Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

 

Commission File Number 000-49709

 

CARDIFF LEXINGTON CORPORATION

(Exact name of registrant as specified in its charter)

 

Florida 84-1044583
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)

 

401 Las Olas Blvd., Unit 1400, Ft. Lauderdale, FL 33301

(Address of principal executive offices)

 

(844) 628-2100

(Registrant's telephone no., including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
N/A N/A N/A

 

Securities registered pursuant to Section 12(g) of the Exchange Act: Par Value $0.001 Common Stock

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x          No o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)

Yes x          No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

 

  Large accelerated filer  o Accelerated filer  o
  Non-accelerated filer  o Smaller reporting company  x
  Emerging growth company  o  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o          No x

 

Common Stock outstanding at August 19, 2019 is 186,633,464 shares of $0.001 par value Common Stock.

 

   

 

 

FORM 10-Q

 

CONSOLIDATED FINANCIAL

STATEMENTS AND SCHEDULES

CARDIFF LEXINGTON CORPORATION

 

For the Quarter ending June 30, 2019

 

The following consolidated financial statements and schedules of the registrant are submitted herewith:

 

    Page
PART I - FINANCIAL INFORMATION
 
Item 1. Unaudited Consolidated Financial Statements: 3
  Condensed Consolidated Balance Sheets 3
  Condensed Consolidated Statements of Operations 4
  Condensed Consolidated Statements of Shareholders’ Equity 5
  Condensed Consolidated Statements of Cash Flows 7
  Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 27
Item 3 Quantitative and Qualitative Disclosures about Market Risk 34
Item 4. Controls and Procedures, Evaluation of Disclosure Controls and Procedures 34
     
PART II - OTHER INFORMATION
     
Item 1. Legal Proceedings 35
Item 1A. Risk Factors 35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35
Item 3. Defaults Upon Senior Securities 35
Item 4. Submission of Matters to a Vote of Security Holders 35
Item 5. Other Information 35
Item 6. Exhibits 35

 

 

 

 2 

 

 

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

 

   June 30,   December 31, 
   2019   2018 
  (Unaudited) All Companies except Red Rock   (Audited) 
ASSETS        
Current assets          
Cash  $176,064   $118,307 
Accounts receivables - net   267,319    64,345 
Inventory - net   3,079    3,079 
Prepaids and other assets   62,831    46,596 
Total current assets   509,293    232,327 
           
Property and equipment, net of accumulated depreciation of $399,262          
and $495,331, respectively   282,809    381,301 
Land   603,000    603,000 
Intangible assets, net        
Goodwill   3,958,897    2,092,048 
Deposits   19,600    24,600 
Right of use - assets   381,088     
Other assets   19,352    7,790 
Total assets  $5,774,039   $3,341,066 
           
LIABILITIES AND SHAREHOLDERS' (DEFICIT)          
           
Current liabilities          
Accounts payable and accrued expense  $662,312   $1,094,521 
Accrued expenses - related parties   1,002,000    747,000 
Interest payable   516,873    366,297 
Right of use - liability   381,088     
Due to officers and shareholders   152,356    137,816 
Deferred Income   345,529    1,036,039 
Line of credit   1,999    1,999 
Common stock to be issued   500    500 
Notes payable, unrelated party   66,796    676,477 
Notes payable - related party   310,242    265,242 
Convertible notes payable, net of debt discounts of $132,548 and $201,024, respectively   722,084    785,776 
Net, liabilities of discontinued operations   2,149,013     
Convertible notes payable - related party   165,000    165,000 
Derivative Liability   6,865,667    1,870,625 
Total current liabilities   13,341,459    7,147,292 
           
Other Liabilities          
Convertible notes payable, net of current portion and net of debt discounts of $933,607 and $0, respectively   83,009    1,040,000 
           
Total liabilities  $13,424,468   $8,187,292 
           
Shareholders' (deficit)          
Preferred stock          
Preferred Stock all classes         
Preferred Stock Series A - 4 Shares authorized, with par value of $0.0001, 1 and 1 share issued and outstanding at June 30, 2019 and December 31, 2018        
Preferred Stock Series B- 10,000,000 shares authorized, with par value of $.001, 2,773,206 and 2,773,206 shares issued and outstanding at June 30, 2019 and December 31, 2018   2,773    2,773 
Preferred Stock Series C- 10,000 shares authorized, with par value of $.0.00001, 119 and 119 shares issued and outstanding at June 30, 2019 and December 31, 2018        
Preferred Stock Series D- 1,000,000 shares authorized, with par value of $.001, 400,000 shares issued and outstanding at June 30, 2019 and December 31, 2018   400    400 
Preferred Stock Series E- 2,000,000 shares authorized, with par value of $.001, 241,199 shares issued and outstanding at June 30, 2019 and December 31, 2018   241    241 
Preferred Stock Series F- 500,000 shares authorized, with par value of $.001, 280,069 shares issued and outstanding at June 30, 2019 and December 31, 2018   280    280 
Preferred Stock Series F-1- 500,000 shares authorized, with par value of $.001, 57,193 shares issued and outstanding at June 30, 2019 and December 31, 2018   57    57 
Preferred Stock Series G- 2,000,000 shares authorized, with par value of $.001, 18,571,428 and -0- shares issued and outstanding at June 30, 2019 and December 31, 2018   18,571     
Preferred Stock Series H- 4,859,379 shares authorized, with par value of $.001, -0- and -0- shares issued and outstanding at June 30, 2019 and December 31, 2018        
Preferred Stock Series H-1- 3,000,000 shares authorized, with par value of $.001, -0- shares issued and outstanding at June 30, 2019 and December 31, 2018        
Preferred Stock Series I- 20,000,000 shares authorized, with par value of $.001, 195,000,000 and -0- shares issued and outstanding at June 30, 2019 and December 31, 2018   195,000     
Preferred Stock Series J- 10,000,000 shares authorized, with par value of $.001,- 0- shares issued and outstanding at June 30, 2019 and December 31, 2018        
Preferred Stock Series J1- 7,500,000 shares authorized, with par value of $.001, -0- shares issued and outstanding at June 30, 2019 and December 31, 2018        
Preferred Stock Series K-10,937,500 shares authorized, with par value of $.001, 8,200,562 shares issued and outstanding at June 30, 2019 and December 31, 2018   8,200    8,200 
Preferred Stock Series K1-35,000,000 shares authorized, with par value of $.001, 1,447,157 shares issued and outstanding at June 30, 2019 and December 31, 2018   1,447    1,447 
Preferred Stock Series L-100,000,000 shares authorized, with par value of $.001, 98,307,692 shares issued and outstanding at June 30, 2019 and December 31, 2018   98,308    98,308 
Preferred I Shares to be issued       200,000 
Common stock; 7,500,000,000 shares authorized with $0.001 par value;100,342,687 and 602,826 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively (reflects post reverse stock split of 1500:1)   100,343    603 
Additional paid-in capital   53,445,201    50,220,067 
Accumulated deficit   (61,521,250)   (55,378,603)
Total shareholders' (deficit)   (7,650,429)   (4,846,226)
           
Total liabilities and shareholders' (deficit)  $5,774,039   $3,341,066 

 

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

 

 

 

 3 

 

 

 

CARDIFF LEXINGTON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2019 AND JUNE 30, 2018

(UNAUDITED)

 

   THREE MONTHS ENDED JUNE 30,   SIX MONTHS ENDED JUNE 30 
   2019   2018   2019   2018 
REVENUE                
Rental income  $43,500   $47,386   $96,378   $98,663 
Food and beverage   167,349    156,719    315,146    304,015 
Sales of ice cream       148,326        207,389 
Sales to franchisees                
Ice cream   76,271    85,282    94,843    93,075 
Franchise fees   2,022    120,000    9,378    120,000 
Royalty fees   10,840    3,150    17,539    6,300 
Tax Services   901,301        1,528,528     
Total revenue   1,201,283    560,863    2,061,812    829,442 
                     
COST OF SALES                    
Rental business   54,456    75,079    121,619    113,488 
Food and beverage   199,717    114,391    349,360    212,847 
Ice cream stores       198,575        280,730 
Tax Services   382,866        585,999     
Total cost of sales   637,039    376,912    1,056,978    595,922 
                     
GROSS MARGIN   564,244    183,951    1,004,834    233,520 
                     
OPERATING EXPENSES                    
Depreciation and amortization expense   6,581    10,870    11,318    14,128 
Selling, general and administrative   875,625    557,777    1,535,597    976,292 
Total operating expenses   882,206    579,790    1,546,915    1,001,563 
                     
LOSS FROM OPERATIONS   (317,962)   (395,839)   (542,081)   (768,042)
                     
OTHER INCOME (EXPENSE)                    
Other income   100,674    1,580    102,816    1,580 
Bad debt expense   (68,049)       (68,049)    
Change in value of derivative liability   (372,156)   51,396    (4,295,382)   581,686 
Gain/(loss) on sale of assets       15,070        15,070 
Interest expense   (71,568)   (42,556)   (170,827)   (91,922)
Conversion cost reimbursement   (3,000)       (13,520)    
Conversion cost penalty           (532,496)    
Amortization of debt discounts   (437,991)   (233,520)   (522,360)   (434,960)
Total other income (expenses)   (852,090)   (208,030)   (5,499,818)   71,454 
                     
Loss from Discontinued Operations   (100,748)       (100,748)    
                     
NET (LOSS) FOR THE PERIOD  $(1,270,800)  $(603,869)  $(6,142,647)  $(696,588)
                     
(LOSS) PER COMMON SHARE  -BASIC AND DILUTED FOR CONTINUED OPERATIONS  $(0.03)  $(10.76)  $(0.04)  $(13.62)
                     
(LOSS) PER COMMON SHARE  -BASIC AND DILUTED FOR DISCONTINUED OPERATIONS   (0.00)*   NA    $(0.00)*    NA  
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES – BASIC AND DILUTED   37,927,962    56,123    155,129,015    51,129 

 

 

*Less than $0.00 

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

 

 

 4 

 

 

 

CARDIFF LEXINGTON CORPORATION (FORMERLY CARDIFF INTERNATIONAL, INC.)

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIENCY)

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2018

(UNAUDITED)

 

 

Preferred Stock
Series A
  Preferred Stock
Series B, D, E, F, F-1, H, I
  Preferred Share
s to be issued
  Preferred Stock,
Series C
  Common Stock  Additional Paid-in  Accumulated    
Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  Total 
Balance December 31, 2017  1  $   8,839,303   8,849         117  $   44,808   45  $45,674,137  $(49,113,352) $(3,430,321)
Conversion of Series B Preferred Stock        (10,000)  (10)              33   0   10       
                                                     
Conversion of Series I  Preferred Stock        (203,655)  (204)              204   0   204       
                                                     
Conversion of Series H  Preferred Stock        (4,859,469)  (4,859)              4,049   4   4,855       
                                                     
Common stock issued for services - Eurasian consulting agreement                          2,591   3   86,748      86,751 
                                                     
Conversion of convertible notes payable                          8,272   8   137,179      137,187 
                                                     
                                                     
Reclassified to Derivative liabilities from Additional Paid in Capital                                156,251      156,251 
                                                     
Net loss                                   (696,589.0)  (696,589)
                                                     
Balance June 30, 2018  1  $   3,776,179  $3,776         117  $   59,958  $60   46,059,384  $(49,809,941) $(3,746,721)

 

 5 

 

 

FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2019

 

Preferred Stock
Series A
  Preferred Stock
Series B, D, E, F, F-1, H, I
  Preferred Share
s to be issued
  Preferred Stock,
Series C
  Common Stock  Additional Paid-in  Accumulated    
Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  Total 
Balance December 31, 2018  1  $   111,697,591   111,707      200,000   119  $0   602,826  $603  $50,220,067  $(55,378,603) $(4,846,226)
Correction to balance reverse split partial rounding shares                          (826)  0         0 
                                                  
Issuance for Key Tax acquisition        18,571,428   18,571               500,000   500   1,836,250      1,855,321 
Issuance of PF I shares as Bonus to Cunningham and Thompson        250,000,000   250,000      (200,000)              (50,000)      
                                                     
Conversion of PF1 to CS shares Cunningham and Thompson        (55,000,000)                 82,500,000   82,500   (27,500)      
Conversion of convertible notes payable                          16,738,687   16,739   771,428      788,167 
Reclassified Derivative liabilities to Additional Paid in Capital                                694,956      694,956 
Net loss                                   (6,142,647)  (6,142,647)
Balance. June 30  2019  1  $   325,269,019  $325,277     $   119  $0   100,340,687  $100,342  $53,445,201  $(61,521,250) $(7,650,429)

 

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

 

 6 

 

 

CARDIFF LEXINGTON CORPORATION (FORMERLY CARDIFF INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS PERIODS ENDED JUNE 30, 2019 AND JUNE 30, 2018

(UNAUDITED)

 

   2019   2018 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net (Loss) from continuing operations  $(6,142,747)  $(696,589)
Adjustments to reconcile net income (loss) to net cash (used in)          
provided by operating activities:          
Depreciation   39,665    70,840 
Loss (gain) from disposal of fixed assets       (15,070)
Bad debt expense   68,049      
Amortization of loan discount   522,360    434,960 
Change in value of derivative liability   4,295,382    (581,686)
Stock based compensation       86,751 
Convertible note issued for conversion cost reimbursement       3,000 
Conversion cost penalty   543,016     
Conversion cost reimbursement   13,520     
Other Income        
Convertible note issued for services rendered        
(Increase) decrease in:        
Accounts receivable   7,249    (21,169)
Deposits   (11,721)    
Prepaids and other assets   (6,562)   (14,100)
Increase (decrease) in:          
Accounts payable   (215,846)   121,149 
Accrued expenses   210,004     
Interest payable   230,983    95,972 
Taxes payable       (3,000)
Accrued payroll taxes        
Accrued officers' salaries   250,909     
Other liabilities - deferred revenue   155,414     
Net cash provided by (used in) operating activities   (40,325)   (308,865)
           
INVESTING ACTIVITIES          
Disposal (Purchase) of fixed assets       114,818 
Net cash provided by (used in) investing activities       114,818 
           
FINANCING ACTIVITIES          
Due to related party       (6,970)
Proceeds from convertible notes payable   209,616    402,090 
Proceeds from notes payable -related party   45,000    8,609 
Proceeds from notes payable         
Repayments of interest payable   (52,020)    
Repayments of convertible notes payable   (96,352)    
Repayments of notes payable   (8,162)   (117,600)
Repayments to line of credit       (7,048)
Net cash provided by financing activities   98,082    279,081 
          
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   57,757    85,034 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   118,307    85,034 
CASH AND CASH EQUIVALENTS, END OF PERIOD  $176,064   $68,986 
           
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION          
Cash paid during the period for:          
Interest  $52,020   $43,402 
           
NON-CASH INVESTING AND FINANCING ACTIVITIES:          
Common stock issued upon conversion of notes payable  $788,167   $137,187 
Series I Preferred Stock and common stock issued for acquisition   1,855,321     
Conversion of preferred stock to common stock  $   $5,073 
Reclassification to derivative liabilities from additional paid in capital  $694,956   $156,252 
Debt discount from derivative liabilities  $258,000   $484,590 

 

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

 

 

 7 

 

  

CARDIFF LEXINGTON CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization and Nature of Operations

 

Legacy Card Company (“Legacy”) was formed as a Limited Liability Company on August 29, 2001. On April 18, 2005, Legacy converted from a California Limited Liability Company to a Nevada Corporation. On November 10, 2005, Legacy merged with Cardiff Lexington Corporation (formerly Cardiff International, Inc.) (“Cardiff”, the “Company”), a publicly held corporation.

 

Organization and Nature of Operations

 

Legacy Card Company (“Legacy”) was formed as a Limited Liability Company on August 29, 2001. On April 18, 2005, Legacy converted from a California Limited Liability Company to a Nevada Corporation. On November 10, 2005, Legacy merged with Cardiff Lexington Corporation (“Cardiff”, the “Company”), a publicly held corporation.

 

In the first quarter of 2013, it was decided to restructure Cardiff into a holding company that adopted a new business model known as "Collaborative Governance," a form of governance enabling businesses to take advantage of the power of a public company. Cardiff began targeting the acquisition of undervalued, niche companies with high growth potential, and income-producing commercial real estate properties, all designed to pay a dividend to the Company’s shareholders. The reason for this strategy was to protect the Company’s shareholders by acquiring businesses with little to no debt, seeking support with both financing and management that had the ability to offer a return to investors. 

 

Description of Business

 

Cardiff is a holding company that adopted a new business model known as "Collaborative Governance.” To date, the Company is not aware of any other domestic holding company using the same business philosophy or governing policies.

 

To date, Cardiff consists of the following wholly-owned subsidiaries:

 

We Three, LLC (Affordable Housing Initiative) acquired on May 15, 2014;

Romeo’s NY Pizza acquired on June 30, 2014;

Edge View Properties, Inc. acquired on July 16, 2014;

FDR Enterprises, Inc. acquired on August 10, 2016; merged into Repicci’s Franchise Group

Refreshment Concepts, LLC acquired on August 10, 2016; Sold assets closed business

Repicci’s Franchise Group, LLC acquired on August 10, 2016;

Red Rock Travel Group, was acquired July31, 2018 (Discontinued operations April 1, 2019)

Platinum Tax Defenders, LLC was acquired July 31, 2018

JM Enterprise 1s, Inc. (dba) Key Tax Group was acquired May 8 2019

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Cardiff, and its wholly-owned subsidiaries: We Three, LLC; Romeo’s NY Pizza; Edge View Properties, Inc.; Repicci’s Franchise Group, LLC, Red Rock Travel Group (Discontinued Operations), and Platinum Tax Defenders LLC and JM Enterprise 1 (dba) Key Tax Group. All significant intercompany accounts and transactions are eliminated in consolidation. Certain prior period amounts may have been reclassified for consistency with the current period presentation. These reclassifications would have no material effect on the reported financial results.

 

 

 

 8 

 

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (US 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.

 

Revenue Recognition

 

On January 1, 2018, we adopted ASC 606, Revenue from contracts with customers (“Topic 606”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606.

 

There was no impact to the opening balance of accumulated deficit or revenues for the year ended December 31, 2018, as a result of applying Topic 606.

 

The Company applies a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when the performance obligation is satisfied. Substantially all of the Company’s revenue is recognized at the time control of the products transfers to the customer.

 

The Company generates revenue from our subsidiaries primarily on a cash basis for sale of food items and monthly rentals of mobile homes. As allowed by a practical expedient in Topic 606, the entity recognizes revenue in the amount to which the entity has a right to invoice. The term between invoicing and when payment is due is not significant.

 

Our subsidiary Repicci, generates revenues through franchise fees. Revenues from franchise fees are recognized in accordance with guidance Topic 606, as the fees are earned. One-third of the revenues are recognized within 60 days and the balance are recognized over the life of the franchise agreement, which can be up to 15 years.

 

Our subsidiaries Platinum Tax Defenders and Key Tax generates revenue from services provided in the tax resolution space. Revenue is recognized once services have been completed, based on the contract terms.

 

Our segmented revenue is disclosed more fully in our consolidated financial statements, see Footnote 15 for further details.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

 

Accounts Receivable

 

Accounts receivable is reported on the balance sheet at gross amounts due to the Company. Management closely monitors outstanding accounts receivable and charges off to expense any balances that are determined to be uncollectible. As of June 30, 2019 and December 31, 2018, the Company had accounts receivable of $267,319 and $64,345, respectively. Accounts receivables are primarily generated from our subsidiaries in their normal course of business.

 

Inventory

 

Inventory consists of finished goods purchased, which are valued at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (FIFO) method. The Company periodically reviews historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand.

 

 

 

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Property and Equipment

 

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

 

Classification Useful Life
Equipment, furniture and fixtures 5 - 7 years
Leasehold improvements 10 years or lease term, if shorter

 

During the six months ended June 30, 2019 and the year ended December 31, 2018, depreciation and amortization expense was $39,665 ($28,347 is included in Cost of Goods Sold) and $80,165 ($57,468 is included in Cost of Goods Sold), respectively.

 

Goodwill and Other Intangible Assets

 

Goodwill and indefinite-lived brands are not amortized, but are evaluated for impairment annually or when indicators of a potential impairment are present. Our impairment testing of goodwill is performed separately from our impairment testing of indefinite-lived intangibles. The annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans. The Company believes such assumptions are also comparable to those that would be used by other marketplace participants. During the six months ended June 30, 2019 and the year-ended December 31, 2018, the company had Goodwill impairment of $-0- and $1,459,725, respectively, related to its acquisitions Red Rock Travel Group. The Company based this decision on impairment testing off 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 360-10-5, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as plant and equipment and construction in progress held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated discounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.

 

Valuation of Derivative Instruments

 

Financial Accounting Standards Board (“FASB”) ASC 815-10, Derivatives and Hedging (“ASC 815-10”), requires that embedded derivative instruments be bifurcated and assessed, along with freestanding derivative instruments such as convertible promissory notes, on their issuance date to determine whether they would be considered a derivative liability and measured at their fair value for accounting purposes. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then revalued at each reporting date, with changes in the fair value reported as charges or credits to income.

 

For option based simple derivative financial instruments, the Company uses the Lattice Binomial option pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.

 

 

 

 10 

 

 

Beneficial Conversion Feature

 

For conventional convertible debt where the rate of conversion is below market value, the Company records a “beneficial conversion feature” (“BCF”) and related debt discount.

 

When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt.

 

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 Input Definition

 

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.

 

The following table presents certain investments and liabilities of the Company’s financial assets measured and recorded at fair value on the Company’s Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of June 30, 2019 and December 31, 2018.

 

   Level 1   Level 2   Level 3   Total 
Fair Value of Derivative Liability –
June 30, 2019
  $   $   $6,865,677   $6,865,677 
                     

 

   Level 1   Level 2   Level 3   Total 
Fair Value of Derivative Liability –
December 31, 2018
  $   $   $1,870,625   $1,870,625 

  

Stock-Based Compensation – Employees

 

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

 

 

 

 11 

 

 

The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.

 

Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest.

 

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

 

Stock-Based Compensation – Non Employees

 

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

 

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB ASC (“Sub-topic 505-50”).

 

Income Taxes

 

Income taxes are determined in accordance with ASC Topic 740, “Income Taxes” (“ASC 740”). 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.

 

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 six month period ended June 30, 2019 and year ended December 31, 2018 the Company did not have any interest and penalties associated with tax positions. As of June 30, 2019 and December 31, 2018, the Company did not have any significant unrecognized uncertain tax positions.

 

Earnings (Loss) per Share

 

FASB ASC Subtopic 260, Earnings Per Share (“ASC 260”), provides for the calculation of "Basic" and "Diluted" earnings per share. Basic earnings per common share is computed by dividing income available to common shareholders 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 shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, warrants, and debts convertible into common shares. The dilutive effect of potentially dilutive securities is 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 following table sets forth the computation of basic and diluted earnings per common share for the six months ended June 30, 2019 and the year ended December 31, 2018. During a period of net loss, all potentially dilutive securities are anti-dilutive. Accordingly, for the six months ended June 30, 2019 and December 31, 2018 potentially dilutive securities have been excluded from the computations since they would be anti-dilutive. However, these dilutive securities could potentially dilute earnings per share in the future (weighted average reflected post 1500:1 reverse stock split for the December 31, 2018 period):

  

   For the Six months and year ended 
   June 30, 2019   December 31, 2018 
         
Numerator:          
Net (loss)  $(6,142,747)  $(6,265,251)
           
Denominator:          
Weighted-average shares outstanding   155,129,015    602,038 
           
Basic (loss) per share  $(0.01)  $(0.01)

 

 

 12 

 

 

This does not include the potential dilutive effect if all exercisable warrants were exercised or conversions of convertible notes and convertible preferred stock as described below as of June 30, 2019:

  

Principal and Interest conversion   613,794,780 
Warrants   8,749,287 
Preferred Stock conversion   179,106,727 
Total   801,6550,794 

 

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 has sustained operating losses since its inception and has negative working capital and an accumulated deficit. These factors raise substantial doubts about the Company’s ability to continue as a going concern. As of June 30, 2019, the Company had shareholders’ deficit of $7,650,429. 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. As a result, the Company’s independent registered public accounting firm, in its report on the Company’s June 30, 2019 consolidated financial statements, has raised substantial doubt about the Company’s ability 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 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 Pronouncements

 

Adoption of ASU 2016-02, Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). Under ASU No. 2016-2, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, The Company adopted this standard on January 1, 2019 using the modified retrospective method. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs; and all of the new standard’s available transition practical expedients.

 

On adoption, the Company recognized a right of use asset of $381,088, operating lease liabilities of $381,088 with a cumulative effect adjustment to accumulated deficit of $35,096, based on the present value of the remaining minimum rental payments under current leasing standards for its existing operating lease.

  

The new standard also provides practical expedients for a company’s ongoing accounting. The Company elected the short-term lease recognition exemption for its leases. For those leases with a lease term of 12 months or less, the Company will not recognize ROU assets or lease liabilities.

 

In May 2017, the FASB issued ASU No. 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting”, to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. The amendments are effective for fiscal years beginning after December 15, 2017 and should be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in an interim period. The Company adopted the standard on January 1, 2018, which did not have a material impact on the consolidated financial statements.

 

 

 

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Recent accounting pronouncements not yet adopted

In June 2016, the FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a Group recognizes an allowance based on the estimate of expected credit loss. The Company does not expect that the adoption of the standard to have an impact on the Company’s consolidated financial statements.

 

Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the Company’s financial position, results of operations or cash flows.

 

2. DISCONTINUED OPERATIONS

 

In April 2019, the Company discontinued operating Red Rock Travel Group due to continuing operating losses.

 

3. ACQUISITIONS

 

JM Enterprise 1 (dba) Key Tax Group 

JM Enterprise 1, Inc. (d.b.a. Key Tax Group) and Cardiff Lexington Corporation as previously announced in May 2019 signed a definitive merger agreement under which Key Tax Group became a wholly owned subsidiary effective May 8, 2019. In connection with the closing of the acquisition, on May 8, 2019 a Preferred “G” Class of stock with a par value of $0.001 was issued. The Preferred “G” Class of stock rights and privileges include voting rights, a conversion ratio of 1:1.25 and were distributed at the adjusted rate of $0.07 per share for a total of 18,571,428 representing a value of $1,300,000. Additionally, Cardiff issued 500,000 Common Shares with a par value of $0.001 to novate a convertible debt of $30,912.32. These Preferred “G” shares have a lock-up/leak-out limiting the sale of stock for 12 months after which conversions and sales are limited to 20% of their portfolio per year, pursuant to the terms of the Acquisition Agreement.

 

The preliminary purchase price allocation of the net assets acquired are as follows:

 

   Key Tax Fair Value 
Cash  $35,991 
Accounts receivable   189,200 
Other assets   11,622 
Property and equipment   2,596 
Goodwill   1,463,281 
Liabilities   (371,778)
Total  $1,330,912 

 

Additionally, Cardiff has allocated a Preferred “G1” Class Series for potential investors – 10,000,000 shares authorized, par value $0.001 per share with the following rights and privileges no - voting rights, converts to common stock at a ratio of 1 share preferred to 1.25 shares common. Series G1 stock cannot be diluted due to actions taken by the Company, BOD and/or its shareholders.

 

4. ACCRUED EXPENSES

 

As of June 30, 2019, and December 31, 2018, the Company had accrued expenses of $1,731,353 and $1,310,074, respectively, consisted of the following:

 

   June 30,   December 31, 
   2019   2018 
Accrued salaries – related party   997,909    747,000 
Accrued expenses – other   733,444    563,074 
Total   1,731,353    1,310,074.0 

 

 

 

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5. PLANT AND EQUIPMENT, NET

 

Plant and equipment, net as of June 30, 2019 and December 31, 2018 was $336,311 and $381,301, respectively, consisting of the following:

 

   June 30,   December 31, 
   2019   2018 
Furniture, fixture and equipment  $546,002   $715,466 
Leasehold improvements   136,069    161,166 
Total   682,071    876,632 
Less: accumulated depreciation   (399,262)   (495,331)
Plant and equipment, net  $282,409   $381,301 

 

During the three and six months ended June 30, 2019, depreciation expense was $22,463 and $39,665, respectively. The Company accounts for depreciation as a separate item in the operational expense of $11,318 and $6,581 respectively and included $15,391 and $28,347, respectively in depreciation in cost of goods sold.

 

6. LAND

 

As of June 30, 2019 and December 31, 2018, the Company had land of $603,000 located in Salmon, Idaho with area of approximately 30 acres, which was in connection with the acquisition of Edge View Properties, Inc. in July 2014. The Company issued 241,199 shares of Series E Preferred Stock as consideration for this acquisition. Based on the price of $2.50 per share, the acquisition consideration represents a $603,000 valuation. The land is currently vacant and is expected to be developed into residential community. The value of the land is not subject to be depreciated.

 

7. LINE OF CREDIT

 

On December 28, 2016, the Company entered into an unsecured Business Line of Credit Agreement with Fundation Group LLC (“Fundation”), pursuant to which the Company was allowed to take a draw from Fundation up to $20,000 from time to time. The Line of Credit bears interest at a rate of 11.49% per annum, subject to increase or decrease with 90 days notice. There was an initial closing fee of $500 and a 2% draw fee on subsequent draws. Monthly principal and interest payments are due and the line is due in full in 18 months from the latest draw. The outstanding principal and interest will be due in payments over 18 months.

 

As of June 30, 2019 and December 31, 2018, The Company had balance of $1,999 and $1,999, respectively. During the six months ended June 30, 2019, total cash advanced amounted to $-0- and cash payment made was $-0-.

 

8. RELATED PARTY TRANSACTIONS 

 

Due to Officers and Officer Compensation

 

During the six months ended June 30, 2019 and December 31, 2018, the Company borrowed a total of $30,176 and $-0-, respectively to related parties.

 

The Company borrows funds from Daniel Thompson, who is a Shareholder and Officer of the Company. The terms of repayment stipulate the unsecured loans are due 24 months from issuance or on demand, at an annual interest rate of six percent. As of June 30, 2019 and December 31, 2018, the Company had $137,816 and $77,640 due (included in due to officers and shareholders on the consolidated financial statements) to Daniel Thompson, respectively.

  

In addition, the Board of Directors of the Company approved to increase Daniel Thompson’s compensation to $25,000 per month from $20,000 effective January 1, 2017. Accordingly, a total salary of $150,000 and $300,000 were accrued and reflected as an expense to Daniel Thompson during the six months ended June 30, 2019 and the year ended December 31, 2018, respectively. The accrued salaries payable to Daniel Thompson was $422,500 and $317,500 as of June 30, 2019 and December 31, 2018, respectively.

 

 

 

 15 

 

 

The Company had an employment agreement with the Chief Operating Officer, Mr. Roberts, whereby the Company provided for compensation of $10,000 per month effective in June 2016. Effective May 2019, the Company and Roberts entered a Allonge Addendum Employment Agreement whereby Roberts accepted and agreed to a $5,000 cash settlement and accrued and future salaries would be stock only. A total salary of $60,000 and $120,000 were accrued and reflected as an expense during the six months ended June 30, 2019 and the year ended December 31, 2018, respectively. The total balance due to Mr. Roberts for accrued salaries at June 30, 2019 and December 31, 2018 were $162,000 and $107,000, respectively balance due in preferred “B” stock at $0.50 per share.

 

The Board of Directors of the Company approved to increase Chief Executive Officer, Mr. Cunningham’s compensation to $25,000 per month from $15,000 effective January 1, 2017. A total salary of $150,000 and $300,000 were accrued and reflected as an expense during the six months ended June 30, 2019 and the year ended December 31, 2018, respectively. The accrued salaries payable to Mr. Cunningham was $417,500 and $322,500 as of June 30, 2019 and December 31, 2018, respectively.

 

Notes Payable – Related Party

 

The Company has entered into several unsecured loan agreements with related parties (see below; Footnote 9, Notes Payable – Related Party; and Footnote 10 Convertible Notes Payable – Related Party).

 

Preferred Stock -

 

During the year ended December 31, 2018, the Company agreed to issue 125,000,000 preferred I shares each to Mr. Thompson and Mr. Cunningham, which were reflected as preferred shares to be issued on the consolidated financial statements at a total cost of stock compensation of $200,000. During the six months ended June 30, 2019, the shares were issued. During the six months ended June 30, 2019, Mssrs. Thompson and Cunningham collectively converted 55,000,000 preferred I shares for 82,500,000 shares of restricted common shares.

 

9. NOTES PAYABLE

 

For the six months ended June 30, 2019, the company received $-0- cash proceeds, from notes payable and repaid $-0- in cash.

 

Notes payable at June 30, 2019 and December 31, 2018 are summarized as follows:

 

   June 30,   December 31, 
   2019   2018 
Loans Payable Unrelated Party  $458,207   $665,488 
Notes Payable – Unrelated Party   10,989    10,989 
Notes Payable – Related Party   360,989    265,242 
Total   830,185    941,719 
Current portion   (830,185)   (941,719)
Long-term portion  $   $ 

 

Loans and Notes Payable – Unrelated Party

 

On March 12, 2009, the Company entered into a preferred debenture agreement with a shareholder for $20,000. The note bore interest at 12% per year and matured on September 12, 2009. In conjunction with the preferred debenture, the Company issued 2,000,000 warrants to purchase its Common Stock, exercisable at $0.10 per share and expired on March 12, 2014. As a result of the warrants issued, the Company recorded a $20,000 debt discount during 2009 which has been fully amortized. The Company assigned all of its receivables from consumer activations of the rewards program as collateral on this debenture. On March 24, 2011, the Company amended the note and the principal balance was reduced to $15,000. The Company was due to pay annual principal payments of $5,000 plus accrued interest beginning March 12, 2012. On July 20, 2011, the Company repaid $5,000 of the note. No warrants had been exercised before the expiration. As of June 30, 2019, the Company is in default on this debenture. The balance of the note was $10,549 at June 30, 2019.

 

 

 

 16 

 

 

As of June 30, 2019, the Company had lease payable of $23,988 in connection with two capital leases on two Mercedes Sprinter Vans for the ice cream section and two auto loans related to our pizza business. There are purchase options at the end of all lease terms that are based on the fair market value of the vans at the time. The leases are not in default at the current time.

 

Notes payable to unrelated party of $31,820 was due to the auto loans for the vehicles used in the Pizza restaurants and Repicci’s Group and for daily operations. The loans carry interest from 0% to 6% interest and are not currently in default.

 

The balance in notes payable to unrelated parties of $402,399, were assumed in connection the acquisition of Red Rock Travel.

 

Notes Payable – Related Party

 

On September 7, 2011, the Company entered into a Promissory Note agreement (“Note 3”) with a related party for $50,000. Note 1 bears interest at 8% per year and matures on September 7, 2016. Interest is payable annually on the anniversary of Note 3, and the principal and any unpaid interest will be due upon maturity. In conjunction with Note 3, the Company issued 2,500,000 shares of its Common Stock to the lender. As a result of the shares issued in conjunction with Note 1, the Company recorded a $50,000 debt discount during 2011. The balance of Note 3, net of debt discount, was $50,000 and $50,000 at June 30, 2019 and December 31, 2018, respectively. Note 3 is currently in default.

 

On November 17, 2011, the Company entered into a Promissory Note agreement (“Note 3-1”) with a related party for $50,000. Note 2 bears interest at 8% per year and matures on November 17, 2016. Interest is payable annually on the anniversary of Note 3-1, and the principal and any unpaid interest will be due upon maturity. In conjunction with Note 3-1, the Company issued 2,500,000 shares of its Common Stock to the lender. As a result of the shares issued in conjunction with Note 3-1, the Company recorded a $50,000 debt discount during 2011. The balance of Note 3-1, net of debt discount, was $50,000 and $50,000 at June 30, 2019 and December 31, 2018, respectively. Note 3-1 is currently in default.

 

The Company borrows funds from Officers of our subsidiaries from time to time. The terms of repayment stipulate the unsecured loans are due demand, at no interest. As of June 30, 2019 and December 31, 2018, the Company had $260,989 and $215,989 due respectively.

 

10. CONVERTIBLE NOTES PAYABLE

 

Certain of the Company’s issued Convertible Notes include anti-dilution provisions that allow for the adjustment of the conversion price. The Company considered the guidance provided by the FASB in “Determining Whether an Instrument Indexed to an Entity’s Own Stock,” the result of which indicates that the instrument is not indexed to the issuer’s own stock. Accordingly, the Company determined that, as the conversion price of the Notes issued in connection therewith could fluctuate based future events, such prices were not fixed amounts. As a result, the Company determined that the conversion features of the Notes issued in connection therewith are not considered indexed to the Company’s stock and characterized the value of the conversion feature of such notes as derivative liabilities upon issuance. The Company has recorded derivative liabilities associated with convertible debt instruments.

  

As of June 30, 2019, the company received $50,000 net cash proceeds, from convertible notes. The Company recorded amortization of debt discount of $522,360 and $201,440 related to convertible notes, during the six months ended June 30, 2019 and the year ended December 31, 2018, respectively.

 

Convertible notes at June 30, 2019 and December 31, 2018 are summarized below:

 

   June 30,
2019
   December 31,
2018
 
Convertible Notes Payable – Unrelated Party  $2,111,248   $2,026,800 
Convertible Notes Payable – Related Party   165,000    165,000 
Discount on Convertible Notes Payable - Unrelated Party   (1,066,205)   (201,024)
Total  $1,210,043   $1,990,775 
Current Portion   962,084    950,775 
Long-Term Portion  $83,009   $1,040,000 

 

 

 

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* Issuance Maturity Rate  Default 12/31/2018    Principal Balance  2019 Add Principal  2019 Principal Conversions  2019 Interest Converted  Shares issued upon conversion 2019  2019 Principal Paid with Cash  2019 interest paid in Cash  6/30/19 Principal Balance  Total  Interest expense for Six Month Ended 6/30/2019  Accrued Interest as of 6/30/2019  Conversion price
R 8/21/2008 8/21/2009  12%  Y  150,000                         150,000   9,050   195,658   Short Term
R 3/11/2009 4/29/2014  12%  Y  15,000                         15,000   905   18,570   Short Term
  2/9/2016 2/9/2017  20%  Y  8,485                         8,485   853   6,635  $.03 per share or 50% of market
  10/28/2016 10/28/2017  20%  Y  25,000                         25,000   2,514   13,391  $.03 per share or 50% of market
  3/8/2016 3/8/2017  20%  Y  1,500                         1,500   151   3,389  $.03 per share or 50% of market
  9/12/2016 9/12/2017  20%  Y  80,000                         80,000   8,044   44,866  $.03 per share or 50% of market
  1/24/2017 1/24/2018  20%  Y  55,000                         55,000   5,531   26,807  $.25 per share or 50% of market
  1/27/2017 1/27/2018  20%  Y  2,698   1,500   (4,198)  (9,225)  1,250,000              135   1,060  $.25 per share or 50% of market
  2/21/2017 2/21/2018  20%  Y  25,000   1,500   (18,770)      4,231,176           7,730   1,641   10,929  $.25 per share or 50% of market
  3/16/2017 3/16/2018  20%  Y  40,000                         40,000   4,022   18,379  $.25 per share or 50% of market
  4/6/2017 4/6/2018  20%  Y  31,997      (31,997)  (2,908)  1,695,400              1,600   11,805  $.25 per share or 50% of market
  4/21/2017 4/21/2018  18%  Y  172,000       (89,410)  (2,984)  3,969,066           82,590   4,872   22,763  $.30 per share or 60% of the lowest trading price for 10 days
  11/27/2017 11/27/2018  12%  Y             (119)  26,630                   60% of the lowest trading or bid (whichever is lower) price for 20 days
  1/19/2018 1/19/2019  24%  Y  83,500       (35,428)     358,333           48,072   4,359   13,857  60% of the lowest trading price for 20 days
  3/29/2018 3/29/2019 24%  Y  25,100       (25,100)     112,844                 762  60% of the lowest trading price for 15 days
  4/9/2018 4/9/2019  10%  Y  130,206       (2,515)     72,901           127,691   10,939   22,326  40% discount on the lowest trading price for previous 25 days

 

 


 18 

 

 

  7/10/2018 1/10/2021  12%  N  1,040,000                 $(140,000) $(52,020)  900,000   56,100   11,016  $0.04/ share or 40% of the lowest bid price for prior 21 days
  2/21/2019 1/10/2021  12%  N     56,616                      56,616   3,416   3,416   
  7/19/2018 12/31/2018  8%  Y             (1,653)                      60% of the lowest trading price for 10 days
  7/19/2018 12/31/2018  8%  Y                                    60% of the lowest trading price for 10 days
  8/13/2018 2/13/2019  12%  Y  78,314           (3,367)              78,314   5,913   8,616  $0.004/ share or 60% of the lowest trading  price for prior 21 days
  8/10/2017 1/27/2018  15%  Y  20,000                          20,000   1,761   3,849  $.25 per share or 50% of market
  12/10/2018 12/10/2019  8%  N  108,000                          108,000   4,344   4,593  60% of the lowest trading price for 10 days
  12/5/2018 12/5/2019  8%   N  100,000       (17,750)  (724)  5,022,337           82,250   3,663   3,224  55% of the lowest trading price for 15 days
  5/10/2019 5/10/2020  8%   N     150,000                      150,000   3,033   3,033  55% of the lowest trading price for 15 days
  5/22/2018 5/22/2019  20%  Y  40,000                           40,000   4,022   8,178  75% of the lowest closing ask price for the three prior trading days
  8/9/2018 8/9/2019  30%   N  100,000                           100,000   15,083   27,083  70% of the lowest closing ask price for the three prior trading days
  9/13/2018 9/13/2019  30%  N  50,000                           50,000   7,542   12,083  70% of the lowest closing ask price for the three prior trading days
  9/13/2018 9/13/2019  30%   N  50,000                           50,000   7,542   12,083  70% of the lowest closing ask price for the three prior trading days
* R = Related Party                                                
                                                     
    Convertible Notes Payable       $2,266,800  $209,616  $(225,168) $(20,980)  16,738,687  $(140,000) $(52,020) $2,111,248  $157,079  $294,142   
  Summary Convertible Notes Payable - Related Party       $165,000  $  $  $     $  $  $165,000  $9,955  $214,228   
     Total       $2,431,800  $209,616  $(225,168) $(20,980)  16,738,687  $(140,000) $(52,020) $2,276,248  $167,034  $508,370   

 

* R = Related Party

 

 

 19 

 

 

The Company entered into a new Convertible note in May 2019 for a total of $150,000. The note is due in 12 months, has 8% interest rate and is convertible after six months at 55% of the lowest trading price for 15 days.

 

11. FAIR VALUE MEASUREMENT

 

The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

 

Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements.

 

The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

 

As of June 30, 2019 and December 31, 2018, the Company did not have any items that would be classified as level 1 or 2 disclosures.

 

The Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company.

 

As of June 30, 2019 and December 31, 2018, the Company did not have any derivative instruments that were designated as hedges.

 

The derivative liability as of June 30, 2019, in the amount of $6,865,667 has a level 3 classification.

 

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the six months ended June 30, 2019:

 

Derivative Liability, December 31,2018  $1,870,625 
Financial instruments issued containing derivatives   1,394,616 
Settlement of derivative liability upon conversion   (694,956)
Mark to market adjustment   (4,2955,382)
Derivative Liability, June 30, 2019  $6,865,667 

 

 

 

 20 

 

 

Net loss for the period included mark-to-market adjustments relating to the liabilities held during the six-month periods ended June 30, 2019 and 2018 in the amounts of $(4,295,382) and a gain of $581,687, respectively.

 

The valuation of the derivative liabilities attached to the convertible debt was arrived at through the use of the Lattice Bi-nominal Option Pricing Model and the following assumptions:

 

      For the period ended  
     

June 30,

2019

     

December 31,

2018

 
Volatility     801.74%-820.86%       182.91%-636.13%  
Risk-free interest rate     1.72%-2.72%       2.13% -2.72%  
Expected term     .45 – 2.41       .04 - 5.14  

 

12. CAPITAL STOCK

 

Series I Preferred Stock

 

During the six months ended June 30, 2019, the Company issued 250,000,000 shares of Series I Preferred Stock to officers of the Company, which were granted during year ended December 31, 2018. See Note 8, for more details.

 

Common Stock

 

During the six months ended June 30, 2019, the Company issued 16,738,687 shares for conversion of convertible notes payable (see Footnote 9), 82,500,00 shares for conversion of Preferred I shares, 500,000 shares issued related to acquisition of Key Tax. and cancelled (826) to adjust partial shares as part of the 1:1500 share reverse stock split.

 

13. COMMITMENTS AND CONTINGENCIES

 

The Company has an employment agreement, renewed May 15, 2014, with the Chairman, Mr. Thompson amended on January 1, 2017 through December 31, 2021, whereby we provide for compensation of $25,000 per month.

 

The Company has an employment agreement with the Chief Executive Officer, Mr. Cunningham, amended on January 1, 2017 through December 31, 2021, whereby we provide for compensation of $25,000 per month.

 

The Company has an employment agreement with the Chief Operating Officer, Mr. Roberts, effective June 2016 through June 2020, whereby we provide for compensation of $10,000 per month.

 

The Company has employment agreements for Chief Executives of subsidiaries Platinum Tax Defenders The agreement for Platinum Tax Defenders is a base salary of $20,000 per month, with additional annual bonuses and stock awards based on performance.

 

There are no other stock option plans, retirement, pension, or profit-sharing plans for the benefit of our sole officers and directors other than as described above.

 

Leases

 

The Company’s subsidiary Platinum Tax Defenders has an operating lease for an office sub-lease in Simi Valley, California with an initial term of 38 months. Base monthly rent is approximately $4,000 per month plus net operating expenses. A deposit equal to one-month rent was paid and the commencement of the lease. The lease can be extended for a two-year period at same amount of increase in the original lease (3%), at the option of the original lessee. The lease contains variable lease payments for non-rental occupancy expenses. These non-lease components were not included in the determination of the right of use asset and lease liability as part of the transition to ASC 842 due to the practical expedients elected by the Company.

 

 

 

 21 

 

 

Additionally, the Company’s subsidiary Romeo Pizza has an operating lease for its restaurant at Johns Creek, Georgia with an initial term of 65 months and renewed on January 1, 2019 for an additional 120 months. Base monthly rent is approximately $4,629 per month plus net operating expenses. A deposit of $6,000 was paid and the commencement of the lease. The current lease renewal does not currently contain an extension provision. The lease contains variable lease payments for non-rental occupancy expenses. These non-lease components were not included in the determination of the right of use asset and lease liability as part of the transition to ASC 842 due to the practical expedients elected by the Company.

 

The Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable. The Company used an estimated incremental borrowing rate of 15% to estimate the present value of the right of use liability.

 

The Company has right-of-use assets of $381,088, operating lease liabilities of $381,088 as of June 30, 2019. Operating lease expense for the six months ended June 30, 2019 was $25,886. The company had cash used in operating activities related to leases of $35,086 during the six months ended June 30, 2019. These leases have a remaining term of 2.5 years and 9.75 years.

 

The following table provides the maturities of lease liabilities at June 30, 2019:

 

 

Maturity of Lease Liabilities at June 30, 2019

    
2019  $51,773 
2020   106,096 
2021   108,705 
2022   67,431 
2023   60,124 
2024 and thereafter   319,144 
Total future undiscounted lease payments   713,272 
Less: Interest   (302,693)
Present value of lease liabilities  $381,088 

 

The Company’s other subsidiaries also maintain short-term lease agreements for office space. Total rent expense for these rentals was $78,161 for the six months ended June 30, 2019. Total rent expense for the six months ended June 30, 2018 was $71,274.

  

14. WARRANTS

 

Pursuant to the same consulting agreement, dated February 10, 2017, in addition to the 800,000 shares of common stock, the Company agreed to grant total 800,000 warrants to the consultant for consulting services related to marketing and business development and are exercisable on the grant date and expire in three years. The initial allotment of 200,000 warrants were granted during the first quarter of 2017. The second allotment of 200,000 warrants were granted during the second quarter of 2017. The third allotment of 200,000 warrants were granted during the third quarter of 2017. The fourth allotment of 200,000 warrants were granted during the fourth quarter of 2017.

 

The Company determined that the warrants were tainted and therefore the carrying value represents an embedded derivative instrument that meets the requirements for liability classification under ASC 815. As a result, the fair value of the derivative financial instrument in the note is reflected in the Company’s balance sheet as a liability. The fair value of the derivative financial instrument of the warrants were measured using the Black-Scholes valuation model at the grant dates of the agreement (February 10, 2017, May 10, 2017, August 10, 2017 and December 10, 2017.) and will do so again on each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income or expense at each balance sheet date. The derivative liabilities will be reclassified into additional paid in capital upon conversion.

 

On April 21, 2017, the Company entered into a Securities Purchase Agreement with an unrelated entity, pursuant to which the purchasers agreed to pay the Company an aggregate of up to $600,000 for an aggregate of up to 660,000 in Principal Amount of Notes. The first tranche of $330,000 was closed simultaneously (“Note 13-1”). The proceeds of $300,000, net of $30,000 Original Issuance Discount, was received by the Company.

 

 

 

 22 

 

 

In addition, in connection with this Securities Purchase Agreement, the Company granted purchasers 2,357,143 warrants with exercise price of $0.14 per share (“Warrants A”), 1,885,715 warrants with exercise price of $0.175 per share (“Warrants B”) and 1,571,429 warrants with exercise price of $0.21 per share (“Warrants C”). Warrants A, B and C are exercisable on the grant date and expire in three years, each of which represents 100% of the Principal Amount at the Closing divided by the respective exercise price.

 

During the year ended December 31, 2018, the Company entered into a note agreement for $1,040,000, as part of the note agreement the Company agreed to issue the noteholder warrants exercisable for 4,000,000 shares of common stock with a term of eight years, at an exercise price of $0.04. The terms also include a full-ratchet anti-dilution protection provision and therefore the Company has deemed them to be a derivative liability.

 

Initial Valuation for Year Ended 12.31.18   89,359 
Ending Value 12.31.18   3,795 

 

Change in Valuation for six months ended 6.30.19     6,015  
Ending Value 6.30.19     9,810  

 

The table below sets forth the assumptions for Black-Scholes valuation model on each initial date and December 31, 2018.

 

    Year Ended
December 31, 2018
 
Volatility     213% - 494%  
Risk-free interest rate     0.147 – 0.269  
Expected term     2.11 – 2.53  
         

  

Accordingly, the Company recorded warrant expenses of $6,015 for the six months ended June 30, 2019 and $133,123 during the year ended December 31, 2018 .

 

The following tables summarize all warrant outstanding as of June 30, 2019 and the related changes during this period. The warrants expire three to eight years from grant date, which as of June 30, 2019 is 0.62 – 7.03 years. The intrinsic value of the warrants as of June 30, 2019 was $-0-.

 

    Number of
Warrants
    Weighted
Average
Exercise
Price
 
Stock Warrants                
Balance at January 1, 2019     6,614,287     $ 0.21  
Granted            
Exercised            
Expired            
Balance at June 30, 2019     6,614,287       0.21  
Warrants Exercisable at June 30, 2019     6,614,287     $ 0.21  

 

15. SEGMENT REPORTING

 

The Company has six 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) Mobile home lease (We Three), (2) Company-owned Pizza Restaurants (Romeo’s NY Pizza), (3) “Repicci’s Italian Ice” franchised stores.(4) Red Rock Travel Group (discontinued operations), and (5) Tax resolution services (Platinum Tax Defenders) and (JM Enterprise 1s (dba) Key Tax Group. These segments are a result of differences in the nature of the products and services sold. Corporate administration costs, which include, but are not limited to, general accounting, human resources, legal and credit and collections, are partially allocated to the three operating segments. Other revenue consists of nonrecurring items.

 

 

 

 23 

 

 

The mobile home lease segment establishes mobile home business as an option for a homeowner wishing to avoid large down payments, expensive maintenance costs, monthly mortgage payments and high property taxes. If bad credit is an issue preventing people from purchasing a traditional house, the Company will provide a financial leasing option with "0" interest on the lease providing a "lease to own" option for their family home.

 

The Company-owned Pizza Restaurant segment includes sales and operating results for all Company-owned restaurants. Assets for this segment include equipment, furniture and fixtures for the Company-owned restaurants.

 

Repicci’s Group offers franchisees for the operation of “Repicci’s Italian Ice” franchises. These franchised stores specialize in the distribution of nonfat frozen confections.

 

The number of franchise agreements in force as of June 30, 2019 was forty-five (45), seven (7) new state of the art “mobile” units.

 

Platinum Tax Defenders provides tax resolution services to individuals and companies that have federal and state tax liabilities. The company collects fees based on efforts to negotiate and assist in the settlement of outstanding tax debts.

 

Red Rock Travel Group was a travel services company that provided discounted travel packages. The packages are marketed in conjunction with interval ownership properties and the company earns fees for scheduling the client visits and commissions on travel packages sold. As of April 1, 2019, this entity is reflected as a discontinued operation.

 

For the three month period ended

 

   June 30, 2019      June 30, 2018 
Revenues:       Revenues:    
We Three  $43,500   We Three  $47,386 
Romeo’s NY Pizza   167,349   Romeo’s NY Pizza   156,719 
Repicci's Group   89,133   Repicci's Group   356,758 
Platinum Tax   777,350   Platinum Tax    
Key Tax   123,951   Key Tax    
Other      Other    
Consolidated revenues  $1,201,283   Consolidated revenues  $560,863 
Cost of Sales:      Cost of Sales:     
We Three  $54,456   We Three  $75,089 
Romeo’s NY Pizza   118,568   Romeo’s NY Pizza   114,391 
Repicci's Group   81,149   Repicci's Group   198,575 
Platinum Tax   236,560   Platinum Tax    
Key Tax   146,306   Key Tax    
Other      Other    
Consolidated cost of sales  $637,040   Consolidated cost of sales  $376,869 
Income (Loss) before taxes      Income (Loss) before taxes     
We Three  $(76,430)  We Three  $(27,410)
Romeo’s NY Pizza   14,553   Romeo’s NY Pizza   25,723 
Repicci’s Group   (2,164)  Repicci’s Group   142,670 
Platinum Tax   59,833   Platinum Tax    
Key Tax   (52,892)  Key Tax    
Others   (1,213,700)  Others   (744,852)
Consolidated gain/(loss) before taxes  $(1,270,800)  Consolidated gain/(loss) before taxes  $(603,869)

 

 

 

 24 

 

 

For the six month period ended

 

  June 30, 2019      June 30, 2018 
Revenues:   Revenues:         
We Three  $96,378   We Three  $98,663 
Romeo’s NY Pizza   315,146   Romeo’s NY Pizza   304,015 
Repicci's Group   121,760   Repicci's Group   426,764 
Platinum Tax   1,404,577   Platinum Tax    
Key Tax   123,951   Key Tax    
Other   (0)  Other    
Consolidated revenues  $2,061,812   Consolidated revenues  $829,442 
Cost of Sales:      Cost of Sales:     
We Three  $121,619   We Three  $113,488 
Romeo’s NY Pizza   228,591   Romeo’s NY Pizza   212,847 
Repicci's Group   120,769   Repicci's Group   280,730 
Platinum Tax   439,693   Platinum Tax    
Key Tax   146,306   Key Tax    
Other      Other    
Consolidated cost of sales  $1,056,978   Consolidated cost of sales  $595,922 
Income (Loss) before taxes      Income (Loss) before taxes     
We Three  $(96,536)  We Three  $(17,218)
Romeo’s NY Pizza   19,351   Romeo’s NY Pizza   27,750 
Repicci’s Group   (18,292)  Repicci’s Group   85,976 
Platinum Tax   89,461   Platinum Tax   (793,097)
Key Tax   (52,892)  Key Tax    
Others   (6,083,838)  Others    
Consolidated gain/(loss) before taxes  $(6,142,747)  Consolidated gain/(loss) before taxes  $(696,589)

 

  

  As of      As of 
  June 30, 2019      December 31, 2018 
Assets:   Assets:         
We Three  $289,797   We Three  $318,285 
Romeo’s NY Pizza   72,175   Romeo’s NY Pizza   108,908 
Repicci’s Group   79,375   Repicci’s Group   169,030 
Platinum Tax   123,479   Platinum Tax   60,578 
Key Tax      Key Tax-    
Others   5,207,620   Others   2,684,265 
   Combined assets  $5,772,446      Combined assets  $3,341,066 

 

 

16. SUBSEQUENT EVENTS

 

Stock Issuances:

 

In August 2019 the Company entered into a letter of intent to acquire the net assets constituting the business of Acela Biomedical, LLC, for a combination of $15 Million in Preferred Stock and $15 Million in cash.  Consummation of the acquisition is conditional upon successful completion of due diligence and transfer of purchase consideration.

 

Subsequent to June 30, 2019 the Company issued 86,292,777 shares of common stock in connection with conversion of convertible debt.

 

Subsequent to June 30, 2019, the Company entered into a Convertible Promissory Note agreement with Power UP Lending Group, LTD., for $73,500.

 

An addendum to change the employment agreement with the Company COO that includes a conversion of accrued payroll to preferred stock was approved by all parties.

 

 

 

 

 

 

 

 

 

 

 26 

 

 

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements including the related notes, and the other financial information included in this report. For ease of reference, “the Company”, “we,” “us” or “our” refer to Cardiff Lexington Corporation, and Legacy Card Company, Inc. (d/b/a: Mission Tuition) unless otherwise stated.

 

Cautionary Statement Concerning Forward-Looking Information

 

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products, plans and objectives of management, markets for stock of Cardiff Lexington Corporation and other matters. Statements in this report that are not historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Such forward-looking statements, including, without limitation, those relating to the future business prospects, revenue and income of Cardiff Lexington Corporation, wherever they occur, are necessarily estimates reflecting the best judgment of the senior management of Cardiff Lexington Corporation on the date on which they were made, or if no date is stated, as of the date of this report. These forward-looking statements are subject to risks, uncertainties and assumptions, including those described in the “Risk Factors” in Item 1A of Part I of our most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”), that may affect the operations, performance, development and results of our business. Because the factors discussed in this report could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. The Company assumes no obligation and does not intend to update these forward looking statements, except as required by law.

 

 

RISK FACTORS

 

You should carefully consider the risks and uncertainties described below and the other information in this document before deciding to invest in shares of our common stock.

 

The occurrence of any of the following risks could materially and adversely affect our business, financial condition and operating result. In this case, the trading price of our common stock could decline and you might lose all or part of your investment.

 

During our startup phase we were not profitable and generated minimal revenue and no profit.

 

As of this filing, though still not profitable, Cardiff is generating significantly higher revenue which helps mitigate the risk. Currently we have a small amount of consolidated stockholders’ equity. As a result, though pleased with our progress and current results, we may never become profitable, and could go out of business.

 

Through inception until December 2014, we have restructured ourselves into a holding company and have acquired several additional businesses; We Three, Inc. d/b/a Affordable Housing Initiative, Romeo’s NY Pizza, Edge View Properties, FDR Enterprises, Inc. and Refreshment Concepts dissolved or merged into Repicci’s Franchise Group, Red Rock Travel Group (discontinued operations as of April 1, 2019),Platinum Tax Defenders  and JM Enterprise 1s (dba) Key Tax Group.

 

Future revenue growth will be derived from our new acquisitions. We cannot guarantee we will ever develop substantial revenue from our subsidiary companies and there is no assurance that we will achieve profitability.

 

 

 

 27 

 

 

Because we have incurred operating losses from our inception, we still consider ourselves a going concern.

 

For the fiscal years ended December 31, 2018 and December 31, 2017, our accountants have expressed concern about our ability to continue as a going concern due to our continued net losses and need for additional capital. However, we believe our ability to achieve and maintain profitability and positive cash flow is dependent upon:

 

· our ability to acquire profitable businesses within Cardiff; and

 

· our ability to generate substantial revenues; and

 

· our ability to obtain additional financing

 

 

Based upon current plans, we may incur operating losses in future periods. Also, we expect approximately $1,000,000 in operating costs to be incurred over the next twelve months. We cannot guarantee that we will be successful in generating sufficient revenues or obtaining other financing in the future to cover these operating costs. Additionally, financing may not be available on terms favorable to the Company. Failure to generate sufficient revenues may cause us to go out of business.

 

Since we are an early stage company that has generated minimal revenue, an investment in our shares is highly risky and could result in a complete loss of your investment if we are unsuccessful in our business plans.

 

We were incorporated in August 2001. In 2014 the Company developed into a Holding Company focusing on acquiring small to medium size Companies that meet the following criteria: 1, Profitable; 2. Good Management; 3. little to no debt. Our efforts are focused on development and growth of our existing subsidiaries and acquiring new acquisitions that meet our requirements. Further, there is no guarantee that we will be successful in realizing revenues or in achieving or sustaining a positive cash flow at any time in the future. Any such failure could result in the possible closure of our business or force us to seek additional capital through loans or additional sales of our equity securities to continue business operations, which would dilute the value of any shares you hold, and could result in the loss of your entire investment.

 

Future acquisitions are important to our success. We may not be able to successfully integrate our acquisitions into our operations

 

The acquisition of new companies is central to our business model and critically important to our success. Although we generally seek companies that have positive cash flows, we cannot be certain that the companies acquired will remain cash flow positive and they could possibly lose revenues. In addition, there are no assurances that the acquisitions will continue as profitable businesses, and they could adversely affect our business and any possible revenues.

 

Successful implementation of our business strategy depends on factors specific to acquiring successful businesses. Adverse changes in our acquisition process could undermine our business strategy and have a material adverse effect on our business, financial condition, and results of operations and cash flow:

 

· The competitive environment in the specific field of business acquired; and

 

· Our ability to acquire the right businesses that meet customers’ needs; and

 

· Our ability to establish, maintain and eventually grow market share in a competitive environment.

 

 

 

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There are no substantial barriers to acquire established businesses and because we can acquire businesses in all types of industries, there is no guarantee the Company will acquire additional businesses, which could severely limit our proposed sales and revenues. If we cannot acquire established businesses, it could result in the loss of your investment.

 

Since we have no copyright protection, unauthorized persons may attempt to copy aspects of our business, including our governance design or functionality, services or marketing materials. Any encroachment upon our corporate information, including the unauthorized use of our brand name, the use of a similar name by a competing company or a lawsuit initiated against us for infringement upon another company's proprietary information or improper use of their copyright, may affect our ability to create brand name recognition, cause customer confusion and/or have a detrimental effect on our business. Litigation or proceedings before the U.S. or International Patent and Trademark Offices may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets and domain name and/or to determine the validity and scope of the proprietary rights of others. Any such infringement, litigation or adverse proceeding could result in substantial costs and diversion of resources and could seriously harm our business operations and/or results of operations. As a result, an investor could lose his or her entire investment.

 

The loss of the services of the current officers and directors could severely impact our business operations and future development, which could result in a loss of revenues and one’s ability to ever sell any shares.

 

Our performance is substantially dependent upon the professional expertise of the current officers and board of directors. Each has extensive expertise in business development and acquisitions and we are dependent on their abilities. If they are unable to perform their duties, this could have an adverse effect on business operations, financial condition and operating results if we are unable to replace them with other individuals qualified to develop and market our business. The loss of their services could result in a loss of revenues, which could result in a reduction of the value of any shares you hold as well as the complete loss of your investment.

 

Our stock has limited liquidity.

 

Our common stock trades on the OTCQB market. Trading volume in our shares may be sporadic and the price could experience volatility. If adverse market conditions exist, you may have difficulty selling your shares.

 

The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, including the following:

 

· actual or anticipated fluctuations in our operating results;
   
· changes in financial estimates by securities analysts or our failure to perform in line with such estimates;
   
· changes in market valuations of other companies, particularly those that market services such as ours;
   
· announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;
   
· introduction of product enhancements that reduce the need for our products;
   
· departure of key personnel.

 

In general, buying low-priced penny stocks is very risky and speculative. Our shares are defined as a penny stock under the Securities and Exchange Act of 1934, and rules of the Commission. You may not able to sell your shares when you want to do so, if at all.

 

Our shares are defined as a penny stock under the Securities and Exchange Act of 1934, and rules of the Commission. The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse, or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser's written agreement prior to such sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the Commission. Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock and may also affect your ability to resell any shares you may purchase in the public markets.

 

 

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Because of our size and limited resources, we may have difficulty establishing adequate management, legal and financial controls, which we are required to do in order to comply with U.S. GAAP and securities laws, and which could cause a materially adverse impact on our financial statements, the trading of our common stock and our business.

 

We are a small holding company that lacks the financial resources and qualified personnel to implement and sustain adequate internal controls As a result, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet proper internal control standards. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002. This may result in significant deficiencies or material weaknesses in our internal controls which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002. Any such deficiencies, material weaknesses or lack of compliance could result in restatements of our historical financial information, cause investors to lose confidence in our reported financial information, have an adverse impact on the trading price of our common stock, adversely affect our ability to access the capital markets and our ability to recruit personnel, lead to the delisting of our securities from the stock exchange on which they are traded, lead to litigation claims, thereby diverting management’s attention and resources, and which may lead to the payment of damages to the extent such claims are not resolved in our favor, lead to regulatory proceedings, which may result in sanctions, monetary or otherwise, and have a materially adverse effect on our reputation and business.

 

We do not expect to pay dividends on common stock in the foreseeable future.

 

We have not paid any cash dividends with respect to our common stock, and it is unlikely that we will pay any dividends on our common stock for the year. Earnings, if any, that we may realize will be retained in the business for further development and expansion.

 

Overview

 

Cardiff Lexington Corporation, is currently structured as a company with holdings of various companies.

 

CARDIFF LEXINGTON CORPORATION, is a public Holding company. Cardiff targets acquisitions of undervalued, niche companies with high growth potential, income-producing businesses, including commercial real estate properties all of which offer high returns for our investors. Our goal is to provide a form of governance enabling businesses to take advantage of the power of a public company without losing management control. Cardiff provides companies the ability to raise money and investors a low risk environment that protects their investment.

 

MISSION TUITION (www.missiontuition.com): Cardiff through Mission Tuition has built one of the largest merchant shopping networks in America consisting of all the top name merchants; offering in-store savings and coupon savings with local, regional and national merchants throughout America. With each purchase members earn rebates which goes directly into their educational savings account. Our Tax-Free educational savings program provides a platform for families to start an "educational savings" program that encourages regular and daily use of the program. The Mission Tuition program helps families save for college. Mission Tuition encourages members to contribute to their educational savings with contribution from work, family members or just rebates generated by online and in- store purchases. The Mission Tuition program leverages the two biggest economic forces in society –– consumer spent and the cost of education –– to create the most unique value-added rewards program in decades. Cardiff’s missiontuition.com helps solve a real need for America's families – saving for your child's college education.

 

We have currently placed Mission Tuition on hold until the Company can hire the appropriate management team.

 

WE THREE, LLC (D/B/A AFFORDABLE HOUSING INITIATIVE) (“AHI”): AHI is located in Maryville, Tennessee. AHI acquires both mobile homes and mobile home parks offering an alternative to traditional housing. Their mobile home business is a popular option for a homeowner wishing to avoid large down payments, expensive maintenance costs, monthly mortgage payments and high property taxes. If bad credit is an issue preventing people from purchasing a traditional house, AHI will provide a financial leasing option with "O" interest on the lease providing a "lease to own" option for their family home. Most homes are 3 bedroom/2bath homes making the dream of owning a home possible.

 

 

 

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ROMEO'S NY PIZZA, INC.: Romeo's NY Pizza - Established in Paterson, New Jersey in 1945. Romeo's NY Pizza makes authentic NY pizza, making their dough in-house, using the finest cheese and ingredients available. No soggy crust or watered down pizza sauce, only the best. They also serve Chicken Wings, Philly Steak Subs, Calzones and Salads. Romeo's NY Pizza is currently in negotiations to open a "quick serve" Romeo's location in the Hartsfield International Airport in Atlanta.

 

EDGE VIEW PROPERTIES LLC: Edge View Properties consists of 30 prime acres of land; 23.5 acres zoned MDR (Medium Density Residential) with 12 lots already platted and 48 lots zoned HDR (High Density Residential), 4 acres of dedicated river front property zoned for recreation on the Salmon River, Idaho's premier whitewater river and 2.5 acres zoned for commercial use. All land is in the city limits of Salmon and adjacent to the Frank church Wilderness Park (the largest wilderness park in the lower 48 states).

 

REPICCI’S GROUP: Repicci’s Group offers franchisees for the operation of “Repicci’s Italian Ice” franchises. These franchised stores specialize in the distribution of nonfat frozen confections.

 

The number of franchise agreements in force as of June 30, 2019 was forty-five (45), seven (7) new state of the art “mobile” units.

 

The Company obligates itself to each franchisee to perform the following services:

 

1. Designate an exclusive territory;

 

2. Provide guidance and approval for selection and location of site;

 

3. Provide initial training of franchisee and employees;

 

4. Provide a company manual and other training aids.

 

The Company has developed a new “Mobile Franchise Opportunity”. The total investment for the new opportunity ranges from $185,000 to $165,000, as follows: $195,000 for a new Mercedes Sprinter Van, customized for the franchisee, $36,000 for the franchise fee, the balance for product. The Company’s obligation is as above, except for Item #3, training is specific to the new opportunity.

 

Red ROCK TRAVEL GROUP: Cardiff Lexington Corporation (OTCQB:CDIX) and Red Rock Travel Group (Private: “Red Rock Travel Group”) in July 2018 signed a definitive merger agreement under which Red Rock Travel Group will merge into Cardiff Lexington as its wholly owned subsidiary has been completed effected July 30th, 2018. In connection with the closing of the acquisition, on July 30th, 2018 a Preferred “K” Class of stock with a par value of $0.001 was established and issued. The Preferred “K” Class of stock rights and privileges include voting rights, a conversion ratio of 1:1.25 and were distributed at the adjusted rate of $0.021 per share for a total of 8,200,562 representing a value of $175,000. These Preferred “K” shares have a lock-up/leak-out limiting the sale of stock for 12 months after which conversions and sales are limited to 20% of their portfolio per year, pursuant to the terms of the Forward Acquisition Agreement. As of April 1, 2019, this entity is reflected as a discontinued operation.

 

 

PLATINUM TAX DEFENDERS: Cardiff Lexington Corporation (OTCQB:CDIX) and Platinum Tax Defenders (Private: “Platinum Tax Defenders”) as previously announced on July 18th, 2018 signed a definitive merger agreement under which Platinum Tax Defenders will merge into Cardiff Lexington as its wholly owned subsidiary has been completed effected July 30th, 2018. In connection with the closing of the acquisition, on July 30th, 2018 a Preferred “L” Class of stock with a par value of $0.001 was established and issued. The Preferred “L” Class of stock rights and privileges include voting rights, a conversion ratio of 1:1.25 and were distributed at the adjusted rate of $0.013 per share for a total of 98.307,692 representing a value of $1,278,000. These Preferred “L” shares have a lock-up/leak-out limiting the sale of stock for 12 months after which conversions and sales are limited to 20% of their portfolio per year, pursuant to the terms of the Acquisition Agreement.

 

 

 

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JM Enterprise 1s (dba) Key Tax Group

 

JM Enterprise 1, Inc. (d.b.a. Key Tax Group) and Cardiff Lexington Corporation as previously announced in May 2019 signed a definitive merger agreement under which Key Tax Group became a wholly owned subsidiary effective May 8, 2019. In connection with the closing of the acquisition, on May 8h, 2019 a Preferred “G” Class of stock with a par value of $0.001 was issued. The Preferred “G” Class of stock rights and privileges include voting rights, a conversion ratio of 1:1.25 and were distributed at the adjusted rate of $0.07 per share for a total of 18,571,428 representing a value of $1,300,000. Additionally, Cardiff issued 500,000 Common Shares with a par value of $0.001 to novate a convertible debt of $30,912.32. These Preferred “G” shares have a lock-up/leak-out limiting the sale of stock for12 months after which conversions and sales are limited to 20% of their portfolio per year, pursuant to the terms of the Acquisition Agreement.

 

Additionally, Cardiff has allocated a Preferred “G1” Class Series for potential investors – 10,000,000 shares authorized, par value $0.001 per share with the following rights and privileges no - voting rights, converts to common stock at a ratio of 1 share preferred to 1.25 shares common. Series G1 stock cannot be diluted due to actions taken by the Company, BOD and/or its shareholders.

 

Results of Operations

 

We had revenues of $1,201,283 and $2,061,812 for the three and six months ended June 30, 2019, respectively, compared to revenues of $560,864 and $829,442 for the same periods in 2018, an increase 114% and a decrease of 149%, respectively. We have had various acquisitions over the past two years, and during the past year, we have acquired two tax resolution companies. A revenue breakdown by segment is as follows:

 

For the three-month period ended

 

   June 30, 2019      June 30, 2018 
Revenues:     Revenues:    
We Three  $43,500   We Three  $47,386 
Romeo’s NY Pizza   167,349   Romeo’s NY Pizza   156,719 
Repicci's Group   89,133   Repicci's Group   356,758 
Platinum Tax   777,350   Platinum Tax    
Key Tax   123,951   Key Tax    
Other      Other    
Consolidated revenues  $1,201,283   Consolidated revenues  $560,863 

 

For the six-month period ended

 

   June 30, 2019      June 30, 2018 
Revenues:     Revenues:    
We Three  $96,378   We Three  $98,663 
Romeo’s NY Pizza   315,146   Romeo’s NY Pizza   304,015 
Repicci's Group   121,760   Repicci's Group   426,764 
Platinum Tax   1,404,577   Platinum Tax    
Key Tax   123,951   Key Tax    
Other   (0)  Other    
Consolidated revenues  $2,061,812   Consolidated revenues  $829,442 

 

We had costs of sales of $637,039 and $1,056,978 for the three and six months ended June 30, 2019 compared to costs of sales of $376,912 and $595,922 for the same periods June 30, 2018. The costs of sales for the periods related to each segment are as follows:

 

Cost of Sales:     Cost of Sales:    
We Three  $54,456   We Three  $75,089 
Romeo’s NY Pizza   118,568   Romeo’s NY Pizza   114,391 
Repicci's Group   81,149   Repicci's Group   198,575 
Platinum Tax   236,560   Platinum Tax    
Key Tax   146,306   Key Tax    
Other      Other    
Consolidated cost of sales  $637,040   Consolidated cost of sales  $376,869 

 

 

 

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Cost of Sales:      Cost of Sales:     
We Three  $121,619   We Three  $113,488 
Romeo’s NY Pizza   228,591   Romeo’s NY Pizza   212,847 
Repicci's Group   120,769   Repicci's Group   280,730 
Platinum Tax   439,693   Platinum Tax    
Key Tax   146,306   Key Tax    
Other      Other    
Consolidated cost of sales  $1,056,978   Consolidated cost of sales  $560,867 

 

The increase in cost of sales was primarily attributable to primarily attributable the acquisition of Platinum Tax Defenders and Key Tax in July 2018 and May 2019, respectively, directly related to the increase in revenue.

 

We had operating expenses of $882,206 and $1,546,415 for the three and six months ended June 30, 2019 compared to operating expenses of $579,790 and $1,001,563 for the three and six months ended June 30, 2018. The increase in operating expenses during the six-month period was primarily due to our increase in salaries and compensation and cost related to penalties on conversion of notes payables. Additionally, stock based compensation decreased to $-0- for the six month period compared to $86,751 for the same period in 2018.

 

Inflation

 

We do not believe that inflation will negatively impact our business plans.

 

Liquidity and Capital Resources

 

Since inception, the principal sources of cash have been funds raised from the sale of common stock, advances from shareholders, and loans in the form of debentures and convertible notes. At June 30, 2019, we had $176,064 in cash and cash equivalents and total assets amounted to $5,774,039. At December 31, 2018 we had $118,307 of cash and cash equivalents, and total assets amounted to $3,341,066.

 

Net cash used in operating activities was $40,325 and $308,865 for the six months ended June 30, 2019 and 2018, respectively. The negative cash flows from operating activities during the periods were primarily attributable to the net losses of $6,142,747 and $696,589, respectively. These amounts were partially offset by non-cash expenses related to depreciation, amortization of debt discount and change in derivative liability which were $39,665, $522,360 and $4,295,382, respectively. We also had increases in accounts payable and accrued officers’ salaries of $210,004 and $250,909, respectively. In the 2018 period, these amounts were partially offset by non-cash expenses related to depreciation, amortization of debt discount and stock based compensation which were $59,697, $434,960 and $86,751, respectively. We also had decreases in accounts payable of $215,846 for the six months ended June 30, 2019 and increases in accounts payable and accrued officers’ salaries of $121,146 and $215,000 in the same periods in 2018, respectively.

 

Net cash provided by investing activities was $-0- for the six months ended June 30, 2019, compared to Net cash provided by investing activities was $114,818 for the same period in 2018. Cash flows provided by investing activities for the 2018 period was solely due to the sale of fixed assets.

 

Net cash provided by financing activities was $98,082 and $279,081 for six months ended June 30, 2019 and 2018, respectively. The cash flows from financing activities during the six months ended June 30, 2019 were primarily attributable to proceeds of convertible notes payable in the amounts of $209,616. For the 2018 period we had cash proceeds of convertible notes payable in the amounts of $402,090.

 

There can be no assurance that we 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 us. Should we be unable to raise sufficient funds, we may be required to curtail our operating plans and possibly relinquish rights to portions of our technology or products. In addition, increases in expenses or delays in product development may adversely impact our cash position and may require cost reductions. No assurance can be given that we will be able to operate profitably on a consistent basis, or at all, in the future.

 

 

 

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In order to continue our operations, development of our products, and implementation of our business plan, we need additional financing. We are currently attempting to obtain additional working capital in an equity transaction.

 

Off Balance Sheet Arrangements

 

As of June 30, 2019, we had no off balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable

 

Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures

 

  (a) Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed,+ summarized, and reported within the required time periods, and that such information is accumulated and communicated to our management, including our Chairman, Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding disclosure. Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer has concluded that these disclosure controls and procedures are ineffective. There have been no changes to our disclosure controls and procedures during the six months ended June 30, 2019.

 

There has been no change in our internal control over financial reporting during the three and six months ended June 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Since the most recent evaluation date, there have been no significant changes in our internal control structure, policies, and procedures or in other areas that could significantly affect our internal control over financial reporting.

 

  (b) Changes in Internal Controls

 

There were no significant changes in the Company's internal controls over financial reporting or in other factors that could significantly affect these internal controls subsequent to the date of their most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

 

 

 

 

 

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

There have been no events under any bankruptcy act, any criminal proceedings nor any judgments or injunctions material to the evaluation of the ability and integrity of any director or executive officer during the last five years.

 

Item 1A. Risk Factors

 

There have been no material changes in our risk factors from those disclosed in the Form 10-K.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Submission of Matters to Vote of Security Holders

 

None.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

31.1 Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2 Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1 Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2 Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101.INS XBRL Instances Document*
101.SCH XBRL Taxonomy Extension Schema Document*
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB XBRL Taxonomy Extension Label Linkbase Document*
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *

* To be filed by amendment

 

 

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SIGNATURE

 

In accordance with the requirements of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  

Dated:August 19, 2019 CARDIFF LEXINGTON CORPORATION
   
  By:   /s/ Alex Cunningham
    Alex Cunningham
Chief Executive Officer and Principal Accounting Officer
     
     
  By: /s/ Daniel Thompson
    Daniel Thompson
    Chairman

 

 

 

 

 

 

 

 

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