UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d)4
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September
30, 2014
Commission File Number 000-49709
CARDIFF INTERNATIONAL, INC.
(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.) |
411 N New River Drive E, Unit 2202, Ft. Lauderdale,
FL 33301
(Address of principal executive offices)
(818) 783-2100 (Registrant's telephone
no., including area code)
Securities registered pursuant to Section 12(b)
of the Exchange Act: None
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
o No
x
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted 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 and post such files).
Yes
o No
x
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definitions
of “accelerated filer,” “large accelerated filer,’’ and “smaller reporting 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
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 November 14, 2014, 4,727,873 shares
of $0.001 par value Common Stock.
FORM 10-Q
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CARDIFF INTERNATIONAL, INC.
For the Quarter September 30, 2014
The following financial statements and
schedules of the registrant are submitted herewith:
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Page |
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PART I - FINANCIAL INFORMATION |
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Item 1. |
Unaudited Condensed Consolidated Financial Statements: |
|
|
|
|
|
Condensed Balance Sheets |
3 |
|
Condensed Statements of Operations |
4 |
|
Condensed Statements of Cash Flows |
5 |
|
Notes to Condensed Consolidated Financial Statements |
6– 18 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
19 |
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Item 4. |
Controls and Procedures, Evaluation of Disclosure Controls and Procedures |
22 |
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PART II - OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
23 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds. |
23 |
Item 3. |
Defaults Upon Senior Securities |
23 |
Item 4. |
Submission of Matters to a Vote of Security Holders |
23 |
Item 5. |
Other Information |
23 |
Item 6. |
Exhibits |
23 |
Part
I – Financial Information
Item 1. Financial Statements
CARDIFF INTERNATIONAL, INC.
CONDENSED CONSOLIDATED
BALANCE SHEETS
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash | |
$ | 91,045 | | |
$ | 4,676 | |
Accounts receivable | |
| 954 | | |
| – | |
Prepaid and other (See Note 1) | |
| 34,392 | | |
| 1,659 | |
Total current assets | |
| 126,391 | | |
| 6,935 | |
| |
| | | |
| | |
Property and equipment | |
| 631,049 | | |
| – | |
Land | |
| 603,000 | | |
| – | |
Goodwill | |
| 1,668,621 | | |
| – | |
Deposits | |
| 600 | | |
| 600 | |
| |
| | | |
| | |
Total Assets | |
$ | 3,029,661 | | |
$ | 6,935 | |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts Payable and accrued expenses | |
$ | 761,303 | | |
$ | 814,265 | |
Interest payable | |
| 140,974 | | |
| 121,440 | |
Accrued payroll taxes | |
| 439,623 | | |
| 412,623 | |
Deferred revenue | |
| 11,760 | | |
| – | |
Derivative liability | |
| 48,779 | | |
| 97,390 | |
Due to officers and shareholders | |
| 408,160 | | |
| 49,500 | |
Notes Payable, unrelated party | |
| 50,000 | | |
| 50,000 | |
Convertible notes payable | |
| 174,000 | | |
| 195,750 | |
Notes Payable acquired - current portion | |
| 23,000 | | |
| – | |
Total current liabilities | |
| 2,057,599 | | |
| 1,740,968 | |
| |
| | | |
| | |
Long-Term Liabilities | |
| | | |
| | |
Notes payable acquired - long-term portion | |
| 91,218 | | |
| – | |
Notes payable, related-party, net of current portion and discount $113,500 and $125,000 respectively | |
| 77,175 | | |
| 74,925 | |
| |
| | | |
| | |
Total liabilities | |
| 2,225,992 | | |
| 1,815,893 | |
| |
| | | |
| | |
SHAREHOLDERS' EQUITY (DEFICIENCY) | |
| | | |
| | |
| |
| | | |
| | |
Series A Preferred | |
| – | | |
| – | |
Series B Preferred | |
| 11,599,096 | | |
| 11,324,471 | |
Series C Preferred | |
| 13,509 | | |
| 13,500 | |
Series D Preferred | |
| 1,000,000 | | |
| – | |
Series E Preferred | |
| 603,000 | | |
| – | |
Series F Preferred | |
| 700,174 | | |
| – | |
Series F-1 Preferred | |
| 379,826 | | |
| – | |
Common stock; 5,000,000 shares authorized with $0.001
par value; 101,673 and 82,777 issued and outstanding at September 30, 2014 and December 31, 2013,
respectively | |
| 11,319,463 | | |
| 11,283,603 | |
Additional paid-in capital | |
| 1,700,214 | | |
| 1,700,214 | |
Retained deficit | |
| (26,511,613 | ) | |
| (26,130,747 | ) |
Total shareholders' equity (deficiency) | |
| 803,669 | | |
| (1,808,959 | ) |
| |
| | | |
| | |
Total liabilities and shareholders' equity (deficiency) | |
$ | 3,029,661 | | |
$ | 6,935 | |
The accompanying notes
are an integral part of these condensed consolidated financial statements.
CARDIFF INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2014 AND 2013
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
| | |
| | |
| | |
| |
REVENUE | |
$ | 421,450 | | |
$ | – | | |
$ | 428,285 | | |
$ | – | |
COST OF SALES | |
| 304,004 | | |
| – | | |
| 314,095 | | |
| – | |
GROSS MARGIN | |
| 117,446 | | |
| – | | |
| 114,190 | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
OPERATING EXPENSES | |
| 343,186 | | |
| 156,764 | | |
| 650,410 | | |
| 478,807 | |
| |
| | | |
| | | |
| | | |
| | |
LOSS FROM OPERATIONS | |
| (225,740 | ) | |
| (156,764 | ) | |
| (536,220 | ) | |
| (478,807 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME (EXPENSE) | |
| | | |
| | | |
| | | |
| | |
Gain on settlement of debt | |
| 152,188 | | |
| – | | |
| 152,188 | | |
| – | |
Change in value of derivative liability | |
| – | | |
| 656 | | |
| 48,613 | | |
| 40,640 | |
Other | |
| 1,852 | | |
| – | | |
| 1,852 | | |
| – | |
Interest expense | |
| (16,054 | ) | |
| (77,667 | ) | |
| (47,299 | ) | |
| (448,023 | ) |
TOTAL OTHER INCOME (EXPENSE) | |
| 137,986 | | |
| (77,011 | ) | |
| 155,354 | | |
| (407,383 | ) |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) FOR THE PERIOD | |
$ | (87,754 | ) | |
$ | (233,775 | ) | |
$ | (380,866 | ) | |
$ | (886,190 | ) |
| |
| | | |
| | | |
| | | |
| | |
INCOME (LOSS) PER COMMON SHARE | |
| | | |
| | | |
| | | |
| | |
-BASIC | |
$ | (0.87 | ) | |
$ | (30.99 | ) | |
$ | (3.94 | ) | |
$ | (128.08 | ) |
-DILUTED | |
$ | (0.87 | ) | |
$ | (30.99 | ) | |
$ | (3.94 | ) | |
$ | (128.08 | ) |
| |
| | | |
| | | |
| | | |
| | |
WEIGHTED AVERAGE NUMBER | |
| | | |
| | | |
| | | |
| | |
OF COMMON SHARES - BASIC AND DILUTED | |
| 100,673 | | |
| 7,543 | | |
| 96,618 | | |
| 6,919 | |
The accompanying
notes are an integral part of these condensed consolidated financial statements.
CARDIFF INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
AND 2013
| |
Nine Months Ended September 30, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
OPERATING ACTIVITIES | |
| | | |
| | |
Net income (loss) | |
$ | (380,866 | ) | |
$ | (886,190 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 18,519 | | |
| 155 | |
Amortization of loan discount | |
| 17,250 | | |
| 86,251 | |
Change in value of derivative liability | |
| (48,612 | ) | |
| (40,640 | ) |
Issuance of warrants as loan costs | |
| – | | |
| 213,800 | |
Gain on settlement of accounts payable | |
| (152,188 | ) | |
| – | |
(Increase) decrease in: | |
| | | |
| | |
Accounts receivable | |
| (928 | ) | |
| – | |
Prepaids and other | |
| (7,294 | ) | |
| – | |
Increase (decrease) in: | |
| | | |
| | |
Accounts payable and accrued expenses | |
| 45,267 | | |
| 50,800 | |
Accrued officers' salaries | |
| 289,700 | | |
| 264,278 | |
Interest payable | |
| 29,805 | | |
| 147,974 | |
Deferred Revenue | |
| 4,419 | | |
| – | |
Settlement payable, shareholder | |
| – | | |
| (3,250 | ) |
Net cash used in operating activities | |
| (184,928 | ) | |
| (166,822 | ) |
| |
| | | |
| | |
INVESTING ACTIVITIES | |
| | | |
| | |
Investment in fixed assets | |
| (84,337 | ) | |
| – | |
Cash acquired in acquisitions | |
| 1,619 | | |
| – | |
Net cash used in investing activities | |
| (82,718 | ) | |
| – | |
| |
| | | |
| | |
| |
| | | |
| | |
FINANCING ACTIVITIES | |
| | | |
| | |
Advances from third parties | |
| – | | |
| 70,000 | |
Proceeds of notes payable, net of repayments | |
| 14,382 | | |
| – | |
Proceeds from sale of common stock | |
| – | | |
| 107,750 | |
Proceeds from sale of preferred stock | |
| 339,633 | | |
| – | |
Net cash provided by financing activities | |
| 354,015 | | |
| 177,750 | |
| |
| | | |
| | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | |
| 86,369 | | |
| 10,928 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | |
| 4,676 | | |
| 1,852 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS - END OF PERIOD | |
$ | 91,045 | | |
$ | 12,780 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid for interest | |
$ | – | | |
$ | – | |
Cash paid for taxes | |
$ | – | | |
$ | – | |
| |
| | | |
| | |
NON-CASH INVESTING AND FINANCING ACTIVITIES: | |
| | | |
| | |
Series D Preferred shares issued for acquisition | |
$ | 1,000,000 | | |
$ | – | |
Series E Preferred shares issued for acquisition | |
$ | 603,000 | | |
$ | – | |
Series F & F-1 Preferred shares issued for acquisition | |
$ | 1,000,000 | | |
$ | – | |
Common stock issued upon conversion of notes payable | |
$ | 30,750 | | |
$ | 65,874 | |
The accompanying notes are an integral part
of these condensed consolidated financial statements.
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2014 and 2013
1. |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Organization and Nature of Operations
Legacy Card Company was formed
as a Limited Liability Company on August 29, 2001. On April 18, 2005, the Company converted from a California Limited Liability
Company to a Nevada Corporation. On November 10, 2005, the Company merged with Cardiff International, Inc. (“Cardiff”),
a publicly held corporation. In first quarter of 2013, it was decided to restructure Cardiff into a new holding company who adopted
a new business model known as "Collaborative Governance" a new form of governance enabling businesses to take advantage
of the power of a public Company. Targeting the acquisition of undervalued, niche companies with high
growth potential, income-producing commercial real estate properties and high return investments, all designed to pay a dividend
to our shareholders. The reason for this was to protect our shareholders by acquiring small to minimum size businesses seeking
support with both financing and management. The plan was to establish new classes of Preferred stock to streamline voting rights,
negate debt and acquire new businesses. By December of 2013 the Company negated 90% plus of all debt; by July of 2014 the Company
acquired four businesses, Mission Tuition, We Three, LLC; Romeo’s NY Pizza; and Edge View Properties, Inc.
Description
of Business
Cardiff
is a holding company who adopted a new business model known as "Collaborative Governance.” To date, we are not aware
of any other holding company using the same business philosophy or governing policies. Our business footprint is to acquire strong
companies that meet the following criteria: (1) in business for a minimum of 2 years; (2) profitable; (3) good management team;
(4) little to no debt; (5) assets of a minimum of $1,000,000. Cardiff continues to practice all business ethics under the (1934
Act) and acknowledges there are approximately 43 plus successful Business Development Companies (1040 Act) all who may be considered
competition to Cardiff that are established and available to the public for investment. These Companies offer experienced management;
dividends and financial security.
To date
Cardiff consist of four (4) subsidiaries; Legacy Card Company, We Three,LLC, Romeo’s NY Pizza and Edge View Properties.
Interim
Financial Statements
The unaudited
condensed consolidated financial statements of Cardiff, a development stage company, have been prepared in accordance with U.S.
generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information
and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.
However, the information included in these interim condensed consolidated financial statements reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the financial
position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be
obtained for a full year. The balance sheet information as of December 31, 2013 was derived from the audited financial statements
included in Form 10K filed with the Securities and Exchange Commission. These interim financial statements should be read in conjunction
with that report.
Prepaid
and Other
This disclosure is not explicitly required by the FRF for SMEs accounting framework. However, as the FRF for SMEs
framework is principles based, it requires the presentation of sufficient information for a fair presentation. As such, management
of Cardiff International, Inc. has decided to include this disclosure in the financial statements as necessary to provide sufficient
information to the financial statement users. The $34,392 Prepaid & Others represents the amount collected by the Company
as of 09/30/2014; total due the Company on these current lease contracts is $557,080. These mobile homes will be amortized over
a 6 and ½ years.
Going
Concern
The accompanying
financial statements have been prepared on a 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 is in the development stage
and as such 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 September 30, 2014, the
Company had a shareholders’ equity of $803,669, is delinquent in payment of $439,623 in payroll taxes, and is in default
of a minor amount of its outstanding debt. The accompanying 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 December 31, 2013 financial statements, has raised substantial doubt about
the Company’s ability to continue as a going concern.
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2014 and 2013
The ability of the Company
to continue as a going concern and 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
for the Company. 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. In addition, increases in expenses 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. Should the Company not be able
to raise sufficient funds, it may cease their operations.
Stock Split
On August 22, 2014, the Company upon
filing Articles of Domestication with the state of Florida on August 22, 2014 the Board authorized and approved a reverse stock
split of one for twenty five thousand (1:25,000) of the Corporation's total issued, outstanding and authorized shares of common
stock (the “Stock Split”).
The change in domicile was effectuated
on September 2, 2014 under the laws of the state of Florida. The Stock Split was effectuated on September 12, 2014 upon filing
the appropriate documentation with FINRA. The Stock Split decreased the Corporation's total issued and outstanding shares of common
stock from 2,516,819,560 to 100,673 and the total authorized shares of Common Stock from 3,000,000,000 to 120,000 shares of common
stock. The common stock remained at $0.00001 par value. On September 15, 2014 the Company raised the authorizes shares of common
stock to 5,000,000 and increased the par value to $0.001.
Use of Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles 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.
Valuation of Derivative Instruments
FASB ASC 815-10, Derivatives and
Hedging, requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments
such as warrants, on their issuance date to determine whether they would be considered a derivative liability and measured at their
fair value for accounting purposes. Prior to July 12, 2012, the Company did not have enough authorized shares to issue common shares
resulting in the potential exercise or conversion of its issued and outstanding options/warrants and convertible notes, respectively.
Accordingly, these instruments were reflected as derivative liabilities for the period ended September 30, 2014 and prior. In determining
the appropriate fair value, the Company uses a weighted average Black-Scholes pricing model. At September 30, 2014 and 2013, the
Company adjusted its derivative liability to its fair value and reflected the increase (decrease) in fair value for the nine months
ended September 30, 2014 and 2013, of $48,613 and $(39,984), respectively, as other income on the Condensed Consolidated Statement
of Operations.
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 |
|
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, that 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. |
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2014 and 2013
The following table presents certain
investments and liabilities of the Company’s financial assets measured and recorded at fair value on the Company’s
condensed balance sheets on a recurring basis and their level within the fair value hierarchy as of September 30, 2014.
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Fair Value of Derivative Liability |
|
$ |
– |
|
|
$ |
– |
|
|
$ |
48,613 |
|
|
$ |
48,613 |
|
Stock Based Compensation
The Company periodically issues stock
options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The
Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided
by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over
the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance
with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based
upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at
which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally
are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance
requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded
in the period of the measurement date.
Income Taxes
The Company accounts for income taxes
under the liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences
of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized
for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting
amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the
amount expected to be realized. The provision for income taxes, if any, represents the tax payable for the period and the change
during the period in deferred tax assets and liabilities.
Earnings (Loss) per Share
FASB ASC Subtopic 260, Earnings Per
Share, provides for the calculation of "Basic" and "Diluted" earnings per share. Basic earnings per common
share is computed by dividing income available to common 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.
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2014 and 2013
Principles of Consolidation
The consolidated financial statements
include the accounts of Cardiff International, Inc. and its wholly owned subsidiary, Legacy Card Company, d/b/a Mission Tuition,
We Three, LLC., Romeo's Pizza and Edge View Properties, Inc. All significant intercompany accounts and transactions are eliminated
in consolidation.
Recently Issued Accounting Pronouncements
The Company has evaluated all of the
recent accounting pronouncements through the filing date of these financial statements and feels that none of them will have a
material effect on the Company’s interim financial statements.
ASU 2014-10, Development Stage
Entities
On June 10, 2014, the Financial
Accounting Standards Board ("FASB") issued update ASU 2014-10, Development Stage Entities (Topic 915). Amongst
other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing
the distinction between development stage entities and other reporting entities from US GAAP. In addition, the amendments
eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income,
cash flows and shareholders equity, (2) label the financial statements as those of a development stage entity; (3) disclose
a description of the development stage activities in which the entity is engaged and (4) disclose in the first year in which the
entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments
are effective for annual reporting periods beginning after December 31, 2014 and interim reporting periods beginning
after December 15, 2015, however entities are permitted to early adopt for any annual or interim reporting period for which
the financial statements have yet to be issued. The Company has elected to early adopt these amendments and accordingly
have not labeled the financial statements as those of a development stage entity and have not presented inception-to-date information
on the respective financial statements.
We Three,
LLC
The Company completed the acquisition
of We Three, LLC (d/b/a Affordable Housing Initiative)(“AHI”) The acquisition became effective, May 15, 2014. The Company
issued approximately 280,069 shares of Preferred Class “F” Shares as consideration for the Acquisition. In addition,
the Company issued 119,931 shares of Preferred Class “F1” for total shares issued of 400,000. Based on the price of
$2.50 per Preferred “F” and “F1” Class of stock the acquisition consideration represents a $1,000,000 evaluation.
| |
Fair Value | |
| |
| | |
Cash | |
$ | 37,000 | |
Property and equipment | |
| 88,000 | |
Goodwill | |
| 957,000 | |
Liabilities | |
| (7,000 | ) |
Notes payable - related party | |
| (75,000 | ) |
| |
$ | 1,000,000 | |
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2014 and 2013
Romeo's NY
Pizza
On September 30, 2014, the Company
completed the acquisition of Romeo’s NY Pizza. The Company issued approximately 400,000 shares of Preferred Class “D”
Shares as consideration for the Acquisition. Based on the price of $2.50 per Preferred “D” Class of stock the acquisition
consideration represents a $1,000,000 evaluation.
| |
Fair Value | |
| |
| | |
Cash | |
$ | 39,000 | |
Other current assets | |
| 25,000 | |
Property and equipment | |
| 477,000 | |
Goodwill | |
| 712,000 | |
Accounts payable and accrued expenses | |
| (65,000 | ) |
Notes payable | |
| (120,000 | ) |
Notes payable - related party | |
| (68,000 | ) |
| |
$ | 1,000,000 | |
Edge View
Properties
On July 11, 2014, the Company completed the acquisition of Edge View Properties. The Company issued 300,000
shares of Preferred Class “E” Shares as consideration for the Acquisition. Based upon the price of $2.50 per Preferred
“E” Class of Stock. The Acquisition consideration represents a $750,000 evaluation.
The Preferred “E” share
of stock was adjusted as a result of the authorization and declaration of a special distribution with a conversion rate of 1 to
5 Common Stock ("Special Conversion"). The Special Conversion right is granted as a result of a Lock-Up/Leak-Out clause
designated by CDIF pursuant to the terms of the Acquisition
|
|
Fair
Value |
|
|
|
|
|
Cash |
|
$ |
– |
|
Land |
|
|
603,000 |
|
|
|
|
|
|
|
|
$ |
603,000 |
|
The results of the operations for the acquired locations
have been included in the condensed consolidated financial statements since the date of the acquisitions. The following table presents
the unaudited pro forma results of continuing operations for the nine months ended September 30, 2014 and 2013, as if the acquisitions
had been consummated at the beginning of each period presented. The pro forma results of continuing operations are prepared for
comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisitions occurred at
the beginning of the year presented or the results which may occur in the future.
| |
Nine Months Ended September
30, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Pro forma revenue | |
$ | 1,249,000 | | |
$ | 1,252,000 | |
Pro forma net loss | |
$ | (158,000 | ) | |
$ | (803,000 | ) |
Pro forma net income (loss) per common share – basic and diluted | |
$ | (1.64 | ) | |
$ | (116.00 | ) |
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2014 and 2013
3. |
|
RELATED PARTY TRANSACTIONS |
Due to Officers
The Company borrows funds from Daniel
Thompson who is a Shareholder and Officer of the Company. The terms of repayment stipulate the loans are due twenty-four (24) months
after the launch of the Legacy Tuition Card (or prior to such date) at an annual interest rate of six (6) percent. In addition,
the Company has an employment agreement, renewed May 15, 2014, with Daniel Thompson whereby the Company provides for compensation
of $20,000 per month. A total salary of $202,500 was reflected as an expense to Daniel Thompson during the nine months ended September
30, 2014. The total balance due to Daniel Thompson for accrued salaries, advances, and accrued interest, at September 30, 2014
and December 31, 2013, was $170,500 and $0, respectively.
The Company has an employment agreement
with the Company President whereby the Company provides for compensation of $25,000 per month beginning May 15, 2014. A total salary
of $112,500 was reflected as an expense during the nine months ended September 30, 2014. The total balance due to the President
for accrued salaries at September 30, 2014 and December 31, 2013, was $108,700 and $0, respectively.
The total balance due others for accrued
salaries at September 30, 2014 and December 31, 2013, was $96,960 and $49,500, respectively.
Notes Payable – Related Party
The Company has entered into several
loan agreements with related parties (see note 3).
International
Card Establishment, Inc.
The Company
entered into an agreement with International Card Establishment, Inc. (“ICE”) on April 19, 2007 whereby ICE will be
the exclusive provider for the rewards and loyalty programs related to merchant contributions to a 529 College Savings Plan.
In connection
with the agreement, the Company received a $50,000 advance from ICE during the second quarter of 2008. This advance is to be repaid
within 120 days of written notice by ICE if the Company launches the card in a test market and the results of that test launch
prove to be unsuccessful. If the Company fails to make the required payment within 120 days, the Company will be granted an additional
30 day period to remedy the default. If the Company does not remedy the default within this 30 day period, ICE may, at its discretion,
convert the $50,000 debt to equity equaling 10% of the outstanding stock of the Company on a fully diluted basis.
Also,
if ICE determines that the test launch was successful, ICE shall obtain up to three (3) $500,000 loan facilities for the Company
within five (5) business days of the successful completion of the test launch. The Company will be required to repay the $50,000
advance directly from the loan proceeds. Upon receipt of each of the $500,000 loan facilities, the Company shall issue ICE a warrant
to purchase three and one-third percent (3 1/3%) of the Company’s outstanding common stock on a fully diluted basis as of
the date of issuance. Each warrant shall have an exercise price equal to $200,000 and shall have a five (5) year term
from the issuance date.
In conjunction
with the Loan, the Company issued 1,500,000 warrants to purchase its common stock, exercisable at $0.20 per share and expire June
2, 2014. As a result of the warrants issued, the Company recorded $13,639 debt discount during 2009.
All warrants
will have a cashless exercise provision and shall entitle ICE to one (1) demand registration right for each warrant, at the Company’s
expense.
The balance outstanding on
the advance from ICE at September 30, 2014 and December 31, 2013 was $50,000 and is currently in default. The Company is in negotiations
to settle a contractual dispute in the 2007 agreement.
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2014 and 2013
5. |
|
CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE RELATED PARTY |
Some of the Convertible Notes issued
as described below included an anti-dilution provision that allowed for the adjustment of the conversion price. The Company considered
the current Financial Accounting Standards Board guidance of “Determining Whether an Instrument Indexed to an Entity’s
Own Stock” which indicates that the instrument is not indexed to the issuers 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 own stock and characterized the value of the conversion feature of such notes
as derivative liabilities upon issuance.
Convertible notes at September 30, 2014 and December 31,
2013 are summarized as follows:
| |
September 30, 2014 | | |
December 31, 2013 | |
Unrelated Party | |
$ | 9,000 | | |
$ | 30,750 | |
Related Party | |
| 165,000 | | |
| 165,000 | |
Total - Current | |
$ | 174,000 | | |
$ | 195,750 | |
Convertible notes payable – unrelated party
On August 10, 2012, the Company entered
into an unsecured Convertible Promissory Note agreement with an unrelated party for $15,000 and $7,500. The Note bears interest
at 8% per year and matures on May 4, 2013. The Note and any accrued and outstanding interest is convertible into the Company’s
common shares at a discount of 45% of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day
period ending on the latest complete Trading Day prior to the Conversion Date. The balance of the note was $0 and $22,500 at September
30, 2014 and December 31, 2013, respectively. The notes payable was converted into common stock.
On December 3, 2012, the Company entered
into an unsecured Convertible Promissory Note agreement with an unrelated party for $8,250. The Note bears interest at 8% per year
and matures on September 5, 2013. The Note and any accrued and outstanding interest is convertible into the Company’s common
shares at a discount of 45% of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period
ending on the latest complete Trading Day prior to the Conversion Date. The balance of the note was $0 and $8,250 at September
30, 2014 and December 31, 2013, respectively. The notes payable and accrued interest was converted into common stock.
On April 21, 2008, the Company entered
into a Convertible Debenture with a shareholder in the amount of $150,000. The Debenture is convertible into common shares of the
Company at $0.03 per share at the option of the holder no earlier than August 21, 2008. The Debenture bears interest
at 12% per year, matured in August 2009, and is unsecured. All principal and unpaid accrued interest is due at maturity. In conjunction
with the Convertible Debenture, the company also issued warrants to purchase 5,000,000 shares of the Company’s common stock
at $0.03 per share. The warrants expire on April 20, 2013. As a result of issued warrants, the Company recorded a $150,000 debt
discount during 2008 which has been fully amortized. The Company is in default on this Convertible Debenture, the warrants have
not been exercised. The balance of the note was $150,000 at September 30, 2014 and December 31, 2013.
On March 11, 2009, the Company entered
into a Convertible Debenture with a shareholder in the amount of $15,000. The Debenture is convertible into common shares of the
Company at $0.03 per share at the option of the holder. The Debenture bears interest at 12% per year, matures March
11, 2014, and is unsecured. All principal and unpaid accrued interest is due at maturity. The balance of the note was $15,000 at
September 30, 2014 and December 31, 2013.
On April 17, 2014, the Company entered
into a convertible note in the amount of $9,000. The note is convertible into common shares of the Company at $0.005 per share
at the option of the holder. The note payable bears interest at 8% per year, matured June 17, 2014, and is unsecured.
All principal and unpaid accrued interest is due at maturity. The balance of the note was $9,000 and $0 at September 30, 2014 and
December 31, 2013, respectively.
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2014 and 2013
Notes payable – related party at September 30, 2014
and December 31, 2013 are summarized as follows:
| |
September 30, 2014 | | |
December 31, 2013 | |
Total Principal Balance | |
$ | 113,500 | | |
$ | 125,000 | |
Discount on Notes | |
| (36,325 | ) | |
| (50,075 | ) |
| |
| 77,175 | | |
| 74,925 | |
Current Portion | |
| – | | |
| – | |
| |
| | | |
| | |
Total - Current | |
$ | 77,175 | | |
$ | 74,925 | |
On September 7, 2011, the Company
entered into a Promissory Note agreement with a related party for $50,000. The Note bears interest at 8% per year and matures on
September 7, 2016. Interest is payable annually on the anniversary of the Note, and the principal and any unpaid interest will
be due upon maturity. In conjunction with the Note, the Company issued 2,500,000 shares of its common stock to the lender. As a
result of the shares issued in conjunction with the note, the Company recorded a $50,000 debt discount during 2011. The balance
of the note, net of discount was $30,630 and $23,130 at September 30, 2014 and December 31, 2013, respectively.
On November 17, 2011, the Company
entered into a Promissory Note agreement with a related party for $50,000. The Note bears interest at 8% per year and matures on
November 17, 2016. Interest is payable annually on the anniversary of the Note, and the principal and any unpaid interest will
be due upon maturity. In conjunction with the Note, the Company issued 2,500,000 shares of its common stock to the lender. As a
result of the shares issued in conjunction with the note, the Company recorded a $50,000 debt discount during 2011. The Company
has not distributed these shares to the lender, therefore, these shares are not in equity and have been included in the calculation
of the derivative liability at December 31, 2013. The balance of the note, net of discount was $28,295 and $20,795 at September
30, 2014 and December 31, 2013, respectively.
On March 11, 2009, the Company entered
into a Convertible Debenture with a shareholder in the amount of $15,000. The Debenture is convertible into common shares of the
Company at $0.03 per share at the option of the holder. The Debenture bears interest at 12% per year, matures March
11, 2014, and is unsecured. All principal and unpaid accrued interest is due at maturity. The balance of the note was
$12,150 at September 30, 2014 and December 31, 2013.
In April 2008, the FASB issued a pronouncement
that provides guidance on determining what types of instruments or embedded features in an instrument held by a reporting entity
can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in the pronouncement
on accounting for derivatives. This pronouncement was effective for financial statements issued for fiscal years beginning after
December 15, 2008. The adoption of these requirements can affect the accounting for warrants and many convertible instruments with
provisions that protect holders from a decline in the stock price (or “down-round” provisions). For example, warrants
with such provisions will no longer be recorded in equity. Down-round provisions reduce the exercise price of a warrant or convertible
instrument if a company either issues equity shares for a price that is lower than the exercise price of those instruments or issues
new warrants or convertible instruments that have a lower exercise price.
The Company evaluated whether
convertible debt and warrants to acquire stock of the Company contain provisions that protect holders from declines in the
stock price or otherwise could result in modification of the exercise price under the respective convertible debt and warrant
agreements. The Company determined that the notes and the conversion notes of certain notes contained such provisions and
recorded such instruments as derivative liabilities upon issuance. In addition, in periods prior to July 1, 2012, the Company
did not have enough authorized shares to issue common shares resulting in the potential exercise or conversion of its issued
and outstanding options, warrants or convertible notes. Accordingly, these instruments were reflected as derivative
liabilities as of June 30, 2012 and prior. In July 2012, the Company was successful in increasing the number of authorized
shares in the corporate treasury effectively eliminating the majority of the derivative liability.
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2014 and 2013
Derivative liabilities were valued
using the weighted-average Black-Scholes-Merton option pricing model, which approximates the Monte Carlo and other binomial valuation
techniques, with the following assumptions:
|
|
September
30, 2014 |
|
December 31, 2013 |
Conversion feature : |
|
|
|
|
Risk-free interest rate |
|
0.01 % to 0.27% |
|
0.01 % to 0.27% |
Expected volatility |
|
100% |
|
100% |
Expected life (in years) |
|
0 – 2 years |
|
0 – 2 years |
Expected dividend yield |
|
0% |
|
0% |
|
|
|
|
|
Fair Value : |
|
|
|
|
Conversion feature |
|
$48,778 |
|
$97,391 |
Warrants |
|
– |
|
– |
|
|
$48,778 |
|
$97,391 |
The risk-free interest rate was based
on rates established by the Federal Reserve Bank. The expected volatility was based on the Company’s historical volatility,
and the expected life of the instruments is determined by the expiration date of the instrument. The expected dividend yield was
based on the fact that the Company has not paid dividends to common stockholders in the past and does not expect to pay dividends
to common stockholders in the future.
The Company determined the fair value
of the derivative liabilities to be $48,778 as of September 30, 2014, and the Company recorded a gain for the change in fair value
of derivative liabilities of $48,613 in the accompanying statement of operations for the period then ended.
The Company has failed
to remit payroll tax payments since 2006, as required by various taxing authorities. When payment is ultimately made management
believes that the Company may be assessed for various penalties for any delayed payments. As of September 30, 2014 and December
31, 2013, to the Company estimates the amount of taxes, interest, and penalties that the Company could incur as a result of these
unpaid taxes to be $439,623 and $412,623, respectively. The Company disagrees with past accounting practices and plans of challenging
their estimates.
Reverse Stock Split:
In August 2014, the Board of Directors
approved new Articles of Incorporation per the effectuated domicile change which authorized 4 classes of Preferred Stock having
4 class A authorized, 5,000,000 Class B authorized, 250 Class C and 100,000,000 Blank Check Preferred.
The principal
features of the Company's capital stock are as follows:
In August 2014, the Board of Directors
approved an amendment to the Company’s Articles of Incorporation to amend series B Preferred Stock Authorized & Designations,
Rights & Privileges and to authorize 3 additional classes of Preferred Stock. After this action the Company has 5 classes of
Common Stock and Preferred Stock.
Series A Preferred Stock
As
of September 30, 2014 and December 31, 2013, the Company has designated 4 shares of preferred stock as Series A preferred stock,
with a par value of $.0001 per share, of which 1 share of preferred stock are issued and outstanding. Class A is authorized
to have 4 shares which do not bear dividends and converts to common shares four times the sum of: {all shares of Common Stock issued
and outstanding at time of conversion + all shares of Series B Preferred Stocks issued and outstanding at time of conversion divided
by the number of issued Class A shares at the time of conversion and have voting rights four times the sum of: {all shares of Common
Stock issued and outstanding at time of voting + all shares of Series B Preferred Stocks issued and outstanding at time of voting
divided by the number of Class A shares issued at the time of voting. )
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2014 and 2013
Series B Preferred Stock
As of September 30, 2014 and amended
from December 31, 2013, the Company has designated 5,000,000 shares of preferred stock as Series B preferred stock, with a par
value $0.001 and $2.50 price per share, of which 4,576,701 shares of preferred stock are issued and outstanding. Shares
of Series B Preferred Stock are anti-dilutive to reverse splits. The conversion rate of shares of Series B Preferred Stock, however,
would increase proportionately in the case of forward splits, and may not be diluted by a reverse split following a forward split.
Each one share of the Series B Preferred Stock shall have no voting rights. The price of each share of Series B Preferred
Stock may be changed either through a majority vote of the Board of Directors through a resolution at a meeting of the Board of
Directors, or through a resolution passed at an Action Without Meeting of the unanimous Board of Directors, until such time as
a listed secondary and/or listed public market develops for the shares.
Series C Preferred Stock
As of September 30, 2014 and amended
from December 31, 2013, the Company has designated 250 shares of preferred stock as Series C preferred stock, with a par value
of $.00001 per share, of which 75 shares of preferred stock are issued and outstanding. Shares of Series C Preferred
Stock are non-dilutive to reverse splits. The conversion rate of shares of Series C Preferred Stock, however, would increase proportionately
in the case of forward splits, and may not be diluted by a reverse split following a forward split. One (1) share of Preferred
Stock converts to 100,000 shares of Common Stock. Each share of Series C Preferred Stock shall have one (1) votes for any election
or other vote placed before the shareholders of the Company. The price of each share of Series C Preferred Stock may be changed
either through a majority vote of the Board of Directors through a resolution at a meeting of the Board of Directors, or through
a resolution passed at an Action Without Meeting of the unanimous Board of Directors, until such time as a listed secondary and/or
listed public market develops for the shares. Shares of Series C Preferred Stock may not be converted into shares of Common Stock
for a period of: a) six (6) months after purchase, if the Company voluntarily or involuntarily files public reports pursuant to
Section 12 or 15 of the Securities Exchange Act of 1934; or b) twelve (12) months if the Company does not file such public reports
During 2014, the Company agreed to
issue 20 shares of Class “C” Preferred shares of stock pursuant to agreements
Blank Check Preferred Stock
As of September 30, 2014 and amended
from December 31, 2013, the Company has designated 100,000,000 shares of Blank Check preferred stock, of which 1,041,200 shares
of stock have been issued with Designations, Rights & Privileges. The following Series have been assigned from the inventory
of Blank Check Preferred Shares. The amount of Blank Check Preferred stock is now 98,958,800.
Series D Preferred Stock
On June 30, 2014, the Company completed
the acquisition of Romeo’s NY Pizza. The Company issued approximately 400,000 shares of Preferred Class “D” Shares
as consideration for the Acquisition. Based on the price of $2.50 per Preferred “D” Class of stock the acquisition
consideration represents a $1,000,000 evaluation. Shares of Series D Preferred Stock are anti-dilutive to reverse splits. The conversion
rate of shares of Series B Preferred Stock, however, would increase proportionately in the case of forward splits, and may not
be diluted by a reverse split following a forward split. Each one share of the Series D Preferred Stock shall have voting rights
equal to one (1) votes of Common Stock. With respect to all matters upon which stockholders are entitled to vote or to which stockholders
are entitled to give consent, the holders of the outstanding shares of Series D Preferred Stock shall vote together with the holders
of Common Stock, without regard to class, except as to those matters on which separate class voting is required by applicable law
or the Corporation’s Certificate of Incorporation or Bylaws. The initial price of each share of Series D Preferred
Stock shall be $2.50.
Series E Preferred Stock
On July 11, 2014, the Company completed
the acquisition of Edge View Properties. The Company issued approximately 241,200 shares of Preferred Class “E” Shares
as consideration for the Acquisition. Based on the price of $2.50 per Preferred “E” Class of stock the acquisition
consideration represents a $603,000 evaluation. Shares of Series E Preferred Stock are anti-dilutive to reverse splits. The conversion
rate of shares of Series E Preferred Stock, however, would increase proportionately in the case of forward splits, and may not
be diluted by a reverse split following a forward split. Each one share of the Series E Preferred Stock shall have voting rights
equal to one (1) votes of Common Stock. With respect to all matters upon which stockholders are entitled to vote or to which stockholders
are entitled to give consent, the holders of the outstanding shares of Series E Preferred Stock shall vote together with the holders
of Common Stock, without regard to class, except as to those matters on which separate class voting is required by applicable law
or the Corporation’s Certificate of Incorporation or Bylaws. The initial price of each share of Series E Preferred
Stock shall be $2.50.
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September 30, 2014 and 2013
Series F Preferred Stock
On May 15, 2014 the Company completed
the acquisition of We Three, LLC (d/b/a Affordable Housing Initiative)(“AHI”) The Company issued approximately 280,069
shares of Preferred Class “F” Shares as consideration for the Acquisition. In addition, the Company issued 119,931
shares of Preferred Class “F1” for total shares issued of 400,000. Based on the price of $2.50 per Preferred “F”
and “F1” Class of stock the acquisition consideration represents a $1,000,000 evaluation. Shares of Series F Preferred
Stock are anti-dilutive to reverse splits. The conversion rate of shares of Series F Preferred Stock, however, would increase proportionately
in the case of forward splits, and may not be diluted by a reverse split following a forward split. Each one share of the Series
F Preferred Stock shall have voting rights equal to five (5) votes of Common Stock. With respect to all matters upon which stockholders
are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Series F Preferred
Stock shall vote together with the holders of Common Stock, without regard to class, except as to those matters on which separate
class voting is required by applicable law or the Corporation’s Certificate of Incorporation or Bylaws. The initial
price of each share of Series F Preferred Stock shall be $2.50.
Common Stock
2014
In September 2014, the Board of Directors
approved increasing the number of authorized shares of common stock from 250,000 to 5,000,000 par value to $0.001.
On August 22, 2014, the Company effectuated
a Reverse Stock Split of its outstanding and authorized shares of common stock at a ratio of one for twenty five thousand (1:25,000).
As a result of the Reverse Stock Split, the Company’s authorized shares of common stock were decreased from 5,000,000,000
to 250,000 shares and it authorized 4 classes of Preferred Stock. Upon the effectiveness of the Reverse Stock Split, which occurred
on September 12, 2014, the Company’s issued, outstanding and authorized shares of common stock was decreased from 2,516,819,560
to 100,673 issued and outstanding shares and 250,000 authorized shares, all with a par value of $0.00001. Accordingly, all share
and per share information has been restated to retroactively show the effect of the Reverse Stock Split.
In October 2013, the Board of Directors
approved increasing the number of authorized share of common stock from 250,000,000 to 3,000,000,000 and authorize 2 classes of
Preferred Stock.
On March 28, 2012, a motion to amend
the Corporation’s Articles of Incorporation with the State of Colorado to increase the authorized shares of common stock
from 60,000,000 to 250,000,000 was brought before the Board and adopted. The board passed the resolution on June 4, 2012 and called
a special meeting to be held on July 18, 2012, the agenda of which was to invite all shareholders of record to vote on the proposed
amendment. On July 18, 2012 the amendment was passed.
During the year ended December
31, 2013, the Company issued 17,895 shares of its common stock for $4,110 in cash and conversion of debt of $33,600.
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September
30, 2014 and 2013
9. |
STOCK OPTIONS AND WARRANTS |
Employee Stock
Options
The following table summarizes the changes
in the options outstanding at September 30, 2014, and the related prices for the shares of the Company’s common stock issued
to employees of the Company under a non-qualified employee stock option plan.
Range of
Exercise
Prices |
|
|
Number
Outstanding |
|
|
Weighted
Average
Exercise
Price |
|
|
Weighted
Average
Remaining
Contractual
Life |
|
|
Number
Exercisable |
|
|
Weighted
Average
Exercise
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.10 |
|
|
|
100 |
|
|
$ |
0.10 |
|
|
|
8.24 |
|
|
|
100 |
|
|
$ |
0.10 |
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
8.24 |
|
|
|
100 |
|
|
|
|
|
A summary of the Company’s stock awards for options
as of December 31, 2013 and changes for the year ended December 31, 2013 is presented below:
|
|
Stock
Options |
|
|
Weighted
Average
Exercise
Price |
|
Outstanding, December 31, 2013 |
|
|
100 |
|
|
$ |
0.10 |
|
Granted |
|
|
– |
|
|
|
– |
|
Exercised |
|
|
– |
|
|
|
– |
|
Expired/Cancelled |
|
|
– |
|
|
|
– |
|
Outstanding, September 30, 2014 |
|
|
100 |
|
|
$ |
0.10 |
|
Exercisable, September 30, 2014 |
|
|
100 |
|
|
$ |
0.10 |
|
The expected life of awards granted represents the period
of time that they are expected to be outstanding. The Company has no historical experience with which to establish a basis for
determining an expected life of these awards. Therefore, the Company only gave consideration to the contractual terms and did not
consider the vesting schedules, exercise patterns and pre-vesting and post-vesting forfeitures significant to the expected life
of the option award.
CARDIFF INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
Nine months ended September
30, 2014 and 2013
We estimate the volatility of our common stock based on the
calculated historical volatility of similar entities in industry, in size and in financial leverage whose share prices are publicly
available. We base the risk-free interest rate used in the Black-Scholes-Merton option valuation model on the implied yield currently
available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. We have
not paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Consequently,
we use an expected dividend yield of zero in the Black-Scholes-Merton option valuation model.
There were no options exercised during the period ended
September 30, 2014 or 2013. Additionally, none of the options outstanding and unvested as of September 30, 2014 had any intrinsic
value.
Warrants
The following table summarizes the changes in the warrants
outstanding at September 30, 2014, and the related prices for the shares of the Company’s common stock issued to non-employees
of the Company. These warrants were issued in lieu of cash compensation for services performed or financing expenses
and in connection with the private placements.
Range
of
Exercise
Prices |
|
|
Number
Outstanding |
|
|
Weighted
Average
Exercise
Price |
|
|
Weighted
Average
Remaining
Contractual
Life |
|
|
Number
Exercisable |
|
|
Weighted
Average
Exercise
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.01 - $0.15 |
|
|
|
187 |
|
|
$ |
0.13 |
|
|
|
1.23 |
|
|
|
187 |
|
|
$ |
0.13 |
|
$ |
0.20 |
|
|
|
202 |
|
|
$ |
0.20 |
|
|
|
0.68 |
|
|
|
202 |
|
|
$ |
0.20 |
|
|
|
|
|
|
389 |
|
|
|
|
|
|
|
0.94 |
|
|
|
389 |
|
|
|
|
|
A summary of the Company’s
stock awards for warrants as of September 30, 2014 and changes for the period ended September 30, 2014 is presented below:
|
|
Warrants |
|
|
Weighted
Average
Exercise
Price |
|
Outstanding, December 31, 2013 |
|
|
674 |
|
|
|
0.12 |
|
Granted |
|
|
– |
|
|
|
– |
|
Exercised |
|
|
– |
|
|
|
– |
|
Expired/Cancelled |
|
|
(285 |
) |
|
|
0.05 |
|
Outstanding, September 30, 2014 |
|
|
389 |
|
|
|
0.17 |
|
Exercisable, September 30, 2014 |
|
|
389 |
|
|
|
0.17 |
|
In accordance with SFAS 165 (ASC 855-10) the Company has
analyzed its operations subsequent to September 30, 2014 to the date these financial statements were issued, and has determined
that it does not have any material subsequent events to disclose in these financial statements other than those specified below.
Common Stock Issuances
On October 10, 2014, the Company appointed Kathleen Robertson,
the Company's Chief Executive Officer, and Jason Levy, the Company's Chief Operating Officer to the Board of Directors. In conjunction
with the appointment, 1,500,000 shares of common stock, was issued to both Kathleen Roberton and Jason Levy, and 1,427,200 shares
of common stock was issued to Daniel Thompson, the Company's Chairman of the Board.
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, “we,” “us”
or “our” refer to Cardiff International, Inc., and Legacy Card Company, Inc. 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 International, Inc. 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 International,
Inc., wherever they occur, are necessarily estimates reflecting the best judgment of the senior management of Cardiff International,
Inc. 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.
Operating History. We have not
commenced active business operations. We anticipate we will commence active operations during the third quarter of 2013. Potential
investors should be aware that there is only a limited basis upon which to evaluate our prospects for achieving our intended business
objectives. We have limited resources and have had no revenues since our formation.
Possibility of Total Loss of Investment.
An investment in Cardiff is a high risk investment, and should not be made unless the investor has no need for current income from
the invested funds and unless the investor can afford a total loss of his or her investment.
Additional Financing Requirements.
We will likely be required to seek additional financing in order to fund our operations and carry out our business plan. In order
to fund our operations and effect additional acquisitions, we will be required to obtain additional capital. There can be no assurance
that such financing will be available on acceptable terms, or at all. We do not have any arrangements with any bank or financial
institution to secure additional financing and there can be no assurance that any such arrangement, if required or otherwise sought,
would be available on terms deemed to be commercially acceptable and in our best interest.
No Public Market for Securities.
There is no active public market for our common stock and we can give no assurance that an active market will develop, or if developed,
that it will be sustained.
Auditor’s Opinion has a Going Concern
Qualification. Our auditor’s report dated August 19, 2014, for the year ended December 31, 2013 includes a going
concern qualification which states that our significant recurring operating losses and negative working capital raise substantial
doubt about our ability to continue as a going concern.
We do not anticipate paying any dividends
and any gains from your investment in our stock will have to come from increases in the price of such stock. We currently
intend to retain any future earnings for use in our business and do not anticipate paying any cash dividends in the foreseeable
future.
We Operate in a Limited Market. The
Educational Rewards program is one of three national programs available to families. We cannot guarantee that we will compete
successfully against our potential competitors, especially those with significantly greater financial resources or brand name
recognition.
Overview
Cardiff is a holding company who adopted a
new business model known as "Collaborative Governance.” To date, we are not aware of any other holding company using
the same business philosophy or governing policies. Our business footprint is to acquire strong companies that meet the following
criteria: (1) in business for a minimum of 2 years; (2) profitable; (3) good management team; (4) little to no debt; (5) assets
of a minimum of $1,000,000. Cardiff continues to practice all business ethics under the (1934 Act) and acknowledges there are approximately
43 plus successful Business Development Companies (1040 Act) all who may be considered competition to CDIF that are established
and available to the public for investment. These Companies offer experienced management; dividends and financial security.
To date Cardiff consist of 4 Subsidiaries;
Legacy Card Company, We Three,LLC, Romeo’s NY Pizza and Edge View Properties.
Critical Accounting Estimates
The discussion and analysis of our financial
condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States (“GAAP”). GAAP requires management to make estimates, judgments
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent
assets and liabilities. We base our estimates on experience and on various other assumptions that we believe to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that may not be readily apparent from other sources. On an on-going basis, we evaluate the appropriateness of our estimates and
we maintain a thorough process to review the application of our accounting policies. Our actual results may differ from these estimates.
We consider our critical accounting estimates
to be those that (1) involve significant judgments and uncertainties, (2) require estimates that are more difficult for
management to determine, and (3) may produce materially different results when using different assumptions. We have discussed
these critical accounting estimates, the basis for their underlying assumptions and estimates and the nature of our related disclosures
herein with the audit committee of our Board of Directors. We believe our accounting policies specific to share-based compensation
expense and estimation of the fair value of derivative liability involve our most significant judgments and estimates that are
material to our consolidated financial statements. They are discussed further below.
Derivative Liability
The Company evaluates its financial instruments
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
re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative
financial instruments, the Company uses the probability weighted average Black-Scholes-Merton models to value the derivative instruments
at inception and on subsequent valuation dates through the September 30, 2014 reporting date. The classification of derivative
instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each
reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether
or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
Share-based compensation expense
We account for the issuance of stock, stock
options and warrants for services from employees and non-employees based on an estimate of the fair value of options and warrants
issued using the Black-Scholes pricing model. This model’s calculations include the exercise price, the market price of shares
on grant date, weighted average assumptions for risk-free interest rates, expected life of the option or warrant, expected volatility
of our stock and expected dividend yield.
The amounts recorded in the financial statements
for share-based expense could vary significantly if we were to use different assumptions. For example, the assumptions we have
made for the expected volatility of our stock price have been based on the historical volatility of our stock, measured over a
period generally commensurate with the expected term. If we were to use a different volatility than the actual volatility of our
stock price, there may be a significant variance in the amounts of share-based compensation expense from the amounts reported.
Recent Accounting Pronouncements
ASU 2014-10, Development Stage Entities
On June 10, 2014, the Financial
Accounting Standards Board ("FASB") issued update ASU 2014-10, Development Stage Entities (Topic 915).
Amongst other things, the amendments in this update removed the definition of development stage entity from Topic 915,
thereby removing the distinction between development stage entities and other reporting entities from US GAAP. In
addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date
information on the statements of income, cash flows and shareholders equity, (2) label the financial statements as those of a
development stage entity; (3) disclose a description of the development stage activities in which the entity is engaged
and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had
been in the development stage. The amendments are effective for annual reporting periods beginning after December 31,
2014 and interim reporting periods beginning after December 15, 2015, however entities are permitted to early adopt
for any annual or interim reporting period for which the financial statements have yet to be issued. The Company has
elected to early adopt these amendments and accordingly have not labeled the financial statements as those of a development
stage entity and have not presented inception-to-date information on the respective financial statements.
Results of Operations
For the Three Months Ended September 30,
2014 and 2013
We had revenues in the amount of $421,450
and $0 for the three months ended September 30, 2014 and 2013, respectively. The revenue for the three months ended September
30, 2014 is attributable to our acquisitions of Romeo's NY Pizza and We Three, LLC in the amount of $405,936 and $15,514.
There was no revenue in the three months ended September 30, 2013.
We had costs of sales in the amount of
$304,004 and $0 for the three months ended September 30, 2014 and 2013, respectively. The costs for the three months ended
September 30, 2014 is attributable to our acquisitions of Romeo's NY Pizza and We Three, LLC in the amount of $269,800 and
$34,204. There was no revenue in the three months ended September 30, 2013.
We had operating expenses of $343,186 and $156,764
for the three months ended September 30, 2014 and 2013, respectively, representing an increase of $186,422. The increase is result
of principally a result of an increase in professional fees of approximately $51,000 and an increase in salaries of $15,000 compared
to the prior year period. In addition, the operating expenses increased in costs of our new acquired companies of approximately
$128,000.
We had a net loss of $87,754 for the three
months ended September 30, 2014 compared to a net loss of $233,775 for the three months ended September 30, 2013, representing
a decrease of $146,021. As the operating costs increased, there was a decrease in the interest expense and gain from the change
in value of the derivative liability of approximately $62,000 compared to the prior period as the Company has converted a majority
of historical debt to preferred stock. Furthermore, the Company was able to extinguish approximately $152,000 of historical accounts
payable.
For the Nine Months Ended September 30,
2014 and 2013
We had revenues in the amount of $428,285
and $0 for the nine months ended September 30, 2014 and 2013, respectively. The revenue for the nine months ended September 30,
2014 is attributable to our acquisitions of Romeo's NY Pizza on June 30, 2014 and We Three, LLC on May 15, 2014 in the amount
of $405,936 and $22,349. There was no revenue in the three months ended September 30, 2013.
We had costs of sales in
the amount of $314,095 and $0 for the three months ended September 30, 2014 and 2013, respectively. The revenue for the nine months
ended September 30, 2014 is attributable to our acquisitions of Romeo's NY Pizza and We Three, LLC in the amount of $269,800 and
$44,295. There was no revenue in the three months ended September 30, 2013.
We had operating expenses of
$650,410 and $478,807 for the nine months ended September 30, 2014 and 2013, respectively, representing an increase of $171,603.
The increase is principally a result of a reduction in professional fees offset by increase costs of our new acquired company.
We had a net loss of $380,866
for the nine months ended September 30, 2014 compared to a net income of $886,190 nine months ended September 30, 2013, representing
a decrease of $485,324. As the operating costs increased, there was a decrease in the interest expense and gain from the change
in value of the derivative liability of approximately $401,000 compared to the prior period as the Company has converted a majority
of historical debt to preferred stock. Furthermore, the Company was able to extinguish approximately $152,000 of historical accounts
payable.
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 September 30, 2014, we had $91,045 in cash and cash equivalents and total assets amounted to $3,029,661. At December
31, 2013 we had $4,676 of cash and cash equivalents, and total assets amounted to $6,935, which include other assets.
Net cash used in operating activities was $184,928
and $166,822 for the nine months ended September 30, 2014 and 2013, respectively. The increase in the amount of net cash used in
operating activities during the nine months ended September 30, 2014 compared to the same period last year was attributable the
operating losses incurred in the current year.
Net cash used in by investing activities was
$82,718 and $0 for the nine months ended September 30, 2014 and 2013, respectively. The cash flows used in investing activities
during the nine months ended September 30, 2014 was attributable to the purchase of fixed assets and an investment of $75,000,
net of cash acquired of $76,619, for We Three, LLC. acquired on May 15, 2014 and Romeo's NY Pizza on June 30, 2014.
Net cash provided by financing activities was
$354,015 and $177,750 for the nine months ended September 30, 2014 and 2013, respectively. The cash flows from financing activities
during the nine months ended September 30, 2014 was attributable to proceeds from the sale of preferred stock of $339,633
and the proceeds from notes payable, net of repayments, of $14,382. The cash flows from financing activities during the nine months
ended September 30, 2013 was attributable to proceeds from the sale of common stock of $107,750 and advances from third parties
of $70,000.
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.
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 a term loan transaction.
Plan of Operation
Our current business plan is described in “Item
1 - Description of Business” of Form 10-K for the year ended December 31, 2013.
Off Balance Sheet Arrangements
As of September 30, 2014, 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 nine months ended September 30, 2014.
There has been no change in our internal control
over financial reporting during the quarter ended September 30, 2014 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.
PART II –
OTHER INFORMATION
Item 1. Legal Proceedings
There have been no events under any bankruptcy
act, any criminal proceedings and 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. |
|
|
99.1 |
Temporary Hardship Exemption
|
|
|
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 furnished by amendment per Temporary Hardship Exemption
under Regulation S-T.
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: November 19,
2014 |
CARDIFF INTERNATIONAL, INC. |
|
|
|
By: /s/ Kathleen
Roberton |
|
Chief Executive Officer |
|
|
|
|
|
By: /s/ Daniel Thompson |
|
Chairman (Acting President and Treasurer) |
|
|
Exhibit 31.1
CERTIFICATION PURSUANT
TO
18 U.S.C. SECTION
1350,
AS ADOPTED PURSUANT
TO
SECTION 302 OF THE
SARBANES-OXLEY ACT 2002
I, Kathleen
Roberton, certify that:
1. I have reviewed
the Quarterly Report on Form 10-Q of Cardiff International, Inc;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The
registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
as defined in Exchange Act Rules 13a-15d-15(f) for the registrant and we have:
a) Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) Designed such
internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness
of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this
report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5. The registrant’s
other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant
deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Dated: November 19,
2014 |
By: /s/ Kathleen Roberton |
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT
TO
18 U.S.C. SECTION
1350,
AS ADOPTED PURSUANT
TO
SECTION 302 OF THE
SARBANES-OXLEY ACT 2002
I, Daniel
Thompson, certify that:
1. I have reviewed
the Quarterly Report on Form 10-Q of Cardiff International, Inc;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s
other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting as defined in
Exchange Act Rules 13a-15d-15(f)
for the registrant and we have:
a) Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) Designed such
internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness
of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this
report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5. The registrant’s
other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant
deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Dated: November 19,
2014 |
By: /s/ Daniel Thompson |
|
Chairman of the Board (Acting President and Treasurer) |
Exhibit 32.1
CERTIFICATION PURSUANT
TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In
connection with the Quarterly Report of Cardiff International, Inc.(the
“Company”) on Form 10-Q for the quarter ended September 30, 2014 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Kathleen Roberton, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: November 19,
2014 |
By: /s/ Kathleen Roberton |
|
Chief
Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly
Report of Cardiff International, Inc.(the “Company”) on Form 10-Q for the quarter ended September 30, 2014 as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel Thompson, Chairman
(Acting President and Treasurer) of the Company, certify, pursuant to 18 U.S.C. section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: November 19,
2014 |
By:
/s/ Daniel Thompson |
|
Chairman of the Board (Acting
President and Treasurer) |
Exhibit 99.1
Temporary Hardship Exemption
In accordance with the temporary hardship
exemption provided by Rule 201 of Regulation S-T, the date by which the interactive data file is required to be submitted has
been extended by six business days.
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