reductions. No assurance can be given that the Company
will be able to operate profitably on a consistent basis, or at all, in the future. Should the Company not be able to raise sufficient
funds, it may cause cessation of operations.

 Recently Issued Accounting Standards 

 The FASB issued Accounting Standards Update (“ASU”)
2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):
Disaggregation of Income Statement Expenses” in November 2024. The amendments are effective for annual reporting periods beginning
after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The amendments
require disclosure in the notes to financial statements of specified information about certain costs and expenses related to selling expenses
and in annual reporting periods, an entity’s definition of selling expenses, among other qualitative descriptions of relevant expense
captions that are not separately disaggregated quantitatively. The Company is analyzing the impact that ASU 2024-03 will have on the Company’s
required disclosures but does not expect any material impacts.

 The FASB issued ASU 2025-11, “Interim Reporting
(Topic 270): Narrow Scope Improvements” in December 2025. The amendments are effective for interim reporting periods within annual
reporting periods beginning after December 15, 2027, for public business entities. The amendments can be applied either prospectively
or retrospectively to any or all prior periods presented in the financial statements. The amendments in this update clarify interim disclosure
requirements and the applicability of Topic 270 and result in a comprehensive list of interim disclosures that are required by GAAP. The
amendments in this update also include a disclosure principle that requires entities to disclose events since the end of the last annual
reporting period that have a material impact on the entity. The Company will review the clarifications in the update around the Topic
270 disclosures but do not expect this update to have a material impact on our financial statements.

 F- 16 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Recently Adopted Accounting Standards 

 The FASB issued ASU 2025-05, “Financial
Instruments – Credit Losses (Topic 326); Measurement of Credit Losses for Accounts Receivable and Contract Assets” in July
2025. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual
reporting periods, with early adoption permitted. The amendments will be applied prospectively. The amendments in this update provide
(1) all entities with a practical expedient wherein as part of developing reasonable and supportable forecasts when estimating expected
credit losses, all entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change
for the remaining life of the asset, and (2) entities other than public business entities are now allowed an accounting policy election
when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted
for under Topic 606 to consider collection activity after the balance sheet date when estimating expected credit losses. The were no material
impacts to the Company’s consolidated financial statements at adoption.

 The FASB issued ASU 2023-09, “Income Taxes
(Topic 740): Improvements to Income Tax Disclosures” in December 2023. The amendments are effective for annual periods beginning
after December 15, 2024 with early adoption permitted for annual financial statements that have not yet been issued or made available
for issuance. The amendments in this update require that public business entities on an annual basis (1) disclose specific categories
in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect
of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the
applicable statutory income tax rate). The amendments in this update also require that all entities disclose on an annual basis certain
information about income taxes paid as well as information related to domestic and foreign income. The Company adopted this standard prospectively.
The adoption did not have any impact on the consolidated financial statements or results of operations, focusing instead on enhanced disclosures.

 2. REVISED AND RESTATED FINANCIAL STATEMENTS 

 During the second quarter of 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 year ended December 31, 2024. This reclassification corrects the presentation of $ 3,092,350 of non-cash interest
accrual adjustments related to the Company’s line of credit as of December 31, 2024. These amounts, previously presented within
net proceeds from the line of credit in financing activities, are now presented within operating activities. 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 table summarizes the impact of
the correction on the Company’s condensed consolidated statement of cash flows for the period ending December 31, 2024.

 Schedule of restated financial information 
 
 Impact of correction of error 

 Twelve months ended December 31, 2024 
 As previously 
reported 
 Adjustments 
 As restated 

 Net cash used in operating activities of continuing operations 
 $ ( 5,858,147 ) 
 $ 3,092,350 
 $ ( 2,765,797 ) 

 Net cash provided by financing activities of continuing operations 
 $ 6,068,077 
 $ ( 3,092,350 ) 
 $ 2,975,727 

 F- 17 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES 

 Schedule of accounts payable and accrued expenses 
 
 December 31, 

 2025 
 2024 

 Accounts payable 
 $ 1,091,113 
 $ 684,324 

 Accrued credit cards 
 12,206 
 14,322 

 Accrued liability for settlement of previously factored receivables 
 221,441 
 242,292 

 Accrued income and property taxes 
 3,687 
 3,317 

 Accrued professional fees 
 99,114 
 29,122 

 Accrued board fees 
 – 
 15,000 

 Accrued expense - dividend payable 
 35,108 
 32,190 

 Accrued public company fees 
 5,000 
 5,000 

 Accrued payroll and bonuses 
 268,346 
 346,347 

 Accrued expense - other 
 24,750 
 7,846 

 Total 
 $ 1,760,765 
 $ 1,379,760 

 4. PLANT AND EQUIPMENT, NET 

 Property and equipment as of December 31, 2025
and 2024 is as follows:

 Schedule of property and equipment 
 
 December 31, 

 2025 
 2024 

 Medical equipment 
 $ 23,640 
 $ 96,532 

 Computer equipment 
 9,189 
 9,189 

 Furniture, fixtures and equipment 
 15,079 
 15,079 

 Leasehold improvement 
 15,950 
 15,950 

 Total 
 63,858 
 136,750 

 Less: accumulated depreciation 
 ( 60,905 ) 
 ( 115,552 ) 

 Property and equipment, net 
 $ 2,953 
 $ 21,198 

 For the years ended December 31, 2025 and 2024,
depreciation expense was $ 5,652 and $ 13,461 , respectively. During the first quarter of 2025, the Company identified assets that were no
longer functional in its medical facilities. 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 year ended December 31,
2025.

 F- 18 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 5. LAND 

 As of December 31, 2025 and 2024, the Company
had 27 acres of land of approximately $ 540,000 . The land is currently vacant and management does not currently have any plans to develop
this property and expects to eventually sell the property.

 6. RELATED PARTY TRANSACTIONS 

 On December 21, 2025, in connection with bonuses
earned by certain employees, the Company issued promissory notes in the aggregate principal amount of $ 1,085,703 (representing bonuses
earned of $ 593,450 and $ 492,253 for the years ended December 31, 2025 and 2024, respectively), in lieu of cash payment, including a promissory
note in the principal amount of $ 460,000 to Alex Cunningham, the Company’s Chairman and Chief Executive Officer, a promissory note
in the principal amount of $ 122,550 to Matthew T. Shafer, the Company’s Chief Financial Officer, and a promissory note in the principal
amount of $ 460,000 to Daniel Thompson, the Company’s Chairman at such time. These notes bear interest of 5 % per annum and mature
on June 30, 2026 . The bonus expense was recognized in the period earned, and the issuance of the notes was accounted for as a non-cash
financing activity. See also Note 7. Notes And Loans Payable .

 In connection with the acquisition of Edge View
on July 16, 2014, the Company assumed amounts due to previous owners who are current managers of Edge View. These amounts are due on demand
and do not bear interest. The balance of these amounts are $ 4,979 due from the previous owners as of December 31, 2025 and 2024.

 The Company previously obtained $ 120,997 in short-term
advances from the former Chairman of the Board that were non-interest bearing and due on demand. During the year ended December 31, 2024,
the Company fully repaid the $ 120,997 owed to the former Chairman.

 See also Note 8. Convertible Notes Payable 
and the disclosure regarding the note issued to the Chief Executive Officer on August 25, 2023.

 See also Note 13. Commitments and Contingencies 
for compensation paid to employees of the Company.

 7. NOTES AND LOANS PAYABLE 

 Notes payable at December 31, 2025 and 2024, respectively,
are summarized as follows:

 Schedule of notes payable 
 
 December 31, 

 2025 
 2024 

 Notes payable – unrelated parties 
 $ 17,474,455 
 $ 9,209,896 

 Note payable – related parties 
 1,085,703 
 – 

 Less current portion 
 ( 18,421,385 ) 
 ( 8,958,171 ) 

 Long-term portion 
 $ 138,773 
 $ 251,725 

 F- 19 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Long-term debt matures as follows:

 Schedule of maturities of long-term debt 
 
 Amount 

 2026 
 $ 18,421,385 

 2027 
 4,785 

 2028 
 4,785 

 2029 
 4,785 

 2030 
 4,785 

 Thereafter 
 119,633 

 Total 
 $ 18,560,158 

 Promissory Note – Settlement Agreement 

 On June 11, 2024, the Company entered into a settlement
agreement and release of claims with the holder of 165 shares of series R convertible preferred stock and certain convertible promissory
notes (see also Note 8. Convertible Notes Payable ). Pursuant to the settlement agreement and release of claims, the holder agreed
to cancel its shares of series R convertible preferred stock and convertible promissory notes in exchange for a new fixed amount settlement
promissory note in the principal amount of $ 535,000 .

 The note does not bear interest and requires fixed
payments as follows: (i) if the Company raises at least $5 million but less than $6 million in its planned underwritten public offering
(the “Offering”), then it must pay $250,000 on the closing date of the Offering, with payments of $125,000, $125,000 and $35,000
to follow on the 90th, 180th, and 240th days following the closing of the Offering, respectively; (ii) if the Company raises at least
$6 million but less than $7 million in the Offering, then it must pay $390,000 on the closing date of the Offering and $145,000 on the
90th day following the closing of the Offering; and (iii) if the Company raises at least $7 million in the Offering, then it must
repay the entire principal amount on the closing date of the Offering. If the Offering is not completed by August 15, 2024, then the Company
is required to pay $25,000 on such date and to continue making payments of $25,000 on each monthly anniversary thereof until the entire
principal amount is repaid in full. Notwithstanding the foregoing, if the Company abandons the Offering and conducts a new public offering
thereafter, then the Company is required to make a payment of $100,000 on the closing date of such other public offering, a second payment
of $100,000 on the 90th day following the closing of such offering and $35,000 each month thereafter until the entire principal amount
is repaid in full. If any portion of the principal amount remains unpaid on the second (2nd) anniversary of the date of the note, it shall
become immediately due and payable on such date. The Company may prepay the entire principal amount at any time without penalty. The note
is unsecured and contains customary events of default for a loan of this type. Upon an event of default, interest would automatically
begin to accrue at a simple interest rate of ten percent per annum. This transaction was accounted for as a debt extinguishment and a
gain on settlement of $ 78,834 was recorded to the consolidated statement of operations for the year ended December 31, 2024, in accordance
with FASB Topic 470 Borrower’s Accounting for Debt Modifications. During the years ended December 31, 2025 and 2024, the Company
paid $ 300,000 and $ 125,000 , respectively, against the outstanding principal balance. At December 31, 2025 and 2024, the remaining principal
balance was $ 110,000 and $ 410,000 , respectively.

 Loans and Notes Payable 

 On March 12, 2009, the Company issued a debenture
in the principal amount of $20,000. The debenture bore interest at 12% per year and matured on September 12, 2009. The balance of the
debenture was $ 10,989 at December 31, 2025 and 2024. The accrued interest of the debenture was $ 10,188 and $ 8,869 at December 31, 2025
and 2024, respectively. The Company assigned all of its receivables from consumer activations of the rewards program as collateral on
this debenture.

 F- 20 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Loans and Notes Payable – Related Parties 

 As of December 31, 2025, the outstanding principal
on the related party notes was $ 1,085,703 . Accrued interest outstanding on the related party notes was $ 1,636 . See also Note 6. Related
Party Transactions .

 Small Business Administration (“SBA”)
Loans 

 On June 2, 2020, the Company obtained an SBA loan
in the principal amount of $ 150,000 with an interest rate of 3.75 % and a maturity date of June 2, 2050. The principal balance and accrued
interest at December 31, 2025 was $ 143,558 and $ 0 , respectively, and principal and accrued interest at December 31, 2024 was $ 142,916 
and $ 0 , respectively.

 Line of Credit 

 On September 29, 2023, the Company and Nova entered
into a two-year revolving purchase and security agreement with DML HC Series, LLC (“DML”) which was automatically renewed
for a term of one year on September 29, 2025. Effective October 22, 2025, the Company entered into amendment No. 5 with DML, which extends
the term of the revolving purchase and security agreement through September 28, 2028. This revolving and purchase security agreement is
structured as a secured borrowing, under which accounts receivable are pledged as collateral to secure advances under our line of credit.
The related accounts receivable remain recorded as assets on our balance sheet, and the amounts drawn are recorded as a liability under
‘Line of Credit’ until repaid. Under the terms of the facility, the Company may request advances up to 70% of eligible receivables,
with the remaining balance held as a reserve. The Company is required to repurchase or replace certain ineligible or uncollected receivables.
All collections on pledged receivables are remitted directly to the lender and applied to the outstanding borrowing. The lender has recourse
to the Company for uncollected balances and maintains the right to enforce its security interest upon default. Initially, accounts receivables
pledged for this revolving and purchase security agreement for up to a maximum advance amount of $ 4.5 million. A review is performed on
a quarterly basis to assess the adequacy of the maximum amount. If mutually agreed upon by the Company and DML, the maximum amount may
be increased. On April 24, 2024, the Company and Nova entered into amendment No. 1 with DML which increased the maximum advance amount
to $ 8,000,000 and defined the discount fee equal to 2.25 % per purchase and claims balance forward on new purchases with a minimum fee
to now be $ 10,000 . On June 11, 2024, the Company and Nova entered into amendment No. 2 with DML which further increased the maximum advance
amount to $ 11,000,000 . On December 27, 2024, the Company and Nova entered into amendment No. 3 with DML which further increased the maximum
advance amount to $ 15,000,000 . On October 1, 2025, the Company and Nova entered into amendment No. 4 with DML which further increased
the maximum advance amount to $ 23,000,000 .

 Under the terms of the facility, collections from
these receivables are used to repay advances outstanding, which are recognized as secured borrowings totaling $ 17,209,908 and $ 8,645,991 
as of December 31, 2025 and December 31, 2024, respectively. The unused line of credit balance as of December 31, 2025 and 2024 was $ 5,790,092 
and $ 6,354,009 , respectively. The accrued interest related to the line of credit was $ 673,267 and $ 315,031 as of December 31, 2025 and
December 31, 2024, respectively. The revolving purchase and security agreement includes discounts recorded as interest expense on each
funding and matures on September 28, 2028. The facility is subject to customary recourse and repurchase provisions, and includes certain
covenants and restrictions on further pledge or sale of receivables.

 F- 21 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 8. CONVERTIBLE NOTES PAYABLE 

 As of December 31, 2025 and December 31, 2024,
the Company had convertible debt outstanding, net of amortized debt discount, of $ 118,295 and $ 105,000 , respectively. Debt discounts associated
with the convertible debt at December 31, 2025 were $ 131,705 and there was no debt discounts associated with the convertible debt at December
31, 2024. Due to the short time period between issuance and December 31, 2025, $ 0 amortization of debt discounts was recorded for the
year ended December 31, 2025. For the year ended December 31, 2024, the Company recorded amortization of debt discounts of $ 24,821 .

 During
the year ended December 31, 2025, the Company received $ 200,000 in proceeds from convertible notes and no interest was repaid. During
the year ended December 31, 2025, the Company converted $ 154,049 in principal and accrued interest and $ 1,500 in conversion cost into
 64,165 shares of common stock. The Company recognized $ 145,871 of additional paid-in capital to adjust the fair value for the debt settlement
during the year ended December 31, 2025. 

 During the year ended December 31, 2024, the Company
made payments on outstanding principal and interest of $ 105,080 and $ 122,780 , respectively. During the year ended December 31, 2024, the
Company converted $ 680 in accrued interest and $ 1,000 in conversion cost into 1,222 shares of common stock. The Company recognized $ 1,679 
of additional paid-in capital to adjust fair value for the debt settlement during the year ended December 31, 2024.

 On June 11, 2024, the Company entered into a settlement
agreement and release of claims with the holder of certain notes (see below and also Note 7. Notes and Loans Payable for further
details). Pursuant to the settlement agreement and release of claims, the holder agreed to cancel these notes in exchange for a new fixed
amount settlement promissory note in the principal amount of $ 535,000 . Additionally, during the year ended December 31, 2024, the Company
exchanged certain notes for the issuance of 938,908 shares of series Y senior convertible preferred stock to the noteholder. See also
Note 9. Capital Stock .

 Convertible notes as of December 31, 2025 and
2024 are summarized as follows:

 Schedule of convertible notes 
 
 December 31, 

 2025 
 2024 

 Convertible notes payable 
 $ 250,000 
 $ 105,000 

 Discounts on convertible notes payable 
 ( 131,705 ) 
 – 

 Total convertible debt less debt discount 
 118,295 
 105,000 

 Current portion 
 118,295 
 105,000 

 Long-term portion 
 $ – 
 $ – 

 On September 12, 2016, the Company issued a convertible
promissory note in the principal of $80,000 for services rendered, which matured on September 12, 2017. In May of 2024, the $ 58,846 total
outstanding principal and interest was paid in full.

 On January 24, 2017, the Company issued a convertible
promissory note in the principal amount of $80,000 for services rendered, which matured on January 24, 2018. On August 26, 2025, the total
outstanding principal and accrued interest of $154,049 of this tranche was converted into 64,165 shares of the Company’s common
stock. On February 10, 2023, the Company executed a second tranche under this note in the principal amount of $50,000. In May of 2024,
$ 63,513 of outstanding principal and interest on this tranche was paid in full. On March 30, 2023, the Company executed a third tranche
under this note in the principal amount of $25,000. On August 11, 2023, the Company executed a fourth tranche under this note in the principal
amount of $25,000. As of December 31, 2025, the outstanding principal amount is $ 50,000 and accrued interest is $ 23,370 . This note is
currently in default and accrues interest at a default interest rate of 20% per annum. At the sole option of the holder, the holder may
convert the outstanding principal amount, or any portion of the principal amount, and any accrued interest, in whole or in part, into
shares of the Company’s common stock. The conversion price is $ 0.25 per share or 50% of the lowest closing price on the primary
trading market on which the Company’s common stock is quoted for the last ten trading days immediately prior to but not including
the conversion date, whichever is lower.

 F- 22 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 On May 10, 2019, the Company issued a convertible
promissory note in the principal amount of $150,000. On November 8, 2019, this note was purchased by and assigned to an unrelated party.
The amount assigned was the existing principal amount of $150,000 and accrued interest of $5,918, which was issued as a new note, plus
a new convertible promissory note in the principal amount of $62,367. On September 3, 2020, the Company issued a convertible promissory
note in the principal amount of $200,000 to the same holder, with an original issue discount of $50,000, which could be drawn in several
tranches. On September 3, 2020, the Company executed the first tranche in the principal amount of $67,000, less an original issue discount
of $17,000, which matured on June 30, 2021. On November 2, 2020, the Company executed the second tranche in the principal amount of $66,500,
less an original issue discount of $16,500, which matured on August 31, 2021. On December 29, 2020, the Company executed the third tranche
in the principal amount of $66,500, less an original issue discount of $16,500, which matured on September 30, 2021. On June 11, 2024,
the Company entered into a settlement agreement and release of claims with the holder. Pursuant to the settlement agreement and release
of claims, the holder agreed to cancel these notes, along with the cancellation of their shares of series R preferred stock, in exchange
for a new fixed amount settlement promissory note in the principal amount of $ 535,000 . See Note 7. Notes and Loans Payable for
further details.

 On September 22, 2022, the Company issued a convertible
promissory note in the principal amount of $2,600,000 in exchange for a total of $4,791,099 of defaulted promissory notes balances. On
November 4, 2022, the Company executed a second tranche under this note in the principal amount of $68,667, less an original issue discount
and fee of $18,667. On November 28, 2022, the Company executed the third tranche under this note in the principal amount of $68,667, less
an original issue discount and fee of $18,667. On December 21, 2022, the Company executed a fourth tranche under this note in the principal
amount of $68,667, less an original issue discount and fee of $18,667. On January 24, 2023, the Company executed a fifth tranche under
this note in the principal amount of $90,166, less an original issue discount and fee of $25,166. On March 21, 2023, the Company executed
a sixth tranche under this note in the principal amount of $136,666, less an original issue discount and fee of $39,166. On June 5, 2023,
the Company executed a seventh tranche under this note in the principal amount of $136,667, less original issue discount and fee of $39,167.
On June 13, 2023, the Company executed an eighth tranche under this note in the principal amount of $21,167, less original issue discount
and fee of $5,167. On July 19, 2023, the Company executed a ninth tranche under this note in the principal amount of $35,500, less an
original issue discount and fee of $8,875. On July 24, 2023, the Company executed a tenth tranche under this note in the principal amount
of $14,000, less an original issue discount and fee of $3,500. On December 1, 2023, the Company executed an amendment to extend the maturity
date to September 20, 2024. All of the tranches matured in one year from the note issuance date and accrued interest at a rate of 10%
per annum. On April 11, 2024, the Company issued 938,908 shares of series Y senior convertible preferred stock in exchange for the settlement
of the principal and interest in full on these notes. See also Note 9. Capital Stock .

 On August 25, 2023, the Company issued a twelve-month
convertible promissory note in the principal amount of $ 5,000 to the Company’s Chief Executive Officer for the Company’s operating
expenses. The rate of interest is 10 % per annum. In August of 2024, the remaining outstanding principal and interest of $ 5,501 was paid
in full.

 In December 2025, the Company entered into loan
agreements with two accredited investors, pursuant to which the Company issued to such investors (i) convertible promissory notes in the
aggregate principal amount of $ 200,000 , (ii) warrants for the purchase of an aggregate of 66,667 shares of common stock and (iii) 6,667 
shares of common stock for total gross and net proceeds of $ 200,000 . The Company concluded that the notes, warrants and common shares
represent freestanding financial instruments issued as a single financing unit and, accordingly, allocated the total transaction proceeds
to each instrument based on their relative fair values. The fair value of the warrants was estimated using the Black-Scholes option pricing
model, and the fair value of the common shares was based on the quoted market price on the issuance date. The aggregate amount allocated
to the warrants and common shares was recorded as a debt discount and is being amortized to interest expense over the contractual term
of the notes. These notes accrue interest at a rate of twelve percent ( 12 %) per annum, payable in shares of common stock, cash or a combination
thereof at our option quarterly commencing on April 1, 2026, with all principal and accrued interest being due and payable one (1) year
after issuance. The Company may prepay the principal and accrued interest at any time without penalty upon fifteen (15) days’ notice.
These notes are unsecured and contain customary events of default for a loan of this type. These notes are convertible into shares of
common stock at a conversion price of $ 3.00 (subject to standard adjustments in the event of any stock splits, stock combinations, dividends
paid in common stock, stock reclassifications or similar transactions). As of December 31, 2025, the outstanding balance of these notes
is $ 200,000 and they have accrued interest of $ 499 . See also Note 9. Capital Stock and Note 10. Warrants .

 F- 23 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 9. CAPITAL STOCK 

 The Company is authorized to issue 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.

 Preferred Stock 

 The Company has designated multiple series of
preferred stock, including 2 shares of series A preferred stock, 3,000,000 shares of series B preferred stock, 500 shares of series C
preferred stock, 1,000,000 shares of series E preferred stock, 50,000 shares of series F-1 preferred stock, 15,000,000 shares of series
I preferred stock, 2,000,000 shares of series J preferred stock, 400,000 shares of series L preferred stock, 3,000,000 shares of series
N senior convertible preferred stock, 5,000 shares of series R convertible preferred stock, 5,000,000 shares of series X senior convertible
preferred stock and 1,500,000 shares of series Y senior convertible preferred stock.

 The following is a description of the rights and
preferences of each series of preferred stock.

 Redeemable Preferred Stock 

 The Company recognizes the series N senior convertible
preferred stock and series X senior convertible preferred stock as mezzanine equity in accordance with ASC 480, “Distinguishing
Liabilities from Equity”.

 Series N Senior Convertible Preferred Stock 

 As of December 31, 2025 and 2024, there were 1,037,311 
and 921,636 shares of series N senior convertible preferred stock issued and outstanding, respectively.

 Ranking . The series N senior convertible
preferred stock ranks, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common
stock and each other class or series that is not expressly made senior to or on parity with the series N senior convertible preferred
stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series N senior convertible preferred
stock; and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company
and each class or series that is expressly made senior to the series N senior convertible preferred stock.

 Dividend Rights. Holders of series N senior
convertible preferred stock are entitled to dividends at a rate per annum of 12.0% of the stated value ($4.00 per share); provided that
upon an event of default (as defined in the certificate of designation for the series N senior convertible preferred stock), such rate
would increase by 8% per annum. Dividends accrued from day to day, whether or not declared, and are cumulative. Dividends are payable
quarterly in arrears on each dividend payment date in cash or common stock at the Company’s discretion. Dividends payable in common
stock are to be calculated based on a price equal to eighty percent (80%) of the volume weighted average price for the common stock on
the Company’s principal trading market (the “VWAP”) during the five (5) trading days immediately prior to the applicable
dividend payment date. At December 31, 2025 and 2024, cumulative dividends earned on the series N senior convertible preferred stock were
$ 1,783,571 and $ 1,320,879 , respectively. During the year ended December 31, 2025, $ 462,693 of the cumulative accrued dividends were paid
by Company via the issuance of 115,675 shares of series N senior convertible preferred stock. During the year ended December 31, 2024,
$ 1,106,562 of the cumulative accrued dividends were paid by the Company via the issuance of 197,601 shares of common stock and $ 214,317 
of the cumulative accrued dividends were paid by the Company via the issuance of 53,580 shares of series N senior convertible preferred
stock.

 F- 24 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Liquidation Rights. Subject to the rights
of creditors and the holders of any senior securities or parity securities (in each case, as defined in the certificate of designation),
upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital
or surplus) 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 is entitled to receive an amount of cash equal
to 115% of the stated value of $4.00 per share, plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether
or not declared) to, but not including the date of final distribution to such holders.

 Voting Rights . Holders of series N senior
convertible preferred stock do not have any voting rights; provided that, so long as any shares of series N senior convertible preferred
stock are outstanding, the affirmative vote of holders of a majority of the series N senior convertible preferred stock, which majority
must include SILAC Insurance Company so long as it holds any shares of series N senior convertible preferred stock, voting as a separate
class, 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 Company’s (or Nova’s) creation or issuance of any parity securities or new indebtedness (as
defined in the certificate of designation); provided that the foregoing does not apply to any financing transaction the use of proceeds
of which would be used to redeem the series N senior convertible preferred stock and the warrants issued in connection therewith. In addition,
the affirmative vote of holders of 66% of the series N senior convertible preferred stock, voting as a separate class, is required prior
to the Company’s (or Nova’s) creation or issuance of any senior securities.

 Conversion Rights . Each share of series
N 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 of $2,700 per share
(subject to standard adjustments in the event of any stock splits, stock combinations, stock reclassifications, dividends paid in common
stock, sales of substantially all assets, mergers, consolidations or similar transactions); provided that in no event shall the holder
of any series N senior convertible preferred stock be entitled to convert any number of shares that upon conversion the sum of (i) the
number of shares of common stock beneficially owned by the holder and its affiliates and (ii) the number of shares of common stock issuable
upon the conversion of the series N senior convertible preferred stock with respect to which the determination of this proviso is being
made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the then outstanding common stock. This
limitation can be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’
prior notice to the Company.

 Redemption Rights . The Company may redeem
the series N senior convertible preferred stock at any time by paying in cash therefore a sum equal to 115% of the stated value of $4.00
per share, plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the certificate of designation.
In addition, any holder may require the Company to redeem some or all of its shares of series N senior convertible preferred stock on
the same terms after a period of twelve months from the date of issuance; provided, however, that such redemption right shall only be
exercisable if the Company raises at least $5,000,000 or the common stock is trading on the Nasdaq Stock Market (“Nasdaq”)
or the New York Stock Exchange.

 Series R Convertible Preferred Stock 

 As of December 31, 2025 and December 31, 2024,
there were no shares of series R convertible preferred issued and outstanding. The series R convertible preferred stock was cancelled
as part of the June 2024 promissory note and settlement agreement. See also Note 7. Notes and Loans Payable and Note 8. Convertible
Notes Payable .

 F- 25 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Series X Senior Convertible Preferred Stock 

 As of December 31, 2025 and 2024, there were 438,388 
and 397,464 shares of series X senior convertible preferred stock issued and outstanding, respectively.

 Ranking. The series X senior convertible
preferred stock ranks, with respect to the payment of dividends and the distribution of assets upon liquidation, (i) senior to all common
stock and each other class or series that is not expressly made senior to or on parity with the series X senior convertible preferred
stock; (ii) on parity with each class or series that is not expressly subordinated or made senior to the series X senior convertible preferred
stock; and (iii) junior to the series N senior convertible preferred stock, all indebtedness and other liabilities with respect to assets
available to satisfy claims against the Company and each class or series that is expressly made senior to the series X senior convertible
preferred stock.

 Dividend Rights. Holders of series X senior
convertible preferred stock are entitled to dividends at a rate per annum of 10.0% of the stated value ($4.00 per share); provided that
upon an event of default (as defined in the certificate of designation for the series X senior convertible preferred stock), such rate
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. At December 31, 2025 and 2024, cumulative dividends earned on the series X senior
convertible preferred stock were $ 436,749 and $ 273,058 , respectively. During the year ended December 31, 2025, $ 163,691 of the cumulative
accrued dividends were paid by the Company via the issuance of 40,924 shares of common stock. During the year ended December 31, 2024,
$ 183,210 of the cumulative accrued dividends were paid by the Company via the issuance of 25,173 shares of common stock and $ 76,788 of
the cumulative accrued dividends were paid by the Company via the issuance of 22,464 shares of series X senior convertible preferred stock.

 Liquidation Rights. Subject to the rights
of creditors and the holders of any senior securities, including the series N senior convertible preferred stock, or parity securities
(in each case, as defined in the certificate of designation), upon any liquidation of the Company or its subsidiaries, before any payment
or distribution of the assets of the Company (whether capital or surplus) 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 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
holders.

 Voting Rights . Holders of series X senior
convertible preferred stock do not have any voting rights; provided that, so long as any shares of series X senior convertible preferred
stock are outstanding, the affirmative vote of holders of a majority of the series X senior convertible preferred stock, which majority
must include Leonite Capital LLC so long as it holds any shares of series X senior convertible preferred stock, voting as a separate class,
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. In addition, the affirmative vote of holders of
66% of the series X senior convertible preferred stock, voting as a separate class, is required prior to the creation or issuance of any
senior securities.

 Conversion Rights . 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
paid in any subsequent financing (the “Fixed Price”). The Fixed Price is subject to standard adjustments in the event of any
stock splits, stock combinations, stock reclassifications, dividends paid in common stock, sales of substantially all assets, mergers,
consolidations or similar transactions, as well as a price based antidilution adjustment, pursuant to which, subject to certain exceptions,
if the Company issues common stock at a price lower than the Fixed Price, the Fixed Price shall decrease to such lower price. Notwithstanding
the foregoing, in no event shall the holder of any series X senior convertible preferred stock be entitled to convert any number of shares
that upon conversion the sum of (i) the number of shares of common stock beneficially owned by the holder and its affiliates and (ii)
the number of shares of common stock issuable upon the conversion of the series X senior convertible preferred stock with respect to which
the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99%
of the then outstanding common stock. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion,
upon not less than sixty-one (61) days’ prior notice to the Company.

 F- 26 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Redemption Rights . Commencing on September
22, 2023, any holder may require the Company to redeem its shares by the payment in cash therefore of a sum equal to 100% of the stated
value of $4.00 per share, plus the amount of accrued and unpaid dividends and any other amounts due pursuant to the terms of the certificate
of designation; provided however, that in the event that the Company completes a public offering prior to the redemption date, then any
holder may only cause the Company to redeem any outstanding series X senior convertible preferred stock by paying such redemption price
in twelve (12) equal monthly installments with the first such payment due on the date that is six (6) months following the date that the
Company completes such public offering.

 Non-redeemable Preferred Stock 

 Series A Preferred Stock 

 As of December 31, 2025 and 2024, there were 2 
shares of series A preferred stock issued and outstanding.

 Ranking. The series A preferred stock ranks,
with respect to the distribution of assets upon liquidation, (i) senior to all common stock and each other class or series that is not
expressly made senior to or on parity with the series A preferred stock; (ii) on parity with each class or series that is not expressly
subordinated or made senior to the series A preferred stock; and (iii) junior to the series B preferred stock, series C preferred stock,
series E preferred stock, series F-1 preferred stock, series I preferred stock, series J preferred stock, series L preferred stock, series
N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock and each other
series of preferred stock and each class or series that is expressly made senior to the series A preferred stock, as well as to all indebtedness
and other liabilities with respect to assets available to satisfy claims against the Company.

 Dividend Rights. The series A preferred
stock is not entitled to participate in any distributions or payments to the holders of common stock or any other class of stock and shall
have no economic interest in the Company.

 Liquidation Rights . In the event of any
liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, a merger or consolidation of our company wherein
the Company is not the surviving entity, or a sale of all or substantially all of the assets of the Company, the holders of each share
of series A preferred stock shall be entitled to receive from any distribution of any of the assets or surplus funds of the Company, before
and in preference of any holder of shares of common stock, an amount equal to the stated value of $250. Once the holders receive the foregoing
from any such liquidation, dissolution or winding up, the holders shall not participate with the common stock or any other class of stock.

 Voting Rights . Each share of series A preferred
stock shall have a number of votes at any time equal to (i) 25% of the number of votes then held or entitled to be made by all other equity
securities of the Company, including, without limitation, the common stock, plus (ii) one (1). The series A preferred stock shall vote
on any matter submitted to the holders of the common stock, or any other class of voting securities, for a vote, and shall vote together
with the common stock, or any class of voting securities, as applicable, on such matter for as long as the shares of series A preferred
stock are issued and outstanding. Notwithstanding the foregoing, the series A preferred stock shall not have the right to vote on any
matter as to which solely another series of preferred stock is entitled to vote pursuant to the Company’s amended and restated articles
of incorporation or a certificate of designation of such other series of preferred stock.

 Transfer . Upon transfer of any share of
series A preferred stock, except for a transfer by the holder to an affiliate, whether such transfer is voluntary or involuntary, such
share of series A preferred stock shall automatically, and without any action being required by the Company or the holder, be converted
into one (1) share of common stock.

 F- 27 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Other Rights . Holders of series A preferred
stock do not have any conversion (except as set forth above) or redemption rights.

 Series B Preferred Stock 

 As of December 31, 2025 and 2024, there were 0 
and 1,279,867 shares of series B preferred stock issued and outstanding, respectively. During the year ended December 31, 2025, all outstanding
shares of series B preferred stock were converted into common stock.

 Series C Preferred Stock 

 As of December 31, 2025 and 2024, there were 0 
and 74 shares of series C preferred stock issued and outstanding, respectively. During the year ended December 31, 2025, all outstanding
shares of series C preferred stock were converted into common stock.

 Series E Preferred Stock 

 As of December 31, 2025 and 2024, there were 0 
and 175,375 shares of series E preferred stock issued and outstanding, respectively. During the year ended December 31, 2025, all outstanding
shares of series E preferred stock were converted into common stock.

 Series F-1 Preferred Stock 

 As of December 31, 2025 and 2024, there were 3,875 
shares of series F-1 preferred stock issued and outstanding.

 Ranking. The series F-1 preferred stock
ranks, with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each
other class or series that is not expressly made senior to or on parity with the series F-1 preferred stock; (ii) on parity with the series
B preferred stock, series C preferred stock, series E preferred stock, series J preferred stock, series L preferred stock and each other
class or series that is not expressly subordinated or made senior to the series F-1 preferred stock; and (iii) junior to the series I
preferred stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred
stock and to each other series of preferred stock and each class or series that is expressly made senior to the series F-1 preferred stock,
as well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 Dividend Rights. The holders of series
F-1 preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends
actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be
paid on shares of series F-1 preferred stock.

 Liquidation Rights . Upon any liquidation,
dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series F-1 preferred stock shall be entitled
to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series F-1 preferred
stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series
F-1 preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 Voting Rights . Except as provided by law,
the holders of series F-1 preferred stock shall have no voting rights. However, as long as any shares of series F-1 preferred stock are
outstanding, the Company shall not, without the affirmative vote of the holders of a majority of outstanding series F-1 preferred stock,
(a) alter or change adversely the powers, preferences or rights given to the series F-1 preferred stock or alter or amend the certificate
of designation for the series F-1 preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or
other charter documents in any manner that adversely affects any rights of the holders of series F-1 preferred stock.

 F- 28 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Conversion Rights . Each share of series
F-1 preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares
of common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which
the common stock is then traded or quoted is less than $4.00 per share, then each share of series F-1 preferred stock shall be convertible
into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price
on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series
F-1 preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing
of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective
registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,
(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation
the New York Stock Exchange, NYSE American or Nasdaq (any tier), or (c) the date and time, or the occurrence of an event, specified by
vote or written consent of the holders of at least 67% of the then outstanding shares of series F-1 preferred stock, voting together as
a single class, each share of series F-1 preferred stock shall be automatically converted into such number of shares of common stock as
is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock
dividends, stock reclassifications and similar events (but not for reverse stock splits).

 Redemption Rights . Holders of series F-1
preferred stock do not have any redemption rights.

 Series I Preferred Stock 

 As of December 31, 2025 and 2024, there were 0 
and 10,469,092 shares of series I preferred stock issued and outstanding, respectively. During the year ended December 31, 2025, all outstanding
shares of series I preferred stock were converted into common stock.

 Series J Preferred Stock 

 As of December 31, 2025 and 2024, there were no 
shares of series J preferred stock issued and outstanding. During the year ended December 31, 2024, all outstanding shares of series J
preferred stock were converted into common stock.

 Series L Preferred Stock 

 As of December 31, 2025 and 2024, there were 319,493 
shares of series L preferred stock issued and outstanding.

 Ranking. The series L preferred stock ranks,
with respect to the distribution of assets upon liquidation, (i) senior to all common stock, series A preferred stock and to each other
class or series that is not expressly made senior to or on parity with the series L preferred stock; (ii) on parity with the series B
preferred stock, series C preferred stock, series E preferred stock, series F-1 preferred stock, series J preferred stock and each other
class or series that is not expressly subordinated or made senior to the series L preferred stock; and (iii) junior to the series I preferred
stock, series N senior convertible preferred stock, series R convertible preferred stock, series X senior convertible preferred stock
and to each other series of preferred stock and each class or series that is expressly made senior to the series L preferred stock, as
well as to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company.

 Dividend Rights. The holders of series
L preferred stock are entitled to receive dividends equal (on an as converted to common stock basis) to and in the same form as dividends
actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. No other dividends shall be
paid on shares of series L preferred stock.

 F- 29 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Liquidation Rights . Upon any liquidation,
dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of series L preferred stock shall be entitled
to receive out of the assets of the Company the same amount that a holder of common stock would receive if the shares of series L preferred
stock were fully converted to common stock immediately prior to such liquidation, which amount shall be paid to the holders of series
L preferred stock pari passu with all holders of parity securities and in preference to the holders of junior securities.

 Voting Rights . On any matter presented
to stockholders for their action or consideration, each holder of series L preferred stock shall be entitled to cast one (1) vote per
share of series L preferred stock held. Except as provided by law, the holders of series L preferred stock shall vote together with the
holders of shares of common stock as a single class. However, as long as any shares of series L preferred stock are outstanding, the Company
shall not, without the affirmative vote of the holders of a majority of outstanding series L preferred stock, (a) alter or change adversely
the powers, preferences or rights given to the series L preferred stock or alter or amend the certificate of designation for the series
L preferred stock, or (b) amend the Company’s amended and restated articles of incorporation or other charter documents in any manner
that adversely affects any rights of the holders of series L preferred stock.

 Conversion Rights . Each share of series
L preferred stock is convertible, at any time and from time to time at the option of the holder thereof, into such number of shares of
common stock as is determined as follows: (i) if the closing market price of the common stock on the principal trading market on which
the common stock is then traded or quoted is less than $4.00 per share, then each share of series L preferred stock shall be convertible
into a number of shares of common stock equal to two (2) times the stated value ($4.00 per share), divided by such closing market price
on the date of conversion; or (ii) if such closing market price is equal to or greater than $4.00 per share, then each share of series
L preferred stock shall be convertible into two (2) shares of common stock. In addition, upon the earlier to occur of: (a) the closing
of the sale of shares of common stock to the public at a price of at least $3.00 per share in a public offering pursuant to an effective
registration statement or offering statement under the Securities Act resulting in at least $3,000,000 of gross proceeds to the Company,
(b) the date on which the shares of common stock of the Company are listed on a national stock exchange, including without limitation
the New York Stock Exchange, NYSE American or Nasdaq (any tier), or (c) the date and time, or the occurrence of an event, specified by
vote or written consent of the holders of at least 67% of the then outstanding shares of series L preferred stock, voting together as
a single class, each share of series L preferred stock shall be automatically converted into such number of shares of common stock as
is determined in accordance with the provisions above. Such conversion price is subject to standard adjustments in the event of any stock
dividends, stock reclassifications and similar events (but not for reverse stock splits).

 Redemption Rights . Holders of series L
preferred stock do not have any redemption rights.

 Series Y Senior Preferred Stock 

 As of December 31, 2025 and 2024, there were 1,067,878 
and 979,125 shares of series Y senior convertible preferred stock issued and outstanding, respectively.

 Ranking. 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.

 F- 30 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 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 year ended December 31, 2025, cumulative dividends earned on the series Y senior convertible preferred
stock were $ 407,923 . The cumulative accrued dividends for the year ended December 31, 2025 were paid by the Company via the issuance of
 88,753 shares of series Y senior convertible preferred stock and $ 50,000 in cash. At December 31, 2025, the total dividends payable was
$ 35,108 . At December 31, 2024, cumulative dividends earned on the series Y senior convertible preferred stock were $ 275,789 . During the
year ended December 31, 2024, $ 147,555 of the cumulative accrued dividends was paid by the Company via the issuance of 12,135 shares of
common stock and 40,217 shares of series Y senior convertible preferred stock. At December 31, 2024, the total dividends payable was $ 32,190 .

 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 Nasdaq, 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.

 F- 31 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Preferred Stock Transactions 

 During the year ended December 31, 2025, the Company
executed the following transactions:

 · 
 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 were issued in exchange for the cancellation of an aggregate of 391,500 shares of series I preferred stock. 

 · 
 An aggregate of 1,579,867 shares of series B preferred stock were converted into an aggregate of 1,053,248 shares of common stock. 

 · 
 An aggregate of 80 shares of series C preferred stock were converted into an aggregate of 266,668 shares of common stock. 

 · 
 An aggregate of 229,375 shares of series E preferred stock were converted into an aggregate of 152,917 shares of common stock. 

 · 
 An aggregate of 10,077,592 shares of series I preferred stock were converted into an aggregate of 6,718,395 shares of common stock. 

 · 
 An aggregate of 88,753 shares of series Y senior convertible preferred stock were issued with an aggregate value of $ 355,012 . 

 · 
 An aggregate of 115,675 shares of series N senior convertible preferred stock were issued with an aggregate value of $ 462,693 . 

 · 
 An aggregate of 40,924 shares of series X senior convertible preferred stock were issued with an aggregate value of $ 163,691 . 

 During the year ended December 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 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. 

 · 
 On May 15, 2024, in conjunction with the exchange of certain senior secured convertible promissory notes, 938,908 shares of series Y senior convertible preferred stock were issued with an aggregate value of $ 3,755,632 . 

 · 
 An aggregate of 1,609,611 shares of series B preferred stock were converted into an aggregate of 1,073,105 shares of common stock. 

 F- 32 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 · 
 An aggregate of 96 shares of series C preferred stock were converted into an aggregate of 320,062 shares of common stock. 

 · 
 An aggregate of 80,375 shares of series E preferred stock were converted into an aggregate of 53,584 shares of common stock. 

 · 
 An aggregate of 31,877 shares of series F-1 preferred stock were converted into an aggregate of 21,256 shares of common stock. 

 · 
 An aggregate of 3,527,000 shares of series I preferred stock were converted into an aggregate of 2,351,347 shares of common stock. 

 · 
 An aggregate of 1,713,584 shares of series J preferred stock were converted into an aggregate of 1,142,391 shares of common stock. 

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

 · 
 165 shares of series R preferred stock were cancelled as part of the settlement agreement described in Note 7. Notes and Loans Payable. 

 · 
 An aggregate of 1,021,408 shares of series I preferred stock were exchanged into an aggregate of 750,000 shares of series B preferred stock, 49 shares of series C preferred stock and 100,000 shares of series E preferred stock. 

 · 
 An aggregate 53,580 shares of series N senior convertible preferred stock were issued with an aggregate value of $ 214,317 as payment of accrued dividends. 

 · 
 An aggregate 22,464 shares of series X senior convertible preferred stock were issued with an aggregate value of $ 89,852 as payment of accrued dividends. 

 · 
 An aggregate of 979,125 shares of series Y senior convertible preferred stock were issued with an aggregate value of $ 3,916,500 . 

 In connection with the aforementioned shares issuances
on January 19, 2024 and January 31, 2024, the Company engaged a valuation specialist to perform a business valuation Monte Carlo simulation
for the series I preferred stock resulting in those indicated fair values.

 Common Stock 

 In addition to the issuance of common stock from
the conversions of preferred stock noted above, during the year ended December 31, 2025, the Company executed the following transactions:

 · 
 On June 5, 2025, as part of a legal settlement, the Company retired 19,750 shares of common stock. 

 · 
 On June 30, 2025, the Company issued 5,000 shares of common stock to an investor relation service provider. The Company recognized the fair value for the issuance of the 5,000 shares at $19.50 per share on the closing market price of June 30, 2025, and recorded selling, general and administrative expense of $ 97,500 in the consolidated statement of operations. 

 F- 33 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 · 
 On July 31, 2025, the Company issued 834 shares of common stock to an employee for services rendered. The Company recognized the fair value for the issuance of the 834 shares at $14.99 per share on the closing market price of July 30, 2025, and recorded share-based compensation expense of $ 12,500 in the consolidated statement of operations. 

 · 
 On September 2, 2025, the Company issued 64,165 shares of common stock upon conversion of a convertible note. 

 · 
 On September 26, 2025, the Company issued an aggregate of 5,001 shares of restricted common stock under the Company’s 2024 Equity Incentive Plan to three board members for their annual retainer grants for the fiscal year 2024, which vested in full on the date of grant. The Company recognized the fair value for the issuance of the shares at $4.59 per share based on the closing market price on the grant date. Share-based compensation expense of $ 22,950 was recorded in the consolidated statement of operations. 

 · 
 On September 26, 2025, the Company also issued an aggregate of 5,001 shares of restricted common stock under the Company’s 2024 Equity Incentive Plan to three board members for their annual retainer grants for the fiscal year 2025, with 1,250 shares vesting on the date of grant and the remaining shares vesting in equal parts over the course of three quarters on October 1, 2025, January 1, 2026 and April 1, 2026. As of December 31, 2025, the Company recognized the fair value for the issuance of the vested shares at $ 4.59 per share based on the closing market price on the grant date. Share-based compensation expense of $ 17,213 was recorded in the consolidated statement of operations for the year ended December 31, 2025. 

 · 
 On November 3, 2025, the Company issued 16,667 shares of common stock to an investor relation service provider. The Company recognized the fair value for the issuance of the 16,667 shares at $3.03 per share on the closing market price of October 31, 2025, and recorded share-based compensation expense of $ 50,500 in the consolidated statement of operations. 

 · 
 On November 25, 2025, the Company issued 100,000 shares of common stock to a consulting service provider. As the service agreement included a provision that entitles the provider to receive additional shares in the event of a reverse stock split, the Company calculated a weighted-average probability assessment to determine the number of incremental shares that would be required to be issued if the reverse stock split were to occur. These incremental shares were included in the calculation of the fair value of the overall award in accordance with ASC 718 and the Company recognized $ 408,000 of share-based compensation expense in the consolidated statement of operations for the fair value of the issuance at $2.55 per share based on the closing market price on November 24, 2025. 

 · 
 On December 11, 2025, the Company administratively issued an aggregate of 111,674 shares of restricted common stock for restricted stock awards to certain employees for services rendered. Although the shares were issued on December 11, 2025, in accordance with ASC 718, the Company determined that a grant-date did not occur until January 2026. As a result, the Company recorded the administratively issued shares in equity on December 11, 2025, with a corresponding contra-equity unearned compensation balance. 

 · 
 On December 22, 2025, the Company issued an aggregate of 114,240 shares of common stock for a correction on the surrender of excess preferred series I shares on November 20, 2024. 

 · 
 On December 29, 2025, the Company issued an aggregate of 6,667 shares of common stock in connection with financing transactions that also included the issuance of convertible promissory notes and warrants. As the common stock were freestanding equity instruments issued as part of a single financing unit, the fair value recognized by the Company was measured at its grant date fair value based on the closing market price as of December 29, 2025 of $1.80 per share and then allocated along with the fair values of the promissory notes and the warrants to each instrument in the financing units. The allocated fair value of the shares was then recorded to additional paid-in-capital with a corresponding debt discount recognized in connection with the related promissory note. See also Note 8. Convertible Notes Payable and Note 10. Warrants . 

 F- 34 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 In addition to the issuance of common stock from
the conversions of preferred stock noted above, during the year ended December 31, 2024, the Company executed the following transactions:

 · 
 In February 2024, as part of the Red Rock settlement executed in July 2022, the Company issued an aggregate of 12,370 shares of common stock to six previous owners. The Company recognized the fair value for the issuance of 12,370 shares at $9 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. This loss was also reflected as an addback to net income in the consolidated statement of cash flows. 

 · 
 On March 5, 2024, the Company issued 2,500 shares of common stock to an investor relation service provider. The Company recognized the fair value for the issuance of the 2,500 shares at $4.65 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 10,002 shares of common stock to three board members. The Company recognized the fair value for the issuance of 10,002 shares at $19.50 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 September 2024, the Company issued an aggregate of 24,742 shares of common stock as part of a legal settlement. 

 · 
 In December 2024, the Company issued 1,834 shares of common stock for services rendered by an employee. The Company recognized the fair value for the issuance of the 1,834 shares at $9.00 per share closing market price of December 5, 2024 and recorded share-based compensation expense of $ 16,500 in the consolidated statement of operations. 

 · 
 The Company issued an aggregate of 78,303 shares of common stock in payment of various accrued dividends on the series N, series X and series Y preferred stock. 

 · 
 The Company issued 408 shares of common stock upon conversion of certain convertible notes. 

 Share-based compensation 

 On January 31, 2024, the Company’s board
of directors and stockholders adopted the Cardiff Lexington Corporation 2024 Equity Incentive Plan (the “Plan”). Awards that
may be granted include incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance
share awards, and performance compensation awards. As of December 31, 2025, pursuant to the Plan, the maximum number of shares of common
stock that could be issued to participants under the Plan was 921,675 (subject to adjustment for certain corporate changes affecting the
common stock, such as stock splits); provided that the number of shares of common stock available for issuance under the Plan will automatically
increase on January 1 of each calendar year during the term of the Plan by an amount equal five percent (5%) of the total number of shares
of common stock issued and outstanding on December 31 of the immediately preceding calendar year. Shares subject to an award under
the Plan for which the award is canceled, forfeited or expires again become available for grants under the Plan. Shares subject to an
award that is settled in cash will not again be made available for grants under the Plan. On January 1, 2026, the number of shares increased
to 1,606,718 .

 Share-based compensation expense is attributable
to restricted common stock awards, stock option awards and preferred stock granted to non-employee independent directors, employees and
service providers for services rendered. The Company recognizes expense using a straight-line amortization method as reflected in general
and administrative expense in the consolidated statement of operations. Share-based compensation expense for the year ended December 31,
2025 and 2024 was $ 754,475 and $ 544,725 , respectively.

 F- 35 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Generally, all forms of share-based payments,
including stock option grants, warrants and restricted stock grants are measured at their fair value on the awards’ grant date,
based on the estimated number of awards that are ultimately expected to vest. The Company has elected to account for forfeitures as they
occur and expense is recognized over the requisite service period. Grant date fair value of restricted common stock and common stock awards
is determined using the Company’s closing share price on the grant date and the grant date fair value of stock options awarded is
determined using a Black-Scholes valuation model. Grant date fair value of any preferred stock awards is determined utilizing a third-party
valuation.

 Non-Vested Common Stock 

 On September 26, 2025, the Company issued an aggregate
of 5,001 shares of restricted common stock under the Plan to three board members for their annual retainer grants for the fiscal year
2024, which vested in full on the date of grant. The Company recognized the fair value for the issuance of the shares at $4.59 per share
based on the closing market price on the grant date. Share-based compensation expense of $ 22,950 was recorded in the consolidated statement
of operations. There is no unearned compensation as of December 31, 2025 related to this award.

 Also on September 26, 2025, the Company issued
an aggregate of 5,001 shares of restricted common stock under the Plan to three board members for their annual retainer grants for the
fiscal year 2025, with 1,250 shares vesting on the date of grant and the remaining shares vesting in equal parts over the course of three
quarters on October 1, 2025, January 1, 2026 and April 1, 2026. As of December 31, 2025, the Company recognized the fair value for the
issuance of the vested shares at $4.59 per share based on the closing market price on the grant date. Share-based compensation expense
of $ 17,213 was recorded in the consolidated statement of operations for the year ended December 31, 2025. As of December 31, 2025, the
remaining unearned compensation related to this award is $ 5,738 with a weighted average amortization period remaining of 0.25 years. These
costs will be charged to expense and amortized on a straight-line basis in the first quarter of 2026.

 On December 11, 2025, the Company administratively
issued an aggregate of 111,674 shares of restricted common stock for restricted stock awards to certain employees for services rendered
under the Plan. Although the shares were issued on December 11, 2025, in accordance with ASC 718, the Company determined that a grant-date
did not occur until January 2026. As a result, the Company recorded the issued shares in equity on December 11, 2025, with a corresponding
contra-equity unearned compensation balance. As of December 31, 2025, unearned stock-based compensation related to this award was $ 579,215 
with a weighted average amortization period remaining of 0.96 years. These costs will be charged to expense and amortized on a straight-line
basis from its determined grant date in January 2026 through the remaining vesting periods in 2026.

 A summary of non-vested restricted stock activity for the year ended
December 31, 2025 is presented as follows:

 Schedule of non-vested restricted stock activity 
 
 Number of 
 Non-vested Restricted Common Shares 
 Weighted
 Average 
 Grant Date Fair Value 

 Balance at January 1, 2025 
 – 
 $ – 

 Granted 
 121,667 
 5.14 

 Vested 
 ( 8,750 ) 
 – 

 Forfeited 
 – 
 – 

 Balance at December 31, 2025 
 112,917 
 $ 5.14 

 F- 36 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Stock Options 

 On December 11, 2025, the Company granted stock
options to purchase 90,002 shares of its common stock to certain employees and directors under the Plan. The options have an exercise
price equal to the fair market value of the Company’s common stock on the grant date of $5.187 per share, vest in equal parts over
the course of four quarters beginning January 1, 2026, and expire six years from the grant date.

 The Company estimated the grant-date fair value
of the options using the Black-Scholes option-pricing model. The weighted-average assumptions used in the valuation were as follows:

 · Expected
term: 3.5 years 

 · Annualized
volatility: 282.72 % 

 · Risk-free
interest rate: 3.60 % 

 · Dividend
yield: 0 % 

 Expected volatility was estimated using a blended
approach that incorporates both the Company’s historical volatility and the historical volatilities of a peer group of publicly
traded healthcare companies with similar size, stage, and operating characteristics. The Company utilized the simplified method to estimate
expected term due to limited historical exercise data.

 The weighted-average grant-date fair value of
options granted during the period was $ 5.15 per option, resulting in total grant date fair value of $ 463,251 . Share-based compensation
expense is recognized on a straight-line basis over the requisite service period. Total unrecognized compensation cost at December 31,
2025 was $ 347,439 and the weighted-average remaining amortization period is 0.75 years. Intrinsic value is $ 0 at grant and will remain
$0 until the stock trades above the exercise price.

 The table below sets forth the option activity
during the year ended December 31, 2025:

 Schedule of option activity 
 
 Number of 
 Options 
 Weighted 
 Average
 Exercise
 Price 

 Outstanding at January 1, 2025 
 – 
 $ – 

 Granted 
 90,002 
 5.15 

 Exercised 
 – 
 – 

 Expired/Forfeited 
 – 
 – 

 Outstanding at December 31, 2025 
 90,002 
 5.15 

 Options Vested and Exercisable at December 31, 2025 
 22,500 
 $ 5.15 

 F- 37 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 10. WARRANTS 

 On October 31, 2025, the Company issued a three-year
warrant to purchase 100,000 shares of common stock at $ 3.00 per share with an investor relations firm as part of a service agreement.
The warrant will vest and become exercisable 30 days prior to the Company’s successful uplisting of its common stock to a national
securities exchange. As of December 31, 2025, the uplisting event had not occurred and was not considered probable yet based on the status
of the Company’s application and the remaining substantive listing requirements. Accordingly, no fair value has been calculated
and no liability or equity instrument has been recognized related to the warrant as of December 31, 2025. If the uplisting occurs in a
future period, the Company will recognize the warrant at its fair value on the date the uplist contingency becomes probable or is satisfied
with the corresponding impact recorded in equity. See also Note 9. Capital Stock .

 On December 22, 2025, the Company entered into
a financing arrangement pursuant to which it issued a twelve-month convertible promissory note with a principal amount of $ 50,000 , together
with a warrant to purchase 16,667 shares of common stock at $ 9.00 per share and 1,667 shares of common stock. The Company concluded that
the note, warrant and common shares represent freestanding financial instruments issued as a single financing unit and, accordingly, allocated
the total transaction proceeds to each instrument based on their relative fair values. The $1.72 per share fair value of the warrant was
estimated using a Black-Scholes option pricing model, and the fair value of the common shares was based on the quoted market price on
the issuance date. The aggregate amount allocated to the warrant and common shares was recorded as a debt discount and is being amortized
to interest expense over the contractual term of the note. See also Note 8. Convertible Notes Payable and Note 9. Capital Stock .

 On December 23, 2025, the Company entered into
a financing arrangement pursuant to which it issued a twelve-month convertible promissory note with a principal amount of $ 150,000 , together
with a warrant to purchase 50,000 shares of common stock at $ 9.00 per share and 5,000 shares of common stock. The Company concluded that
the note, warrant and common shares represent freestanding financial instruments issued as a single financing unit and, accordingly, allocated
the total transaction proceeds to each instrument based on their relative fair values. The $1.76 per share fair value of the warrant was
estimated using a Black-Scholes option pricing model, and the fair value of the common shares was based on the quoted market price on
the issuance date. The aggregate amount allocated to the warrant and common shares was recorded as a debt discount and is being amortized
to interest expense over the contractual term of the note. See also Note 8. Convertible Notes Payable and Note 9. Capital Stock .

 On December 29, 2025, the Company issued a three-year
warrant to purchase 33,334 shares of common stock at $ 9.00 per share with an investor relations firm in connection with a financing transaction
that also included the issuance of a convertible promissory note and restricted common shares. The related promissory note did not fund
as of December 31, 2025 and as such, there is no consideration for the transaction in its entirety. In accordance with ASC 405 and ASC
470, there is no debt liability and no warrant value recorded as of December 31, 2025 because no cash was received in 2025.

 The tables below set forth warrant activity during
the years ended December 31, 2025 and 2024:

 Schedule of warrant activity 
 
 Number of 
 Warrants 
 Weighted 
 Average
 Exercise
 Price 

 Balance at January 1, 2025 
 1,050 
 $ 3,538.93 

 Granted 
 200,001 
 6.00 

 Exercised 
 – 
 – 

 Expired 
 ( 3 ) 
 27,000.00 

 Balance at December 31, 2025 
 201,048 
 24.05 

 Warrants Exercisable at December 31, 2025 
 67,714 
 $ 62.54 

 F- 38 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Number of 
 Warrants 
 Weighted
 Average 
 Exercise 
 Price 

 Balance at January 1, 2024 
 1,056 
 $ 3,521.12 

 Granted 
 – 
 – 

 Exercised 
 – 
 – 

 Expired 
 ( 6 ) 
 405.00 

 Balance at December 31, 2024 
 1,050 
 3,538.93 

 Warrants Exercisable at December 31, 2024 
 1,050 
 $ 3,538.93 

 11. DISCONTINUED OPERATIONS 

 The income from discontinued operations presented
in the consolidated statement of operations for the year ended December 31, 2025 represents obligations which were reported as net liabilities
from discontinued operations on the consolidated balance sheet as of December 31, 2024, related to the sale of Platinum Tax, a business
previously owned by the Company, which was sold in November 2023, that have been subsequently determined no longer due and payable, due
to the final resolution and dismissal of liabilities and legal claim, and therefore have been released. In accordance with ASC 205-20,
this adjustment has been reflected within income (loss) from discontinued operations in the accompanying consolidated statements of operations
for the year ended December 31, 2025. The adjustment did not impact income from continuing operations.

 The $ 111,312 loss from discontinued operations
presented in the consolidated statement of operations for the year ended December 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 12,370 shares at $9 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.

 Schedule of discontinued operations 
 
 December 31, 

 Net liabilities of discontinued operations 
 2025 
 2024 

 Accounts payable and accrued expenses 
 $ – 
 $ 238,285 

 Net liabilities of discontinued operations 
 $ – 
 $ ( 238,285 ) 

 Year Ended December 31, 

 Gain (Loss) from discontinued operations 
 2025 
 2024 

 Gain (loss) on settlement 
 $ 238,285 
 $ ( 111,312 ) 

 Gain (loss) from discontinued operations 
 $ 238,285 
 $ ( 111,312 ) 

 F- 39 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 12. GOODWILL 

 The Company reviews goodwill for impairment on
a reporting unit basis annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.
During the years ended December 31, 2025 and 2024, the Company determined there to be no impairment. The Company based this decision on
impairment testing of the underlying assets, expected cash flows, decreased asset value and other factors.

 13. COMMITMENTS AND CONTINGENCIES 

 Leases 

 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
position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying
asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by
class of underlying asset not to recognize lease assets and lease liabilities. 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; and 

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

 The Company also made the accounting policy decision
not to recognize lease assets and liabilities for leases with a term of 12 months or less.

 The Company leases eleven medical facilities and
one vehicle as operating leases as of December 31, 2025. The Company recorded operating lease expenses of $ 449,796 and $ 447,402 for the
years ended December 31, 2025 and 2024, respectively.

 The Company has operating leases with future commitments
as follows:

 Schedule of operating leases with future commitments 
 
 Amount 

 2026 
 $ 187,871 

 2027 
 43,892 

 Total Future Undiscounted Lease Payments 
 231,763 

 Less imputed interest 
 ( 10,263 ) 

 Total lease obligations 
 $ 221,500 

 F- 40 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 The following table summarizes supplemental information
about the Company’s leases:

 Schedule of supplemental information 
 
 Weighted-average remaining lease term 
 
 1.22 years 
 
 Weighted-average discount rate 
 
 7.29 % 
 
 Employees 

 In connection with separate employment agreements
and related addendums with Alex Cunningham, the Company’s Chairman, President and Chief Executive Officer, and Daniel Thompson,
the Company’s former Chairman, from time to time the Company accrued each of their respective compensation elements at their election
rather than pay them in cash to Accrued expenses - related parties in the Company’s consolidated balance sheet. The total outstanding
accrued compensation as of December 31, 2025 and 2024 for Alex Cunningham was $ 2,163,000 and $ 2,215,500 , respectively, and for Daniel
Thompson was $ 2,237,167 and $ 2,320,500 , respectively, all of which is included in Accrued expenses – related parties in the consolidated
balance sheets as of December 31, 2025 and 2024, respectively. The total interest accrued as of December 31, 2025 was $ 111,588 for Alex
Cunningham, and $ 117,014 for Daniel Thompson. See also Note 7. Notes and Loans Payable and Note 17. Subsequent Events .

 14. LEGAL PROCEEDINGS 

 From time to time, the Company may become involved
in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties,
and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. Management is
not currently aware of any such legal proceedings or claims that it believes will have a material adverse effect on the Company’s
business, financial condition, or operating results.

 15. INCOME TAXES 

 At December 31, 2025, the Company had federal
and state net operating loss carry forwards of approximately $ 24.4 million that expire in various years through the year 2041. Due to
the current net loss and carryforwards of past net operating losses, there is no provision for current federal or state income taxes for
the years ended December 31, 2025 and 2024.

 The Company has not paid federal or state income
taxes as a result of its net losses and the availability of its net operating loss carryforwards. The State of Nevada, the Company's state
of incorporation, does not impose a corporate income tax. Florida, the state in which the Company's operating subsidiary conducts business,
imposes a corporate income tax at a rate of 5.5 %; however, the Company has not been required to pay Florida income taxes due to its net
loss position and available net operating loss carryforwards. The Company does not conduct any business outside the United States and
accordingly has no foreign income tax obligations.

 F- 41 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 The reconciliation of the Company’s U.S.
federal statutory income tax rate to its effective income tax rate as of December 31, 2025 is as follows:

 Schedule of effective income tax rate 
 
 2025 

 U.S. statutory federal tax 
 
 $ 
 ( 1,156,594 
 ) 
 
 21.0 % 

 State tax, net of federal benefits 
 
 0 
 
 0.0 % 

 Foreign jurisdictional tax 
 
 0 
 
 0.0 % 

 Non-deductible items 
 
 22,812 
 
 ( 0.4 ) % 

 Valuation allowance 
 
 1,133,782 
 
 ( 20.6 ) % 

 Effective tax rate 
 
 $ 
 0 
 
 0.0 % 

 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’s deferred tax asset at December
31, 2025 and 2024 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately
$ 7 .0 million and $ 5.9 million, respectively, less a valuation allowance in the amount of approximately $ 7 .0 million and $ 5.9 million,
respectively. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance
in both 2025 and 2024. The OBBBA, which was enacted on July 4, 2025, makes numerous tax changes. The tax provisions of the OBBBA
did not have a material impact on the Company’s effective tax rate and it also did not impact the Company’s net deferred tax
assets, as the Company continues to maintain a full valuation allowance against that balance. During the year ended December 31, 2025,
the valuation allowance increased by approximately $ 1.1 million from December 31, 2024.

 The Company’s total deferred tax asset as
of December 31, 2025 and 2024 is as follows:

 Schedule of deferred tax assets 
 
 2025 
 2024 

 Deferred tax assets 
 $ 7,000,000 
 $ 5,900,000 

 Valuation allowance 
 ( 7,000,000 ) 
 ( 5,900,000 ) 

 Net deferred tax asset 
 $ – 
 $ – 

 F- 42 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 16. SEGMENT REPORTING 

 As of December 31, 2025 and 2024, the Company
had two reportable operating segments as determined by management using the “management approach” as defined by the authoritative
guidance on Disclosures about Segments of an Enterprise and Related Information .

 (1) 
 Healthcare (Nova) 

 (2) 
 Real Estate (Edge View) 

 These segments are a result of differences in
the nature of the products and services sold. 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
diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints, tendons, muscles, ligaments,
and nerves.

 The real estate segment consists of Edge View,
a real estate company that owns five (5) acres zoned medium density residential (MDR) with 12 lots already platted, six (6) acres zoned
high-density residential (HDR) that can be platted in various configurations to meet current housing needs, and twelve (12) acres
zoned in Lemhi County as Agriculture that is available for further annexation into the City of Salmon for development, as well as a common
area for landowners to view wildlife, provide access to the Salmon River and fishing in a two (2) acre pond.

 The 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. To help
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.

 F- 43 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Schedule of revenues and net income from operations 
 
 As of December 31, 

 Asset: 
 2025 
 2024 

 Healthcare 
 $ 27,349,522 
 $ 21,298,866 

 Real Estate 
 540,522 
 576,478 

 Corporate 
 1,196,901 
 2,050,335 

 Consolidated assets 
 $ 29,086,945 
 $ 23,925,679 

 Years Ended December 31, 

 2025 
 2024 

 Revenues: 
 
 Healthcare 
 $ 11,535,577 
 $ 8,270,126 

 Real Estate 
 – 
 – 

 Consolidated revenues 
 $ 11,535,577 
 $ 8,270,126 

 Cost of Sales: 
 
 Healthcare 
 $ 4,329,330 
 $ 3,841,628 

 Real Estate 
 – 
 – 

 Consolidated cost of sales 
 $ 4,329,330 
 $ 3,841,628 

 Operating Expenses: 
 
 Healthcare 
 
 Depreciation expense 
 $ 5,652 
 $ 13,461 

 Loss on disposal of fixed assets 
 12,593 
 – 

 Selling, General and Administrative 
 1,193,654 
 1,148,971 

 Total Healthcare 
 1,211,899 
 1,162,432 

 Real Estate 
 36,327 
 8,949 

 Corporate, administration and other expenses (a) 
 4,857,435 
 3,450,621 

 Consolidated Operating Expenses 
 $ 6,105,661 
 $ 4,622,002 

 Income (Loss) from Operations from Subsidiaries: 
 
 Healthcare 
 $ 5,994,348 
 $ 3,266,065 

 Real Estate 
 ( 36,327 ) 
 ( 8,949 ) 

 Income (loss) from operations from subsidiaries 
 5,958,021 
 3,257,116 

 Loss from operations from Cardiff Lexington 
 ( 4,857,435 ) 
 ( 3,450,620 ) 

 Total income (loss) from operations 
 $ 1,100,586 
 $ ( 193,504 ) 

 Income (Loss) before taxes 
 
 Healthcare 
 $ 5,992,751 
 $ 3,266,065 

 Real Estate 
 ( 36,327 ) 
 ( 8,949 ) 

 Corporate, administration and non-operating expenses (b) 
 ( 11,702,301 ) 
 ( 6,448,803 ) 

 Consolidated loss before taxes 
 $ ( 5,745,877 ) 
 $ ( 3,191,687 ) 

 (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 as noted above as well as interest, amortization of notes payable discount and gain on settlement of debt. 

 F- 44 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 17. SUBSEQUENT EVENTS 

 The Company has evaluated its operations subsequent
to December 31, 2025 to the date these consolidated financial statements were available to be issued and determined the following subsequent
events and transactions required disclosure in these consolidated financial statements.

 Reverse Stock Split 

 On January 12, 2026, the Company implemented a
1-for-3 reverse split of our outstanding shares of common stock. As a result of this reverse split, the Company’s issued and
outstanding common stock decreased from 41,102,612 shares to 13,701,698 shares as of December 31, 2025. Accordingly, all share
and per share information contained in these consolidated financial statements has been restated to retroactively show the effect of this
reverse stock split. 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.

 Bridge Loan 

 In December 2025 and January 2026, the Company
also entered into loan agreements with two additional accredited investors, pursuant to which the Company issued to such investors (i)
convertible promissory notes in the aggregate principal amount of $80,000, which also provide for a second tranche of up to an additional
$80,000 upon the mutual agreement of the parties, all of which were issued in January 2026, (ii) warrants for the purchase of an aggregate
of 73,334 shares of common stock, of which 33,334 were issued in December 2025 and 40,000 were issued in January 2026, and (iii) 36,667
shares of common stock, all of which were issued in January 2026, for total gross proceeds of $80,000 and net proceeds of approximately
$269,500, all of which were received in January 2026.

 As noted above, although one of the loan agreements
and one warrant were executed in December 2025, no proceeds were received as of December 31, 2025, and the promissory note was not funded
or outstanding at year-end. In accordance with ASC 405 and ASC 470, the Company will record the convertible promissory notes, the related
warrants, the issuance of the common stock and any associated debt discount in the period in which the proceeds were received based on
their relative fair values.

 These convertible promissory notes accrue interest
at a rate of twelve percent (12%) per annum, payable in shares of common stock, cash or a combination thereof at the Company’s option
quarterly commencing on April 1, 2026, with all principal and accrued interest being due and payable five (5) years after issuance. If
a quarterly interest payment is paid in shares of common stock, then the interest rate used in connection with such issuance shall be
fifteen percent (15%) per annum. The Company may prepay the principal and accrued interest at any time without penalty upon fifteen (15)
days’ notice. In addition, if the Company completes a financing of at least $2.5 million, then, if requested by a holder, the Company
must repay the remaining principal and interest from the proceeds of such financing. These convertible promissory notes are unsecured
and contain customary events of default for a loan of this type. These convertible promissory notes are convertible into shares of common
stock at a conversion price of $0.825 (subject to standard adjustments in the event of any stock splits, stock combinations, dividends
paid in common stock, stock reclassifications or similar transactions). In addition, these convertible promissory note provide that if
the closing price of the Company’s common stock on the sixth (6th) month anniversary of the issuance date is less than the conversion
price then in effect, then the conversion price shall be adjusted to such lower price, and also provide that if the Company issues any
shares of common stock, or securities convertible into common stock, at a price that is less than the conversion price then in effect,
then the conversion price shall be adjusted to such lower price, subject to certain exceptions.

 F- 45 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 All of the warrants may be exercised for a period
of three years at an exercise price of $9.00 (subject to standard adjustments in the event of any stock splits, stock combinations, dividends
paid in common stock, stock reclassifications, mergers, consolidations, reorganizations or similar transactions) and may be exercised
on a cashless basis if there is no effective registration statement covering the shares of common stock issuable upon the exercise of
the warrants.

 All of the convertible promissory notes and warrants
contain ownership limitations, which provide that the Company shall not effect any conversion or exercise, and a holder shall not have
the right to convert or exercise any portion of a note or a warrant, to the extent that after giving effect to the issuance of common
stock upon such conversion or exercise, such holder, together with its affiliates, would beneficially own in excess of 4.99% of the number
of shares of common stock outstanding immediately after giving effect to the issuance of common stock upon such conversion or exercise.
This limitation may be waived, up to a maximum of 9.99%, by a holder upon not less than sixty-one (61) days’ prior notice to us.

 See also Note 8. Convertible Notes Payable ,
Note 9. Capital Stock and Note 10. Warrants .

 Conversion of Deferred Compensation 

 On January 29, 2026, the Company entered into
a conversion agreement with Alex Cunningham, the Company’s Chief Executive Officer, pursuant to which deferred compensation in the
amount of $2,365,242 owed to Mr. Cunningham was cancelled in exchange for 556,528 shares of common stock. The number of shares issued
was determined based on the closing market price of the Company’s common stock of $4.25 on January 28, 2026. Because the underlying
compensation was fully earned and the fair value of equity issued equals the amount accrued, the settlement will be accounted for as an
equity issuance with no impact on the Company’s consolidated statements of operations. The Company will record a reduction to accrued
compensation and a corresponding increase to stockholders’ equity upon issuance of the shares.

 On March 6, 2026, the Company entered into a conversion
agreement with Daniel Thompson, the Company’s former Chairman of the Board, pursuant to which deferred compensation in the amount
of $2,352,994 owed to Mr. Thompson was cancelled in exchange for 588,249 shares of common stock. The number of shares issued was determined
based on the closing market price of the Company’s common stock of $4.00 on March 4, 2026. Because the underlying compensation was
fully earned and the fair value of equity issued equals the amount accrued, the settlement will be accounted for as an equity issuance
with no impact on the Company’s consolidated statements of operations. The Company will record a reduction to accrued compensation
and a corresponding increase to stockholders’ equity upon issuance of the shares.

 Compensation Resolution Agreement 

 On March 6, 2026, the Company entered into a lock-up
and compensation resolution agreement with Daniel Thompson, the Company’s former Chairman of the Board, to resolve outstanding accrued
compensation obligations. Under the agreement, the Company issued an unsecured promissory note in the principal amount of $116,666.66
bearing interest at 10% annually, payable interest-only in year one and 50% principal in each of years two and three, with all amounts
due within three years. The agreement also required Mr. Thompson to execute a lock-up agreement in connection with the Company’s
planned public offering.

 F- 46 

 CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 DECEMBER 31, 2025 AND 2024 
 
 Amendment to Series N Certificate of Designation 

 On January 29, 2026, the Company filed a certificate
of amendment to the certificate of designation for its series N senior convertible preferred stock with the Nevada Secretary of State’s
Office to amend the certificate of designation to remove the redemption provisions, which previously provided for an optional redemption
by the Company and a mandatory redemption at the option of the holder in certain circumstances. As a result of this modification, the
preferred stock no longer meets the criteria for classification outside of permanent equity. The $3,802,010 carrying value will be reclassified
from mezzanine equity to permanent equity prospectively on the Company’s consolidated balance sheet.

 Additional Stock Issuances 

 As described above, on November 25, 2025, the
Company issued 100,000 shares of common stock to a consulting service provider. The service agreement included a provision that entitles
the provider to receive additional shares in the event of a reverse stock split. The reverse stock split noted above became effective
on January 12, 2026, and as a result, the Company issued 200,000 shares of common stock on January 13, 2026. The Company will recognize
the incremental expense related to these shares based upon the fair value at the grant date. See also Note 9. Capital Stock .

 On January 13, 2026, the Company issued a restricted
stock award for 62,500 shares of common stock, of which 31,250 shares vested on the date of grant and 15,625 shares will vest on each
of January 2, 2027 and January 2, 2028.

 On January 14, 2026, the Company issued 13,761
to a service provider.

 F- 47 

 SIGNATURES 

 Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

 Date March 10, 2026 
 CARDIFF LEXINGTON CORPORATION 

 /s/ Alex Cunningham 

 Name: Alex Cunningham 

 Title: Chief Executive Officer 

 (Principal Executive Officer) 

 /s/ Matthew Shafer 

 Name: Matthew Shafer 

 Title: Chief Financial Officer 

 (Principal Financial Officer) 

 Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

 SIGNATURE 
 TITLE 
 DATE 

 /s/ Alex Cunningham 
 
 Chairman of the Board, President and Chief Executive Officer (principal executive officer) 
 March 10, 2026 

 Alex Cunningham 
 
 /s/ Matthew Shafer 
 
 Chief Financial Officer (principal financial officer) 
 March 10, 2026 

 Matthew Shafer 
 
 /s/ Gillard B. Johnson III 
 
 Director 
 March 10, 2026 

 Gillard B. Johnson III 
 
 /s/ Cathy Pennington 
 
 Director 
 March 10, 2026 

 Cathy Pennington 
 
 /s/ L. Jack Staley 
 
 Director 
 March 10, 2026 

 L. Jack Staley
Cardiff Lexington Corp 10-K

Item 9A. Controls and Procedures
