NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial
information, and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited
condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the
opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results
are not necessarily indicative of results for a full year.
The unaudited condensed consolidated financial
statements and related disclosures have been prepared with the presumption that users of the interim financial information have
read or have access to the Company’s annual audited consolidated financial statements for the preceding fiscal year. Accordingly,
these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial
statements and the related notes for the years ended December 31, 2015 and 2014 thereto contained in the Annual Report on Form
10-K for the year ended December 31, 2015.
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 the following whole-owned subsidiaries:
We Three, LLC (Affordable Housing Initiative) acquired
on May 15, 2014;
Romeo’s NY Pizza acquired on June 30, 2014;
Edge View Properties, Inc acquired on July 16, 2014;
FDR Enterprises, Inc. acquired on August 10, 2016;
Repicci’s Franchise Group, LLC acquired on August
10, 2016;
Refreshment Concepts, LLC acquired on August 10, 2016.
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 June 30, 2016, the Company had shareholders’
deficit of $1,001,385. 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
The Company has reviewed all recently issued,
but not yet effective, accounting pronouncements up to ASU 2016-13, and does not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.
2. PLANT AND EQUIPMENT, NET
Plant and equipment, net as of June 30, 2016
and December 31, 2015 was $471,438 and $540,024, respectively, consisting of the following:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
Furniture, fixture and equipment
|
|
$
|
265,856
|
|
|
$
|
261,882
|
|
Leasehold improvements
|
|
|
599,184
|
|
|
|
635,972
|
|
|
|
|
881,167
|
|
|
|
897,854
|
|
Less: accumulated depreciation
|
|
|
(393,602
|
)
|
|
|
(357,830
|
)
|
Plant and equipment, net
|
|
$
|
471,438
|
|
|
$
|
540,024
|
|
During the six months ended June 30, 2016 and
2015, depreciation expense was $35,772 and $33,622, respectively.
During the six months ended June 30, 2016,
the Company disposed fixed asset for cash payment of $31,637, resulting in loss of $5,151 from disposal of fixed assets. And the
Company purchases a Vehicle for $3,974.
During the six months ended June 30, 2015,
the Company disposed 2 smart cars for cash payment of $30,902, resulting in gain of $12,007 from disposal of fixed assets.
3. LAND
As of June 30, 2016 and December 31, 2015,
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.
4. ACCRUED EXPENSES
As of June 30, 2016 and December 31, 2015,
the Company had accrued expenses of $1,375,759 and $1,087,304, respectively, consisted of the following:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
Accrued salaries
|
|
$
|
781,503
|
|
|
$
|
584,804
|
|
Accrued expenses - other
|
|
|
594,255
|
|
|
|
502,500
|
|
Total
|
|
$
|
1,375,758
|
|
|
$
|
1,087,304
|
|
5. 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 June 30, 2016 and December
31, 2015, the Company had $110,815 and $81,905 due to related party.
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 $120,000 and $240,000 were accrued and reflected as an expense to Daniel
Thompson during the period ended June 30, 2016 and December 31, 2015, respectively. The accrued salaries payable to Daniel Thompson
was $594,255 and $502,500 as of June 30, 2016 and December 31, 2015, 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 $90,000 and $180,000 were accrued and reflected as an expense during period ended June 30, 2016 and the year ended December
31, 2015. The total balance due to Mr. Levy for accrued salaries at June 30, 2016 and December 31, 2015 were $270,000 and $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 $90,000 and $180,000 were accrued and reflected as an expense during the year ended December 31, 2015. The total balance due
to Mr. Cunningham for accrued salaries at June 30, 2016 and December 31, 2015 were $270,000 and $180,000.
Notes Payable – Related Party
The Company has entered into several loan agreements
with related parties (see above; Footnote 6, Notes Payable – Related Party; and Footnote 7, Convertible Notes Payable –
Related Party).
6. NOTES PAYABLE
Notes payable at June 30, 2016 and December
31, 2015 are summarized as follows:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
Notes Payable – Unrelated Party
|
|
$
|
61,848
|
|
|
$
|
60,811
|
|
Notes Payable – Related Party
|
|
|
109,000
|
|
|
|
119,500
|
|
Discount on notes
|
|
|
–
|
|
|
|
–
|
|
Total
|
|
$
|
170,848
|
|
|
$
|
180,311
|
|
Current portion
|
|
|
(170,848
|
)
|
|
|
(180,311
|
)
|
Long-term portion
|
|
$
|
–
|
|
|
$
|
–
|
|
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 June 30, 2016,
the Company is in default on this debenture. The balance of the note was $10,989 and $10,989 at June 30, 2016 and December 31,
2015, respectively.
The balance of $50,859 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 June 30, 2016 and December 31, 2015, 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 June 30, 2016 and December 31, 2015, respectively.
During the first quarter of 2016, the Company
entered into a Promissory Note agreement (“Note 3”) with a related party for $9,000. Note 3 bears interest at 0% and
is due on demand. The balance of Note 3, was $9,000 and $0 at June 30, 2016 and December 31, 2015, respectively.
The following is a schedule showing the future
minimum loan payments in the future 5 years.
Year ending December 31,
|
|
|
|
2016
|
|
|
170,848
|
|
2017
|
|
|
0
|
|
2018
|
|
|
0
|
|
2019
|
|
|
0
|
|
2020
|
|
|
0
|
|
Total
|
|
$
|
170,848
|
|
7. 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 June 30, 2016 and December 31, 2015 are summarized
as follows:
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
Convertible Notes Payable – Unrelated Party
|
|
$
|
82,784
|
|
|
$
|
29,700
|
|
Convertible Notes Payable – Related Party
|
|
|
165,000
|
|
|
|
165,000
|
|
Discount on notes
|
|
|
–
|
|
|
|
–
|
|
Total - Current
|
|
$
|
247,784
|
|
|
$
|
194,700
|
|
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. During the period ended June 30, 2016, the note holder converted $1,216 principal and $1,084 accrued interest
payable into 460,000 shares of common stock at a conversion price of $0.005 per share. And $3,000 of principal is forgiven by the
note holder. The balance of the note was $3,284 and $9,000 at June 30, 2016 and December 31, 2015, 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, March 8, 2016, respectively. For the period
ended June 30, 2016, December 31, 2015, and 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 $12,217 and $13,948 at March 8, 2016 and
December 31, 2015. On March 8, 2016, the converted note agreement was amended and therefore the conversion price becomes $0.005.
And the derivative liabilities of $12,217 was reclassified as additional capital as a result of the addendum.
Reporting
Date
|
Fair
Value
|
Term
(Years)
|
Assumed
Conversion Price
|
Market Price on
Issuance Date
|
Volatility
Percentage
|
Risk-free
Rate
|
5/6/2015
|
$22,495
|
0.33
|
$0.83
|
$1.69
|
507%
|
0.0002
|
12/31/2015
|
$13,948
|
0.003
|
$0.04
|
$0.08
|
533%
|
0.0014
|
3/8/2016
|
$12,217
|
0.003
|
$0.03
|
$0.05
|
569%
|
0.0027
|
The Company is currently in default on Note
5. During the period ended June 30, 2016, the note holders converted $10,200 unpaid principal and $840 accrued interest payable
into 2,208,000 shares of common stock at a conversion price of $0.005 per share. As of June 30, 2016 and December 31, 2015, the
carrying values of Note 5 were $2,000 and $12,200 and the debt discount was $0 and $0, respectively. The Company recorded interest
expense related to Note 5 in amount of $355 and $0 during the period ended June 30, 2016 and 2015, respectively. The accrued interest
of Note 5 was $314 and $799 as of June 30, 2016 and December 31, 2015, respectively.
The Notes
|
|
|
|
Proceeds
|
|
$
|
12,200
|
|
Less derivative liabilities on initial recognition
|
|
|
(12,200
|
)
|
Value of the Notes on initial recognition
|
|
|
–
|
|
Add accumulated accretion expense
|
|
|
12,200
|
|
Conversion during period ended June 30, 2016
|
|
|
(10,200
|
)
|
Balance as of June 30, 2016
|
|
$
|
2,000
|
|
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 liability
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 derivative liabilities is reclassified as
additional paid in capital due to the conversion price become fixed price as of January 1, 2016.
Reporting
Date
|
Fair
Value
|
Term
(Years)
|
Assumed
Conversion Price
|
Market Price on
Issuance Date
|
Volatility
Percentage
|
Risk-free
Rate
|
7/29/2015
|
$18,041
|
0.33
|
$0.30
|
$0.60
|
513%
|
0.0006
|
12/31/2015
|
$10,008
|
0.003
|
$0.038
|
$0.075
|
533%
|
0.0014
|
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 $500 and $0 during the three months
ended June 30, 2016 and 2016, respectively. The accrued interest of Note 6 was $809 and $359 as of June 30, 2016 and December 31,
2015, respectively.
The Notes
|
|
|
|
Proceeds
|
|
$
|
10,000
|
|
Less derivative liabilities on initial recognition
|
|
|
(10,000
|
)
|
Value of the Notes on initial recognition
|
|
|
0
|
|
Add accumulated accretion expense
|
|
|
10,000
|
|
Balance as of June 30, 2016
|
|
$
|
10,000
|
|
On February 3, 2016, the Company entered into
a 15% convertible line of credit (“Note 7”) with an unrelated entity in the amount up to $50,000. On February 9, 2016,
the Company received $17,500 cash for the line of credit, matured on February 9, 2017, and was unsecured. This note was convertible
into Common Shares of the Company at the conversion ratio of $0.03 or 50% discount of the lowest closing price on the primary trading
market on which Company's Common stock is quoted for the last five trading days prior to the conversion date. However, the note
is not converted after 6 months of the effective date of this note. And therefore, no derivative liability is generated as of June
30, 2016.
On March 8, 2016, the Company entered into
a 15% convertible line of credit (“Note 8”) with an unrelated entity in the amount of $50,000, matured on March 8,
2018, and was unsecured. This note was convertible into Common Shares of the Company at the conversion ratio of $0.03 or 50% discount
of the lowest closing price on the primary trading market on which Company's Common stock is quoted for the last five trading days
prior to the conversion date. However, the note is not converted after 6 months of the effective date of this note. And therefore,
no derivative liabilities is generated as of June 30, 2016.
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 June 30, 2016 and December 31, 2015, 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 June 30, 2016 and December 31, 2015, respectively.
The following is a schedule showing the future
minimum loan payments in the future 5 years.
Year
ending December 31,
|
|
|
|
|
2016
|
|
$
|
247,784
|
|
8. 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 the 2015. As of June 30, 2016 and December 31, 2015, 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 $38,641 and $38,902, respectively.
9. NET LOSS PER SHARE
Basic net loss per share is computed using
the weighted average number of common shares outstanding during the periods. There were no dilutive earnings per share
for the three months ended June 30, 2016 and 2015, and the six months ended June 30, 2016 and 2015, due to net loss during the
periods.
The following table sets forth the computation
of basic net loss per share for the periods indicated:
|
|
For the three months ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
Numerator:
|
|
|
|
|
|
|
- Net loss
|
|
$
|
(242,351
|
)
|
|
$
|
(2,879,657
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
- Weighted average common shares outstanding
|
|
|
11,836,014
|
|
|
|
7,778,462
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
Numerator:
|
|
|
|
|
|
|
- Net loss
|
|
$
|
(446,213
|
)
|
|
$
|
(3,004,148
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
- Weighted average common shares outstanding
|
|
|
10,682,020
|
|
|
|
6,373,118
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.47
|
)
|
|
|
|
|
|
|
|
|
|
10. CAPITAL STOCK
Series B Preferred Stock
During the six months ended June 30, 2016 72,718
shares of Series “B” Preferred Stock were converted into 363,589 shares of Common Stock of the Company per the preferred
shareholder’s instruction.
Series F Preferred Stock
During the period ended June 30, 2016, 10,000
shares of Series “F” Preferred Stock were converted into 50,000 shares of Common Stock of the Company per the preferred
shareholder’s instruction.
Common Stock
During the six months ended June 30, 2016,
the Company issued total 415,000 shares of Common Stock to investors for total cash payment of $24,000, or $0.05 per share, pursuant
to the executed subscription agreements.
During the six months ended June 30, 2016,
the Company issued 2,920,000 shares of common stock for the conversion of $14,600 of unpaid convertible notes principal and accrued
interest payable at a price of $0.005 per share.
11. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company had operating leases of $72,120
and $66,266 for the three months ended June 30, 2016 and 2015, respectively, consisting of the followings.
|
|
For the three months ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
36,732
|
|
|
$
|
43,020
|
|
Lot
|
|
|
18,657
|
|
|
|
14,542
|
|
Office
|
|
|
16,731
|
|
|
|
7,600
|
|
Equipment Rentals
|
|
|
–
|
|
|
|
1,104
|
|
Total
|
|
$
|
72,120
|
|
|
$
|
66,266
|
|
The Company had operating leases of $148,620
and $131,969 for the six months ended June 30, 2016 and 2015, respectively, consisting of the followings.
|
|
For the six months ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
72,268
|
|
|
$
|
86,797
|
|
Lot
|
|
|
29,981
|
|
|
|
27,623
|
|
Office
|
|
|
46,039
|
|
|
|
14,900
|
|
Equipment Rentals
|
|
|
332
|
|
|
|
2,649
|
|
Total
|
|
$
|
148,620
|
|
|
$
|
131,969
|
|
12. 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.
|
|
For the three months ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
Revenues:
|
|
|
|
|
|
|
We Three
|
|
$
|
40,360
|
|
|
$
|
42,743
|
|
Romeo’s NY Pizza
|
|
|
168,923
|
|
|
|
286,793
|
|
Others
|
|
|
–
|
|
|
|
–
|
|
Consolidated revenues
|
|
$
|
209,283
|
|
|
$
|
329,536
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales:
|
|
|
|
|
|
|
|
|
We Three
|
|
$
|
51,000
|
|
|
$
|
42,306
|
|
Romeo’s NY Pizza
|
|
|
96,254
|
|
|
|
200,888
|
|
Others
|
|
|
–
|
|
|
|
–
|
|
Consolidated cost of sales
|
|
$
|
147,254
|
|
|
$
|
243,194
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before taxes
|
|
|
|
|
|
|
|
|
We Three
|
|
$
|
(50,695
|
)
|
|
$
|
(7,146
|
)
|
Romeo’s NY Pizza
|
|
|
40,371
|
|
|
|
(17,561
|
)
|
Others
|
|
|
(232,027
|
)
|
|
|
(2,854,950
|
)
|
Consolidated loss before taxes
|
|
$
|
(242,351
|
)
|
|
$
|
(2,879,657
|
)
|
|
|
For the six months ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
Revenues:
|
|
|
|
|
|
|
We Three
|
|
$
|
80,973
|
|
|
$
|
84,491
|
|
Romeo’s NY Pizza
|
|
|
383,516
|
|
|
|
663,913
|
|
Others
|
|
|
18,090
|
|
|
|
10,100
|
|
Consolidated revenues
|
|
$
|
482,579
|
|
|
$
|
758,504
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales:
|
|
|
|
|
|
|
|
|
We Three
|
|
$
|
80,970
|
|
|
$
|
71,299
|
|
Romeo’s NY Pizza
|
|
|
203,157
|
|
|
|
473,293
|
|
Others
|
|
|
–
|
|
|
|
–
|
|
Consolidated cost of sales
|
|
$
|
284,127
|
|
|
$
|
544,592
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before taxes
|
|
|
|
|
|
|
|
|
We Three
|
|
$
|
(18,312
|
)
|
|
$
|
2,140
|
|
Romeo’s NY Pizza
|
|
|
42,720
|
|
|
|
50,597
|
|
Others
|
|
|
(470,621
|
)
|
|
|
(3,056,885
|
)
|
Consolidated loss before taxes
|
|
$
|
(446,213
|
)
|
|
$
|
(3,004,148
|
)
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
Assets:
|
|
|
|
|
|
|
We Three
|
|
$
|
91,214
|
|
|
$
|
243,134
|
|
Romeo’s NY Pizza
|
|
|
214,322
|
|
|
|
76,386
|
|
Others
|
|
|
866,076
|
|
|
|
892,959
|
|
Combined assets
|
|
$
|
1,171,612
|
|
|
$
|
1,212,479
|
|
13. MATERIAL 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.
As of June 30, 2016, the shares are not issued.
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.
As of June 30, 2016, the shares are not issued.
14. SUBSEQUENT EVENTS
In accordance with ASC Topic 855-10, the Company
has analyzed its operations subsequent to June 30, 2016 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:
Stock issuance:
After June 30, the Company issued 753,000 shares
of common stock for conversion, 1,000,000 shares of common stock for compensation, and 1,360,783 shares of common stock for cash.
Notes payable:
On October 25, 2016, the Company received $25,000
from the unrelated third party
First 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 December 15, 2016.
Second 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 December 15, 2016.
Third 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 December 15, 2016.