CDIX Cardiff Lexington Corporation (PK)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 International, Inc. (“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, income-producing commercial real estate properties, and high return investments, 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 profitable small- to minimum-sized businesses with little to no debt, seeking support with both financing and management that had the ability to offer a return to investors. The plan is to establish new classes of preferred stock to streamline voting rights, negate debt, and acquire new businesses. By December of 2013, the Company had negated more than 90% of all its debt; by July of 2014, the Company had completed the acquisition of three businesses: We Three, LLC; Romeo’s NY Pizza; and Edge View Properties, Inc. The Company delayed the filing of its Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2015 due to difficulty obtaining information from another acquisition, which was subsequently unwound.

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. The Company’s business footprint is to acquire strong companies that meet the following criteria: (1) in business for a minimum of two years; (2) profitable; (3) good management team; (4) little to no debt; and (5) assets of a minimum of $1,000,000. Cardiff continues to practice all business ethics under the Securities Exchange Act of 1934 (“1934 Act”) and acknowledges that there are more than 43 successful Business Development Companies subject to the Investment Company Act of 1940 (“1940 Act”), all of which may be considered competition to Cardiff and that are established and available to the public for investment. These companies offer experienced management, dividends and financial security.

To date, Cardiff consists of three subsidiaries: We Three, LLC; Romeo’s NY Pizza; and Edge View Properties, Inc.

Principles of Consolidation

The consolidated financial statements include the accounts of Cardiff International, Inc., and its wholly-owned subsidiaries: We Three, LLC; Romeo’s NY Pizza; and Edge View Properties, Inc. 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.

Cash and Cash Equivalents

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

Revenue Recognition

In general, the Company recognizes revenue on an accrual basis. Revenue is generally realized or realizable and earned when all of the following criteria are met: 1) persuasive evidence of an arrangement exists between the Company and our customer(s); 2) services have been rendered; 3) our price to our customer is fixed or determinable; and 4) collectability is reasonably assured.

Rental Income

The Company’s rental income is derived from the mobile home leases. The expired leases are considered month-to-month leases. In accordance with section 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition, the cost of property held for leasing by major classes of property according to nature or function, and the amount of accumulated depreciation in total, is presented in the accompanying consolidated balance sheets as of December 31, 2015 and 2014. There are no contingent rentals included in income in the accompanying statements of operations. With the exception of the month-to-month leases, revenue is recognized on a straight-line basis and amortized into income on a monthly basis, over the lease term.

Restaurant Sales

Revenue from restaurant sales is recognized when food and beverage products are sold. The Company reports revenue net of sales taxes collected from customers and remitted to governmental taxing authorities.

Use of Estimates

The preparation of financial statements in conformity with 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.

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 believe such assumptions are also comparable to those that would be used by other marketplace participants. During the year ended December 31, 2014, goodwill of $1,707,153 resulted from the business acquisitions in 2014 was impaired in full. There was no goodwill impairment in 2015.

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. There has been no impairment charge for the periods presented.

Valuation of Derivative Instruments

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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. During the year ended December 31, 2014, the convertible notes principal and accrued interest totaled $32,010 were converted into 2,496 shares of Common Stock of the Company at the options of the noteholder. The Company used a Black-Scholes pricing model to determine the appropriate fair value of $132,981 at the conversion date. The Company adjusted its derivative liability to its fair value, and reflected the increase (decrease) in fair value of $35,590 for the year ended December 31, 2014 as Other Expenses on the Consolidated Statements of Operations. The derivative liability of $132,981 was reclassified as additional paid-in capital at the conversion. During the year ended December 31, 2015, the conversion price of a $10,000 convertible note was changed from 50% of the market to $0.01 per share due to the market price falling below certain level. As a result, the embedded derivative liabilities of $10,008 was reclassified as additional paid-in capital.

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:

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 December 31, 2015 and 2014.

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 Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

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

If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model.  The ranges of assumptions for inputs are as follows:

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 Accounting Standards Codification (“Sub-topic 505-50”).

Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum, or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows:

Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments.

The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic.

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised.

Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

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:

During the years ended December 31, 2015 and 2014, depreciation and amortization expense was $84,752 and $39,992, respectively.

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 years ended December 31, 2015 and 2014, the Company did not have any interest and penalties associated with tax positions. As of December 31, 2015 and 2014, 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 years ended December 31, 2015 and 2014. During a period of net loss, all potentially dilutive securities are anti-dilutive. Accordingly, for the years ended December 31, 2015 and 2014, 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:

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 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 December 31, 2015, the Company had shareholders’ deficit of $594,557. 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 December 31, 2015 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

In September 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This ASU describes how an entity should assess its ability to meet obligations and sets disclosure requirements for how this information should be disclosed in the financial statements. The standard provides accounting guidance that will be used with existing auditing standards. The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this guidance will be examined for the year ended December 31, 2016, and if applicable at that time, will require management to make the appropriate disclosures.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03,  Interest—Imputation of Interest (Topic 835-30): Simplifying the Presentation of Debt Issuance Costs  (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by ASU 2015-03. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. Upon adoption, the Company will reclassify debt issuance costs from prepaid expenses and other current assets and other assets as a reduction to debt in the condensed consolidated balance sheets. The Company is not planning to early adopt ASU 2015-03 and does not anticipate that the adoption of ASU 2015-03will materially impact its condensed consolidated financial statements.

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-11,  Inventory (Topic 330): Simplifying the Measurement of Inventory  (“ASU 2015-11”), which applies guidance on the subsequent measurement of inventory. ASU 2015-11 states that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. The guidance excludes inventory measured using last-in, first-out or the retail inventory method. ASU 2015-11 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is not planning to early adopt ASU 2015-11 and is currently evaluating ASU 2015-11 to determine the potential impact to its condensed consolidated financial statements and related disclosures.

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 2015, the Company closed 2 pizza restaurants located in Alpharetta, Georgia and Lawrenceville, Georgia due to continuing losses in operations and slow traffic at these 2 locations.

During the years ended December 31, 2015 and 2014, depreciation expense was $84,752 and $39,992, respectively.

During the year ended December 31, 2015, the Company disposed 2 smart cars for cash payment of $30,902, resulting in gain of $12,007 from disposal of fixed assets.

4. LAND

As of December 31, 2015 and 2014, 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.

6. RELATED PARTY TRANSACTIONS

Due to Officers and Officer Compensation

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 24 months after the launch of the Legacy Tuition Card (or prior to such date) at an annual interest rate of six percent. As of December 31, 2015, the Company had $81,905 due to Daniel Thompson.

In addition, the Company has an employment agreement, renewed May 15, 2014, with Daniel Thompson whereby the Company changed Daniel Thompson’s compensation to $20,000 per month from $25,000. Accordingly, a total salary of $240,000 and $262,500 were accrued and reflected as an expense to Daniel Thompson during the years ended December 31, 2015 and 2014, respectively. The accrued salaries payable to Daniel Thompson was $502,500 and $450,000 as of December 31, 2015 and 2014, respectively.

The Company has an employment agreement with a former President, Ms. Roberton, whereby the Company provides for compensation of $25,000 per month beginning May 15, 2014. A total salary of $187,500 was reflected as an expense during the year ended December 31, 2014. On June 1, 2015, Ms. Roberton resigned from all her positions of the Company and agreed to waive all unpaid salary earned during her employment. Accordingly, the Company reclassified the accrued salaries of $187,500 into additional paid-in capital. The total balance due to Ms. Roberton for accrued salaries at December 31, 2015 and 2014 was $0 and $0, respectively.

The Company had an employment agreement with a former Chief Operating Officer, Mr. Levy, whereby the Company provided for compensation of $15,000 per month. A total salary of $180,000 was accrued and reflected as an expense during the year ended December 31, 2015. The total balance due to Mr. Levy for accrued salaries at December 31, 2015 was $180,000.

The Company had an employment agreement with the Chief Executive Officer, Mr. Cunningham, whereby the Company provided for compensation of $15,000 per month. A total salary of $180,000 was accrued and reflected as an expense during the year ended December 31, 2015. The total balance due to Mr. Cunningham for accrued salaries at December 31, 2015 was $180,000.

Notes Payable – Related Party

The Company has entered into several loan agreements with related parties (see above; Footnote 7, Notes Payable – Related Party; and Footnote 8, Convertible Notes Payable – Related Party).

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. As of December 31, 2012, the warrants had not been exercised. As of December 31, 2015, the Company is in default on this debenture. The balance of the note was $10,989 and $10,989 at December 31, 2015 and 2014, respectively.

The balance of $49,822 in notes payable to unrelated party was due to the auto loan for the vehicles used in the Pizza restaurants.

Notes Payable – Related Party

On September 7, 2011, the Company entered into a Promissory Note agreement (“Note 1”) 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 1, and the principal and any unpaid interest will be due upon maturity. In conjunction with Note 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 1, the Company recorded a $50,000 debt discount during 2011. The balance of Note 1, net of debt discount, was $50,000 and $50,000 at December 31, 2015 and 2014, respectively.

On November 17, 2011, the Company entered into a Promissory Note agreement (“Note 2”) 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 2, and the principal and any unpaid interest will be due upon maturity. In conjunction with Note 2, 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 2, the Company recorded a $50,000 debt discount during 2011. The balance of Note 2, net of debt discount, was $50,000 and $50,000 at December 31, 2015 and 2014, respectively.

On August 4, 2015, the Company entered into a Promissory Note agreement (“Note 3”) with a related party for $19,500. Note 3 bears interest at 6% per year and matures on December 31, 2016. Interest is payable annually on the anniversary of Note 3, and the principal and any unpaid interest will be due upon maturity. The balance of Note 3 was $19,500 at December 31, 2015.

The following is a schedule showing the future minimum loan payments in the future 5 years.

8. CONVERTIBLE NOTES PAYABLE

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 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.

Convertible notes at December 31, 2015 and 2014 are summarized as follows:

Convertible Notes Payable – Unrelated Party

On April 17, 2014, the Company entered into an unsecured Convertible Note (“Note 4”) in the amount of $9,000. Note 4 was convertible into Common Shares of the Company at $0.005 per share at the option of the holder. Note 4 bore interest at eight percent per year, matured on June 17, 2014, and was unsecured. All principal and unpaid accrued interest was due at maturity. The Company is currently in default on Note 4. On August 17, 2015, a portion of principal of $1,500 was converted into 300,000 shares of Common Stock of the Company upon the request of the holder. The balance of the note was $7,500 and $9,000 at December 31, 2015 and 2014, respectively.

On May 6, 2015, the Company entered into a 10% convertible promissory note (“Note 5”) with an unrelated entity in the amount of $12,200. Note 5 bore interest at ten percent per year, matured on September 3, 2015, and was unsecured. Note 5 was convertible into Common Shares of the Company at the conversion ratio of 50% discount to market at the lowest traded price within 20 business days prior to “Notice of Conversion”. This gives rise to derivative liability accounting related to this Note since the conversion ratio is considered floorless.

Accordingly, Note 5 has been evaluated with respect to the terms and conditions of the conversion features contained in Note 5 to determine whether they represent embedded or freestanding derivative instruments under the provisions of ASC 815. The Company determined that the conversion features contained in Note 5 for $12,200 carrying value represents a freestanding 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 convertible note was measured using the Black-Scholes valuation model at the inception date of Note 5 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 table below sets forth the assumptions for Black-Scholes valuation model on May 6, 2015 (inception) and December 31, 2015, respectively. For the period ended December 31, 2015, the Company had initial loss of $10,295 due to derivative liabilities, and decreased the derivative liability of $22,495 by $8,547, resulting in a derivative liability of $13,948 at December 31, 2015.

The Company is currently in default on Note 5. As of December 31, 2015, the carrying values of Note 5 were $12,200 and the debt discount was $0. The Company recorded interest expense related to Note 5 in amount of $799 during the year ended December 31, 2015. The accrued interest of Note 5 was $799 as of December 31, 2015.

On July 29, 2015, the Company entered into an 8% convertible promissory note (“Note 6”) with an unrelated entity in the amount of $10,000. Note 6 bore interest at eight percent per year, matured on November 26, 2015, and was unsecured. Note 6 was convertible into Common Shares of the Company at the conversion ratio of 50% discount to market at the conversion date. However, if the closing bid price of the Company’s Common Shares falls below $0.10 per share, the conversion price will be changed to $0.01 per share and remain intact from that point forward. Since the Company’s common stock was $0.075 per share at December 31, 2015, the conversion feature contained in Note 6 no longer meets the requirements for liability classification under ASC 815. As a result, the embedded derivative liabilities of $10,008 at December 31, 2015 was reclassified as additional paid-in capital.

The table below sets forth the assumptions for Black-Scholes valuation model on July 29, 2015 (inception) and December 31, 2015, respectively. For the period ended December 31, 2015, the Company had initial loss of $8,041 due to derivative liabilities, and decreased the derivative liability of $18,041 by $8,033, resulting in a derivative liability of $10,008 at December 31, 2015.

The Company is currently in default on Note 6 and bears default interest at ten percent per year. As of December 31, 2015, the carrying values of Note 6 were $10,000 and the debt discount was $0. The Company recorded interest expense related to Note 6 in amount of $359 during the year ended December 31, 2015. The accrued interest of Note 6 was $359 as of December 31, 2015.

Convertible Notes Payable – Related Party

On April 21, 2008, the Company entered into an unsecured Convertible Debenture (“Debenture 1”) with a shareholder in the amount of $150,000. Debenture 1 was convertible into Common Shares of the Company at $0.03 per share at the option of the holder no earlier than August 21, 2008. Debenture 1 bore interest at 12% per year, matured in August 2009, and was unsecured. All principal and unpaid accrued interest was due at maturity. In conjunction with the Debenture 1, the Company also issued warrants to purchase 5,000,000 shares of the Company’s Common Stock at $0.03 per share. The warrants expired 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 Debenture 1, and the warrants have not been exercised. The balance of Debenture 1 was $150,000 and $150,000 at December 31, 2015 and 2014, respectively.

On March 11, 2009, the Company entered into an unsecured Convertible Debenture (“Debenture 2”) with a shareholder in the amount of $15,000. Debenture 2 was convertible into Common Shares of the Company at $0.03 per share at the option of the holder. Debenture 2 bore interest at 12% per year, matured on March 11, 2014, and was unsecured. All principal and unpaid accrued interest was due at maturity. The Company is in default on Debenture 2. The balance of Debenture 2 was $15,000 and $15,000 at December 31, 2015 and 2014, respectively.

The following is a schedule showing the future minimum loan payments in the future 5 years.

9. DERIVATIVE LIABILITIES

As of December 31, 2015, the Company’s derivative liabilities are embedded derivatives associated with the Company’s convertible note payable (see Footnote 8). Due to the Notes’ conversion feature, the actual number of shares of common stock that would be required if a conversion of the note as described in Footnote 8 was made through the issuance of the Company’s common stock cannot be predicted. As a result, the conversion feature requires derivative accounting treatment and will be bifurcated from the note and “marked to market” each reporting period through the statement of operations.

The Company measured the fair value of the derivative liabilities as $40,536 on the inception date, and remeasured the fair value as $23,956 on December 31, 2015, of which $10,008 was reclassified as additional paid-in capital due to the change in conversion price from discounted market price to fixed price. The Company recorded the change of fair value of $1,756 in the statements of operations for the year ended December 31, 2015.

There was no derivative liabilities as of December 31, 2014.

10. PAYROLL TAXES

The Company previously reported that it has failed to remit payroll tax payments since 2006, as required by various taxing authorities. Payroll taxes and estimated penalties were accrued in recognition of accrued salaries subsequently settled via stock issue and other agreements that did not result in reportable or taxable payroll transactions. These accruals were reversed for prior years, and a similar estimated accrual established for 2015 and 2014. As of December 31, 2015 and 2014, the Company estimated the amount of taxes, interest, and penalties that the Company could incur as a result of payroll related taxes and penalties to be $38,902 and $38,400, respectively.

11. NET LOSS PER SHARE

Basic net loss per share is computed using the weighted average number of common shares outstanding during the years.  There were no dilutive earnings per share for the years ended December 31, 2015 and 2014 due to net loss during the years.  

The following table sets forth the computation of basic net loss per share for the years indicated:

12. CAPITAL STOCK

Reverse Stock Split:

In August 2014, the Board of Directors approved new Articles of Incorporation per the effectuated domicile change which authorized four classes of Preferred Stock: 4 Series A shares authorized, 5,000,000 Series B shares authorized, 250 Series C shares and 100,000,000 Blank Check Preferred shares authorized.

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 three additional classes of Preferred Stock. After this action, the Company has five classes of Common Stock and Preferred Stock.

Series A Preferred Stock

As of December 31, 2015 and 2014, the Company has designated four shares of preferred stock as Series A Preferred Stock (“Series A”), with a par value of $.0001 per share, of which one share of preferred stock is issued and outstanding. Series A is authorized to have four shares which do not bear dividends and converts to common shares at four times the sum of: all shares of Common Stock issued and outstanding at time of conversion plus all shares of Series B Preferred Stock 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 plus 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.

Series B Preferred Stock

As of December 31, 2015 and 2014, the Company has designated 5,000,000 shares of preferred stock as Series B Preferred Stock (“Series B”), with a par value $0.001 and $2.50 price per share, of which 4,978,028 and 5,270,693 shares of preferred stock are issued and outstanding, respectively. Shares of Series B are anti-dilutive to reverse splits. The conversion rate of shares of Series B, 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 Series B shall have no voting rights. The price of each share of Series B 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.

During the year ended December 31, 2014, the Company sold 81,993 shares of Series B to various investors at a price of $2.50 per share, or totaled $204,983 in cash.

During the year ended December 31, 2014, the Company issued 600,000 shares of Series B preferred stock to officers for services rendered. The fair value of this stock issuance was determined by the private placement price of $2.5 per share in the arms-length transactions. Accordingly, the Company recognized stock based compensation of $1,500,000 to employees.

During the year ended December 31, 2014, the Company issued 11,999 shares of Series B preferred stock and 1 share of Series C preferred stock to certain consultants for marketing services rendered. The fair value of this stock issuance was determined by the private placement price of $2.5 per share in the arms-length transactions. Accordingly, the Company recognized stock based compensation of $30,000 to non-employees.

During the year ended December 31, 2015, 325,862 shares of Series “B” Preferred Stock were converted into 1,610,206 shares of Common Stock of the Company per the preferred shareholder’s instruction.

During the year ended December 31, 2015, the Company issued 33,197 shares of Series “B” Preferred stock and 3 shares of Series “C” Preferred Stock to several investors for total cash payment of $82,500 pursuant to the executed subscription agreements.

Series C Preferred Stock

As of December 31, 2015 and 2014, the Company has designated 250 shares of preferred stock as Series C Preferred Stock (“Series C”), with a par value of $.00001 per share, of which 118 and 113 shares are issued and outstanding, respectively. Shares of Series C are non-dilutive to reverse splits. The conversion rate of shares of Series C, 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 Series C converts to 100,000 shares of Common Stock. Each share of Series C shall have one vote for any election or other vote placed before the shareholders of the Company. The price of each share of Series C 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 may not be converted into shares of Common Stock for a period of: a) six 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) 12 months if the Company does not file such public reports.

During the year ended December 31, 2014, the Company sold 33 shares of Series C to various investors at a price of $2.50 per share, or totaled $83 in cash.

During the year ended December 31, 2015, the Company sold 4 shares of Series C to various investors at a price of $2.50 per share and 1 share at a price of $4.00 per share, or totaled $14 in cash.

Blank Check Preferred Stock

As of December 31, 2015 and 2014, the Company has designated 100,000,000 shares of Blank Check Preferred Stock, of which 1,094,019 and 1,077,771 shares 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 98,905,981 as of December 31, 2015.

Series D Preferred Stock

On June 30, 2014, the Company completed the acquisition of Romeo’s NY Pizza. The Company issued 400,000 shares of Series D Preferred Stock (“Series D”) as consideration for this acquisition. Based on the price of $2.50 per share, the acquisition consideration represents a $1,000,000 valuation. Shares of Series D are anti-dilutive to reverse splits. The conversion rate of shares of Series D, 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 Series D shall have voting rights equal to one vote 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 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 shall be $2.50.

There was no change in Series D Preferred Stock in 2015.

Series E Preferred Stock

On July 11, 2014, the Company completed the acquisition of Edge View Properties, Inc. The Company issued 241,199 shares of Series E Preferred Stock (“Series E”) as consideration for this acquisition. Based on the price of $2.50 per share, the acquisition consideration represents a $603,000 valuation. Shares of Series E are anti-dilutive to reverse splits. The conversion rate of shares of Series E, 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 Series E shall have voting rights equal to one vote 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 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 shall be $2.50.

There was no change in Series E Preferred Stock in 2015.

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 280,069 shares of Series F Preferred Stock (“Series F”) as consideration for this acquisition. The fair value of We Three LLC was $1,000,000 (see Note 2). Based on the price of $2.50 per share for the Series F Preferred Stock, the fair value of the stock issuance of Series F Preferred Stock was $700,174, resulting in the gain of $299,826 on investment in We Three, which was offset the goodwill impairment at the end of 2014. In addition, the Company sold 156,503 shares of Series F1 Preferred Stock (Series F1”), to various investors at a price of $2.50 per share, or totaled $391,248 in cash. Shares of Series F are anti-dilutive to reverse splits. The conversion rate of shares of Series F, 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 Series F shall have voting rights equal to five 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 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 shall be $2.50.

During the year ended December 31, 2015, the Company issued 6,249 shares of Series “F-1” Preferred stock and 1 share of Series “C” Preferred Stock to an investor for total cash payment of $25,000 pursuant to the executed subscription agreement.

During the year ended December 31, 2015, the Company issued 9,999 shares of Series “F-1” Preferred stock and 1 share of Series “C” Preferred Stock to an investor for total cash payment of $25,000 pursuant to the executed subscription agreement.

Common Stock

2014

In September 2014, the Board of Directors approved increasing the number of authorized shares of Common Stock from 250,000 to 50,000,000, par value of $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 four-- 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.

During the year ended December 31, 2014, the Company issued 4,427,200 shares of common stock to officers for services rendered. The fair value of the common stock issuance was determined by the fair value of our common stock on the grant date, at a price of approximately $2.3 per share. Accordingly, the Company recognized stock based compensation of $10,182,560 to employees.

During the year ended December 31, 2014, the Company issued 417,896 shares of common stock for note conversion in amount of $36,930 per the requests from the noteholders.

2015

On April 15, 2015, the Company entered into three consulting service agreements with three Consultants for marketing, management and financial strategies in exchange for 1,500,000 shares of Common Stock of the Company. The fair value of this stock issuance was determined by the fair value of the Company’s Common Stock on the grant date, at a price of approximately $1.78 per share. Accordingly, the Company calculated the stock based compensation of $2,670,000 at its fair value and included it in the consolidated statements of operations for the year ended December 31, 2015.

On June 3, 2015, the Company entered into a consulting service agreement with a Consultant for marketing, management and financial strategies in exchange for 150,000 shares of Common Stock of the Company. The fair value of this stock issuance was determined by the fair value of the Company’s Common Stock on the grant date, at a price of approximately $0.84 per share. Accordingly, the Company calculated the stock based compensation of $126,000 at its fair value and included it in the consolidated statements of operations for the year ended December 31, 2015.

On September 1, 2015, the Company entered into a consulting service agreement with a Consultant for marketing, management and financial strategies in exchange for 500,000 shares of Common Stock of the Company. The fair value of this stock issuance was determined by the fair value of the Company’s Common Stock on the grant date, at a price of approximately $0.42 per share. Accordingly, the Company calculated the stock based compensation of $210,000 at its fair value and included $209,800 in the consolidated statements of operations for the year ended December 31, 2015 due to the receipt of $200 cash from the Consultant.

On October 8, 2015, the Company entered into a consulting service agreement with a Consultant for marketing, management and financial strategies in exchange for 362,000 shares of Common Stock of the Company. The fair value of this stock issuance was determined by the fair value of the Company’s Common Stock on the grant date, at a price of approximately $0.36 per share. Accordingly, the Company calculated the stock based compensation of $130,320 at its fair value and included it in the consolidated statements of operations for the year ended December 31, 2015.

During the year ended December 31, 2015, the Company issued 250,000 shares of Common Stock to five investors for total cash payment of $25,000, or $0.10 per share, pursuant to the executed subscription agreements.

There was no rent expense for office in 2014 as such office space was contributed at no cost by Daniel Thompson, the imputed effects of which are immaterial to the consolidated financial statements taken as a whole. 

14. INCOME TAXES

At December 31, 2015, the Company had federal and state net operating loss carry forwards of approximately $43,000,000 that expire in various years through the year 2035.

Due to operating losses, there is no provision for current federal or state income taxes for the years ended December 31, 2015 and 2014.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.

The Company’s deferred tax asset at December 31, 2015 and 2014 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $16,770,000 and $15,210,000, respectively, less a valuation allowance in the amount of approximately $16,770,000 and $15,210,000, respectively. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance in both 2015 and 2014. The valuation allowance increased by approximately $1,560,000 for the year ended December 31, 2015.

The Company’s total deferred tax asset as of December 31, 2015 and 2014 is as follows:

The reconciliation of income taxes computed at the federal and state statutory income tax rate to total income taxes for the years ended December 31, 2015 and 2014 is as follows:

15. SEGMENT REPORTING

The Company has two reportable operating segments as determined by management using the “management approach” as defined by the authoritative guidance on Disclosures about Segments of an Enterprise and Related Information :  (1) Mobile home lease (We Three), and (2) Company-owned Pizza Restaurants (Romeo’s NY Pizza).  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 two operating segments. Other revenue consists of nonrecurring items.

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.

Corporate administration and other assets primarily include the deferred tax asset, cash and short-term investments, as well as furniture and fixtures located at the corporate office and trademarks and other intangible assets. All assets are located within the United States.

16. SUBSEQUENT EVENTS

In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to December 31, 2015 to the date these consolidated 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.

First Acquisition:

As previously disclosed on June 30, 2016, the Company completed the acquisition of Titancare, LLC. The acquisition became effective (the “Effective day”) on June 27, 2016, a Pennsylvania At Home Care franchise. The acquisition is subject to Franchisor approval and the completion of an independent audit.

In connection with the closing of the acquisition, at the Effective Time, each outstanding class of preferred shares of Titan, par value $0.17 per share ("Titan Preferred Class Stock"), was converted into $0.17 preferred shares (the "Stock Consideration") of the Company’s Preferred Class “G” Stock, par value $0.001 per share ("CDIF Preferred “G” Stock"). The preferred share Consideration was adjusted as a result of the authorization and declaration of a special distribution to the preferred Titan stockholders at $0.17 per share with a conversion rate of 1 to 1.3 Common Stock payable to Titan shareholders of record as of the close of business on June 27, 2016 (the "Special Conversion"). The Special Conversion right is granted as a result of the closing of the sale of certain interests in assets of Titan to certain parties designated the Company, which closed on June 27, 2016 (the "Asset Sale"). Pursuant to the terms of the Acquisition.

Pending Franchisor approval and the completion of the independent audit, CDIF will issue approximately 977,247 shares of CDIF Preferred “G” Shares to Titancare shareholders as Stock Consideration in the Acquisition. Based on the price of CDIF’s Common stock as of June 27 and 29, 2016 at $0.17 per share, the acquisition consideration represents an approximate value of $166,132. The LLC has filed to convert to a Pennsylvania Corporation.

Second Acquisition:

As previously disclosed on June 29, 2016, the Company completed the acquisition of York County In Home Care, Inc. The acquisition became effective (the “Effective day”) on June 27, 2016, a Pennsylvania At Home Care franchise. The acquisition is subject to Franchisor approval and the completion of an independent audit.

In connection with the closing of the acquisition, at the Effective Time, each outstanding class of preferred shares of York, par value $0.17 per share ("York Preferred Class Stock"), was converted into $0.17 preferred shares (the "Stock Consideration") of the Company’s Preferred Class “G” Stock, par value $0.001 per share ("CDIF Preferred “G” Stock"). The preferred share Consideration was adjusted as a result of the authorization and declaration of a special distribution to the preferred York stockholders at $0.17 per share with a conversion rate of 1 to 1.3 Common Stock payable to York shareholders of record as of the close of business on June 29, 2016 (the "Special Conversion"). The Special Conversion right is granted as a result of the closing of the sale of certain interests in assets of York to certain parties designated by the Company, which closed on June 29, 2016 (the "Asset Sale"). Pursuant to the terms of the Acquisition.

Pending Franchisor approval and the completion of the independent audit, CDIF will issued approximately 8,235,294 shares of CDIF Preferred “G” Shares as Stock Consideration in the Acquisition. Based on the price of the Company’s Preferred “G” Class of stock on June 29, 2016. The acquisition consideration (based on the value of $0.17 in CDIF Preferred Stock, represents approximately $1,400,000.00.

Third Acquisition:

On August 10 ^th , 2016, Cardiff International, Inc. (CDIF) completed the acquisition of Refreshment Concepts, LLC. The acquisition became effective (the "Effective day") on August 10 ^th , 2016.

In connection with the closing of the acquisition, at the Effective Time, each outstanding class of preferred shares of Refreshment Concepts, par value $0.20 per share ("Refreshment Concepts Preferred Class Stock"), was converted into $0.20 preferred shares (the "Stock Consideration") of CDIF’s Preferred Class “H” Stock, par value $0.001 per share ("CDIF Preferred “H” Stock"). The preferred share Consideration was adjusted as a result of the authorization and declaration of a special distribution to the preferred Refreshment Concepts stockholders at $0.20 per share with a conversion rate of 1 to 1.25 Common Stock payable to Refreshment Concepts shareholders of record as of the close of business on July 22, 2016 (the "Special Conversion"). The Special Conversion right is granted as a result of the closing of the sale of certain interests in assets of Refreshment Concepts to certain parties designated by CDIF, which closed on July 22, 2016 (the "Asset Sale"). Pursuant to the terms of the Acquisition. 

CDIF issued approximately 1,440,000 shares of CDIF Preferred “H” Shares as Stock Consideration in the Acquisition. Based on the price of CDIF’s Preferred “H” Class of stock on July 1 ^st , 2016. The acquisition consideration (based on the value of $0.20 in CDIF Preferred Stock, represents approximately $288,000.00. The LLC has filed to convert to a Georgia Corporation. An amended 8K will be filed with audited financials by October 10 ^th , 2016.

Fourth Acquisition:

On August 10 ^th , 2016, Cardiff International, Inc. (CDIF) completed the acquisition of F.D.R. Enterprises. The acquisition became effective (the "Effective day") on August 10th, 2016.

In connection with the closing of the acquisition, at the Effective Time, each outstanding class of preferred shares of F.D.R. Enterprises par value $0.20 per share ("F.D.R. Enterprises Preferred Class Stock"), was converted into $0.20 preferred shares (the "Stock Consideration") of CDIF’s Preferred Class “H” Stock, par value $0.001 per share ("CDIF Preferred “H” Stock"). The preferred share Consideration was adjusted as a result of the authorization and declaration of a special distribution to the preferred F.D.R. Enterprises stockholders at $0.20 per share with a conversion rate of 1 to 1.25 Common Stock payable to F.D.R. Enterprises shareholders of record as of the close of business on July 22, 2016 (the "Special Conversion"). The Special Conversion right is granted as a result of the closing of the sale of certain interests in assets of F.D.R. Enterprises to certain parties designated by CDIF, which closed on July 22, 2016 (the "Asset Sale"). Pursuant to the terms of the Acquisition.

CDIF issued approximately 1,206,870 shares of CDIF Preferred “H” Shares as Stock Consideration in the Acquisition. Based on the price of CDIF’s Preferred “H” Class of stock on July 1 ^st , 2016. The acquisition consideration (based on the value of $0.20 in CDIF Preferred Stock, represents approximately $241,374.00. The LLC has filed to convert to a Tennessee Corporation. An amended 8K will be filed with audited financials by October 10 ^th , 2016.

Fifth Acquisition:

On August 10 ^th , 2016, Cardiff International, Inc. (CDIF) completed the acquisition of Repicci’s Franchise Group. The acquisition became effective (the "Effective day") on August 10 ^th , 2016.

In connection with the closing of the acquisition, at the Effective Time, each outstanding class of preferred shares of Repicci’s Franchise Group par value $0.20 per share ("Repicci’s Franchise Group Preferred Class Stock"), was converted into $0.20 preferred shares (the "Stock Consideration") of CDIF’s Preferred Class “H” Stock, par value $0.001 per share ("CDIF Preferred “H” Stock"). The preferred share Consideration was adjusted as a result of the authorization and declaration of a special distribution to the preferred Repicci’s Franchise Group stockholders at $0.20 per share with a conversion rate of 1 to 1.25 Common Stock payable to Repicci’s Franchise Group shareholders of record as of the close of business on July 22, 2016 (the "Special Conversion"). The Special Conversion right is granted as a result of the closing of the sale of certain interests in assets of Repicci’s Franchise Group to certain parties designated by CDIF, which closed on July 22, 2016 (the "Asset Sale"). Pursuant to the terms of the Acquisition.

CDIF issued approximately 1,770,000 shares of CDIF Preferred “H” Shares as Stock Consideration in the Acquisition. Based on the price of CDIF’s Preferred “H” Class of stock on July 1 ^st , 2016. The acquisition consideration (based on the value of $0.20 in CDIF Preferred Stock, represents approximately $354,000.00. The LLC has filed to convert to a Tennessee Corporation. An amended 8K will be filed with audited financials by October 10 ^th , 2016.