Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549












FORM 10-K/A2



ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) 4 OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended December 31,
2017



Commission File Number 000-49709












CARDIFF LEXINGTON CORP. (FORMERLY
CARDIFF INTERNATIONAL, INC.)

(Exact name of registrant as specified in
its charter)



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



401 East Las Olas Blvd., Suite 1400,
Ft. Lauderdale, FL 33301

(Address of principal executive offices)



(844) 628-2100

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



Securities registered pursuant to Section
12(b) of the Exchange Act: None



Securities registered pursuant to Section 12(g) of the Exchange
Act: Par Value $0.001 Common Stock Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act. Yes ☐No ☒.



Indicate by check mark if registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐No
☒.



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

Yes ☒     No
☐



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).

Yes ☒
    No ☐



Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-K is contained in this form and no disclosure will be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. ☒

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

| | Large accelerated filer  ☐ | Accelerated filer  ☐        
| | -------------------------- | ----------------------------
| | Non-accelerated filer  ☐   | Smaller reporting company  ☒
| | Emerging growth company  ☐ |                             



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

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

Yes ☐    No
☒

State the aggregate market
value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s
most recently completed second fiscal quarter. $1,378,430.



Common shares outstanding at
June 27, 2018 is 87,138,713 with a par value of $0.001.
























FORM 10-K

CARDIFF INTERNATIONAL,
INC.

INDEX







|                                                                                                                     | Page
|-------------------------------------------------------------------------------------------------------------------- | ----
|                                                                                                                     |     
|PART I                                                                                                              
|                                                                                                                     |     
|Item 1. Business                                                                                                     | 1   
|                                                                                                                     |     
|Item 1A. Risk Factors                                                                                                | 4   
|                                                                                                                     |     
|Item 1B. Unresolved Staff Comments                                                                                   | 6   
|                                                                                                                     |     
|Item 2. Property                                                                                                     | 7   
|                                                                                                                     |     
|Item 3. Legal Proceedings                                                                                            | 7   
|                                                                                                                     |     
|Item 4. Mine Safety Disclosures                                                                                      | 7   
|                                                                                                                     |     
|PART II                                                                                                             
|                                                                                                                     |     
|Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 8   
|                                                                                                                     |     
|Item 6. Selected Financial Data                                                                                      | 9   
|                                                                                                                     |     
|Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations                        | 9   
|                                                                                                                     |     
|Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                                  | 18  
|                                                                                                                     |     
|Item 8. Financial Statements and Supplementary Data                                                                  | 18  
|                                                                                                                     |     
|Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures                        | 62  
|                                                                                                                     |     
|Item 9A. Controls and Procedures                                                                                     | 62  
|                                                                                                                     |     
|Item 9B. Other Information                                                                                           | 63  
|                                                                                                                     |     
|PART III                                                                                                            
|                                                                                                                     |     
|Item 10. Directors, Executive Officers and Corporate Governance                                                      | 64  
|                                                                                                                     |     
|Item 11. Executive Compensation                                                                                      | 66  
|                                                                                                                     |     
|Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters              | 67  
|                                                                                                                     |     
|Item 13. Certain Relationships and Related Transactions, and Director Independence                                   | 67  
|                                                                                                                     |     
|Item 14. Principal Accountant Fees and Services                                                                      | 69  
|                                                                                                                     |     
|PART IV                                                                                                             
|                                                                                                                     |     
|Item 15. Exhibits and Financial Statement Schedules                                                                  | 70  
|                                                                                                                     |     
|Signatures                                                                                                           | 71  
|                                                                                                                     |     
|Index to Financial Statements                                                                                        |     











i









EXPLANATORY NOTE



On April 17, 2018, CARDIFF LEXINGTON
CORP. (FORMERLY CARDIFF INTERNATIONAL, INC.), a Florida corporation (the "Corporation"), filed an Annual Report on Form
10-K for the year ended December 31, 2017 without an audit report from its registered independent public accounting firm. The
entire filing was mistakenly and erroneously filed by our EDGAR filing agent and therefore did not include the audit report. This
amended Form 10-K has been updated to include the audited financial statements and the audit report from our independent public
accounting firm. For purposes of this report, unless otherwise indicated or the context otherwise requires, all references herein
to “Cardiff International,” “the Company”, “we,” “us,” and “our,”
refer to Cardiff Lexington Corp (Formerly Cardiff International, Inc.), a Florida corporation, and its subsidiaries.



For purposes of this report, unless otherwise
indicated or the context otherwise requires, all references herein to “Cardiff International,” “the Company”,
“we,” “us,” and “our,” refer to Cardiff International, Inc., a Florida corporation, and its
subsidiaries.



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



This Annual Report on Form 10-K (this “Report”)
contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Forward- looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking
statements may include words such as “anticipate,” “believe,” “estimate,” “intend,”
“could,” “should,” “would,” “may,” “seek,” “plan,” “might,”
“will,” “expect,” “predict,” “project,” “forecast,” “potential,”
“continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are
made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements
involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance
or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking
statements.



We cannot predict all of the risks and
uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described
in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or
completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout
this Report and include information concerning possible or assumed future results of our operations, including statements about
potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management;
any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results,
and any other statements that are not historical facts.



These forward-looking statements represent
our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other
factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results
expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described
in the forward- looking statements might not occur or might occur to a different extent or at a different time than we have described.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report.
All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to
us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred
to in this Report.



Except to the extent required by law, we
undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events,
a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.







ii







PART I



Item 1. DESCRIPTION OF BUSINESS.



History of the Business





Legacy Card Company (“Legacy”)
was formed as a Limited Liability Company on August 29, 2001. On April 18, 2005, Legacy converted from a California Limited Liability
Company to a Nevada Corporation. On November 10, 2005, Legacy merged with Cardiff Lexington Corp (formerly Cardiff International,
Inc.) (“Cardiff”, the “Company”), a publicly held corporation in Colorado. On August 27, 2014 Cardiff
redomiciled to Florida.



In the first quarter of 2013, it was decided
to restructure Cardiff into a holding company 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 our shareholders. The reason for this strategy was to protect our
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, we were able to reduce more than 90% of
all its debt; by July of 2014, we had completed the acquisition of three businesses: We Three, LLC; Romeo’s NY Pizza; and
Edge View Properties, Inc. We 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. By December
of 2016 we completed the acquisition of 3 additional businesses and have 2 currently pending lender approvals.



BUSINESS DEVELOPMENTS



The following business developments have been reported in our
reports filed with the Securities and Exchange Commission (the “SEC”), which are referenced in Part IV, Item 15, of
this Annual Report:



FDR Enterprises, Inc. acquired on August 10, 2016;

Refreshment Concepts, LLC acquired on August 10, 2016;

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

On May 25, 2017 the Company terminated its auditing firm KLJ
& Associates

July 11, 2017 increased authorized common shares to 500,000,000
at par value of $0.001

July 20, 2017 Engaged Malone Bailey as Cardiff’s new
auditors



Current Business Operations



Cardiff is a public holding company, much
like a cooperative, leveraging proven management in private companies that become subsidiaries under our umbrella. Our focus is
not based on a specific industry or geographic location, but rather on a proven management, market, and historical operating margin.
We target acquisitions of mature, high growth, niche companies. Cardiff’s strategy identifies and empowers select income-producing
middle market private businesses and commercial real estate properties.



The target company’s management team
typically maintains control of the day to day operations. Acquisitions become standalone autonomous subsidiaries that gain the
advantages of a publicly traded company without losing their independent management control. Management enjoys the advantage of
improved valuation, liquidity, synergies, and support, along with diversification and asset appreciation through collective subsidiary
performance. Diversification and pooled resources leverage value and mitigate risk.









1







Cardiff provides these companies both 1)
the enhanced ability to raise money for operations or expansion, and 2) an equity exit and liquidity strategy for the owner, heirs,
and/or Investors.



For investors, Cardiff provides a diversified lower risk to
protect and safely enhance their investment by continually adding assets and holdings.



Cardiff employs a merge, acquire, and hold
strategy to maximize value and potential of private, often family run, enterprises while providing diversification and risk mitigation
for all shareholders.



Cardiff is led by strong and talented roster
of executives and advisors providing expert acquisition, market guidance and added value for subsidiaries and investors. 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.



Organization



We are comprised of one parent corporation and six subsidiaries.
Operations are primarily conducted through the subsidiaries of the Company.



Employees



Collectively, Cardiff currently has approximately 40 employees
and anticipates hiring additional personal with new acquisitions.



Competition



We are a Small Cap holding company 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 our shareholders. The reason for this strategy was to protect our 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.



Proprietary Information



We own the following trademarks: Cardiff USA; Mission Tuition,
Collaborative Governance, Legacy Card and Small Cap Rescue.



Government Regulation



We do not expect to be subject to material governmental regulation.
However, it is our policy to fully comply with all governmental regulation and regulatory authorities.



Research and Development



We have spent funds on research and
development finding an appropriate social media agency that could develop and execute a social media campaign, as well as building
a new website representing the Company’s new direction, keeping investors more informed, etc. We plan to spend further funds
on research and development activities in the future as our social media awareness increases.







2







Environmental Compliance



We believe that we are not subject to any material costs for
compliance with any environmental laws.



How to Obtain our SEC Filings



We file annual, quarterly, and special
reports, proxy statements, and other information with the Securities Exchange Commission (SEC). Reports, proxy statements and other
information filed with the SEC can be inspected and copied at the public reference facilities of the SEC at 100 F Street N.E.,
Washington, DC 20549. Such material may also be accessed electronically by means of the SEC's website at www.sec.gov.



Our investor relations department can be
contacted at our principal executive office located at, 401 East Las Olas Blvd. Unit 1400, Fort Lauderdale, FL 33301. Our telephone
number is (844-628-2100).























3







Item 1A. RISK FACTORS



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



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



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





As of this filing, though still not
profitable, Cardiff is generating revenue which helps mitigate the risk. As a result, though pleased with our acquisitions , we
may never become profitable, and could go out of business.



Since 2014, we have restructured ourselves
into a holding company and have acquired six  additional businesses; We Three, Inc. d/b/a Affordable Housing Initiative,
Romeo’s NY Pizza, Edge View Properties, FDR Enterprises, Inc. Repicci’s Franchise Group and Refreshment Concepts.



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





For the fiscal years ended December
31, 2017 and December 31, 2016 our auditors have expressed concern about our ability to continue as a going concern due to
our continued net losses and need for additional capital. However, we believe our ability to achieve and maintain profitability
and positive cash flow is dependent upon:



| | · | our ability to acquire profitable businesses within CDIF; and
| | - | -------------------------------------------------------------

| | · | our ability to generate substantial revenues; and
| | - | -------------------------------------------------

| | · | our ability to obtain additional financing
| | - | ------------------------------------------



Based upon current plans, we may incur
operating losses in future periods. Also, we expect approximately $600,000 in operating costs to be incurred over the next twelve
months. We cannot guarantee that we will be successful in generating sufficient revenues or obtaining other financing in the future
to cover these operating costs. Additionally, financing may not be available on terms favorable to the Company. Failure to generate
sufficient revenues may cause us to go out of business.



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



We were incorporated in August 2001 and
have focused all of our efforts on the development of our product and we have generated minimal amounts revenue. Further, there
is no guarantee that we will be successful in realizing revenues or in achieving or sustaining positive cash flow at any time in
the future. Any such failure could result in the possible closure of our business or force us to seek additional capital through
loans or additional sales of our equity securities to continue business operations, which would dilute the value of any shares
you hold, and could result in the loss of your entire investment.



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



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









4







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



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

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

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



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



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



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



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



Our stock has limited liquidity.



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



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



| | · | actual or anticipated fluctuations in our operating results;
| | - | ------------------------------------------------------------

| | · | changes in financial estimates by securities analysts or our failure to perform in line with such estimates;
| | - | ------------------------------------------------------------------------------------------------------------

| | · | changes in market valuations of other companies, particularly those that market services such as ours;
| | - | ------------------------------------------------------------------------------------------------------

| | · | announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures or
capital commitments;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------

| | · | introduction of product enhancements that reduce the need for our products;
| | - | ---------------------------------------------------------------------------

| | · | departure of key personnel.
| | - | ---------------------------









5







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



Our shares are defined as a penny stock
under the Securities and Exchange Act of 1934, and rules of the Commission. The Exchange Act and such penny stock rules generally
impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain
accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess
of $1,000,000 or annual income exceeding

$200,000, or $300,000 jointly with spouse,
or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker- dealer must
make a suitability determination for each purchaser and receive the purchaser's written agreement prior to such sale. In addition,
the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price
and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver
certain disclosures required by the Commission. Consequently, the penny stock rules may affect the ability of broker-dealers to
make a market in or trade our common stock and may also affect your ability to resell any shares you may purchase in the public
markets.



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



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



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



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



ITEM 1B. UNRESOLVED STAFF COMMENTS



None.









6







ITEM 2. DESCRIPTION OF PROPERTY.





The Company had operating lease expense
 of $176,062 and $160,840 for the year ended December 31, 2017 and 2016, respectively, consisting of the followings.





|                  |  | For the year ended |        
|----------------- |  | ------------------ | -------
|                  |  | December 31, 2017  |        
|                  |  |                    |        
|Restaurants       |  | $                  | 71,750 
|Lot               |  |                    | 35,350 
|Office            |  |                    | 68,962 
|Equipment Rentals |  |                    | –      
|Total             |  | $                  | 176,062





The Company has property leases that are
renewable on an annual basis, with no long term property leases.



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



ITEM 3. LEGAL PROCEEDINGS.



We are not a party to any material legal
proceedings, nor is our property the subject of any material legal proceeding.



ITEM 4. MINE SAFETY DISCLOSURES.



Not applicable.













7







PART II



ITEM 5. MARKET FOR REGISTRANT’S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.



Holders



As of December 31, 2017 there were 853 record holders of our
common stock, and there were 64,414,091 shares of our common stock outstanding.



Public Market for Common Stock



Our common stock, par value $.001 per share
(the “Common Stock”), is currently quoted on the OTCQB under the symbol “CDIF”. The OTCBB is a quotation
service that displays real-time quotes, last-sale prices, and volume information in over-the-counter, or the OTC, equity securities.
An OTCBB equity security generally is any equity that is not listed or traded on a national securities exchange. The following
table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTCBB quotation
service. These bid prices represent prices quoted by broker-dealers on the OTCBB quotation service. The quotations reflect inter-
dealer prices, without retail mark-up, mark- down or commissions, and may not represent actual transactions.



|                              |  | High Close |      |  | Low Close |  
|----------------------------- |  | ---------- | ---- |  | --------- | -
|December 31 December 31, 2017 |  |            |      |  |           |  
|1st Quarter                   |  | $          | .13  |  |           | $
|2nd Quarter                   |  | $          | .16  |  |           | $
|3rd Quarter                   |  | $          | .11  |  |           | $
|4th Quarter                   |  | $          | .06  |  |           | $
|December 31 December 31, 2016 |  |            |      |  |           |  
|1st Quarter                   |  | $          | .24  |  |           | $
|2nd Quarter                   |  | $          | .59  |  |           | $
|3rd Quarter                   |  | $          | .22  |  |           | $
|4th Quarter                   |  | $          | ..25 |  |           | $



The market price of our common stock will
be subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market,
and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well as general
economic, business and political conditions, may adversely affect the market for our common stock, regardless of our actual or
projected performance.



The Securities Enforcement and Penny Stock Reform Act of
1990



The Securities and Exchange Commission
has also adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are
generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges
or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities
is provided by the exchange or system).



A purchaser is purchasing penny stock which
limits the ability to sell the stock. The shares offered by this prospectus constitute penny stock under the Securities and Exchange
Act. The shares will remain penny stocks for the foreseeable future. The classification of penny stock makes it more difficult
for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her
investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules
15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker- dealers
will refuse to attempt to sell penny stock.









8







The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document
prepared by the Commission, which:



| | · | contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary
trading;
| | - | -------------------------------------------------------------------------------------------------------------------------------------

| | · | contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer
with respect to a violation to such duties or other requirements of the Securities Act of 1934, as amended;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" prices for
penny stocks and the significance of the spread between the bid and ask price;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | contains a toll-free telephone number for inquiries on disciplinary actions;
| | - | ----------------------------------------------------------------------------

| | · | defines significant terms in the disclosure document or in the conduct of trading penny stocks; and
| | - | ---------------------------------------------------------------------------------------------------

| | · | contains such other information and is in such form (including language, type, size and format) as the Securities and Exchange
Commission shall require by rule or regulation;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The broker-dealer also must provide, prior to effecting any
transaction in a penny stock, to the customer:



| | · | the bid and offer quotations for the penny stock;
| | - | -------------------------------------------------

| | · | the compensation of the broker-dealer and its salesperson in the transaction;
| | - | -----------------------------------------------------------------------------

| | · | the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity
of the market for such stock; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | monthly account statements showing the market value of each penny stock held in the customer's account.
| | - | -------------------------------------------------------------------------------------------------------



In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker- dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment
of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated
copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in
the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty
selling their securities.



Dividend Policy



We have not previously declared or paid
any dividends on our common stock and do not anticipate declaring any dividends in the foreseeable future. The payment of dividends
on our common stock is within the discretion of our board of directors. We intend to retain any earnings for use in our operations
and the expansion of our business. Payment of dividends in the future will depend on our future earnings, future capital needs
and our operating and financial condition, among other factors that our board of directors may deem relevant. We are not under
any contractual restriction as to our present or future ability to pay dividends.



ITEM 6. SELECTED FINANCIAL DATA



We are a smaller reporting company as defined by Rule 12b-2
of the Exchange Act and are not required to provide the information under this item.



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS



This Management’s Discussion and
Analysis or Plan of Operation contains forward-looking statements that involve future events, our future performance and our expected
future operations and actions. In some cases, you can identify forward-looking statements by the use of words such as “may”,
“will”, “should”, “anticipate”, “believe”, “expect”, “plan”,
“future”, “intend”, “could”, “estimate”, “predict”, “hope”,
“potential”, “continue”, or the negative of these terms or other similar expressions. These forward-looking
statements are only our predictions and involve numerous assumptions, risks and uncertainties. Our actual results or actions may
differ materially from these forward-looking statements for many reasons, including, but not limited to, the matters discussed
in this report under the caption “Risk Factors”. We urge you not to place undue reliance on these forward-looking statements,
which speak only as of the date of this prospectus. We undertake no obligation to publicly update any forward looking-statements,
whether as a result of new information, future events or otherwise.









9







The following discussion of our consolidated financial condition
and consolidated results of operations should be read in conjunction with our consolidated financial statements and the related
notes included in this report.



The following table provides selected financial data about us
for the fiscal years ended December 31, 2017 and December 31, 2016. For detailed financial information, see the audited Financial
Statements included in this report.



Balance Sheet Data:



|                         |  | December 31, 2017 |            |   | December 31 2016 | 
|------------------------ |  | ----------------- | ---------- | - | ---------------- | 
|Cash                     |  | $                 | 68,986     |   |                  | 
|Total assets             |  | $                 | 1,319,061  |   |                  | 
|Total liabilities        |  | $                 | 4,749,382  |   |                  | 
|Shareholders'  (deficit) |  | $                 | (3,430,321 | ) |                  | 
|                         |  |                   |            |   |                  | 
|Operating Data:          |  |                   |            |   |                  | 
|Revenues                 |  | $                 | 1,625,768  |   |                  | 
|Operating Expenses       |  | $                 | 3,186,399  |   |                  | 
|Net (Loss)               |  | $                 | (3,651,995 | ) |                  | 





Segment reporting for the years ended December 31, 2017 and
2016 were as follows:



|                               |  | For the years ended |           
|------------------------------ |  | ------------------- | ----------
|                               |  | December 31 ,2017   |           
|Revenues:                      |  |                     |           
|We Three                       |  | $                   | 193,601   
|Romeo’s NY Pizza               |  |                     | 592,445   
|Repicci’s Group                |  |                     | 835,968   
|Others                         |  |                     | 3,754     
|Consolidated revenues          |  | $                   | 1,625,768 
|                               |  |                     |           
|Cost of Sales:                 |  |                     |           
|We Three                       |  | $                   | 155,416   
|Romeo’s NY Pizza               |  |                     | 429,779   
|Repicci’s Group                |  |                     | 846,714   
|Others                         |  |                     | –         
|Consolidated cost of sales     |  | $                   | 1,431,909 
|                               |  |                     |           
|Income (Loss) before taxes     |  |                     |           
|We Three                       |  | $                   | (4,494    
|Romeo’s NY Pizza               |  |                     | (185,299  
|Repicci’s Group                |  |                     | (111,302  
|Others                         |  |                     | (3,350,900
|Consolidated loss before taxes |  | $                   | (3,651,995







10







|                 |  | As of
 December 31, 2017 |           |  | As of 
December 31, 
2016 |  
|---------------- |  | ------------------------ | --------- |  | ------------------------- | -
|Assets:          |  |                          |           |  |                           |  
|We Three         |  | $                        | 235,532   |  |                           | $
|Romeo’s NY Pizza |  |                          | 158,551   |  |                           |  
|Repicci’s Group  |  |                          | 293,216   |  |                           |  
|Others           |  |                          | 631,762   |  |                           |  
|Combined assets  |  | $                        | 1,319,061 |  |                           | $



Results of Operations





Revenues. We had revenues in the
amount of $1,625,768 and $1,150,251 for the years ended December 31, 2017 and 2016, respectively. The increase in revenue
was primarily associated with increases in sales of ice cream. We expect revenue to increase during 2018, as we will realize
a full operating cycle for our current operating subsidiaries and planned expansion.



Cost of Goods Sold. We had costs
of sales in the amount of $1,431,909 and $797,073 for the years ended December 31, 2017 and 2016, respectively. The increase
in cost of sales were also primarily attributable to increase in sales of ice cream locations during the year and reclass of
depreciation from operating expenses to cost of goods sold.



Operating Expenses. Operating expenses
consisted of depreciation, amortization and general and administrative expenses. We had operating expenses of $3,186,399 and
$2,517,945 for the years ended December 31, 2017 and 2016, respectively. The operating expenses in 2016 were primarily attributable
to the issuance of 7,728,589 shares of common stock for marketing, management and financial strategies, resulting in non-cash
stock based compensation of $1,020,602 during the year ended December 31, 2016. Comparatively, we had non-cash stock based
compensation of $285,623 in 2017 due to the issuance of 1,806,907 shares of common stock during the yea rand we had a loss due
to impairment of goodwill of $932,529 and loss on disposal of assets of $38,584 from our Romeo’s Pizza stores, Other operating
expenses remained relatively fixed for the year. Also, the Company has reclassed depreciation from other expenses in year
end December 31, 2016 to operating expense and cost of sales for year end December 31, 2017, resulting in $160,171 in additional
operating expense.



Non-employee stock compensation.
During the years ended December 31, 2017 and 2016, we issued a total of 1,306,907 and 7,728,589 shares of common stock, respectively,
to four different consultants for marketing, management and financial strategies. The fair value of the stock issuance was determined
by the fair value of the Company’s common stock on the grant date, at prices ranging from $0.05-$0.24 per share. Accordingly,
we recognized stock based compensation of $215,623 and $1,020,602 for the years ended December 31, 2017 and 2016, respectively,
in connection with these issuances. These amounts are included in our financial statements.



Change in value of derivative liability.
During the years ended December 31, 2017 and 2016 the change in value of derivative liability amounted to $(36,469) and
$1,731, respectively. In 2017, we issued 10 convertible promissory notes totaling $729,378, all of which were convertible
into shares of the Company’s common stock at discount to the market. As a result, we had change in value of derivative liability
amounted to $(36,469). We premeasured the fair value of the converted amount at the conversion date and increased the derivative
liabilities to $2,236,656, which was credited to additional paid-in capital at the conversion.



Interest Expense during the years
end December 31, 2017 and 2016, interest expense amounted to $111,682 and $48,789, respectively. The increase in interest
was a result of new borrowings in 2017.



Net Loss. As a result of the foregoing,
we had a net loss of $3,651,995 for the December 31, 2017, which is compared to the net loss for the December 31, 2016
of $2,254,492.



Our activities have a focus on growing
revenue. We plan to continue this strategy into 2018.









11







To try to operate at a break-even level
based upon our current level of proposed business activity, we believe that we must generate approximately $20,000,000 in revenue
per year. Each dollar of revenue is not directly tied to increasing costs. We believe that we can become profitable without incurring
additional costs under our current operating cost structure. However, if our forecasts are inaccurate, we will need to raise additional
funds. In the event that we need additional capital, our directors have orally agreed to loan such funds as may be necessary through
December 31, 2017 for working capital purposes, although they have no obligation to do so.



On the other hand, if we decide that we
cannot operate at a profit in our current configuration, we may choose to scale back our operations to operate at break-even with
a smaller level of business activity, while adjusting our overhead to meet the revenue from current operations. In such event,
we will probably not be profitable. In addition, we expect that we will need to raise additional funds if we decide to pursue more
rapid expansion, the development of new or enhanced services or products, appropriate responses to competitive pressures, or the
acquisition of complementary businesses or technologies, or if we must respond to unanticipated events that require us to make
additional investments. We cannot assure that additional financing will be available when needed on favorable terms, or at all.



We expect to incur operating losses in future periods because
we will be incurring expenses and not generating sufficient revenues. We expect approximately $600,000 in operating costs over
the next twelve months. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the
future to cover these operating costs. Failure to generate sufficient revenues or additional financing when needed could cause
us to go out of business.



Liquidity and Capital Resources





As of December 31, 2017, we had cash and
cash equivalents of $68,986 and a working capital deficit of $4,558,777. As of December 31, 2016, we had cash and cash
equivalents of $62,948 and a working capital deficit of $3,897,131.



Net cash used for operating activities
was $(614,904) for the December 31, 2017, which was comparable to the net cash used in operating activities of $(198,135)
for the December 31, 2016. The increase in the amount of net cash used in operating activities in 2016 compared to last year was
primarily attributable to a greater amount of non-cash items during the 2016 such as common stock issued for services, accrued
expenses and loss on impairment of Goodwill.



Net cash used in investing activities
was $12,800 for the December 31, 2017 compared with cash provided by investing activities of $12,972 during the December
31, 2016. The cash flows provided by investing activities in 2016 was primarily attributable to the purchase of fixed assets in,
offset by the cash from disposal of fixed assets in the discontinued operations.



Cash flows provided by financing activities
were $633,742 for the December 31, 2017, which compares to cash flows provided by financing activities of $176,519 for the December
31, 2016. These cash flows were related to sales of stock in the amounts of $40,000 and $136,500 during the years ended December
31, 2017 and 2016, respectively. In addition, during 2017, we had $687,200 in proceeds from notes payable, of which $-0- was with
a related party. These amounts were partially offset by repayments of $78,684 to certain notes payable. Comparatively, during
2016, financing activities provided $28,624 in proceeds from notes payable, which included $11,124 from a related party related
party, partially offset by note payable repayments of $61,279 during the year.



Over the next twelve months we expect significant
capital costs to develop operations since we have plans for acquisitions in 2018. Our operating costs of will primarily be used
for operations.



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









12







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



Off-Balance Sheet Arrangements



We have no off-balance sheet arrangements
with any party.



Plan of Operation



At Cardiff, we acquire or merge with
middle market companies by providing them the ability to have an infusion of equity into their business or providing them the
ability to exit equity out of their company. Our focus is not industry or geographic-specific, but rather proven management, market
and margin - we are opportunity oriented.



We target acquisitions of mature, high
growth, niche companies. Our target companies' proven management maintains full operational control, meaning our acquisitions
become standalone autonomous subsidiaries that gain the advantages of a public company without losing their operational independence.
For investors, our goal is to provide a diversified lower risk platform to protect and safely enhance your investment by continually
adding assets and holdings. By employing a merge, acquire and hold strategy, we expect to maximize the value and potential of
private, often family run, enterprises while providing diversification and risk mitigation for all shareholders. Our portfolio
is comprised of mature, high growth and niche companies with great management, in an identifiable market, which they have penetrated
through a significant advantage, and have acceptable margins.



Recent Developments





As of this filing, on May 1st,
2018 we acquired, Red Rock Travel Group agency out of Orlando, Florida.



Current Business Operations





Cardiff Lexington Corp (formerly Cardiff
International, Inc.), is currently structured as a company with holdings of various companies.



The following milestones are estimates
only. The working capital requirements and the projected milestones are approximations only and subject to adjustment based on
sales, costs and needs.



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



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



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









13







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



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



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





REPICCI’S FRANCHISE GROUP: The Company consolidated Repicci Franchise Group, F.D.R. and Refreshment Concepts into Repicci’s Franchise Group. Repicci’s
Franchise Group offers franchisees for the operation of “Repicci’s Italian Ice” franchises. These franchised
stores specialize in the distribution of nonfat frozen confections.



The number of franchise agreements in force
as of December 31, 2016 was 48, five of which are “mobile” unites.



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



| | 1. | Designate an exclusive territory;
| | -- | ---------------------------------

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

| | 3. | Provide initial training of franchisee and employees;
| | -- | -----------------------------------------------------

| | 4. | Provide a company manual and other training aids.
| | -- | -------------------------------------------------



The Company has developed a new “Mobile
Franchise Opportunity”. The total investment for the new opportunity ranges from $155,600 to $165,000, as follows:

$125,000 for a new Mercedes Sprinter Van,
customized for the franchisee, $25,000 for the franchise fee, the balance for product. The Company’s obligation is as above,
except for Item #3, training is specific to the new opportunity.



Critical Accounting Estimates



The discussion and analysis of our financial
condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States (“GAAP”). GAAP requires management to make estimates, judgments
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent
assets and liabilities. We base our estimates on experience and on various other assumptions that we believe to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that may not be readily apparent from other sources. On an on-going basis, we evaluate the appropriateness of our estimates and
we maintain a thorough process to review the application of our accounting policies. Our actual results may differ from these estimates.



We consider our critical accounting estimates
to be those that (1) involve significant judgments and uncertainties, (2) require estimates that are more difficult for management
to determine, and (3) may produce materially different results when using different assumptions. We have discussed these critical
accounting estimates, the basis for their underlying assumptions and estimates and the nature of our related disclosures herein
with the audit committee of our Board of Directors. We believe our accounting policies specific to share-based compensation expense
and estimation of the fair value of derivative liability involve our most significant judgments and estimates that are material
to our consolidated financial statements. They are discussed further below.









14







Derivative Liability





The Company evaluates its financial instruments
to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial
instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then
re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative
financial instruments, the Company uses the probability weighted average Lattice Binomial models to value the derivative instruments
at inception and on subsequent valuation dates through the December 31, 2017 reporting date. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Derivative liabilities are classified as current liabilities as of December 31, 2017 and December 31, 2016.



Share-based compensation expense



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 lattice-binomial option pricing valuation model. The ranges of assumptions
for inputs are as follows:



| | • | Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees expected exercise and post vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------











15






| | • | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f) (2)(ii) a thinly traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for 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
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | • | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



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 – Nonemployees



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 Subtopic 505-50 of the FASB Accounting
Standards Codification (“Subtopic 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:



| | • | Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









16







| |  | 
| |  | 

| | • | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f) (2)(ii) a thinly traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| | • | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| | • | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Pursuant to ASC paragraph 505-50-257, if
fully vested, no 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.



Inflation



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



Seasonality.



We do not expect our revenues to be impacted
by seasonal demands for our services.  However Repicci’s is a seasonal business who has shown growth each year in total
revenue.









17









ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK.



We are a smaller reporting company as defined
by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.



See next page. Remainder of this page intentionally
left blank.



















































18







INDEX TO
FINANCIAL STATEMENTS



|                                                          |  | Page
|--------------------------------------------------------- |  | ----
|Reports of Independent Registered Public Accounting Firm  |  | 20  
|                                                          |  |     
|Consolidated Balance Sheets                               |  | 22  
|                                                          |  |     
|Consolidated Statements of Operations                     |  | 23  
|                                                          |  |     
|Consolidated Statements of Shareholders’ Equity (Deficit) |  | 24  
|                                                          |  |     
|Consolidated Statements of Cash Flows                     |  | 26  
|                                                          |  |     
|Notes to Consolidated Financial Statements                |  | 27  













19









REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM





To the Shareholders and Board of Directors of

Cardiff Lexington Corp.

(formerly Cardiff International, Inc.)



Opinion on the Financial Statements



We have audited the accompanying
consolidated balance sheet of Cardiff Lexington Corp (formerly Cardiff International, Inc.) and its subsidiaries (collectively,
the “Company”) as of December 31, 2017, and the related consolidated statements of operations, stockholders’
deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2017, and the results of their operations and their cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.



Going Concern Matter



The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.



Restatement



As discussed in Note 18 the financial
statements have been restated for changes to previously issued financial statements that were issued erroneously by the Company.



Basis for Opinion



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



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



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



/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

June 29, 2018



We have served as the Company's
auditor since 2017.











20





















REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Board of Directors and Stockholders of Cardiff International,
Inc.



We have audited the accompanying consolidated
balance sheet of Cardiff International, Inc. (the “Company”) as of December 31, 2016 and the related consolidated statements
of operations, stockholders’ equity, and cash flows for the year ended December 31, 2016. Cardiff International, Inc.’s
management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements
based on our audit.



We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.



In our opinion, based upon our audit the
consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cardiff
International, Inc. as of December 31, 2016 and the results of its operations and its cash flows for the year ended December 31,
2016, in conformity with accounting principles generally accepted in the United States of America.



The accompanying consolidated financial
statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements,
The Company has suffered net losses and has had negative cash flows from operating activities during the year ended December 31,
2016. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.





/s/ KLJ & Associates, LLP



KLJ & Associates, LLP Edina, MN

April 17, 2017



















21









CARDIFF LEXINGTON CORP. (FORMERLY CARDIFF INTERNATIONAL, INC.) AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2017 AND DECEMBER 31, 2016







|                                                                                                                                                                                          |  | 2017       |             |   | 2016 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | ----------- | - | ---- | -
|ASSETS                                                                                                                                                                                    |  | (Restated) |             |   |      |  
|                                                                                                                                                                                          |  |            |             |   |      |  
|Current assets                                                                                                                                                                            |  |            |             |   |      |  
|Cash                                                                                                                                                                                      |  |            | 68,986      |   |      | $
|Accounts receivable-net                                                                                                                                                                   |  |            | 63,061      |   |      |  
|Inventory-net                                                                                                                                                                             |  |            | 46,928      |   |      |  
|Prepaid and other                                                                                                                                                                         |  |            | 11,631      |   |      |  
|Total current assets                                                                                                                                                                      |  |            | 190,606     |   |      |  
|Property and equipment, net of accumulated depreciation of $1,030,231 and
    $838,736, respectively                                                                                      |  |            | 491,474     |   |      |  
|Land                                                                                                                                                                                      |  |            | 603,000     |   |      |  
|Intangible assets, net                                                                                                                                                                    |  |            | 15,561      |   |      |  
|Deposits                                                                                                                                                                                  |  |            | 16,600      |   |      |  
|Due from related party                                                                                                                                                                    |  |            | 1,820       |   |      |  
|Investment                                                                                                                                                                                |  |            | –           |   |      |  
|Goodwill                                                                                                                                                                                  |  |            | –           |   |      |  
|Total assets                                                                                                                                                                              |  |            | 1,319,061   |   |      | $
|                                                                                                                                                                                          |  |            |             |   |      |  
|LIABILITIES AND SHAREHOLDERS' (DEFICIT)                                                                                                                                                   |  |            |             |   |      |  
|                                                                                                                                                                                          |  |            |             |   |      |  
|Current liabilities                                                                                                                                                                       |  |            |             |   |      |  
|Accounts payable                                                                                                                                                                          |  |            | 206,739     |   |      | $
|Accrued expenses                                                                                                                                                                          |  |            | 245,446     |   |      |  
|Accrued expenses - related parties                                                                                                                                                        |  |            | 495,250     |   |      |  
|Interest payable                                                                                                                                                                          |  |            | 312,192     |   |      |  
|Accrued payroll taxes                                                                                                                                                                     |  |            | 2,047       |   |      |  
|Due to officers and shareholders                                                                                                                                                          |  |            | 77,640      |   |      |  
|Line of credit                                                                                                                                                                            |  |            | 15,498      |   |      |  
|Common stock to be issued                                                                                                                                                                 |  |            | 500         |   |      |  
|Series H preferred shares to be issued                                                                                                                                                    |  |            | –           |   |      |  
|Notes payable, unrelated party                                                                                                                                                            |  |            | 215,979     |   |      |  
|Notes payable - related party                                                                                                                                                             |  |            | 144,189     |   |      |  
|Convertible notes payable, net of debt discounts of $245,494 and $21,833, respectively                                                                                                    |  |            | 616,381     |   |      |  
|Convertible notes payable - related party                                                                                                                                                 |  |            | 165,000     |   |      |  
|Derivative Liability                                                                                                                                                                      |  |            | 2,236,656   |   |      |  
|Income Tax payable                                                                                                                                                                        |  |            | 15,865      |   |      |  
|Total current liabilities                                                                                                                                                                 |  |            | 4,749,382   |   |      |  
|                                                                                                                                                                                          |  |            |             |   |      |  
|Total liabilities                                                                                                                                                                         |  |            | 4,749,382   |   |      |  
|                                                                                                                                                                                          |  |            |             |   |      |  
|Shareholders' (deficit)                                                                                                                                                                   |  |            |             |   |      |  
|Preferred stock                                                                                                                                                                           |  |            |             |   |      |  
|Preferred Stock all classes                                                                                                                                                               |  |            | 8,849       |   |      |  
|Preferred Stock Series A - 4 Shares authorized, with par value of $.001, 1 and 1 share issued and outstanding at December 31, 2017 and December 31, 2016                                  |  |            |             |   |      |  
|Preferred Stock Series B- 3,000,000 shares authorized, with par value of $.001, 2,798,205 and 4,836,031 shares issued and outstanding at December 31, 2017 and December 31, 2016          |  |            |             |   |      |  
|Preferred Stock Series C- 500 shares authorized, with par value of $.0.001, 117 and 118 shares issued and outstanding at December 31, 2017 and December 31, 2016                          |  |            |             |   |      |  
|Preferred Stock Series D- 800,000 shares authorized, with par value of
    $.001, 400,000 and 400,000 shares issued and outstanding at December 31, 2017 and December 31, 2016            |  |            |             |   |      |  
|Preferred Stock Series E- 1,000,000 shares authorized, with par value of
    $.001, 241,199 and 241,199 shares issued and outstanding at December 31, 2017 and December 31, 2016          |  |            |             |   |      |  
|Preferred Stock Series F- 800,000 shares authorized, with par value of
    $.001, 280,069 and 280,069 shares issued and outstanding at December 31, 2017 and December 31, 2016            |  |            |             |   |      |  
|Preferred Stock Series F-1- 800,000 shares authorized, with par value of
    $.001, 57,194 and 172,751 shares issued and outstanding at December 31, 2017 and December 31, 2016           |  |            |             |   |      |  
|Preferred Stock Series G- 20,000,000 shares authorized,
    with par value of $.001, 0 and 0 shares issued and outstanding at December 31, 2017 and December 31, 2016                     |  |            |             |   |      |  
|Preferred Stock Series H- 4,859,379 shares authorized,
    with par value of $.001, 4,859,379 and 0 shares issued and outstanding at December 31, 2017 and December 31, 2016              |  |            |             |   |      |  
|Preferred Stock Series H-1- 3,000,000 shares authorized,
    with par value of $.001,0 and 0 shares issued and outstanding at December 31, 2017 and December 31, 2016                     |  |            |             |   |      |  
|Preferred Stock Series I- 20,000,000 shares authorized,
    with par value of $.001, 203,655 and
    0 shares issued and outstanding at December 31, 2017 and December 31, 2016           |  |            |             |   |      |  
|Preferred Stock Series J- 10,000,000 shares authorized, with par value of $.001, 0 and 0 shares issued and outstanding at December 31, 2017 and December 31, 2016                         |  |            |             |   |      |  
|Preferred Stock Series J1- 7,500,000 shares authorized, with par value of $.001, 0 and 0 shares issued and outstanding at December 31, 2017 and December 31, 2016                         |  |            |             |   |      |  
|Preferred Stock Series K- 9,607,840 shares authorized, with par value of $.001, 0 and 0 shares issued and outstanding at December 31, 2017 and December 31, 2016                          |  |            |             |   |      |  
|Preferred Stock Series K1-35,000,000 shares authorized, with par value of $.001, 0 and 0 shares issued and outstanding at December 31, 2017 and December 31, 2016                         |  |            |             |   |      |  
|Common stock; 1,000,000,000 shares authorized with $0.001 par value;
    66,029,791 and 25,223,578 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively |  |            | 66,031      |   |      |  
|Additional paid-in capital                                                                                                                                                                |  |            | 45,608,151  |   |      |  
|Accumulated deficit                                                                                                                                                                       |  |            | (49,113,352 | ) |      |  
|Total shareholders' (deficit)                                                                                                                                                             |  |            | (3,430,321  | ) |      |  
|                                                                                                                                                                                          |  |            |             |   |      |  
|Total liabilities and shareholders' (deficit)                                                                                                                                             |  |            | 1,319,061   |   |      | $





The accompanying notes are an integral
part of these financial statements









22









CARDIFF LEXINGTON CORP. (FORMERLY CARDIFF INTERNATIONAL, INC.) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS
ENDED DECEMBER 31, 2017 AND 2016









|                                        |  | December 31, 2017 |            |   | December 31, 2016 |  
|--------------------------------------- |  | ----------------- | ---------- | - | ----------------- | -
|                                        |  | (Restated)        |            |   |                   |  
|REVENUE                                 |  |                   |            |   |                   |  
|Rental income                           |  | $                 | 193,601    |   |                   | $
|Sales of pizza                          |  |                   | 592,445    |   |                   |  
|Sales of ice cream                      |  |                   | 474,546    |   |                   |  
|Sales to franchisees                    |  |                   |            |   |                   |  
|Ice cream                               |  |                   | 131,487    |   |                   |  
|Franchise fees                          |  |                   | 81,435     |   |                   |  
|Royalty fees                            |  |                   | 19,500     |   |                   |  
|Truck sales and build out               |  |                   | 129,000    |   |                   |  
|Other                                   |  |                   | 3,754      |   |                   |  
|Total revenue                           |  |                   | 1,625,768  |   |                   |  
|                                        |  |                   |            |   |                   |  
|COST OF SALES                           |  |                   |            |   |                   |  
|Rental business                         |  |                   | 155,416    |   |                   |  
|Pizza restaurants                       |  |                   | 429,779    |   |                   |  
|Ice cream stores                        |  |                   | 846,714    |   |                   |  
|Other                                   |  |                   | –          |   |                   |  
|Total cost of sales                     |  |                   | 1,431,909  |   |                   |  
|                                        |  |                   |            |   |                   |  
|GROSS MARGIN                            |  |                   | 193,859    |   |                   |  
|                                        |  |                   |            |   |                   |  
|OPERATING EXPENSES                      |  |                   |            |   |                   |  
|Depreciation and amortization expense   |  |                   | 160,171    |   |                   |  
|Goodwill Impairment                     |  |                   | 932,529    |   |                   |  
|Loss on disposal of assets              |  |                   | 38,584     |   |                   |  
|Selling, general and administrative     |  |                   | 2,055,115  |   |                   |  
|Total operating cost                    |  |                   | 3,186,399  |   |                   |  
|                                        |  |                   |            |   |                   |  
|(LOSS) FROM OPERATIONS                  |  |                   | (2,992,540 | ) |                   |  
|                                        |  |                   |            |   |                   |  
|OTHER INCOME (EXPENSE)                  |  |                   |            |   |                   |  
|Other Income                            |  |                   | 108,234    |   |                   |  
|(Loss) Gain from extinguishment of debt |  |                   | (45,933    | ) |                   |  
|Change in value of derivative liability |  |                   | (36,469    | ) |                   |  
|Interest expense                        |  |                   | (111,682   | ) |                   |  
|Amortization of debt discounts          |  |                   | (573,605   | ) |                   |  
|Total other income (expenses)           |  |                   | (659,455   | ) |                   |  
|                                        |  |                   |            |   |                   |  
|NET INCOME (LOSS) FOR THE PERIOD        |  | $                 | (3,651,995 | ) |                   | $
|                                        |  |                   |            |   |                   |  
|                                        |  |                   |            |   |                   |  
|INCOME (LOSS) PER COMMON SHARE          |  |                   |            |   |                   |  
|-BASIC AND DILUTED                      |  | $                 | (0.08      | ) |                   | $
|                                        |  |                   |            |   |                   |  
|WEIGHTED AVERAGE NUMBER OF COMMON       |  |                   |            |   |                   |  
|SHARES - BASIC AND DILUTED              |  |                   | 43,405,712 |   |                   |  







The accompanying
notes are an integral part of these financial
statements









23









CARDIFF
LEXINGTON CORP. (FORMERLY CARDIFF INTERNATIONAL, INC.)

CONSOLIDATED
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)

FOR
THE YEARS ENDED DECEMBER 31, 2015, 2016 and 2017





|                                                                  | Preferred Stock Series A |   | Preferred Stock Series B, D, E, F, F-1, H, I |   | Preferred Stock, Series C |  | Common Stock |           | Additional Paid- |   | Accumulated |   |        |    
|----------------------------------------------------------------- | ------------------------ | - | -------------------------------------------- | - | ------------------------- |  | ------------ | --------- | ---------------- | - | ----------- | - | ------ | ---
|                                                                  | Shares                   |   | Amount                                       |   | Shares                    |  | Amount       |           | Shares           |   | Amount      |   | Shares |    
|Balance December 31, 2015                                         |                          | 1 |                                              | $ | –                         |  |              | 6,072,047 |                  | $ | 6,072       |   |        | 118
|                                                                  |                          |   |                                              |   |                           |  |              |           |                  |   |             |   |        |    
|Issuance of common stock to be issued                             |                          | – |                                              |   | –                         |  |              | –         |                  |   | –           |   |        | –  
|                                                                  |                          |   |                                              |   |                           |  |              |           |                  |   |             |   |        |    
|Common stock issued for services                                  |                          | – |                                              |   | –                         |  |              | –         |                  |   | –           |   |        | –  
|                                                                  |                          |   |                                              |   |                           |  |              |           |                  |   |             |   |        |    
|Common stock issued for cash                                      |                          | – |                                              |   | –                         |  |              | –         |                  |   | –           |   |        | –  
|                                                                  |                          |   |                                              |   |                           |  |              |           |                  |   |             |   |        |    
|Conversion of Series B Preferred Stock                            |                          | – |                                              |   | –                         |  |              | (591,997  | )                |   | (592        | ) |        | –  
|                                                                  |                          |   |                                              |   |                           |  |              |           |                  |   |             |   |        |    
|Conversion of convertible notes payable                           |                          | – |                                              |   | –                         |  |              | –         |                  |   | –           |   |        | –  
|                                                                  |                          |   |                                              |   |                           |  |              |           |                  |   |             |   |        |    
|Intrinsic value due to BCF                                        |                          | – |                                              |   | –                         |  |              | –         |                  |   | –           |   |        | –  
|                                                                  |                          |   |                                              |   |                           |  |              |           |                  |   |             |   |        |    
|Reclassified Derivative liabilities to Additional Paid in Capital |                          | – |                                              |   | –                         |  |              | –         |                  |   | –           |   |        | –  
|                                                                  |                          |   |                                              |   |                           |  |              |           |                  |   |             |   |        |    
|Net loss                                                          |                          | – |                                              |   | –                         |  |              | –         |                  |   | –           |   |        | –  
|                                                                  |                          |   |                                              |   |                           |  |              |           |                  |   |             |   |        |    
|Balance December 31, 2016                                         |                          | 1 |                                              | $ | –                         |  |              | 5,480,050 |                  | $ | 5,480       |   |        | 118







24









CARDIFF
LEXINGTON CORP. (FORMERLY CARDIFF INTERNATIONAL, INC.)

CONSOLIDATED
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)

FOR
THE YEARS ENDED DECEMBER 31, 2015, 2016 and 2017

(continued)





|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|---------------------------------------------------------------------- |  | - |  | - | - |  |  | ---------- | - | - | ------ | - |  | --- | - | - | - |  |  | ---------- | - | - | ------ | - | - | ---------- | - | - | ----------- | - | - | ---------- | -
|Common stock issued for payment of accrued expenses                    |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | 19,000,000 |   |   | 19,000 |   |   | 1,396,600  |   |   | –           |   |   | 1,415,600  |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Cancellation of Common Stock - accrued liabilities                     |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | (500,000   | ) |   | (500   | ) |   | (2,000     | ) |   | –           |   |   | (2,500     | )
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Conversion of convertible notes payable                                |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | 9,482,587  |   |   | 9,483  |   |   | 134,380    |   |   | –           |   |   | 143,863    |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Common stock issued for debt settlement - related party                |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | 2,244,075  |   |   | 2,244  |   |   | 533,724    |   |   | –           |   |   | 535,968    |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Shares issuance for prior conversion error                             |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | 1,508      |   |   | 1      |   |   | 75         |   |   | –           |   |   | 76         |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Series B Preferred Stock issued for debt settlement                    |  | – |  |   | – |  |  | 24,000     |   | $ | 24     |   |  | –   |   |   | – |  |  | –          |   |   | –      |   |   | 21,756     |   |   | –           |   |   | 21,780     |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Common stock issued for services                                       |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | 2,256,907  |   |   | 2,257  |   |   | 275,014    |   |   | –           |   |   | 277,271    |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Cancellation of Common Stock                                           |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | (1,000,000 | ) |   | (1,000 | ) |   | –          |   |   | –           |   |   | (1,000     | )
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Common stock compensation for shares cancellation                      |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | 50,000     |   |   | 50     |   |   | 2,948      |   |   | –           |   |   | 2,998      |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Preferred B issued for service                                         |  | – |  |   | – |  |  | 15,906     |   | $ | 16     |   |  | –   |   |   | – |  |  | –          |   |   | –      |   |   | 6,338      |   |   | –           |   |   | 6,354      |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Common stock issued for cash                                           |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | 100,000    |   |   | 100    |   |   | 9,900      |   |   | –           |   |   | 10,000     |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Issuance of Series I Preferred Stock for cash                          |  | – |  |   | – |  |  | 112,746    |   | $ | 113    |   |  | –   |   |   | – |  |  | –          |   |   | –      |   |   | 19,887     |   |   | –           |   |   | 20,000     |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Preferred I issued for cash - related party                            |  | – |  |   | – |  |  | 90,909     |   | $ | 101    |   |  | –   |   |   | – |  |  | –          |   |   | –      |   |   | 9,899      |   |   | –           |   |   | 10,000     |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Conversion of Series B Preferred Stock                                 |  | – |  |   | – |  |  | (1,627,732 | ) | $ | (1,628 | ) |  | –   |   |   | – |  |  | 8,138,660  |   |   | 8,139  |   |   | (6,511     | ) |   | –           |   |   | –          |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Conversion of Series F1 Preferred Stock                                |  | – |  |   | – |  |  | (115,955   | ) | $ | (116   | ) |  | –   |   |   | – |  |  | 579,785    |   |   | 580    |   |   | (464       | ) |   | –           |   |   | –          |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Conversion of Series C Preferred Stock                                 |  | – |  |   | – |  |  | –          |   |   | –      |   |  | (1  | ) |   | – |  |  | 100,000    |   |   | 100    |   |   | (100       | ) |   | –           |   |   | –          |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Conversion of Series I Preferred Stock                                 |  | – |  |   | – |  |  | –          |   | $ | –      |   |  | –   |   |   | – |  |  | 352,691    |   |   | 353    |   |   | (353       | ) |   | –           |   |   | –          |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Series H Preferred Stock issued for prior year acquisition             |  | – |  |   | – |  |  | 4,859,379  |   | $ | 4,859  |   |  | –   |   |   | – |  |  | –          |   |   | –      |   |   | 724,048    |   |   | –           |   |   | 728,907    |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Warrants granted                                                       |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | –          |   |   | –      |   |   | 219,210    |   |   | –           |   |   | 219,210    |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Derivative resolution upon conversion                                  |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | –          |   |   | –      |   |   | 405,443    |   |   | –           |   |   | 405,443    |  
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Reclassified to Derivative liabilities from Additional Paid in Capital |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | –          |   |   | –      |   |   | (1,972,999 | ) |   | –           |   |   | (1,972,999 | )
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   | –          |  
|Net loss                                                               |  | – |  |   | – |  |  | –          |   |   | –      |   |  | –   |   |   | – |  |  | –          |   |   | –      |   |   | –          |   |   | (3,651,995  | ) |   | (3,651,995 | )
|                                                                       |  |   |  |   |   |  |  |            |   |   |        |   |  |     |   |   |   |  |  |            |   |   |        |   |   |            |   |   |             |   |   |            |  
|Balance December 31, 2017 (Restated)                                   |  | 1 |  | $ | – |  |  | 8,839,303  |   | $ | 8,849  |   |  | 117 |   | $ | – |  |  | 66,029,791 |   | $ | 66,031 |   | $ | 45,608,151 |   | $ | (49,113,352 | ) | $ | (3,430,321 | )





The accompanying
notes are an integral part of these financial
statements







25









CARDIFF LEXINGTON CORP. (FORMERLY CARDIFF INTERNATIONAL, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS
ENDED DECEMBER 31, 2017 AND 2016







|                                                                                                       |  | 2017       |            |   | 2016 |  
|------------------------------------------------------------------------------------------------------ |  | ---------- | ---------- | - | ---- | -
|                                                                                                       |  | (Restated) |            |   |      |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                   |  |            |            |   |      |  
|Net loss                                                                                               |  | $          | (3,651,995 | ) |      | $
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating
    activities: |  |            |            |   |      |  
|Depreciation                                                                                           |  |            | 227,959    |   |      |  
|Loss from disposal of fixed assets                                                                     |  |            | 38,584     |   |      |  
|(Gain) from debt forgiveness                                                                           |  |            | –          |   |      |  
|Loss from impairment of goodwill                                                                       |  |            | 932,529    |   |      |  
|(Gain) on settlement of liabilities                                                                    |  |            | (38,220    | ) |      |  
|Loss on settlement of note payable - related party                                                     |  |            | 84,153     |   |      |  
|Amortization of loan discount                                                                          |  |            | 573,605    |   |      |  
|Change in value of derivative liability                                                                |  |            | 36,469     |   |      |  
|Stock based compensation                                                                               |  |            | 285,623    |   |      |  
|Warrants expense                                                                                       |  |            | 96,753     |   |      |  
|Convertible note issued for services rendered                                                          |  |            | 80,000     |   |      |  
|(Increase) decrease in:                                                                                |  |            |            |   |      |  
|Accounts receivable                                                                                    |  |            | (31,053    | ) |      |  
|Inventory                                                                                              |  |            | (4,699     | ) |      |  
|Other assets                                                                                           |  |            | (15,072    | ) |      |  
|Deposits                                                                                               |  |            | –          |   |      |  
|Prepaids and other current assets                                                                      |  |            | 25,359     |   |      |  
|Accounts payable                                                                                       |  |            | 140,837    |   |      |  
|Accrued expenses                                                                                       |  |            | (152,261   | ) |      |  
|Interest payable                                                                                       |  |            | 80,740     |   |      |  
|Taxes payable                                                                                          |  |            | (7,579     | ) |      |  
|Accrued payroll taxes                                                                                  |  |            | (39,736    | ) |      |  
|Accrued officers' salaries                                                                             |  |            | 723,100    |   |      |  
|                                                                                                       |  |            |            |   |      |  
|Net cash used in operating activities                                                                  |  |            | (614,904   | ) |      |  
|                                                                                                       |  |            |            |   |      |  
|INVESTING ACTIVITIES                                                                                   |  |            |            |   |      |  
|Purchase of intangible assets                                                                          |  |            | (5,000     | ) |      |  
|Disposal of fixed assets                                                                               |  |            | –          |   |      |  
|Purchase of fixed assets                                                                               |  |            | (7,800     | ) |      |  
|                                                                                                       |  |            |            |   |      |  
|Net cash provided by (used in) investing activities                                                    |  |            | (12,800    | ) |      |  
|                                                                                                       |  |            |            |   |      |  
|FINANCING ACTIVITIES                                                                                   |  |            |            |   |      |  
|Due to related party                                                                                   |  |            | (91,791    | ) |      |  
|Proceeds from sales of stock                                                                           |  |            | 40,000     |   |      |  
|Proceeds from convertible notes payable                                                                |  |            | 687,200    |   |      |  
|Proceeds from notes payable - related party                                                            |  |            | 46,176     |   |      |  
|Proceeds from notes payable -3rd party                                                                 |  |            | 25,343     |   |      |  
|Proceeds from line of credit                                                                           |  |            | 16,841     |   |      |  
|Repayments to line of credit                                                                           |  |            | (11,343    | ) |      |  
|(Repayments to) convertible notes payable                                                              |  |            | (10,000    | ) |      |  
|(Repayments to) notes payable                                                                          |  |            | (68,684    | ) |      |  
|                                                                                                       |  |            |            |   |      |  
|Net cash provided by financing activities                                                              |  |            | 633,742    |   |      |  
|                                                                                                       |  |            |            |   |      |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                   |  |            | 6,038      |   |      |  
|                                                                                                       |  |            |            |   |      |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                         |  |            | 62,948     |   |      |  
|                                                                                                       |  |            |            |   |      |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                               |  | $          | 68,986     |   |      | $
|                                                                                                       |  |            |            |   |      |  
|SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION                                                      |  |            |            |   |      |  
|Cash paid during the period for:                                                                       |  |            |            |   |      |  
|Income tax                                                                                             |  |            | –          |   |      |  
|Interest                                                                                               |  | $          | 30,866     |   |      | $
|                                                                                                       |  |            |            |   |      |  
|                                                                                                       |  |            |            |   |      |  
|NON-CASH INVESTING AND FINANCING ACTIVITIES:                                                           |  |            |            |   |      |  
|Common stock issued for settlement of accrued expense                                                  |  | $          | 1,415,600  |   |      | $
|Common stock issued upon conversion of notes payable                                                   |  | $          | 143,863    |   |      | $
|Common stock issued for settlement of note payable - related party                                     |  | $          | 451,891    |   |      | $
|Conversion of preferred stock into common stock                                                        |  | $          | 1,744      |   |      | $
|Common stock cancellation related to accrued liability                                                 |  | $          | 2,500      |   |      | $
|Series H Preferred Stock issued for prior year acquisition                                             |  | $          | 728,907    |   |      | $
|Series B preferred shares issued for debt settlement                                                   |  | $          | 60,000     |   |      | $
|Debt discount from issuance of warrant                                                                 |  | $          | 219,210    |   |      | $
|Derivative Resolution upon conversion                                                                  |  | $          | 405,443    |   |      | $
|Reclassification to derivative liabilities from additional paid in capital                             |  | $          | 1,972,999  |   |      | $
|Debt discount from derivative liabilities                                                              |  | $          | 535,878    |   |      | $
|Cash carried over from acquisition                                                                     |  | $          | –          |   |      | $





The accompanying
notes are an integral part of these financial
statements









26







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 Lexington Corp (formerly Cardiff International,
Inc.) (“Cardiff”, the “Company”), a publicly held corporation. By December 31, 2016, the Company had completed
the acquisition of six businesses: We Three, LLC; Romeo’s NY Pizza; Edge View Properties, Inc.; FDR Enterprises, Inc.; Refreshment
Concepts, LLC; and Repicci’s Franchise Group, LLC.



Description of Business



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;

Refreshment Concepts, LLC acquired on August 10, 2016;

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



Principles of Consolidation



The consolidated financial statements include
the accounts of Cardiff, and its wholly-owned subsidiaries: We Three, LLC; Romeo’s NY Pizza; Edge View Properties, Inc.;
FDR Enterprises, Inc.; Refreshment Concepts, LLC and Repicci’s Franchise Group, LLC. 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.



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.



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.











27






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, 2017 and 2016. 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.



Cash and Cash Equivalents



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



Accounts Receivable





Accounts receivable is reported on the
balance sheet at gross amounts due to the Company. Management closely monitors outstanding accounts receivable and charges off
to expense any balances that are determined to be uncollectible. As of December 31, 2017 and 2016, the Company had accounts receivable
of $63,061 and $32,008, respectively. Accounts receivables are primarily generated from our subsidiaries We Three and Repicci’s
in their normal course of business.





Inventory



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



Property and Equipment



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



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



During the years ended December 31, 2017 and 2016, depreciation
and amortization expense was $227,959 ($108,039 is included in Cost of Goods Sold) and $174,859, respectively.











28






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 year-ended December 31, 2017, the company had Goodwill impairment
of $932,529, related to its acquisitions of FDR Enterprises, Inc.; Refreshment Concepts, LLC; and Repicci’s Franchise Group,
LLC. (collectively referred to as “Repicci’s Group”). The Company based this decision on impairment testing off the underlying assets, expected cash flows,
decreased asset value and other factors.



Valuation of long-lived assets



In accordance with the provisions of Accounting
Standards Codification (“ASC”) Topic 360-10-5, “Impairment or Disposal of Long-Lived Assets”, all
long-lived assets such as plant and equipment and construction in progress held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated discounted net cash flows
expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amounts of the assets exceed the fair value of the assets.



Valuation of Derivative Instruments



Financial Accounting Standards Board (“FASB”)
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. The Company evaluates all of it financial instruments, including stock purchase warrants, to
determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial
instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then
revalued at each reporting date, with changes in the fair value reported as charges or credits to income.



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



Beneficial Conversion Feature



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



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











29






Fair Value Measurements



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



Level Input Definition



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

|Level 2 | Inputs, other than quoted prices included in Level 1, which are observable for the asset or liability through corroboration with
market data at the measurement date.
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Level 3 | Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability
at the measurement date.
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



The following table presents certain investments and liabilities
of the Company’s financial assets measured and recorded at fair value on the Company’s Consolidated Balance Sheets
on a recurring basis and their level within the fair value hierarchy as of December 31, 2017 and 2016.





|                                                       |  | Level 1 |   |  | Level 2 |   |   | Level 3 |  |   | Total     | 
|------------------------------------------------------ |  | ------- | - |  | ------- | - | - | ------- |  | - | --------- | 
|Fair Value of Derivative Liability – December 31, 2017 |  | $       | – |  |         | $ | – |         |  | $ | 2,236,656 | 





|                                                       |  | Level 1 |   |  | Level 2 |   |   | Level 3 |  |   | Total | 
|------------------------------------------------------ |  | ------- | - |  | ------- | - | - | ------- |  | - | ----- | 
|Fair Value of Derivative Liability – December 31, 2016 |  | $       | – |  |         | $ | – |         |  | $ | –     | 



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.











30






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.





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”).





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, 2017 and
2016, the Company did not have any interest and penalties associated with tax positions. As of December 31, 2017 and 2016, 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.









31







The following table sets forth the computation
of basic and diluted earnings per common share for the years ended December 31, 2017 and 2016. During a period of net loss, all
potentially dilutive securities are anti-dilutive. Accordingly, for the years ended December 31, 2017 and 2016, 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:





|                                    |  | For the years ended |           
|----------------------------------- |  | ------------------- | ----------
|                                    |  | December 31, 2017   |           
|                                    |  |                     |           
|Numerator:                          |  |                     |           
|Net (loss)                          |  | $                   | (3,651,995
|                                    |  |                     |           
|Denominator:                        |  |                     |           
|Weighted-average shares outstanding |  |                     | 43,405,712
|                                    |  |                     |           
|Basic (loss) per share              |  | $                   | (0.08     



This does not include the potential dilutive
effect if all exercisable warrants were exercised or conversions of convertible notes and convertible preferred stock as described
below as of December 31, 2017:





|Principal conversion       |  |  | 46,880,298  | 
|-------------------------- |  |  | ----------- | 
|Interest conversion        |  |  | 15,609,600  | 
|Warrants                   |  |  | –           | 
|Preferred Stock conversion |  |  | 314,475,025 | 
|Total                      |  |  | 376,964,923 | 



Going Concern



The accompanying consolidated financial
statements have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization
of assets and liabilities and commitments in the normal course of business. The Company has sustained operating losses since its
inception and has negative working capital and an accumulated deficit. These factors raise substantial doubts about the Company’s
ability to continue as a going concern. As of December 31, 2017, the Company had shareholders’ deficit of $3,430,321. 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, 2017 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 May 2014, the FASB issued ASU 2014-09,
“Revenue from Contracts with Customers (Topic 606),” on revenue recognition. This guidance provides that an entity
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires more detailed disclosures
to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising
from contracts with customers. The original effective date of this guidance was for interim and annual reporting periods beginning
after December 15, 2016, early adoption is not permitted, and the guidance must be applied retrospectively or modified retrospectively.
In July 2015, the FASB approved an optional one-year deferral of the effective date. As a result, we have adopted the modified
retrospective guidance on January 1, 2018.









32







We expect the adoption will have an immaterial
impact to our comparative net income or loss and as such comparative information has not been restated and continues to be reported
under the accounting standards in effect for those periods. We also expect the impact of the adoption of the new standard to be
immaterial to our net income or loss on an ongoing basis, due to the nature of our revenues.



A majority of our sales revenue continues
to be recognized when products sold to customers or service has been rendered.



In February 2016, the FASB issued an accounting
standards update which modifies the accounting for leasing arrangements, particularly those arrangements classified as operating
leases. This update will require entities to recognize the assets and liabilities arising from operating leases on the balance
sheet. This guidance is effective for fiscal and interim periods beginning after December 15, 2018 and is required to be applied
retrospectively to all leasing arrangements. We are currently assessing the effects this guidance may have on our financial statements.





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



|2. | ACQUISITIONS
|-- | ------------



On August 10, 2016, the Company completed
the acquisitions of FDR Enterprises, Inc.; Refreshment Concepts, LLC; and Repicci’s Franchise Group, LLC. (collectively
referred to as “Repicci’s Group”). Pursuant to the acquisition agreement, the Company agreed to issue 4,859,379
shares of Series H Preferred Stock as consideration for the acquisition of Repicci’s Group. The combined book value of Repicci’s
Group was $(203,622) as set forth below. Based on the price of $.15 per share for the Series H Preferred Stock, which was determined
by the market price of common stock at $.12 per share on the acquisition date multiplied by the conversion ratio of 1:1.25, the
fair value of the stock issuance of Series H Preferred Stock was $728,907, resulting in the goodwill of $932,529. The 4,859,379
shares of Series H Preferred Stock were issued subsequently to the date of this report. Accordingly, the Company recorded Series
H Preferred Stock to be issued of $728,907 in the consolidated balance sheet as of December 31, 2016. During year-ended December
31, 2017, the company had Goodwill impairment of $932,529, related to its acquisitions of FDR Enterprises, Inc.; Refreshment Concepts,
LLC; and Repicci’s Franchise Group, LLC. (collectively referred to as “Repicci’s Group”). The Company based this decision on impairment testing off the underlying assets, expected cash flows,
decreased asset value and other factors.





|                                |  | Fair Value |         
|------------------------------- |  | ---------- | --------
|Cash                            |  | $          | 40,033  
|Accounts receivable             |  |            | 87,982  
|Inventory                       |  |            | 34,024  
|Other assets                    |  |            | 38,566  
|Property and equipment          |  |            | 389,373 
|Goodwill                        |  |            | 932,529 
|Liabilities                     |  |            | (415,563
|Notes payable – related parties |  |            | (378,037
|Total                           |  | $          | 728,907 



Repicci’s Group offers franchisees
for the operation of “Repicci’s Italian Ice” franchises. These franchised stores specialize in the distribution
of nonfat frozen confections. The results of the operations for Repicci’s Group have been included in the consolidated financial
statements since the date of the acquisitions (August 10, 2016). The following table presents the unaudited pro forma results of
continuing operations for December 31, 2016, as if the acquisitions had been consummated at the beginning of the
period presented. The pro forma results of continuing operations are prepared for comparative purposes only and do not necessarily
reflect the results that would have occurred had the acquisitions occurred at the beginning of the period presented or the results
which may occur in the future. The Pro forma adjustments are to eliminate all significant intercompany accounts and transactions
within Repicci’s Group.









33









CARDIFF LEXINGTON CORP. (FORMERLY CARDIFF
INTERNATIONAL, INC. )

Pro Forma Combined Statement of Operations

For the year ended December 31, 2016

(Unaudited)



|                                         |  | CDIF and subsidiaries |            |   | F.D.R Enterprises |   |         | Refreshment Concept LLC |  |   | Repicci’s Franchise Group |   |  | Pro forma adjustment |         |   | Pro forma combined total |  
|---------------------------------------- |  | --------------------- | ---------- | - | ----------------- | - | ------- | ----------------------- |  | - | ------------------------- | - |  | -------------------- | ------- | - | ------------------------ | -
|REVENUE                                  |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|Rental income                            |  | $                     | 152,120    |   |                   | $ | –       |                         |  | $ | –                         |   |  | $                    | –       |   |                          | $
|Sales of pizza                           |  |                       | 603,787    |   |                   |   | –       |                         |  |   | –                         |   |  |                      | –       |   |                          |  
|Sales of ice cream                       |  |                       | –          |   |                   |   | 342,123 |                         |  |   | 489,022                   |   |  |                      | 278,098 |   |                          |  
|Other                                    |  |                       | 24,928     |   |                   |   | –       |                         |  |   | –                         |   |  |                      | –       |   |                          |  
|Total revenue                            |  |                       | 780,835    |   |                   |   | 342,123 |                         |  |   | 489,022                   |   |  |                      | 278,098 |   |                          |  
|                                         |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|COST OF SALES                            |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|Rental business                          |  |                       | 145,795    |   |                   |   | –       |                         |  |   | –                         |   |  |                      | –       |   |                          |  
|Pizza restaurants                        |  |                       | 404,481    |   |                   |   | –       |                         |  |   | –                         |   |  |                      | –       |   |                          |  
|Ice cream stores                         |  |                       | –          |   |                   |   | 225,514 |                         |  |   | 419,550                   |   |  |                      | 172,681 |   |                          |  
|Other                                    |  |                       | –          |   |                   |   | –       |                         |  |   | –                         |   |  |                      | –       |   |                          |  
|Total cost of sales                      |  |                       | 550,276    |   |                   |   | 225,514 |                         |  |   | 419,550                   |   |  |                      | 172,681 |   |                          |  
|                                         |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|GROSS MARGIN                             |  |                       | 230,559    |   |                   |   | 116,609 |                         |  |   | 69,472                    |   |  |                      | 105,417 |   |                          |  
|                                         |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|OPERATING EXPENSES                       |  |                       | 2,180,974  |   |                   |   | 120,342 |                         |  |   | 137,833                   |   |  |                      | 175,663 |   |                          |  
|                                         |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|GAIN (LOSS) FROM OPERATIONS              |  |                       | (1,950,415 | ) |                   |   | (3,733  | )                       |  |   | (68,361                   | ) |  |                      | (70,246 | ) |                          |  
|                                         |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|OTHER INCOME (EXPENSE)                   |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|Gain on settlement of debt               |  |                       | 3,000      |   |                   |   | –       |                         |  |   | –                         |   |  |                      | –       |   |                          |  
|(Loss) gain on disposal of fixed asset   |  |                       | (5,151     | ) |                   |   | –       |                         |  |   | –                         |   |  |                      | –       |   |                          |  
|Amortization of debt discounts           |  |                       | (45,667    | ) |                   |   | –       |                         |  |   | –                         |   |  |                      | –       |   |                          |  
|Change in value of derivative liability  |  |                       | 1,731      |   |                   |   | –       |                         |  |   | –                         |   |  |                      | –       |   |                          |  
|Interest expense                         |  |                       | (44,533    | ) |                   |   | (1,987  | )                       |  |   | (4,736                    | ) |  |                      | (1,005  | ) |                          |  
|Total other expenses                     |  |                       | (90,620    | ) |                   |   | (1,987  | )                       |  |   | (4,736                    | ) |  |                      | (1,005  | ) |                          |  
|                                         |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|NET  (LOSS) FOR THE PERIOD               |  |                       | (2,041,035 | ) |                   |   | (5,720  | )                       |  |   | (73,097                   | ) |  |                      | (71,251 | ) |                          |  
|                                         |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|(LOSS) PER COMMON SHARE                  |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|- Basic                                  |  | $                     | (0.15      | ) |                   |   | **      |                         |  |   | **                        |   |  |                      | **      |   |                          | $
|                                         |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  
|- Basic                                  |  |                       |            |   |                   |   |         |                         |  |   |                           |   |  |                      |         |   |                          |  



** Less than $.01







34







|3. | PLANT AND EQUIPMENT, NET
|-- | ------------------------





Plant and equipment, net as of December
31, 2017 and 2016 was $491,474 and $736,672, respectively, consisting of the following:



|                                 |  | December 31,  2017 |            |   | December 31,  2016 | 
|-------------------------------- |  | ------------------ | ---------- | - | ------------------ | 
|                                 |  |                    |            |   |                    | 
|Furniture, fixture and equipment |  |                    | 904,375    |   |                    | 
|Leasehold improvements           |  |                    | 672,159    |   |                    | 
|                                 |  |                    | 1,576,534  |   |                    | 
|Less: accumulated depreciation   |  |                    | (1,085,060 | ) |                    | 
|Plant and equipment, net         |  |                    | 491,474    |   |                    | 



During the years ended December 31,
2017 and 2016 depreciation expense was $227,959 and $174,859, respectively. The year end December 31, 2016 depreciation
expense is included in selling, general and administrative expenses. During the year end December 31, 2017. The Company
reclassed depreciation as a separate item in the operational expense of $160,171 and included $108,039 in depreciation in
cost of goods sold. The prior year has not been reclassified.



During the December 31, 2017, the Company
disposed fixed assets of $101,434, resulting in accelerated depreciation expense of $101,434 from disposal of fixed assets.



During the December 31, 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 purchased
a vehicle for $3,974 and other fixed assets for $14,691.



|4. | LAND
|-- | ----



As of December 31, 2017 and 2016, 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.



|5. | ACCRUED EXPENSES
|-- | ----------------





As of December 31, 2017 and 2016, the Company
had accrued expenses of $740,696 and $1,717,725, respectively, consisted of the following:



|                                 |  | December 31,  2017 |         |  | December 31,  2016 | 
|-------------------------------- |  | ------------------ | ------- |  | ------------------ | 
|                                 |  |                    |         |  |                    | 
|Accrued salaries                 |  |                    | –       |  |                    | 
|Accrued salaries – related party |  |                    | 470,000 |  |                    | 
|Lease payable – related party    |  |                    | 25,250  |  |                    | 
|Accrued expenses – other         |  |                    | 245,446 |  |                    | 
|Total                            |  |                    | 740,696 |  |                    | 









35








|6. | LINE OF CREDIT
|-- | --------------



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



As of December 31, 2017 and December 31,
2016, The Company had balance of $15,498 and $10,000, respectively.  During the year ended December 31, 2017, total cash advanced
amounted to $16,841 and cash payment made was $11,343.



|7. | RELATED PARTY TRANSACTIONS
|-- | --------------------------



Due to Officers and Officer Compensation



During the year ended December 31, 2017, the Company repaid
a total of $91,791 to related parties.



Refreshment Concepts, LLC leases its premises
from its prior owner under a month-to-month lease at the rate of $1,500 per month. As of December 31, 2017 and December 31, 2016,
the Company had lease payable of $25,250 to the related party, which is reflected in accrued expenses – related party.



On January 24, 2017, the Company issued
2,010,490 shares of Common Stock to settle $482,518 due to the prior owner of Refreshment Concepts LLC, pursuant to the Acquisition
Agreement, dated August 10, 2016. 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 $0.24 per share, resulting in loss from extinguishment of debt in amount
of $80,420. As of December 31, 2017 and December 31, 2016, in addition to the lease payable of $25,250, the outstanding balance
due (included in notes payable to related parties on the financial statements) to the same prior owner was $44,189 and $57,695,
respectively.



On January 24, 2017, the Company issued
173,585 shares of Common Stock to settle $41,660 due to the prior owner of Repicci’s Franchise Group LLC, pursuant to the
Acquisition Agreement, dated August 10, 2016. 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 $0.24 per share, resulting in loss from extinguishment of debt
in amount of $6,943. As of December 31, 2017 and December 31, 2016, the outstanding balance due (included in accrued liabilities
to related parties on the financial statements) to the same prior owner was $0 and $40,550, respectively.



During the second quarter of 2017, the
prior owner of Repicci’s Franchise Group LLC submitted a subscription agreement to the Company regarding the purchase of
90,909 shares of the Company’s Series I Preferred Stock by cash payment of $10,000, which was collected during the second
quarter of 2017. The transaction was independently negotiated between the Company and the related party. The proceeds from the
subscription agreement mitigated the Company’s cash pressure in short term. The 90,909 shares of Series I Preferred Stock
were issued as of December 31, 2017.



During the second quarter of 2017, the
Company issued 906,907 shares of Common Stock to We three Inc., a related party, for services rendered. 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
$.0799 per share. Accordingly, the Company recognized stock based compensation of $72,462 to the consolidated statements of operations
for December 31, 2017.



The Company borrows funds from Daniel Thompson,
who is a Shareholder and Officer of the Company. The terms of repayment stipulate the unsecured loans are due 24 months 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, 2017 and
December 31, 2016, the Company had $77,640 and $84,540 due (included in due to officers and shareholders on the financial statements)
to Daniel Thompson, respectively.



In addition, the Board of Directors of
the Company approved to increase Daniel Thompson’s compensation to $25,000 per month from $20,000 effective January 1, 2017.
Accordingly, a total salary of $300,000 and $180,000 were accrued and reflected as an expense to Daniel Thompson during the year
ended December 31, 2017 and 2016, respectively. During the three- month period ended September 30, 2017, the Company issued 10,000,000
shares of Common Stock for forgiveness of $800,000 in accrued salaries. The accrued salaries payable to Daniel Thompson was $117,500
and $742,500 as of December 31, 2017 and December 31, 2016, respectively.









36







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 in 2015 and
$10,000 per month in 2016. Mr. Levy resigned on June 7, 2016. A total salary of $0 and $60,000 were accrued and reflected as an
expense during the year ended December 31, 2017 and 2016, respectively. During the three- month period ended September 30, 2017,
the Company issued 1,000,000 shares of Common Stock for forgiveness of $80,000 in accrued salaries. The total balance due to Mr.
Levy for accrued salaries at December 31, 2017 and December 31, 2016 were $160,000 and $240,000, respectively.



The Company had an employment agreement
with the Chief Operating Officer, Mr. Roberts, whereby the Company provided for compensation of $10,000 per month effective in
June 2016. A total salary of $120,000 and $60,000 were accrued and reflected as an expense during the year ended December 31,
2017 and 2016, respectively. The total balance due to Mr. Roberts for accrued salaries at December 31, 2017 and December 31, 2016
were $70,000 and $60,000, respectively. In addition, the Company agreed to grant Mr. Roberts stock options for a minimum of 300,000
shares of the Company's common stock at an exercise price of 50% of the current last ten (10) day stock average per share, and
600,000 shares of common stock as a key officer employment incentive to be earned and vested on a pro rata basis at 25,000 shares
per month for twenty-four (24) months. The fair value of both 300,000 options and 600,000 shares were determined by the fair value
of the Company’s Common Stock on the grant date, at a price of approximately $0.226 per share. On August 8, 2017, Mr.
Roberts accepted the offer from the Company to issue 3,000,000 common shares for forgiveness of all accrued expenses, options,
and common stock granted totaling $135,600 through June 2016.  Additionally, the Company issued 1,000,000 shares of Common
Stock as a bonus to Mr. Roberts for his past service to 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 $.07 per share. Accordingly,
the Company recognized stock based compensation of $70,000 to the consolidated statements of operations for the year ended December
31, 2017.



The Board of Directors of the Company approved
to increase Chief Executive Officer, Mr. Cunningham’s compensation to $25,000 per month from $15,000 effective January 1,
2017. A total salary of $300,000 and $135,000 were accrued and reflected as an expense during the year ended December 31, 2017
and 2016, respectively. During the three- month period ended September 30, 2017, the Company issued 5,000,000 shares of Common
Stock for forgiveness of $400,000 in accrued salaries. The total balance due to Mr. Cunningham for accrued salaries at December
31, 2017 and December 31, 2016 were $122,500 and $360,000, respectively.



Notes Payable – Related Party



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





|8. | NOTES PAYABLE
|-- | -------------



Notes payable at December 31, 2017 and
December 31, 2016 are summarized as follows:



|                                |  | December 31,  2017 |          |   | December 31,  2016 |  
|------------------------------- |  | ------------------ | -------- | - | ------------------ | -
|                                |  |                    |          |   |                    |  
|Notes Payable – Unrelated Party |  | $                  | 215,979  |   |                    | $
|Notes Payable – Related Party   |  |                    | 144,189  |   |                    |  
|Total                           |  |                    | 360,168  |   |                    |  
|Current portion                 |  |                    | (360,168 | ) |                    |  
|Long-term portion               |  | $                  | –        |   |                    | $



Notes Payable – Unrelated Party

During the year end December 31, 2017,
the Company received $25,343 from third parties and repaid $68,684.









37







On March 12, 2009, the Company entered
into an unsecured preferred debenture agreement (Note 5) with a shareholder for $20,000. The note bore interest at 12% per year
and matured on September 12, 2009. In conjunction with the preferred debenture, the Company issued 2,000,000 warrants to purchase
its Common Stock, exercisable at $0.10 per share and expired on March 12, 2014. As a result, of the warrants issued, the Company
recorded a $20,000 debt discount during 2009 which has been fully amortized. The Company assigned all of its receivables from consumer
activations of the rewards program as collateral on this debenture. On March 24, 2011, the Company amended the note and the principal
balance was reduced to $15,000. The Company was due to pay annual principal payments of $5,000 plus accrued interest beginning
March 12, 2012. On July 20, 2011, the Company repaid $5,000 of the note. No warrants had been exercised before the expiration.
As of December 31, 2017, the Company was in default on this debenture. The balance of the note was $10,989 and $10,989 at December
31, 2017 and December 31, 2016, respectively.



As of December 30, 2017, the Company had
lease payable of $140,317 in connection with 2 capital leases on 2 Mercedes Sprinter Vans for the ice cream section. There are
purchase options at the end of all lease terms that are based on the fair market value of the vans at the time. The leases are
not in default at the current time.



The balance of $64,673 in notes payable
to unrelated party was due to the auto loan for the vehicles used in the Pizza restaurants and Repicci’s Group and for daily
operations. The loans carry interest from 0% to 6% interest and are not currently in default.



Notes Payable – Related Party



During the year end December 31, 2017,
the Company received $46,176 from related parties.



On September 7, 2011, the Company entered
into an unsecured 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, 2017 and December 31, 2016, respectively.
Note 1 is currently in default.



On November 17, 2011, the Company entered
into an unsecured 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, 2017 and December 31, 2016, respectively.
Note 2 is currently in default.



On August 4, 2015, the Company entered
into a an unsecured 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 principal balance of Note 3 was $-0- as of December 31, 2017 and $9,000 as of
December 31, 2016, respectively.



As of December 31, 2017 and December 31,
2016, the Company also had an unsecured note payable of $44,189 and $57,695, respectively, to the prior owner of Repicci’s
Group. The note is due on demand and carries no interest.



|9. | 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.









38







During 2017, the company received $687,200 cash proceeds, from
convertible notes payable and repaid $10,000 in cash. The company recorded amortization of debt discount of $573,605 related to
convertible notes, during the year end December 31, 2017.



Convertible notes at December 31, 2017 and December 31, 2016
are summarized as follows:



|                                            |  | December 31,  2017 |          |   | December 31,  2016 |  
|------------------------------------------- |  | ------------------ | -------- | - | ------------------ | -
|                                            |  |                    |          |   |                    |  
|Convertible Notes Payable – Unrelated Party |  | $                  | 861,875  |   |                    | $
|Convertible Notes Payable – Related Party   |  |                    | 165,000  |   |                    |  
|Discount on notes                           |  |                    | (245,494 | ) |                    |  
|Total – Current                             |  | $                  | 781,381  |   |                    | $



The Company has recorded derivative liabilities associated with
convertible debt instruments, as more fully discussed at Note 10.



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. During the year end December 31, 2016,
the note holder converted $3,715 principal and $1,310 accrued interest payable into 1,005,000 shares of common stock at a conversion
price of $0.005 per share. And $3,000 of principal is forgiven by the note holder. In addition, the Company agreed to reimburse
the holder’s certificate processing cost by adding $1,000 to the principal for each note conversion pursuant to an addendum,
dated February 3, 2016. During the first quarter of 2017, the note holder converted $2,785 principal, $1,000 processing cost reimbursement
and $102 accrued interest into 777,400 shares of common stock at a conversion price of $0.005 per share. The balance of Note 4
was $2,785 as of December 31, 2016, which was paid in full as of December 31, 2017.



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 matured on November
26, 2015. The note is convertible into common shares of the Company at the conversion ratio of 50% discount to market or $0.01,
if the bid price falls below $0.10. Note 6 and accrued interest totaled $11,666 was paid in full by cash on May 1, 2017. The principal
balance on Note 6 at December 31, 2016 and 2017 was $10,000 and zero, respectively. The derivative liabilities was reclassified
as additional paid in capital due to the note being paid in cash as of June 30, 2017.



On February 9, 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 unsecured. Note 7 is 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, whichever is lower.
In January 2017, the Company determined that the conversion features contained in Note 7 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 Binomial-Lattice valuation model as of January
2017 and will do so again on each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments
are recorded as non-operating, non-cash income or expense at each balance sheet date. The derivative liabilities will be reclassified
into additional paid in capital upon conversion. See Footnote 10 for more information on derivative liabilities.



Note 7 principal of $6,000 was converted
into 200,000 shares of common stock at the end of 2016. During the year ended December 31, 2017, the Company recorded interest
expense, late fee of 5% and default interest of 20% related to Note 7 in total amount of $9,258 and amortization of debt discounts
in amount of $3,500. The balance of Note 7 was $11,500 with unamortized debt discount of $3,500 as of December 31, 2016, and without
unamortized debt discount as of December 31, 2017. Note 7, is currently in default and will incur a late fee of 5% and default
interest rate of 20%.









39







On October 28, 2016, the Company received
$25,000 cash pursuant to the terms of Note 7, matures on October 28, 2017 (“Note 7-1”). Note 7-1 was entitled to conversion
after April 28, 2017 which met the requirements for liability classification under ASC 815. See Footnote 10 for more information
on derivative liabilities.



During the year ended December 31, 2017,
the Company recorded interest expense related to Note 7-1 in amount of $11,454 and amortization of debt discount in amount of $18,333.
This resulted in an unamortized debt discount of $-0- as of December 31, 2017. The balance of Note 7-1 was $25,000 as of December
31, 2017 and December 31, 2016, respectively. Note 7-1 is currently in default and will incur a late fee of 5% and default interest
rate of 20%.



On March 8, 2016, the Company entered into
a 15% convertible promissory note in the principal of $50,000 (“Note 8”) with an unrelated entity for services rendered.
Note 8 is matured on March 8, 2017, and unsecured. This Note is 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, whichever is lower. The Company determined that the conversion features
contained in Note 8 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 Binomial-Lattice valuation model at the inception date of the note and will do so again on each subsequent balance sheet date.
Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income or expense
at each balance sheet date. The derivative liabilities will be reclassified into additional paid in capital upon conversion. See
Footnote 10 for more information on derivative liabilities.



On February 16, 2017, a portion of principal
of $6,000 was converted into 200,000 shares of common stock at a conversion price of $0.03 per share.



On April 13, 2017, a portion of principal
of $12,853, including $1,000 conversion cost reimbursement, plus accrued interest of $12,247 were converted into 836,667 shares
of common stock at a conversion price of $0.03 per share.



On May 4, 2017, a portion of principal
of $6,000, including $2,000 conversion cost reimbursement, plus accrued interest of $70 were converted into 202,333 shares of common
stock at a conversion price of $0.03 per share.



On July 6, 2017, a portion of principal
of $18,147, and $1,000 conversion cost reimbursement, were converted into 704,733 shares of common stock at a conversion price
of $0.03 per share.



Note 8 was in default with principal balance
of $12,294 as of December 31, 2017. During the year ended December 31, 2017, the Company recorded late fee and default interest
related to Note 8 in total amount of $8,748 and amortization of debt discounts in amount of $50,000 The balance of Note 8 was $50,000
with unamortized debt discount of $-0- as of December 31, 2016, and without unamortized debt discount as of December 31, 2017.
Note 8, is currently in default and will incur a late fee of 5% and default interest rate of 20%.



On September 12, 2016, the Company entered
into a 10% convertible promissory note in the principal of $80,000 (“Note 9”) with an unrelated entity for services
rendered. Note 9 is matured on September 12, 2017, and unsecured. This Note is convertible into common shares of the Company at
the conversion ratio of $0.03 or 50% discount of the lowest closing bid 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, whichever is lower. The Company determined
that the conversion features contained in Note 9 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 Binomial-Lattice valuation model at the inception date of the note and will do so
again on each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded
as non-operating, non-cash income or expense at each balance sheet date. The derivative liabilities will be reclassified into additional
paid in capital upon conversion. See Footnote 10 for more information on derivative liabilities. Note 9 is currently in default
and will incur a late fee of 5% and default interest rate of 20%.









40







As a result, Note 9 was discounted in the
amount of $80,000 and amortized over the remaining life of this Note. As of September 12, 2017, the note was in default. During
the year ended December 31, 2017, the Company recorded late fee and default interest related to Note 9 in total amount of $15,655
and amortization of debt discounts in amount of $80,000. The balance of Note 9 was $80,000 without unamortized debt discount as
of December 31, 2016, and $80,000 with unamortized debt discount of $0 as of December 31, 2017. Note 9 is currently in default
and will incur a late fee of 5% and default interest rate of 20%.



On January 24, 2017, the Company entered
into a 10% convertible promissory note in the principal of $80,000 (“Note 10”) with an unrelated entity for services
rendered. Note 10 is matured on January 24, 2018, and unsecured. This Note is convertible into common shares of the Company at
the conversion ratio of $0.25 or 50% discount of the lowest closing bid price on the primary trading market on which Company's
common stock is quoted for the last ten trading days prior to the conversion date, whichever is lower. As of July 24, 2017 this
Note is convertible into common shares of the Company as described above. The Company determined that the conversion features contained
in Note 10 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 Binomial-Lattice valuation model at the inception date of the note and will do so again on each subsequent balance sheet date.
Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income or expense
at each balance sheet date. The derivative liabilities will be reclassified into additional paid in capital upon conversion. See
Footnote 10 for more information on derivative liabilities.



On October 25, 2017, a portion of principal
of $15,000, plus $1,500 conversion cost reimbursement, were converted into 1,434,782 shares of common stock at a conversion price
of $0.0115 per share.



On November 6, 2017, a portion of principal
of $10,000, plus $1,500 conversion cost reimbursement, were converted into 1,212,121 shares of common stock at a conversion price
of $0.0825 per share.



As a result, Note 10 was discounted in
the amount of $80,000 and amortized over the remaining life of this Note. During the year ended December 31, 2017, the Company
recorded amortization of debt discounts in amount of $35,555.56.. During the year ended December 31, 2017, the Company recorded
interest expense related to Note 10 in amount of $5,494. The balance of Note 10 was $55,000 with unamortized debt discount of $19,444
as of December 31, 2017. Note 10 is currently in default and will incur a late fee of 5% and default interest rate of 20%.



On January 24, 2017, the Company entered
into a 15% convertible line of credit (“Note 11”) with an unrelated entity in the amount up to $250,000. On January
24, 2017, the Company received $50,000 cash for the line of credit, is matured on January 24, 2018, and unsecured. Note 11 is convertible
into common shares of the Company at the conversion ratio of $0.25 or 50% discount of the lowest closing price on the primary trading
market on which Company's common stock is quoted for the last ten trading days prior to the conversion date, whichever is lower.
However, Note 11 is convertible after 6 months of the effective date of this Note, which is July 27, 2017. The Company determined
that the conversion features contained in Note 10 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 Binomial-Lattice valuation model at the inception date of the note and will do so
again on each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded
as non-operating, non-cash income or expense at each balance sheet date. The derivative liabilities will be reclassified into additional
paid in capital upon conversion. See Footnote 10 for more information on derivative liabilities.



As a result, Note 11 was discounted in
the amount of $50,000 and amortized over the remaining life of this Note. During the year ended December 31, 2017, the Company
recorded amortization of debt discounts in amount of $43,611. During the year ended December 31, 2017, the Company recorded interest
expense related to Note 11 in amount of $7,042. The balance of Note 11 was $50,000 with unamortized debt discount of $6,389 as
of December 31, 2017. Note 11 is currently in default and will incur a late fee of 5% and default interest rate of 20%.









41







On February 21, 2017, the Company received
$25,000 cash pursuant to the terms of Note 11, is matured on February 21, 2018 (“Note 11-1”). Note 11 is convertible
into common shares of the Company at the conversion ratio of $0.25 or 50% discount of the lowest closing price on the primary trading
market on which Company's common stock is quoted for the last ten trading days prior to the conversion date, whichever is lower.
However, Note 11-1 is convertible after 6 months of the effective date of this Note, which is August 21, 2017. The Company determined
that the conversion features contained in Note 11-1 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 Binomial-Lattice valuation model at the inception date of the note and will do so
again on each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded
as non-operating, non-cash income or expense at each balance sheet date. The derivative liabilities will be reclassified into additional
paid in capital upon conversion. See Footnote 10 for more information on derivative liabilities.



As a result, Note 11-1 was discounted in
the amount of $25,000 and amortized over the remaining life of this Note. During the year ended December 31, 2017, the Company
recorded amortization of debt discounts in amount of $18,833. The balance of Note 11-1 was $0 without debt discount as of December
31, 2016. During the year ended December 31, 2017, the Company recorded interest expense related to Note 11 in amount of $3,260.
The balance of Note 11-1 was $25,000 with unamortized debt discount of $6,667 as of December 31, 2017. Note 11-1 is currently
in default and will incur a late fee of 5% and default interest rate of 20%.



On March 16, 2017, the Company received
$40,000 cash pursuant to the terms of Note 11, is matured on March 16, 2018 (“Note 11-2”). Note 11-2 is convertible
into common shares of the Company at the conversion ratio of $0.25 or 50% discount of the lowest closing price on the primary trading
market on which Company's common stock is quoted for the last ten trading days prior to the conversion date, whichever is lower.
However, Note 11-2 is convertible after 6 months of the effective date of this Note, which is September 16, 2017. The Company determined
that the conversion features contained in Note 11-2 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 Binomial-Lattice valuation model at the inception date of the note and will do so
again on each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded
as non-operating, non-cash income or expense at each balance sheet date. The derivative liabilities will be reclassified into additional
paid in capital upon conversion. See Footnote 10 for more information on derivative liabilities.



As a result, Note 11-2 was discounted in
the amount of $40,000 and amortized over the remaining life of this Note. During the year ended December 31, 2017, the Company
recorded amortization of debt discounts in amount of $23,556. The balance of Note 11-2 was $0 without debt discount as of December
31, 2016. During the year ended December 31, 2017, the Company recorded interest expense related to Note 11-2 in amount of $3,260.
The balance of Note 11-2 was $40,000 with unamortized debt discount of $16,444 as of December 31, 2017. Note 11-2 is currently
in default and will incur a late fee of 5% and default interest rate of 20%.



On April 6, 2017, the Company entered into
a 15% convertible promissory note with an unrelated entity in the amount $50,000 (“Note 12”). Note 12 is matured on
April 6, 2018, and unsecured. This Note is convertible into common shares of the Company at the conversion ratio of $0.25 or 50%
of the lowest trading price on the primary trading market on which Company's common stock is quoted for the last ten trading days
prior to the conversion date, whichever is lower. However, Note 12 is convertible after 6 months of the effective date of this
Note, which is October 6, 2017. The Company determined that the conversion features contained in Note 12 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 Binomial-Lattice valuation model
at the inception date of the note and will do so again on each subsequent balance sheet date. Any changes in the fair value of
the derivative financial instruments are recorded as non-operating, non-cash income or expense at each balance sheet date. The
derivative liabilities will be reclassified into additional paid in capital upon conversion. See Footnote 10 for more information
on derivative liabilities.



On November 8, 2017, a portion of principal
of $6,503, plus $1,500 conversion cost reimbursement and $1,036 in interest, were converted into 1,095,636 shares of common stock
at a conversion price of $0.0825 per share.



As a result, Note 12 was discounted in
the amount of $50,000 and amortized over the remaining life of this Note. During the year ended December 31, 2017, the Company
recorded amortization of debt discounts in amount of $30,392.. During the year ended December 31, 2017, the Company recorded interest
expense related to Note 12 in amount of $5,043. The balance of Note 12 was $43,478 with unamortized debt discount of $19,608 as
of December 31, 2017. Note 12 is currently in default and will incur a late fee of 5% and default interest rate of 20%.









42






On April 21, 2017, the Company entered
into a Securities Purchase Agreement with an unrelated entity, pursuant to which the purchasers agreed to pay the Company an aggregate
of up to $600,000 for an aggregate of up to 660,000 in Principal Amount of Notes. The first tranche of $330,000 was closed simultaneously
(“Note 13-1”). The proceeds of $300,000, net of $30,000 Original Issuance Discount, was received by the Company. Note
13-1 is convertible into common shares of the Company at the conversion ratio of 60% of the lowest trading price on the primary
trading market on which Company's common stock is quoted for the last ten trading days prior to the conversion date. The Company
determined that the conversion features contained in Note 13-1 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 Binomial-Lattice valuation model at the inception date of the note and will do so
again on each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded
as non-operating, non-cash income or expense at each balance sheet date. The derivative liabilities will be reclassified into additional
paid in capital upon conversion. See Footnote 10 for more information on derivative liabilities.



On October 23 2017, a portion of principal
of $5,000, plus $250 in interest, were converted into 383,772 shares of common stock at a conversion price of $0.013680 per share.



On November 14, 2017, a portion of principal
of $7,500, plus $375 in interest, were converted into 795,455 shares of common stock at a conversion price of $0.00990 per share.



On December 7, 2017, a portion of principal
of $10,000, plus $500 in interest, were converted into 714,286 shares of common stock at a conversion price of $0.01470 per share.



On December 27, 2017, a portion of principal
of $20,000, plus $1,000 in interest, were converted into 1,125,402 shares of common stock at a conversion price of $0.013680 per
share.



In addition, in connection with this Securities
Purchase Agreement, the Company granted purchasers 2,357,143 warrants with exercise price of $0.14 per share (“Warrants A”),
1,885,715 warrants with exercise price of $0.175 per share (“Warrants B”) and 1,571,429 warrants with exercise price
of $0.21 per share (“Warrants C”). Warrants A, B and C are exercisable on the grant date and expire in three years,
each of which represents 100% of the Principal Amount at the Closing divided by the respective exercise price.  The fair value
of these warrants was measured using the Black-Scholes valuation model at the grant date. Accordingly, the Company recorded warrant
expenses at the fair market value of $219,210 during the year ended December 31, 2017. See footnote 13 for more information.



As a result, Note 13-1 was discounted in
the amount of $330,000 and amortized over the remaining life of this Note. During the year ended December 31, 2017, the Company
recorded interest expenses related to Note 13-1 in amount of $10,142 and amortization of debt discounts in amount of $293,375.
The balance of Note 13-1 was $287,500 with unamortized debt discount of $36,625 as of December 31, 2017. Note 13-1 is currently
in default.



On October 6, 2017, the Company
entered into a 12% convertible promissory note with an unrelated entity in the amount $82,500, which included an original
issue discount of $6,600, for net cash to the company of $75,900 (“Note 14”). Note 14 is matured on July 6, 2018,
and unsecured. This Note is convertible into common shares of the Company at the conversion ratio of 40% of the lowest
trading price on the primary trading market on which Company's common stock is quoted for the last ten trading days prior to
the conversion date. Note 12 is convertible after 9 months of the effective date of this Note, which is October 6, 2018.
Neither derivative liability accounting nor beneficial conversion feature will be considered before Note 14 is entitled for
conversion. During the year ended December 31, 2017, the Company recorded interest expense related to Note 14 in amount of
$2,365 and amortization of debt discounts in amount of $2,079 for the original issue discount of $6,600. The balance of Note
14 was $82,500 unamortized debt discount of $4,521 on the original issue discount as of December 31, 2017.











43






On November 2, 2017, the Company entered
into a 8% convertible promissory note with an unrelated entity in the amount $54,600, with original issue discount of $2,100 for
net cash to the company of $52,500 (“Note 15”). Note 15 is matured on November 2, 2018, and unsecured. This Note is
convertible into common shares of the Company at the conversion rate of 60% of the lowest trading price on the primary trading
market on which Company's common stock is quoted for the last ten trading days prior to the conversion date, whichever is lower.
The Company determined that the conversion features contained in Note 15 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 Binomial-Lattice valuation model at the inception date of the note and
will do so again on each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are
recorded as non-operating, non-cash income or expense at each balance sheet date. The derivative liabilities will be reclassified
into additional paid in capital upon conversion. See Footnote 10 for more information on derivative liabilities.



As a result, Note 15 was discounted in
the amount of $54,600 and amortized over the remaining life of this Note. During the year ended December 31, 2017, the Company
recorded amortization of debt discounts in amount of $8,948. The balance of Note 15 was $0 without debt discount as of December
31, 2016. During the year ended December 31, 2017, the Company recorded interest expense related to Note 15 in amount of $716.
The balance of Note 15 was $54,600 with unamortized debt discount of $45,652 as of December 31, 2017.



On November 27, 2017, the Company entered
into a 12% convertible promissory note with an unrelated entity in the amount $53,800 (“Note 16”). Note 16 is matured
on November 27, 2018, and unsecured. This Note is convertible into common shares of the Company at the conversion ratio of 60%
of the lowest trading price on the primary trading market on which Company's common stock is quoted for the last 20 trading days
prior to the conversion date. Note 14 is convertible immediately. The Company determined that the conversion features contained
in Note 16 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 Binomial-Lattice valuation model at the inception date of the note and will do so again on each subsequent balance sheet date.
Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income or expense
at each balance sheet date. The derivative liabilities will be reclassified into additional paid in capital upon conversion. See
Footnote 10 for more information on derivative liabilities.



As a result, Note 16 was discounted in
the amount of $53,800 and amortized over the remaining life of this Note. During the year ended December 31, 2017, the Company
recorded amortization of debt discounts in amount of $5,081. The balance of Note 16 was $0 without debt discount as of December
31, 2016. During the year ended December 31, 2017, the Company recorded interest expense related to Note 16 in amount of $610.
The balance of Note 16 was $53,800 with unamortized debt discount of $48,719 as of December 31, 2017.



On December 14, 2017, the Company entered
into a 8% convertible promissory note with an unrelated entity in the amount $43,478, with original issue discount of $4,378 for
net cash to the company of $40,000 (“Note 17”). Note 17 is matured on December 14, 2018, and unsecured. This Note is
convertible into common shares of the Company at the conversion rate of 60% of the lowest trading price on the primary trading
market on which Company's common stock is quoted for the last ten trading days prior to the conversion date, whichever is lower.
The Company determined that the conversion features contained in Note 17 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 Binomial-Lattice valuation model at the inception date of the note and
will do so again on each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are
recorded as non-operating, non-cash income or expense at each balance sheet date. The derivative liabilities will be reclassified
into additional paid in capital upon conversion. See Footnote 10 for more information on derivative liabilities.



As a result, Note 17 was discounted in
the amount of $43,478 and amortized over the remaining life of this Note. During the year ended December 31, 2017, the Company
recorded amortization of debt discounts in amount of $2,053. The balance of Note 17 was $0 without debt discount as of December
31, 2016. During the year ended December 31, 2017, the Company recorded interest expense related to Note 17 in amount of $164.
The balance of Note 15 was $43,378 with unamortized debt discount of $41,425 as of December 31, 2017.









44







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 was in default on Debenture 1, and no warrants
had been exercised before expiration. The balance of Debenture 1 was $150,000 and $150,000 at December 31, 2017 and December 31,
2016, respectively. The Company recorded interest expense related to Debenture 1 in amount of $18,000 and $18,000 during the year
ended December 31, 2017 and 2016, 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
was in default on Debenture 2. The balance of Debenture 2 was $15,000 and $15,000 at December 31, 2017 and December 31, 2016, respectively.
The Company recorded interest expense related to Debenture 2 in amount of $1,800 and $1,800 during the years ended December 31,
2017 and 2016, respectively.



Resulting from the tainted issue by the
derivative financial instrument of the convertible notes, The Company determined that the conversion features contained in Debenture
1 and Debenture 2 carrying value represents an embedded derivative instrument that meets the requirements for liability classification
under ASC 815. As a result, the fair value of the derivative financial instrument in the note is reflected in the Company’s
balance sheet as a liability. The fair value of the derivative financial instrument of the convertible note was measured using
the Binomial-Lattice valuation model at the inception date of the note and will do so again on each subsequent balance sheet date.
Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income or expense
at each balance sheet date. The derivative liabilities will be reclassified into additional paid in capital upon conversion. See
Footnote 10 for more information on derivative liabilities.



As of December 31, 2017, the Company’s
derivative liabilities are embedded derivatives associated with the Company’s convertible notes payable. 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 Note 9 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 used the Binomial-Lattice
valuation model to measure the fair value of the derivative liabilities as $2,236,656 on December 31, 2017 and will
subsequently remeasure the fair value at the end of each period and record the change of fair value in the consolidated
statement of operation during the corresponding period.





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





|                        |  | Year Ended December 31, | 
|----------------------- |  | ----------------------- | 
|                        |  | 2017                    | 
|Volatility              |  | 111.09% - 220.65%       | 
|Risk-free interest rate |  | 0.51% - 1.76%           | 
|Expected term           |  | .02-1                   | 











45









|10. | FAIR VALUE MEASUREMENT
|--- | ----------------------



The Company measures assets and liabilities
at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents
the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction
between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset
or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value
on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.



The following are the hierarchical levels
of inputs to measure fair value:



| | • | Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.                                                                                                                                                                                                                                                               
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | • | Level 2 Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
| | • | Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.                                                                                                                           



The carrying amounts of the Company’s
financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses,
certain notes payable and notes payable – related party, approximate their fair values because of the short maturity of these
instruments.



The Company recognizes its derivative liabilities
as level 3 and values its derivatives using the methods discussed in note 9. While the Company believes that its valuation methods
are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions
to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting
date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 9 are that of
volatility and market price of the underlying common stock of the Company.

As of December 31, 2017 and December 31,
2016, the Company did not have any derivative instruments that were designated as hedges.



The derivative liability as of December
31, 2017, in the amount of $2, 236,656 has a level 3 classification.



The following table provides a summary
of changes in fair value of the Company’s Level 3 financial liabilities for the year ended December 31, 2017:



|Derivative Liability, December 31, 2016            |  | – |           
|-------------------------------------------------- |  | - | ----------
|Day 1 Loss                                         |  |   | 1,287,744 
|Discount from derivatives                          |  |   | 535,878   
|Warrants reclassified to derivative liabilities    |  |   | 96,753    
|Tainting of Convertible notes                      |  |   | 1,972,999 
|Resolution of derivative liability upon conversion |  |   | (405,443  
|(Gain) on Change in Fair Value                     |  |   | (1,251,275
|                                                   |  |   |           
|Derivative Liability, December 31, 2017            |  |   | 2,236,656 



Fluctuations in the Company’s stock
price are a primary driver for the changes in the derivative valuations during each reporting period. During the year ended December
31, 2017, the Company’s stock price decreased from initial valuation and thus, the derivative liability also decreased.  Generally,
as the stock price decreases for each of the related convertible notes that have an embedded derivative liability, the value of
the derivative liability decreases. Stock price is one of the significant unobservable inputs used in the fair value measurement
of each of the Company’s convertible notes with an embedded derivative liability.



The Company used the Binomial-Lattice valuation
model to measure the fair value of the derivative liabilities as $2,236,656 on December 31, 2017, and will subsequently remeasure
the fair value at the end of each period, and record the change of fair value in the consolidated statement of operation during
the corresponding period. The Company recorded a net change of derivative liability of $36,469 for the year ended December 31,
2017.









46







|11. | 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 2017 and 2016. As of December 31, 2017 and December 31, 2016, 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 $2,047 and $41,783, respectively.



|12. | CAPITAL STOCK
|--- | -------------



During the first quarter of 2017, the Company
filed Amended Articles of Incorporation with the Secretary of State of Florida to amend the rights and privileges for series of
Preferred Stock, and to authorize the issuance of Series I, F1, G1, H1, J1 and K1 Preferred Stock, which was effective on April
26, 2017.



Series A Preferred Stock



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 was issued and outstanding as of December 31, 2017 and December 31, 2016. 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



The Company has designated 3,000,000 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 2,798,205 shares of Series B preferred stock were issued and outstanding as of December 31, 2017. 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. Series B is awarded “Voting Right”
at the ratio of 1 vote per share owned. Each one share of Series B converts to 5 shares of Common Stock. 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, 2016,
591,997 shares of Series B Preferred Stock were converted into 2,959,985 shares of Common Stock of the Company per the preferred
shareholder’s instruction.



During the first quarter of 2017, 1,406,829
shares of Series B Preferred Stock were converted into 7,034,145 shares of Common Stock of the Company per the preferred shareholder’s
instruction.



On March 30, 2017, the Company issued 24,000
shares of Series B Preferred Stock to settle legal expenses of $60,000. Based on the price of $.9075 per share for the Series B
Preferred Stock, which was determined by the market price of common stock at $.1815 per share on the issuance date multiplied by
the conversion ratio of 1:5, the fair value of the stock issuance of Series B Preferred Stock was $21,780, resulting in gain from
extinguishment of debt in amount of $38,220.



During the second quarter of 2017, 193,904
shares of Series B Preferred Stock were converted into 969,520 shares of Common Stock of the Company per the preferred shareholder’s
instruction.









47







On June 27, 2017, the Company issued 15,906
shares of Series B Preferred Stock to 2 different consultants for services rendered. Based on the price of $.3995 per share for
the Series B Preferred Stock, which was determined by the market price of common stock at $.0799 per share on the issuance date
multiplied by the conversion ratio of 1:5, the fair value of the stock issuance of Series B Preferred Stock was $6,354, which was
recorded as stock based compensation during the six months ended June 30, 2017.



During the third quarter of 2017, 20,999
shares of Series B Preferred Stock were converted into 104,995 shares of Common Stock of the Company per the preferred shareholder’s
instruction.



During the fourth quarter of 2017, 6,000
shares of Series B Preferred Stock were converted into 30,000 shares of Common Stock of the Company per the preferred shareholder’s
instruction.



Series C Preferred Stock



The Company has designated 500 shares of
preferred stock as Series C Preferred Stock (“Series C”), with a par value of $.001 per share, of which 117 shares
were issued and outstanding as of December 31, 2017. 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 first quarter of 2017, 1 share
of Series C Preferred Stock were converted into 100,000 shares of Common Stock of the Company per the preferred shareholder’s
instruction.



Blank Check Preferred Stock



As of December 31, 2017, the Company has
designated 100,000,000 shares of Blank Check Preferred Stock, of which 46,132,277 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 undesignated
Blank Check Preferred Stock is 91,160,181 as of December 31, 2017.



Series D Preferred Stock



The Company has designated 800,000 shares
of preferred stock as Series D Preferred Stock (“Series D”), with a par value of $.001 per share, of which 400,000
shares were issued and outstanding as of December 31, 2017. Series D is awarded “Voting Right” at the ratio of 1 vote
per share owned. Each one share of Series D converts to 5 shares of Common 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.









48







There was no change in Series D Preferred
Stock during the year ended December 31, 2017 and 2016.



Series E Preferred Stock



The Company has designated 1,000,000 shares
of preferred stock as Series E Preferred Stock (“Series E”), with a par value of $.001 per share, of which 241,199
shares were issued and outstanding as of December 31, 2017. Series E is awarded “Voting Right” at the ratio of 1 vote
per share owned. Each one share of Series E converts to 5 shares of Common 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 during the year ended December 31, 2017 and 2016.



Series F Preferred Stock



The Company has designated 800,000 shares
of preferred stock as Series F Preferred Stock (“Series F”), with a par value of $.001 per share, of which 280,069
shares were issued and outstanding as of December 31, 2017. Series F is awarded “Voting Right” at the ratio of 1 vote
per share owned. Each one share of Series F converts to 5 shares of Common Stock.



There was no change in Series F Preferred
Stock during the year ended December 31, 2017 and 2016.



The Company has designated 800,000 shares
of preferred stock as Series F1 Preferred Stock (“Series F1”), with a par value of $.001 per share, of which 57,193
shares were issued and outstanding as of December 31, 2017. Series F1 is “non-Voting stock”. Each one share of Series
F1 converts to 5 shares of Common 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.
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 F-1 Preferred Stock (Series F-1”), 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 first quarter of 2017, 31,997
shares of Series F1 Preferred Stock were converted into 159,985 shares of Common Stock of the Company per the preferred shareholder’s
instruction.



During the second quarter of 2017, 42,640
shares of Series F1 Preferred Stock were converted into 213,200 shares of Common Stock of the Company per the preferred shareholder’s
instruction.



During the third quarter of 2017, 41,318
shares of Series F1 Preferred Stock were converted into 206,600 shares of Common Stock of the Company per the preferred shareholder’s
instruction.









49







Series G Preferred Stock



The Company has designated 20,000,000 shares
of preferred stock as Series G Preferred Stock (“Series G”), with a par value of $.001 per share, of which 0 share
was issued and outstanding as of December 31, 2017. Series G is awarded “Voting Right” at the ratio of 1 vote per share
owned. Each one share of Series G converts to 1.25 shares of Common Stock.



The Company has designated 10,000,000 shares
of preferred stock as Series G1 Preferred Stock (“Series G1”), with a par value of $.001 per share, of which 0 share
was issued and outstanding as of December 31, 2017. Series G1 is “non-Voting stock”. Each one share of Series G1 converts
to 1.25 shares of Common Stock.



There was no change in Series G and G1
Preferred Stock during the year ended December 31, 2017 and 2016.



Series H Preferred Stock



The Company has designated 4,859,379 shares
of preferred stock as Series H Preferred Stock (“Series H”), with a par value of $.001 per share, of which 4,859,379
shares were issued and outstanding as of December 31, 2017. Series H is awarded “Voting Right” at the ratio of 1 vote
per share owned. Each one share of Series H converts to 1.25 shares of Common Stock.



The Company has designated 3,000,000 shares
of preferred stock as Series H1 Preferred Stock (“Series H1”), with a par value of $.001 per share, of which 0 share
was issued and outstanding as of December 31, 2017. Series H1 is “non-Voting stock”. Each one share of Series H1 converts
to 1.25 shares of Common Stock.



On August 10, 2016, the Company completed
the acquisitions of FDR Enterprises, Inc.; Refreshment Concepts, LLC; and Repicci’s Franchise Group, LLC. (collectively referred
to as “Repicci’s Group”). Pursuant to the acquisition agreement, the Company agreed to issue 4,859,379 shares
of Series H Preferred Stock as consideration for the acquisition of Repicci’s Group. The combined book value of Repicci’s
Group was $(203,622). Based on the price of $.15 per share for the Series H Preferred Stock, which was determined by the market
price of common stock at $.12 per share on the acquisition date multiplied by the conversion ratio of 1:1.25, the fair value of
the stock issuance of Series H Preferred Stock was $728,907, resulting in the goodwill of $932,529 which was offset with loss on
goodwill impairment during the quarter ended December 31, 2017. The 4,859,379 shares of Series H Preferred Stock were issued during
the first quarter of 2017.

There was no change in Series H and H1
Preferred Stock during the year ended December 31, 2016.



Series I Preferred Stock



The Company has designated 20,000,000 shares
of preferred stock as Series I Preferred Stock (“Series I”), with a par value of $.001 per share, of which 203,655
shares was issued and outstanding as of December 31, 2017. Series I is awarded “Voting Right” at the ratio of 1 vote
per share owned. Each one share of Series I converts to 1.50 shares of Common Stock.



During the first quarter of 2017, one investor
submitted a subscription agreement to the Company regarding the purchase of 29,412 shares of the Company’s Series I Preferred
Stock by cash payment of $10,000, which was collected during the first quarter of 2017. During the second quarter of 2017, the
same investor submitted a subscription agreement to the Company regarding the purchase of 83,334 shares of the Company’s
Series I Preferred Stock by cash payment of $10,000. The transactions were independently negotiated between the Company and the
investor. The proceeds from the subscription agreement mitigated the Company’s cash pressure in short term. The total 112,746
shares of Series I Preferred Stock were issued during the second quarter of 2017.



During the second quarter of 2017, a related
party submitted a subscription agreement to the Company regarding the purchase of 90,909 shares of the Company’s Series I
Preferred Stock by cash payment of $10,000, which was collected during the second quarter of 2017. The transaction was independently
negotiated between the Company and the related party. The proceeds from the subscription agreement mitigated the Company’s
cash pressure in short term.



During the year ended December 31, 2017,
564,538 shares of Series I Preferred Stock were converted into 626,220 shares of Common Stock of the Company per the preferred
shareholder’s instruction.









50







Series J Preferred Stock



The Company has designated 10,000,000 shares
of preferred stock as Series J Preferred Stock (“Series J”), with a par value of $.001 per share, of which 0 share
was issued and outstanding as of December 31, 2017. Series J is awarded “Voting Right” at the ratio of 1 vote per share
owned. Each one share of Series J converts to 1.25 shares of Common Stock.



The Company has designated 7,500,000 shares
of preferred stock as Series J1 Preferred Stock (“Series J1”), with a par value of $.001 per share, of which 0 share
was issued and outstanding as of June 30, 2017. Series J1 is “non-Voting stock”. Each one share of Series J1 converts
to 1.25 shares of Common Stock.



There was no change in Series J and J1
Preferred Stock during the year ended December 31, 2017 and 2016.



Series K Preferred Stock



The Company has designated 9,607,840 shares
of preferred stock as Series K Preferred Stock (“Series K”), with a par value of $.001 per share, of which 0 share
was issued and outstanding as of December 31, 2017. Series K is awarded “Voting Right” at the ratio of 1 vote per share
owned. Each one share of Series K converts to 1.25 shares of Common Stock.



The Company has designated 35,000,000 shares
of preferred stock as Series K1 Preferred Stock (“Series K1”), with a par value of $.001 per share, of which 0 share
was issued and outstanding as of December 31, 2017. Series K1 is “non-Voting stock”. Each one share of Series K1 converts
to 1.25 shares of Common Stock.



There was no change in Series K and K1
Preferred Stock during the year ended December 31, 2017 and 2016.



Common Stock



2016



During the year ended December 31, 2016,
the Company issued 90,000 shares of Common Stock to an investor for total cash payment of $4,500 pursuant to the executed subscription
agreements, which was collected in 2015 and recorded as common stock to be issued as of December 31, 2015. The balance of common
stock to be issued was $500 as of December 31, 2017.



During the year ended December 31, 2016,
the Company issued total 1,159,116 shares of Common Stock to investors for total cash payment of $136,500 pursuant to the executed
subscription agreements.



During the year ended December 31, 2016, the Company issued
3,673,000 shares of common stock for the conversion of unpaid convertible notes principal and accrued interest in amount of $15,915
and $2,450, respectively, at a price of $0.005 per share.



During the year ended December 31, 2016, the Company issued
200,000 shares of common stock for the conversion of unpaid convertible notes principal $6,000, at a price of $0.03 per share.



During the year ended December 31, 2016, the Company issued
25,599 shares of common stock to a Consultant for services rendered. 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 $0.0475 per share.



Accordingly, the Company calculated the stock based compensation
of $1,216 at its fair value and included it in the consolidated statements of operations for the year ended December 31, 2016.









51







During the year ended December 31, 2016, the Company issued
387,990 shares of common stock to a Consultant for services rendered. 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 $0.09 per share. Accordingly, the Company
calculated the stock based compensation of $34,919 at its fair value and included it in the consolidated statements of operations
for the year ended December 31, 2016.



During the year ended December 31, 2016, the Company issued
1,000,000 shares of common stock to Mr. Cunningham, Company's Chief Executive Officer, as bonus. 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 $0.22 per share.
Accordingly, the Company calculated the stock based compensation of $220,000 at its fair value and included it in the consolidated
statements of operations for the year ended December 31, 2016.



During the year ended December 31, 2016, the Company issued
66,667 shares of common stock to a consultant for services rendered. 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 $0.22 per share. Accordingly, the Company
calculated the stock based compensation of $14,667 at its fair value and included it in the consolidated statements of operations
for the year ended December 31, 2016.



During the year ended December 31, 2016, the Company issued
total 6,000,000 shares of common stock to Mr. Thompson and Mr. Cunningham, or 3,000,000 shares each, for services rendered. 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 $0.12 per share. Accordingly, the Company calculated the stock based compensation of $720,000 at its fair value
and included it in the consolidated statements of operations for the year ended December 31, 2016.



During the year ended December 31, 2016, the Company issued
248,333 shares of common stock to two consultants for services rendered. 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 $0.12 per share.



Accordingly, the Company calculated the stock based compensation of $29,800 at its fair value and included
it in the consolidated statements of operations for the year ended December 31, 2016.



2017



On February 10, 2017, the Company entered
into a consulting agreement with an unrelated party, pursuant to which the Company agreed to issue total 800,000 shares to the
consultant in four allotments, or 200,000 shares each, for consulting services related to marketing and business development. During
the first quarter of 2017, 250,000 shares were issued. 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 $.235 per share. During the second quarter of 2017,
the difference of 150,000 shares were not issued as of the date of the Report. The fair value of the 150,000 shares was $15,600,
or approximately $.104 per share. During the third quarter of 2017, the third installment of 200,000 shares were not issued as
of the date of the Report. The fair value of the 200,000 shares was $27,475, or approximately $.1099 per share. Accordingly, the
Company recognized stock based compensation of $101,825 to the consolidated statements of operations for the year ended December
31, 2017 and recorded $43,075 as accrued expenses in the consolidated balance sheet as of December 31, 2017.



During the first quarter of 2017, the note
holder converted $1,785 principal, $2,102 processing cost reimbursement and accrued interest into 777,400 shares of common stock
at a conversion price of $0.005 per share.



During the first quarter of 2017, the note
holder converted $6,000 principal into 200,000 shares of common stock at a conversion price of $0.03 per share.



On January 24, 2017, the Company issued
173,585 shares of Common Stock to settle $34,717 due to the prior owner of Repicci’s Franchise Group LLC, pursuant to the
Acquisition Agreement, dated August 10, 2016. 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 $0.24 per share, resulting in loss from extinguishment of debt
in amount of $6,943.



On January 24, 2017, the Company issued
2,010,490 shares of Common Stock to settle $402,098 due to the prior owner of Refreshment Concepts LLC, pursuant to the Acquisition
Agreement, dated August 10, 2016. 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 $0.24 per share, resulting in loss from extinguishment of debt
in amount of $80,420.









52







On March 20, 2017, the Company issued 60,000
shares of Common Stock to settle consulting fees of $15,000. 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 $0.1965 per share, resulting in gain from
extinguishment of debt in amount of $3,210.



During the three months ended March 31,
2017, one investor submitted a subscription agreement to the Company regarding the purchase of 100,000 shares of Common Stock by
cash payment of $10,000. The transaction was independently negotiated between the Company and the investor. The proceeds from the
subscription agreement mitigated the Company’s cash pressure in short term.



On July 11, 2017 the Company’s Board
of Directors approved a resolution to increase the authorized common shares to 500,000,000 at par value $0.001.



During the second quarter of 2017, the
Company issued 100,000 shares of Common Stock to an attorney for legal services. 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 $.1145 per share. Accordingly,
the Company recognized stock based compensation of $11,450 to the consolidated statements of operations for the year ended December
31, 2017.



During the second quarter of 2017, the
Company issued 906,907 shares of Common Stock to We Three, a related party, for services rendered. 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
$.0799 per share. Accordingly, the Company recognized stock based compensation of $90,691 to the consolidated statements of operations
for the year ended December, 2017.



During the second quarter of 2017, the
Company redeemed 500,000 shares from a shareholder for a cash payment of $2,500. The 500,000 shares were returned to the treasury
for cancellation and the $2,500 was recorded as accrued liabilities in the consolidated balance sheet as of December 31, 2017.



During the second quarter of 2017, the
note holders converted $18,853 principal, including $3,000 processing cost reimbursement, and $12,317 accrued interest into 1,039,000
shares of common stock at a conversion price of $0.03 per share.



During the second quarter of 2017,
the note holders converted $18,147 principal, including $2,995 in fees and accrued interest into 704,733 shares of common
stock at a conversion price of $0.03 per share.



On September 15, 2017, the Company issued
19,000,000 shares of Common Stock to settle $1,415,600 in accrued salaries to current and former officers of the Company. Additionally,
the Company issued 1,000,000 shares to a former employee as a one time bonus, valued at $70,000. 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 $0.07
per share. Accordingly, the Company reduced its accrued expenses by $1,415,600 and stock based compensation by $70,000. The difference
in the fair market value of the shares and the related expenses was recorded to additional paid in capital.



During the quarter ended December 31, 2017,
the Company issued 6,761,454 shares of common stock for the conversion of unpaid convertible notes principal and processing cost
reimbursement and interest in the amount of $81,664 at a prices ranging from $0.00825 to $0.01470 per share.



During the fourth quarter of 2017, 6,000
shares of Series B Preferred Stock were converted into 30,000 shares of Common Stock of the Company per the preferred shareholder’s
instruction.



During the fourth quarter of 2017, the
company issued 1,508 shares of Common Stock for a correction of a prior period conversion of Series B Preferred Stock.



During the quarter ended September 30,
2017, the Company negotiated an agreement to cancel 500,000 shares previously issued to a third party consultant for services and
to issue 25,000 shares of common stock for services rendered. 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 $0.0699 per share. Accordingly, the
Company calculated the stock based compensation of $1,748 at its fair value and included it in the consolidated statements of operations
for the year ended December 31, 2017 and reduced selling general and administrative expenses by $500.











53






During the quarter ended December 31, 2017,
the Company negotiated an agreement to cancel 500,000 shares previously issued to a third party consultant for services and to
issue 25,000 shares of common stock for services rendered. 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 $0.050 per share. Accordingly, the Company
calculated the stock based compensation of $1,250 at its fair value and included it in the consolidated statements of operations
for the year ended December 31, 2017 and reduced selling general and administrative expenses by $500.



|13. | WARRANTS
|--- | --------



Pursuant to the same consulting agreement,
dated February 10, 2017, in addition to the 800,000 shares of common stock, the Company agreed to grant total 800,000 warrants
to the consultant for consulting services related to marketing and business development and are exercisable on the grant date and
expire in three years. The initial allotment of 200,000 warrants were granted during the first quarter of 2017. The second allotment
of 200,000 warrants were granted during the second quarter of 2017. The third allotment of 200,000 warrants were granted during
the third quarter of 2017. The fourth allotment of 200,000 warrants were granted during the fourth quarter of 2017. The fair value
of these warrants was measured using the Black-Scholes valuation model at the grant date. The table below sets forth the assumptions
for Black-Scholes valuation model on February 10, 2017, May 10, 2017, August 10, 2017 and December 10, 2017, respectively. See
the chart below for initial measurement values.



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



|                  |  | Year Ended 
December 31, |       
|----------------- |  | ------------------------ | ------
|Initial Valuation |  |                          | 96,753
|Ending Value      |  |                          | 47,559



The table below sets forth the assumptions
for Black-Scholes valuation model on each initial date and December 31, 2017







|                        |  | Year Ended 
December 31, 2017 | 
|----------------------- |  | ----------------------------- | 
|Volatility              |  | 274% - 314%                   | 
|Risk-free interest rate |  | 0.147 - 0.198                 | 
|Expected term           |  | 2.11 - 3.0                    | 





Accordingly, the Company recorded warrant
expenses of $96,753 during the year ended December 31, 2017.



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



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









54







The fair value of these warrants was measured
using the Black-Scholes valuation model at the grant date. The table below sets forth the assumptions for Black-Scholes valuation
model on April 21, 2017.



|ReportingDate | FairValue | Term(Years) | ExercisePrice | MarketPrice onGrant Date | VolatilityPercentage | Risk-freeRate
|------------- | --------- | ----------- | ------------- | ------------------------ | -------------------- | -------------
|4/21/2017     | $814,000  | 3           | $0.14 - $0.21 | $0.14                    | 676%                 | 0.0177       



Accordingly, the Company recorded warrant
expenses at the fair market value of $219,210 during the year ended December 31, 2017.



The following tables summarize all warrant
outstanding as of December 31, 2017, and the related changes during this period. The warrants expire three years from grant date,
which as of December 31, 2017 is 4.08 years. The intrinsic value of the warrants as of December 31, 2017 was $-0-.



|                                          |  | Number of  Warrants |           |  | Weighted Average  Exercise  Price |  
|----------------------------------------- |  | ------------------- | --------- |  | --------------------------------- | -
|Stock Warrants                            |  |                     |           |  |                                   |  
|Balance at January 1, 2017                |  |                     | –         |  |                                   | $
|Granted                                   |  |                     | 6,614,287 |  |                                   |  
|Exercised                                 |  |                     | –         |  |                                   |  
|Expired                                   |  |                     | –         |  |                                   |  
|Balance at December 31, 2017              |  |                     | 6,614,287 |  |                                   |  
|Warrants Exercisable at December 31, 2017 |  |                     | 6,614,287 |  |                                   | $



14. STOCK OPTIONS



The Company agreed to grant Mr. Roberts
stock options for a minimum of 300,000 shares of the Company's common stock at an exercise price of 50% of the current last ten
(10) day stock average per share, and 600,000 shares of common stock as a key officer employment incentive to be earned and vested
on a pro rata basis at 25,000 shares per month for twenty-four (24) months. The fair value of both 300,000 options and 600,000
shares were determined by the fair value of the Company’s Common Stock on the grant date, at a price of approximately
$0.226 per share. Accordingly, the accrued expense was $135,600 as of December 31, 2017. On August 8, 2017, Mr. Roberts accepted
the offer from the Company to issue 3,000,000 common shares to supersede all his options and warrants in the employment agreement.



After the cancellation of the above transaction,
there were no stock options issued as of December 31, 2017.











55






|15. | COMMITMENTS AND CONTINGENCIES
|--- | -----------------------------



Operating Leases



The Company had operating lease expense
of $176,062 and $160,840 for the year ended December 31, 2017 and 2016, respectively, consisting of the followings.



|                  |  | For the year ended |        
|----------------- |  | ------------------ | -------
|                  |  | December 31,2017   |        
|                  |  |                    |        
|Restaurants       |  | $                  | 71,750 
|Lot               |  |                    | 35,350 
|Office            |  |                    | 68,962 
|Equipment Rentals |  |                    | –      
|Total             |  | $                  | 176,062



The Company has property leases that are
renewable on an annual basis, with no long term property leases.



We have an employment agreement, renewed
May 15, 2014, with the Chairman, Mr. Thompson amended on July 27, 2017 and effective on January 1, 2017, whereby we provide for
compensation of $25,000 per month.



We have an employment agreement with the
Chief Executive Officer, Mr. Cunningham, amended on July 27, 2017 and effective on January 1, 2017, whereby we provide for compensation
of $25,000 per month.



We have an employment agreement with the
Chief Operating Officer, Mr. Roberts, effective June 2016, whereby we provide for compensation of $10,000 per month.



There are no other stock option plans,
retirement, pension, or profit sharing plans for the benefit of our sole officer and director other than as described herein.



16. INCOME TAXES



At December 31, 2017, the Company had federal
and state net operating loss carry forwards of approximately $15,071,165 that expire in various years through the year 2037.



Due to operating losses, there is no provision
for current federal or state income taxes for the years ended December 31, 2017 and 2016.



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, 2017 and 2016 consists of net operating loss carry forwards calculated using federal and state effective tax rates
equating to approximately $3,815,102 and $4,626,416, respectively, less a valuation allowance in the amount of approximately $3,815,102
and $4,626,416, respectively. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset
by a valuation allowance in both 2017 and 2016. The valuation allowance increased by approximately $811,314 for the year ended
December 31, 2017.









56







The Company’s total deferred tax
asset as of December 31, 2017 and 2016 is as follows:



|                       |  | 2017 |            |   | 2016 |  
|---------------------- |  | ---- | ---------- | - | ---- | -
|Deferred tax assets    |  | $    | 3,815,102  |   |      | $
|Valuation allowance    |  |      | (3,815,102 | ) |      |  
|                       |  |      |            |   |      |  
|Net deferred tax asset |  | $    | –          |   |      | $



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, 2017 and 2016 is as follows:



Repicci, one of our operating segments,
recorded income tax payable of $15,865 as of December 31, 2017 and $22,344 as of December 31, 2016.



On December 22, 2017, the U.S. Tax Cuts
and Jobs Act (the “Tax Reform Act”) was signed into law by President Trump. The Tax Reform Act significantly revised
the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January
1, 2018, while also repealing the deduction for domestic production activities, implementing a territorial tax system and imposing
a repatriation tax on deemed repatriated earnings of foreign subsidiaries. U.S. GAAP requires that the impact of tax legislation
be recognized in the period in which the law was enacted. The provisional amounts incorporate assumptions made based upon the Company’s
current interpretation of the Tax Reform Act and may change as the Company receives additional clarification and implementation
guidance. Based on the new rates effective in 2018, this would reduce the potential tax deferred assets and valuation allowance
to $3,815,102 or a reduction of approximately 42%.



|17. | SEGMENT REPORTING
|--- | -----------------



The Company has four reportable operating
segments as determined by management using the “management approach” as defined by the authoritative guidance on Disclosures
about Segments of an Enterprise and Related Information: (1) Mobile home lease (We Three), (2) Company-owned Pizza Restaurants
(Romeo’s NY Pizza), and (3) “Repicci’s Italian Ice” franchised stores. These segments are a result of differences
in the nature of the products and services sold. Corporate administration costs, which include, but are not limited to, general
accounting, human resources, legal and credit and collections, are partially allocated to the three operating segments. Other revenue
consists of nonrecurring items.



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



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



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



The number of franchise agreements in force
as of December 31, 2017 was 48, five of which are “mobile” units.



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



| | 1. | Designate an exclusive territory;
| | -- | ---------------------------------

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

| | 3. | Provide initial training of franchisee and employees;
| | -- | -----------------------------------------------------

| | 4. | Provide a company manual and other training aids.
| | -- | -------------------------------------------------







57






The Company has developed a new “Mobile
Franchise Opportunity”. The total investment for the new opportunity ranges from $155,600 to $165,000, as follows: $125,000
for a new Mercedes Sprinter Van, customized for the franchisee, $25,000 for the franchise fee, the balance for product. The Company’s
obligation is as above, except for Item #3, training is specific to the new opportunity.



|                               |  | For the Years Ended |           
|------------------------------ |  | ------------------- | ----------
|                               |  | December 31 ,2017   |           
|Revenues:                      |  |                     |           
|We Three                       |  | $                   | 193,601   
|Romeo’s NY Pizza               |  |                     | 592,445   
|Repicci’s Group                |  |                     | 835,968   
|Others                         |  |                     | 3,754     
|Consolidated revenues          |  | $                   | 1,625,768 
|                               |  |                     |           
|Cost of Sales:                 |  |                     |           
|We Three                       |  | $                   | 155,416   
|Romeo’s NY Pizza               |  |                     | 429,779   
|Repicci’s Group                |  |                     | 846,714   
|Others                         |  |                     | –         
|Consolidated cost of sales     |  | $                   | 1,431,909 
|                               |  |                     |           
|Income (Loss) before taxes     |  |                     |           
|We Three                       |  | $                   | (4,494    
|Romeo’s NY Pizza               |  |                     | (185,299  
|Repicci’s Group                |  |                     | (111,302  
|Others                         |  |                     | (3,350,900
|Consolidated loss before taxes |  | $                   | (3,651,995



|                 |  | As of December 31,  2017 |           |  | As of  December 31,  2016 |  
|---------------- |  | ------------------------ | --------- |  | ------------------------- | -
|Assets:          |  |                          |           |  |                           |  
|We Three         |  | $                        | 235,532   |  |                           | $
|Romeo’s NY Pizza |  |                          | 158,551   |  |                           |  
|Repicci’s Group  |  |                          | 293,216   |  |                           |  
|Others           |  |                          | 631,762   |  |                           |  
|Combined assets  |  | $                        | 1,319,061 |  |                           | $











58








|18. | RESTATEMENT
|--- | -----------



The Company has restated its previously
issued Consolidated Statements of Operations for the years ended December 31, 2017 to correct for an error in its presentation
previously filed in error by our EDGAR filing agent. Changes to deposits of $10,000 was due to a correction identified. Changes
to accounts payable $13,500, accrued expenses $46,380 and accrued expenses – related parties $22,250 were are related to
reclassifications identified by the Company and an additional expense not previously recorded. Changes to notes payable-related
party $24,061, convertible notes payable – net $18,042 and derivative liability $(182,680) were the result of changes the
Company identified during the audit. Changes to sales of ice cream $(118,887), cost of sales for ice cream $75,501, depreciation
$(86,154) are related to the change in other income $108,234, for a reclass of certain event sales of ice cream and reclass of
depreciation expense from operating expense to cost of sales. Loss on disposal of assets $38,584 were related to the closure of
the Romeo’s stores, selling, general and administrative $3,495 were related to reclass of certain expenses identified by
the Company during our audit. Change in value of derivative liability $1,349,586 and amortization of debt discounts $23,170 were
to due revaluations by the Company for certain convertible debts. Changes in loss from extinguishment of $76 and interest expense
of $(76) related to reclass of certain expenses identified by the Company during our audit. All changes to cash flow are a result
of changes noted above for assets and statements of operations and reclassifications of certain accounts identified by the Company
during our audit.





|                                                                                                                                                                                            |  | December 31, 2017 |             |   | Adjustment |   |            | As Restated | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ---------- | - | ---------- | ----------- | 
|ASSETS                                                                                                                                                                                      |  |                   |             |   |            |   |            |             | 
|Current assets                                                                                                                                                                              |  |                   |             |   |            |   |            |             | 
|Cash                                                                                                                                                                                        |  |                   | 68,986      |   |            |   | (0         | )           | 
|Accounts receivable-net                                                                                                                                                                     |  |                   | 63,061      |   |            |   | 0          |             | 
|Inventory-net                                                                                                                                                                               |  |                   | 46,928      |   |            |   | –          |             | 
|Prepaid and other                                                                                                                                                                           |  |                   | 11,631      |   |            |   | (0         | )           | 
|                                                                                                                                                                                            |  |                   |             |   |            |   |            |             | 
|Total current assets                                                                                                                                                                        |  |                   | 190,606     |   |            |   | (0         | )           | 
|                                                                                                                                                                                            |  |                   |             |   |            |   |            |             | 
|Property and equipment,
    net of accumulated depreciation of $1,030,232 and $838,736, respectively                                                                                        |  |                   | 491,473     |   |            |   | 1          |             | 
|Land                                                                                                                                                                                        |  |                   | 603,000     |   |            |   | –          |             | 
|Intangible assets, net                                                                                                                                                                      |  |                   | 15,561      |   |            |   | –          |             | 
|Deposits                                                                                                                                                                                    |  |                   | 6,660       |   |            |   | 10,000     |             | 
|Due from related party                                                                                                                                                                      |  |                   | 1,820       |   |            |   | –          |             | 
|                                                                                                                                                                                            |  |                   |             |   |            |   |            |             | 
|Total assets                                                                                                                                                                                |  |                   | 1,309,061   |   |            |   | 10,000     |             | 
|                                                                                                                                                                                            |  |                   |             |   |            |   |            |             | 
|LIABILITIES AND SHAREHOLDERS' DEFICIENCY                                                                                                                                                    |  |                   |             |   |            |   |            |             | 
|Current liabilities                                                                                                                                                                         |  |                   |             |   |            |   |            |             | 
|Accounts payable                                                                                                                                                                            |  |                   | 193,239     |   |            |   | 13,500     |             | 
|Accrued expenses                                                                                                                                                                            |  |                   | 291,826     |   |            |   | (46,380    | )           | 
|Accrued expenses - related parties                                                                                                                                                          |  |                   | 472,750     |   |            |   | 22,500     |             | 
|Interest payable                                                                                                                                                                            |  |                   | 312,192     |   |            |   | –          |             | 
|Accrued payroll taxes                                                                                                                                                                       |  |                   | 2,047       |   |            |   | –          |             | 
|Due to officers and shareholders                                                                                                                                                            |  |                   | 77,640      |   |            |   | –          |             | 
|Line of credit                                                                                                                                                                              |  |                   | 15,498      |   |            |   | –          |             | 
|Common stock to be issued                                                                                                                                                                   |  |                   | 500         |   |            |   | –          |             | 
|Series H preferred shares to be issued                                                                                                                                                      |  |                   | –           |   |            |   | –          |             | 
|Notes payable, unrelated party                                                                                                                                                              |  |                   | 215,979     |   |            |   | –          |             | 
|Notes payable - related party                                                                                                                                                               |  |                   | 120,128     |   |            |   | 24,061     |             | 
|Convertible notes payable,
    net of debt discounts of $263,536 and $21,833, respectively                                                                                                  |  |                   | 598,339     |   |            |   | 18,042     |             | 
|Convertible notes payable - related party                                                                                                                                                   |  |                   | 165,000     |   |            |   | –          |             | 
|Derivative Liability                                                                                                                                                                        |  |                   | 2,419,337   |   |            |   | (182,680   | )           | 
|Income Tax payable                                                                                                                                                                          |  |                   | 15,865      |   |            |   | –          |             | 
|                                                                                                                                                                                            |  |                   |             |   |            |   |            |             | 
|Total current liabilities                                                                                                                                                                   |  |                   | 4,900,340   |   |            |   | (150,958   | )           | 
|                                                                                                                                                                                            |  |                   |             |   |            |   |            |             | 
|Total liabilities                                                                                                                                                                           |  |                   | 4,900,340   |   |            |   | (150,958   | )           | 
|                                                                                                                                                                                            |  |                   |             |   |            |   |            |             | 
|Shareholders' (deficit)                                                                                                                                                                     |  |                   |             |   |            |   |            |             | 
|Preferred stock                                                                                                                                                                             |  |                   | 8,849       |   |            |   | –          |             | 
|Common stock; 500,000,000
    shares authorized with $0.001 par value; 64,414,091 and 25,223,578 shares issued and outstanding at December 31, 2017 and
    December 31, 2016, respectively |  |                   | 66,031      |   |            |   | –          |             | 
|Additional paid-in capital                                                                                                                                                                  |  |                   | 46,795,517  |   |            |   | (1,187,366 | )           | 
|Accumulated deficit                                                                                                                                                                         |  |                   | (50,461,676 | ) |            |   | 1,348,324  |             | 
|Total shareholders' deficiency                                                                                                                                                              |  |                   | (3,591,279  | ) |            |   | 160,958    |             | 
|                                                                                                                                                                                            |  |                   |             |   |            |   |            |             | 
|Total liabilities and
    shareholders' deficiency                                                                                                                                          |  | $                 | 1,309,061   |   |            | $ | 10,000     |             | 









59








|                                                                                                  |  | December 31, 2017 |            |   | Adjustment |   |           | As Restated | 
|------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | - | ---------- | - | --------- | ----------- | 
|REVENUE                                                                                           |  |                   |            |   |            |   |           |             | 
|Rental income                                                                                     |  | $                 | 193,601    |   |            |   |           |             | 
|Sales of pizza                                                                                    |  |                   | 592,445    |   |            |   |           |             | 
|Sales of ice cream                                                                                |  |                   | 954,855    |   |            |   | (480,309  | )           | 
|Sales to franchisees                                                                              |  |                   |            |   |            |   |           |             | 
|Ice cream                                                                                         |  |                   | –          |   |            |   | 131,487   |             | 
|Franchise fees                                                                                    |  |                   | –          |   |            |   | 81,435    |             | 
|Royalty fees                                                                                      |  |                   | –          |   |            |   | 19,500    |             | 
|Truck sales and build out                                                                         |  |                   | –          |   |            |   | 129,000   |             | 
|Other                                                                                             |  |                   | 3,754      |   |            |   | –         |             | 
|Total revenue                                                                                     |  |                   | 1,744,655  |   |            |   | (118,887  | )           | 
|                                                                                                  |  |                   |            |   |            |   |           |             | 
|COST OF SALES(Exclusive
    of depreciation not related to Cost of Sales, shown separately below) |  |                   |            |   |            |   |           |             | 
|Rental business                                                                                   |  |                   | 155,416    |   |            |   | –         |             | 
|Pizza restaurants                                                                                 |  |                   | 429,779    |   |            |   | –         |             | 
|Ice cream stores                                                                                  |  |                   | 771,213    |   |            |   | 75,500    |             | 
|Sales to franchisees                                                                              |  |                   | –          |   |            |   | –         |             | 
|Ice cream                                                                                         |  |                   | –          |   |            |   | –         |             | 
|Franchise fees                                                                                    |  |                   | –          |   |            |   | –         |             | 
|Royalty fees                                                                                      |  |                   | –          |   |            |   | –         |             | 
|Truck sales and build out                                                                         |  |                   | –          |   |            |   | –         |             | 
|Other                                                                                             |  |                   | –          |   |            |   | –         |             | 
|Total cost of sales                                                                               |  |                   | 1,356,408  |   |            |   | 75,501    |             | 
|                                                                                                  |  |                   |            |   |            |   |           |             | 
|GROSS MARGIN                                                                                      |  |                   | 388,247    |   |            |   | (194,388  | )           | 
|                                                                                                  |  |                   |            |   |            |   |           |             | 
|OPERATING EXPENSES                                                                                |  |                   |            |   |            |   |           |             | 
|Depreciation and amortization expense                                                             |  |                   | 246,325    |   |            |   | (86,154   | )           | 
|Goodwill Impairment                                                                               |  |                   | 932,529    |   |            |   | –         |             | 
|Loss on disposal of assets                                                                        |  |                   | –          |   |            |   | 38,584    |             | 
|Selling, general and administrative                                                               |  |                   | 2,051,620  |   |            |   | 3,495     |             | 
|                                                                                                  |  |                   |            |   |            |   | –         |             | 
|Total operating cost                                                                              |  |                   | 3,230,474  |   |            |   | (44,075   | )           | 
|                                                                                                  |  |                   |            |   |            |   |           |             | 
|                                                                                                  |  |                   |            |   |            |   |           |             | 
|(LOSS) FROM OPERATIONS                                                                            |  |                   | (2,842,227 | ) |            |   | (150,313  | )           | 
|                                                                                                  |  |                   |            |   |            |   |           |             | 
|OTHER INCOME (EXPENSE)                                                                            |  |                   |            |   |            |   |           |             | 
|Other Income                                                                                      |  |                   | 0          |   |            |   | 108,234   |             | 
|(Loss) Gain from extinguishment of debt                                                           |  |                   | (46,009    | ) |            |   | 76        |             | 
|Change in value of derivative liability                                                           |  |                   | (1,386,055 | ) |            |   | 1,349,586 |             | 
|Interest expense                                                                                  |  |                   | (111,606   | ) |            |   | (76       | )           | 
|Amortization of debt discounts                                                                    |  |                   | (596,775   | ) |            |   | 23,170    |             | 
|Loss on disposal of assets                                                                        |  |                   | (17,647    | ) |            |   | 17,647    |             | 
|Loss on Impairment of Goodwill                                                                    |  |                   | –          |   |            |   | –         |             | 
|                                                                                                  |  |                   |            |   |            |   |           |             | 
|Total other income (expenses)                                                                     |  |                   | (2,158,092 | ) |            |   | 1,498,637 |             | 
|                                                                                                  |  |                   |            |   |            |   |           |             | 
|(LOSS) FOR THE PERIOD                                                                             |  | $                 | (5,000,319 | ) |            | $ | 1,348,324 |             | 
|                                                                                                  |  |                   |            |   |            |   |           |             | 
|                                                                                                  |  |                   |            |   |            |   |           |             | 
|(LOSS) PER COMMON SHARE                                                                           |  |                   |            |   |            |   |           |             | 
|-BASIC AND DILUTED                                                                                |  | $                 | (0.12      | ) |            | $ | 0.04      |             | 







60








|                                                                                                       |  | December 31, 2017 |            |   | Adjustment |   |            | As Restated | 
|------------------------------------------------------------------------------------------------------ |  | ----------------- | ---------- | - | ---------- | - | ---------- | ----------- | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|CASH
    FLOWS FROM OPERATING ACTIVITIES                                                               |  |                   |            |   |            |   |            |             | 
|Net
    (Loss)                                                                                         |  | $                 | (5,000,319 | ) |            | $ | 1,348,324  |             | 
|Adjustments to reconcile
    net income (loss) to net cash (used in) provided by operating activities: |  |                   |            |   |            |   |            |             | 
|Depreciation                                                                                           |  |                   | 268,211    |   |            |   | (40,252    | )           | 
|Loss from disposal of fixed
    assets                                                                 |  |                   | 17,647     |   |            |   | 20,937     |             | 
|(Gain) from debt forgiveness                                                                           |  |                   | 46,009     |   |            |   | (46,009    | )           | 
|Loss from impairment of
    goodwill                                                                   |  |                   | 932,529    |   |            |   | –          |             | 
|(Gain) on settlement of
    liabilities                                                                |  |                   | –          |   |            |   | (38,220    | )           | 
|Loss on settlement of note
    payable - related party                                                 |  |                   | –          |   |            |   | 84,153     |             | 
|Amortization of loan discount                                                                          |  |                   | 596,775    |   |            |   | (23,170    | )           | 
|Change in value of derivative
    liability                                                            |  |                   | 1,386,055  |   |            |   | (1,349,586 | )           | 
|Stock based compensation                                                                               |  |                   | 402,994    |   |            |   | (117,371   | )           | 
|Warrants expense                                                                                       |  |                   | 98,573     |   |            |   | (1,820     | )           | 
|Convertible note issued
    for conversion cost reimbursement                                          |  |                   | 9,500      |   |            |   | (9,500     | )           | 
|Convertible note issued
    for services rendered                                                      |  |                   | 80,000     |   |            |   | –          |             | 
|(Increase) decrease in:                                                                                |  |                   |            |   |            |   | –          |             | 
|Accounts receivable                                                                                    |  |                   | (31,053    | ) |            |   | –          |             | 
|Inventory                                                                                              |  |                   | (4,699     | ) |            |   | –          |             | 
|Other assets                                                                                           |  |                   | –          |   |            |   | (15,072    | )           | 
|Deposits                                                                                               |  |                   | (5,072     | ) |            |   | 5,072      |             | 
|Prepaids and other current
    assets                                                                  |  |                   | 25,359     |   |            |   | –          |             | 
|Accounts payable                                                                                       |  |                   | 127,336    |   |            |   | 13,501     |             | 
|Accrued expenses                                                                                       |  |                   | (347,629   | ) |            |   | 195,368    |             | 
|Interest payable                                                                                       |  |                   | 98,315     |   |            |   | (17,575    | )           | 
|Taxes payable                                                                                          |  |                   | 7,579      |   |            |   | (15,158    | )           | 
|Accrued payroll taxes                                                                                  |  |                   | (39,736    | ) |            |   | 0          |             | 
|Accrued
    officers' salaries                                                                         |  |                   | 700,600    |   |            |   | 22,500     |             | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|Net
    cash used in operating activities                                                              |  |                   | (663,830   | ) |            |   | 48,926     |             | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|INVESTING
    ACTIVITIES                                                                               |  |                   |            |   |            |   |            |             | 
|Purchase of intangible assets                                                                          |  |                   | (5,000     | ) |            |   | –          |             | 
|Disposal of fixed assets                                                                               |  |                   |            |   |            |   |            |             | 
|Purchase
    of fixed assets                                                                           |  |                   | (9,468     | ) |            |   | 1,668      |             | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|Net
    cash provided by (used in) investing activities                                                |  |                   | (14,468    | ) |            |   | 1,668      |             | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|FINANCING
    ACTIVITIES                                                                               |  |                   |            |   |            |   |            |             | 
|Due to related party                                                                                   |  |                   | (37,059    | ) |            |   | (54,732    | )           | 
|Proceeds from sales of stock                                                                           |  |                   | 40,000     |   |            |   | 0          |             | 
|Shareholder contributions                                                                              |  |                   | 24,061     |   |            |   |            |             | 
|Proceeds from convertible
    notes payable                                                            |  |                   | 705,177    |   |            |   | (17,977    | )           | 
|Proceeds from notes
    payable -related party                                                         |  |                   | –          |   |            |   | 46,176     |             | 
|Proceeds from notes payable
    -3rd party                                                             |  |                   | –          |   |            |   | 25,343     |             | 
|Proceeds from line of credit                                                                           |  |                   | 5,498      |   |            |   | 11,343     |             | 
|Repayments to line of credit                                                                           |  |                   | –          |   |            |   | (11,343    | )           | 
|(Repayments to) convertible
    notes payable                                                          |  |                   | (43,341    | ) |            |   | (25,343    | )           | 
|(Repayments
    to) notes payable                                                                      |  |                   | (10,000    | ) |            |   | 0          |             | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|Net
    cash provided by financing activities                                                          |  |                   | 684,336    |   |            |   | (50,594    | )           | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|NET INCREASE
    (DECREASE) IN CASH AND CASH EQUIVALENTS                                               |  |                   | 6,038      |   |            |   | –          |             | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|CASH
    AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                     |  |                   | 62,948     |   |            |   | –          |             | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|CASH
    AND CASH EQUIVALENTS, END OF PERIOD                                                           |  | $                 | 68,986     |   |            | $ | –          |             | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|SUPPLEMENTARY
    DISCLOSURE OF CASH FLOW INFORMATION                                                  |  |                   |            |   |            |   |            |             | 
|Cash paid during the period
    for:                                                                   |  |                   |            |   |            |   |            |             | 
|Income tax                                                                                             |  |                   |            |   |            |   |            |             | 
|Interest                                                                                               |  | $                 | –          |   |            | $ | 30,866     |             | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|                                                                                                       |  |                   |            |   |            |   |            |             | 
|NON-CASH
    INVESTING AND FINANCING ACTIVITIES:                                                       |  |                   |            |   |            |   |            |             | 
|Common
    stock issued for settlement of accrued expense                                              |  | $                 | 1,415,600  |   |            | $ | –          |             | 
|Common
    stock issued upon conversion of notes payable                                               |  | $                 | 143,863    |   |            | $ | –          |             | 
|Common
    stock issued for settlement of note payable - related party                                 |  |                   | –          |   |            | $ | 451,891    |             | 
|Conversion
    of preferred stock into common stock                                                    |  | $                 | 9,171      |   |            | $ | (7,427     | )           | 
|Common
    stock cancellation related to accrued liability                                             |  |                   | –          |   |            | $ | 2,500      |             | 
|Series
    H Preferred Stock issued for prior year acquisition                                         |  | $                 | 728,907    |   |            | $ | –          |             | 
|Series
    B preferred shares issued for debt settlement                                               |  |                   | –          |   |            | $ | 60,000     |             | 
|Debt
    discount from issuance of warrant                                                             |  |                   | –          |   |            | $ | 219,210    |             | 
|Derivative
    Resolution upon conversion                                                              |  |                   | –          |   |            | $ | 405,443    |             | 
|Reclassification
    to derivative liabilities from additional paid in capital                         |  | $                 | 1,033,004  |   |            | $ | 939,995    |             | 
|Debt
    discount from derivative liabilities                                                          |  |                   | –          |   |            | $ | 535,878    |             | 
|Cash
    carried over from acquisition                                                                 |  |                   | –          |   |            | $ | –          |             | 









61











|19. | SUBSEQUENT EVENTS
|--- | -----------------



On April 3, 2018, the Board of Directors of Cardiff increased
the authorized to One Billion (1,000,000,000) shares of Common Stock, par value of $0.001.



Stock Issuances:



Subsequent to December 31, 2017, 12,407,985
shares were issued for debt conversion.



Subsequent to December 31, 2017, 50,000
shares were issued for Series B Preferred Stock conversion.



Subsequent to December 31, 2017, 6,210,588
shares were issued for Series H Preferred Stock conversion.



Subsequent to December 31, 2017, 169,119
shares were issued for Series I Preferred Stock conversion.



Subsequent to December 31, 2017, 3,886,930
shares were issued for services rendered.



Subsequent to December 31, 2017, a cashless
warrant to purchase 1,335,000 shares was issued in connection with a services contract. The warrant is exercisable for three years
at a price of $0.03 per share.





Notes Payable:



On January 19, 2018 the Company entered into a 12% convertible
note with an unrelated entity in the amount of $83,500. The note is convertible into shares of the company at any time at a 60%
discount of the lowest trading price for the prior 20 days to conversion. The Company received $75,000 cash pursuant to the terms
of this Note as of the date of this Report.



On February 20, 2018 the Company entered into a 8% convertible
line of credit with an unrelated entity in the amount of $78,750. The note is convertible into shares of the company at any time
at a 60% discount of the lowest trading price for the prior 15 days to conversion. The Company received $75,000 cash pursuant
to the terms of this Note as of the date of this Report.



On March 28, 2018 the Company entered into a 8% convertible
line of credit with an unrelated entity in the amount of $100,000. The note is convertible into shares of he company at any time
at a 60% discount of the lowest trading price for the prior 15 days to conversion. The Company received $95,000 cash pursuant
to the terms of this Note as of the date of this Report.



On April 9, 2018 the Company entered into a 10% convertible
line of credit with an unrelated entity in the amount of $145,000. The note is convertible into shares of he company at any time
at a 60% discount of the lowest trading price for the prior 25 days to conversion. The Company received $131,000 cash pursuant
to the terms of this Note as of the date of this Report.









62







ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.



There were no disagreements related to
accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the
two fiscal years and interim periods, including the interim periods up through the date the relationship ended.



ITEM 9A. CONTROLS AND PROCEDURES.



Disclosure Controls and Procedures



Disclosure controls and procedures are
designed to ensure that information required to be disclosed in the reports that are filed and submitted under the Exchange Act
is recorded, processed, summarized and reported, within the time periods specified by the SEC’s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be
disclosed in the reports that are filed under the Exchange Act is accumulated and communicated to management, including the principal
executive officer, as appropriate to allow timely decisions regarding required disclosure. Under the supervision of and with the
participation of its executive officer, the Company has evaluated the effectiveness of its disclosure controls and procedures as
required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this Annual Report. Based on that evaluation, the
sole executive officer of the Company has concluded that, as of the end of the period covered in this Annual Report, these disclosure
controls and procedures were ineffective.



We maintain disclosure controls and procedures
that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules forms, and that such information
is accumulated and communicated to our management, including our principal executive officer (our president) and our principal
accounting and financial officer (our chief financial officer and treasurer) to allow for timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and
our management is required to apply its judgment in evaluation the cost-benefit relationship of possible controls and procedures.



Our management does not expect that our
disclosure controls or our internal controls over financial reporting will prevent all error and fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, but no absolute, assurance that the objectives of a control system
are met. Further, any control system reflects limitations on resources and benefits of a control system must be considered relative
to its costs. These limitations also include the realities that judgments in decision-making can be faulty and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons,
by collusion of two or more people or by management override of a control. A design of a control system is also based upon certain
assumptions about potential future condition; over time controls may become inadequate because of changes in conditions, or the
degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be detected.



As of December 31, 2017, the year-end period
covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including
our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on the foregoing, our president and chief financial officer concluded that our disclosure controls
and procedures were not effective as of the end of the period covered by this annual report.



There have been no significant changes
in our internal controls over financial reporting that occurred during the fiscal year ended December 31, 2017 that have materially
or are reasonably likely to materially affect, our internal controls over financial reporting.



Management’s Report on Internal
Control over Financial Reporting



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rule 13a- 15(f) under the Exchange Act, and assessed
the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, our management
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal
Control-Integrated Framework. A material weakness is a deficiency or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses:









63







1.As
of December 31, 2017, our controls over the control environment were not effective. Specifically, we have not developed and effectively
communicated to our employees our accounting policies and procedure. This has resulted in inconsistent practices. Further, the
Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial experts
as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization,
management has determined that these circumstances constitute a material weakness.





2.            As
of December 31, 2017, our controls over financial statement disclosure were not effective. Specifically, controls were not designed
and in place to ensure that all disclosures required were originally addressed in our consolidated financial statements. Accordingly,
management has determined that this deficiency constitutes a material weakness.



3.            Lack
of formal documentation over internal control procedures and environment.



4.            Lack
of proper segregation of duties and multiple level of reviews.



5.            Lack
of expertise in accounting of derivative liabilities.



Because of these material weaknesses, management has concluded
that the Company did not maintain effective internal control over financial reporting as of December 31, 2017, based on the criteria
established in “2013 Internal Control-Integrated Framework” issued by COSO.



This annual report does not include an
attestation report of the company’s independent registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant
to temporary rules of the SEC that permit the company to provide only management’s report.



Changes in Internal Controls



There were no changes in our internal control over financial
reporting during the fiscal year ended December 31, 2017 that have affected, or are reasonably likely to affect, our internal control
over financial reporting.



ITEM 9B. OTHER INFORMATION.



None.























64







PART III



ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE.



Officers and Directors



Our directors will serve until successors
are elected and qualified. Our four officers are elected by the Board of Directors to a term of one year and serve until a successor
is duly elected and qualified, or until that person is removed from office. Our Board of Directors has no nominating, or compensation
committees. Our Board of Directors have three members.





The name, address, age and position of
our sole officer and director is set forth below:

|Name and Address     |  | Age | Positions                            
|-------------------- |  | --- | -------------------------------------
|Daniel Thompson      |  | 67  | Chairman of the Board of Directors   
|Alex Cunningham      |  | 60  | Chief Executive Officer and President
|Dr. Rolan Roberts II |  | 37  | Chief Operating Officer              

Background of our officers and directors





Daniel Thompson, 67, Chairman
of the Board of Directors. In June of 2010 Thompson was previously appointed Chairman and CEO of Cardiff Formerly a television
and entertainment industry professional with a 30-year career that embraces network and cable advertising sales programming production
and product placement, Mr. Thompson was president of Creative Entertainment Services, which he founded and successfully sold in
a transaction. Mr. Thompson also co-founded and successfully sold an industry service company – Creative Television Marketing,
a producer of short-form advertising concepts: Closed- Captioning Sponsorships, 10-Second Promotional Advertising vehicles, and
network Game Show Merchandising. He also oversaw new business for A Creative Group, a full service entertainment marketing company.
Mr. Thompson also founded CableRep USA, a media sales firm specializing in local market cable advertising, which he sold to Cox
Cable in 1981. Mr. Thompson attended Wayne State University, Bellevue College, and College of Continuing Studies at University
of Nebraska at Omaha.



Alex Cunningham,60, Chief
Executive Officer and President. Mr. Cunningham has agreed to join the Cardiff family in June of 2015. Mr. Cunningham's background
is in Business Development. His focus is on identifying prospects for franchising, mergers and acquisitions specializing in structuring
one or multiple franchise acquisitions; and/or franchising existing businesses. He is a founder of Fran Consult, Inc. a business
development company representing over 300 Franchise operations; owner, managing partner at AH Cunningham & Associates, LLC
2006 - Present; Profit Management Consulting, Inc., founder, President & CEO 1996-2005; managed projects and staff of 85 for
20 years for over 2000 private or closely held middle-market companies throughout 24 states. He was a partner at London Capital
Corporation 1991 - 1996; President & CFO at Vance Communications, Inc. 1988-1991. Honors and Awards: 2010 Consultant of the
Year - Franchise, Inc. National Association of Franchise Consultants. MBA - Crummer Graduate School of Business Rollins College
- Winter Park, Florida; BBA's - Finance and Business Administration University of Kentucky - Lexington, Kentucky.



Dr. Rolan Roberts II, 37,
Chief Operating Officer. Dr. Roberts II turned around large, established companies and has created high growth revenue organizations.
Dr. Roberts has passionately led with excellence a multi-billion, publicly-held database company along with healthcare, technology,
manufacturing and direct sales companies. He has led nearly 1,500 employees at a given time servicing clients such as Capital One,
IndyMac Bank, State Farm, Allstate, Nationwide along with federal and state government agencies.



Dr. Roberts has authored 4 business and
leadership books, holds an MBA from Liberty University, a doctorate degree in International Business & Entrepreneurship from
California InterContinental University and was recognized as the “Top 100 Most Influential Floridians” of 2015. He
has served on several industry and civic non-profit boards along with founding a non-profit that serves entrepreneurs in crisis.



| | · | Successfully led the turnaround, rebranding, and new product line of a 29-year old, $250MM life sciences company.
| | - | -----------------------------------------------------------------------------------------------------------------

| | · | Developed market-disrupting products in a startup environment by partnering with cancer treatment centers prior to a successful
exit strategy.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------

| | · | Led multi-site, geographically-dispersed team of 1,000 and crisis management response as senior executive for a multi-billion,
publicly- held company.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Recognized for superior interpersonal and communication skills, outstanding team leadership and an authority in the consumer,
healthcare and technology fields.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Recognized as “Top 100 Most Influential Floridians” of 2015.
| | - | ------------------------------------------------------------









65







Professional Accomplishments



| | · | Recognized as “Top 100 Most Influential Floridians” of 2015 by Insight Magazine.
| | - | --------------------------------------------------------------------------------

| | · | Best-selling author who has received international exposure for books based on corporate leadership and personal development.
| | - | -----------------------------------------------------------------------------------------------------------------------------

| | · | Professional speaker and TV host with authentic, charismatic and dynamic personality.
| | - | -------------------------------------------------------------------------------------

| | · | Participated and starred in leadership movie titled “The Journey” with Brian Tracy.
| | - | -----------------------------------------------------------------------------------

| | · | Produced two seven-disc audio programs on personal excellence and corporate sales growth.
| | - | -----------------------------------------------------------------------------------------

| | · | Advisor/Strategist to political and business leaders.
| | - | -----------------------------------------------------

| | · | Licensed private pilot.
| | - | -----------------------



Audit Committee Financial Expert



The functions of the Audit Committee are
currently carried out by our Board of Directors. Our Board of Directors has determined that we do not have an audit committee financial
expert on our Board of Directors carrying out the duties of the Audit Committee. The Board of Directors has determined that the
cost of hiring a financial expert to act as a director and to be a member of the Audit Committee or otherwise perform Audit Committee
functions outweighs the benefits of having a financial expert on the Audit Committee. Our Board of Directors has three members.



Code of Ethics



We have not adopted a code of ethics that
applies to our President, Chief Executive Officer, Secretary, Treasurer, Chief Financial Officer, or persons performing similar
functions, because of the small number of persons involved in the management of the Company.



Compliance with Section 16 (a) of the Exchange Act



Under Section 16(a) of the Exchange Act,
requires that our directors and executive officers and persons who beneficially own more than 10% of our Common Stock (referred
to herein as the “Reporting Persons”) file with the SEC various reports as to their ownership of and activities relating
to our Common Stock. Such Reporting Persons are required by the SEC regulations to furnish us with copies of all Section 16(a)
reports they file. Based solely upon our review of the copies of the forms we have received and representations that no other reports
were required, we believe that all Reporting Persons complied on a timely basis with all filing requirements applicable to them
with respect to transactions during fiscal year ended October 31, 2013 except as stated below.









66







ITEM
11. EXECUTIVE COMPENSATION



Summary
Compensation Table



|                                      |      |                     |       |        |              |  |          |  | Long-Term Compensation
|------------------------------------- | ---- | ------------------- | ----- | ------ | ------------ |  | -------- |  | ----------------------
|                                      |      | Annual Compensation |       | Awards | Payouts     
|Names                                 |      |                     |       |        |              |  | Under    |  | Restricted            
|Executive                             |      |                     |       |        | Other        |  | Options/ |  | Shares or             
|Officer and                           |      |                     |       |        | Annual       |  | SARs     |  | Restricted            
|Principal                             |      | Salary              | Bonus |        | Compensation |  | Granted  |  | Share/Units           
|Position                              | Year | (US$)               | (US$) |        | (US$)        |  | (#)      |  | (US$)                 
|Daniel Thompson                       | 2014 | 300,000             | 0     |        | 0            |  | 0        |  | 2,257,018             
|Chairman of the Board of Directors    | 2015 | 240,000             | 0     |        | 0            |  | 0        |  | 0                     
|                                      | 2016 | 240,000             | 0     |        | 0            |  | 0        |  | 360,000               
|                                      | 2017 | 300,000             | 0     |        | 0            |  | 0        |  | 0                     
|                                      |      |                     |       |        |              |  |          |  |                       
|Alex Cunningham                       | 2014 | 0                   | 0     |        | 0            |  | 0        |  | 0                     
|President and Chief Executive Officer | 2015 | 180,000             | 0     |        | 0            |  | 0        |  | 0                     
|                                      | 2016 | 180,000             | 0     |        | 0            |  | 0        |  | 580,000               
|                                      | 2017 | 300,000             | 0     |        | 0            |  | 0        |  | 0                     
|                                      |      |                     |       |        |              |  |          |  |                       
|Dr. Rolan Roberts II                  | 2014 | 0                   | 0     |        | 0            |  | 0        |  | 0                     
|Chief Operating Officer               | 2015 | 0                   | 0     |        | 0            |  | 0        |  | 0                     
|                                      | 2016 | 60,000              | 0     |        | 0            |  | 0        |  | 0                     
|                                      | 2017 | 100,000             | 0     |        | 0            |  | 0        |  | 205,600               



Employment Agreements





We have an employment agreement, renewed
May 15, 2014, with the Chairman, Mr. Thompson amended on January 1, 2017, whereby we provide for compensation of $25,000 per month.



We have an employment agreement with the
Chief Executive Officer, Mr. Cunningham, amended on January 1, 2017, whereby we provide for compensation of $25,000 per month.



We have an employment agreement with the
Chief Operating Officer, Mr. Roberts, effective June 2016, whereby we provide for compensation of $10,000 per month.



There are no other stock option plans,
retirement, pension, or profit sharing plans for the benefit of our sole officer and director other than as described herein.





Long-Term Incentive Plan Awards



We do not have any long-term incentive
plans that provide compensation intended to serve as incentive for performance.



Compensation of Directors



Our directors do not receive any compensation
for serving as members of the Board of Directors.









67







Indemnification



Under our Articles of Incorporation and
Bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit,
because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance
expenses incurred in defended a proceeding. To the extent that the officer or director is successful on the merits in a proceeding
as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect
to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defended the proceeding, and
if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent
permitted by the laws of the State of Florida.



Regarding indemnification for liabilities
arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that,
in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and
is, therefore, unenforceable.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT



The following table sets forth certain
information regarding our shares of common stock beneficially owned as of December 31, 2017, for (i) each stockholder known to
be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director,
and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which
such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the
right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise
indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised
solely by the beneficial owner or shared by the owner and the owner’s spouse or children.







|Name of Beneficial Owner and Address                                    |  | Amount andNature ofBeneficialOwnership ofCommon Stock |            | Percent ofCommon Stock (1)
|----------------------------------------------------------------------- |  | ----------------------------------------------------- | ---------- | --------------------------
|Daniel Thompson401 East Las Olas Blvd. Unit 1400Ft. Lauderdale, Florida |  |                                                       | 16,003,562 |                           
|                                                                        |  |                                                       |            |                           
|Alex Cunningham                                                         |  |                                                       |            |                           
|401 East Las Olas Blvd. Unit 1400                                       |  |                                                       |            |                           
|Ft. Lauderdale, Florida                                                 |  |                                                       | 9,000,000  |                           
|All directors and officers and 5% stockholders as a group               |  |                                                       | 25,003,562 |                           





(1) Based on 64,414,091 shares of common stock issued and
outstanding as of December 31, 2017.



Note: Daniel Thompson also owns 1 share of Preferred “A”,
720,000 shares of Preferred “B” and 1 share of Preferred “C”; and Alex Cunningham also owns 9,999 shares
of Preferred “B” and 1 share of Preferred “C”, respectively.



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





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, 2017
and 2016, the Company had $77,640 and $84,540 due to Daniel Thompson.











68









Refreshment Concepts, LLC leases its premises
from its prior owner under a month-to-month lease at the rate of $1,500 per month. As of December 31, 2017, the Company had lease
payable of $25,250 to the related party.



On January 24, 2017, the Company issued
2,010,490 shares of Common Stock to settle $402,098 due to the prior owner of Refreshment Concepts LLC, pursuant to the Acquisition
Agreement, dated August 10, 2016. 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 $0.24 per share, resulting in loss from extinguishment of debt in amount
of $80,420. As of December 31, 2017 and December 31, 2016, in addition to the lease payable of $25,250, the outstanding balance
due (included in notes payable to related parties on the financial statements) to the same prior owner was $44,189 and $57,695,
respectively.



On January 24, 2017, the Company issued
173,585 shares of Common Stock to settle $34,717 due to the prior owner of Repicci’s Franchise Group LLC, pursuant to the
Acquisition Agreement, dated August 10, 2016. 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 $0.24 per share, resulting in loss from extinguishment of debt
in amount of $6,943. As of December 31, 2017 and December 31, 2017, the outstanding balance due (included in notes payable to related
parties on the financial statements) to the same prior owner was $2,074 and $40,550, respectively.



During the second quarter of 2017, the
prior owner of Repicci’s Franchise Group LLC submitted a subscription agreement to the Company regarding the purchase of
90,909 shares of the Company’s Series I Preferred Stock by cash payment of $10,000, which was collected during the second
quarter of 2017. The transaction was independently negotiated between the Company and the related party. The proceeds from the
subscription agreement mitigated the Company’s cash pressure in short term. The 90,909 shares of Series I Preferred Stock
were issued as of December 31, 2017.



During the second quarter of 2017, the
Company issued 906,907 shares of Common Stock to a related party for services rendered. 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 $.0799 per
share. Accordingly, the Company recognized stock based compensation of $72,462 to the consolidated statements of operations for
the December 31 December 31, 2017.





In addition, the Board of Directors of
the Company approved to increase Daniel Thompson’s compensation to $25,000 per month from $20,000 effective January 1, 2017.
Accordingly, a total salary of $300,00 and $180,000 were accrued and reflected as an expense to Daniel Thompson during the year
ended December 31, 2017 and 2016, respectively. During September 2017, the Company issued 10,000,000 shares of Common Stock
for forgiveness of $800,000 in accrued salaries. The accrued salaries payable to Daniel Thompson was $117,500 and $742,500 as
of December 31, 2017 and December 31, 2016, 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 in 2015 and
$10,000 per month in 2016. Mr. Levy resigned on June 7, 2016. A total salary of $0 and $90,000 were accrued and reflected as an
expense during the year ended December 31, 2017 and 2016, respectively. During September 2017, the Company issued 1,000,000
shares of Common Stock for forgiveness of $80,000 in accrued salaries. The total balance due to Mr. Levy for accrued salaries
at December 31, 2017 and December 31, 2016 were $160,000 and $240,000, respectively.





The Company had an employment agreement
with the Chief Operating Officer, Mr. Roberts, whereby the Company provided for compensation of $10,000 per month effective in
June 2016. A total salary of $60,000 and $0 were accrued and reflected as an expense during the year ended December 31, 2017 and
2016, respectively. The total balance due to Mr. Roberts for accrued salaries at December 31, 2017 and December 31, 2016 were
$-0- and $60,000, respectively. In addition, the Company agreed to grant Mr. Roberts stock options for a minimum of 300,000 shares
of the Company's common stock at an exercise price of 50% of the current last ten (10) day stock average per share, and 600,000
shares of common stock as a key officer employment incentive to be earned and vested on a pro rata basis at 25,000 shares per
month for twenty-four (24) months. The fair value of both 300,000 options and 600,000 shares were determined by the fair value
of the Company’s Common Stock on the grant date, at a price of approximately $0.226 per share. Accordingly, the accrued
expense was $135,600 as of December 31, 2017. On August 8, 2017, Mr. Roberts accepted the offer from the Company to issue 3,000,000
common shares to supersede all his options and warrants in the employment agreement. Additionally, the Company issued 1,000,000
shares of Common Stock as a bonus to Mr. Roberts for his past service to 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 $.07 per
share. Accordingly, the Company recognized stock based compensation of $70,000 to the consolidated statements of operations for
the year ended December 31, 2017.









69









The Board of Directors of the Company
approved to increase Chief Executive Officer, Mr. Cunningham’s compensation to $25,000 per month from $15,000 effective
January 1, 2017. A total salary of $300,000 and $135,000 were accrued and reflected as an expense during the year ended December
31, 2017 and 2016, respectively. During September 2017, the Company issued 5,000,000 shares of Common Stock for forgiveness
of $400,000 in accrued salaries. The total balance due to Mr. Cunningham for accrued salaries at December 31, 2017 and December
31, 2016 were $122,500 and $360,000, respectively.



During the third quarter of 2016, the Company
issued 1,000,000 shares of common stock to Mr. Cunningham as bonus. 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 $0.22 per share. Accordingly, the
Company calculated the stock based compensation of $220,000 at its fair value and included it in the consolidated statements of
operations for the year ended December 31, 2016.



During the fourth quarter of 2016, the
Company issued total 6,000,000 shares of common stock to Mr. Thompson and Mr. Cunningham, or 3,000,000 shares each, for services
rendered. 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 $0.12 per share. Accordingly, the Company calculated the stock based compensation of $720,000
at its fair value and included it in the consolidated statements of operations for the year ended December 31, 2016.





As noted above, on September 15, 2017,
the Company issued 19,000,000 shares of Common Stock to settle $1,415,600 in accrued salaries to current and former officers
of the Company. Additionally, the Company issued 1,000,000 shares to a former employee as a one time bonus, valued at $70,000.
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 $0.07 per share. Accordingly, the Company reduced its accrued expenses by $1,415,600 and stock based
compensation by $70,000.



Conversion of equity



During the fourth quarter of 2017, 6,000
shares of Series B Preferred Stock were converted into 30,000 shares of Common Stock of the Company per the preferred shareholder’s
instruction.



During the fourth quarter of 2017, the
company issued 1,508 shares of Common Stock for a correction of a prior period conversion of Series B Preferred Stock.

During the year ended December 31, 2016,
591,997 shares of Series “B” Preferred Stock were converted into 2,959,985 shares of Common Stock of the Company per
the preferred shareholder’s instruction.





ITEM 14. PRINCIPAL LEGAL AND ACCOUNTING
FEES AND SERVICES



The aggregate fees billed for the
years ended December 31, 2017 and 2016 for professional services rendered by the principal accountant for the audit of its annual
financial statements included in Form 10-K (“Audit Fees”), (2) tax compliance, advice, and planning (“Tax Fees”),
and (iv) other products or services provided (“Other Fees”) and for professional services rendered by company’s
legal attorney:



|                          |  | Year
                    Ended December
                                         31, |         |  | Year Ended
    December 31 |  
|------------------------- |  | ------------------------------------------------------------------------------------ | ------- |  | -------------------------- | -
|                          |  | 2017                                                                                 |         |  | 2016                       |  
|Legal and Accounting Fees |  | $                                                                                    | 95,000  |  |                            | $
|Tax Fees                  |  |                                                                                      | 0       |  |                            |  
|All Other Fees            |  |                                                                                      | 10,500  |  |                            |  
|Total                     |  | $                                                                                    | 105,500 |  |                            | $









70









PART
IV



ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES



|Exhibit No. | Description                                                                                                                                                                           
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1*        | Articles of Incorporation, (incorporated by reference to the
    Company’s     Form 10 filed with the SEC on      March 27, 2002                                                      
|3.2*        | Articles
    of Amendment, (incorporated by reference to the     Company’s     Form 10 filed with the SEC on      March 27,
    2002                                                  
|3.3*        | Articles
    of Amendment, (incorporated by reference to the     Company’s     Form 10 filed with the SEC on      March
    27, 2002                                                  
|3.4*        | Articles
    of Amendment adopted July 18, 2012, (incorporated by reference to the     Company’s     Form 8-K/A filed with the
    SEC on      August 9, 2012                         
|3.5*        | Articles
    of Incorporation dated August 22, 2014, (incorporated by reference to the     Company’s     Form 8-K filed with
    the SEC on      September 15, 2014                   
|3.6*        | Bylaws,
    filed with the Company’s Form 8-K on September 15, 2014                                                                                                                   
|31.1        | Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|32.1        | Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|101.INS**   | XBRL Instance Document                                                                                                                                                                
|101.SCH**   | XBRL Taxonomy Schema                                                                                                                                                                  
|101.CAL**   | XBRL Taxonomy Calculation Linkbase                                                                                                                                                    
|101.DEF**   | XBRL Taxonomy Definition Linkbase                                                                                                                                                     
|101.LAB**   | XBRL Taxonomy Label Linkbase                                                                                                                                                          
|101.PRE**   | XBRL Taxonomy Presentation Linkbase                                                                                                                                                   



*Previously filed.

** To be filed by amendment.







71









SIGNATURES



Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities
on this 29th day of June 2018.





| | CARDIFF LEXINGTON CORP (FORMERLY CARDIFF INTERNATIONAL, INC.          
| | ----------------------------------------------------------------------
| |                                                                       
| | /s/ Alex Cunningham                                                   
| | Alex Cunningham                                                       
| | Chief Executive Officer                                               
| |                                                                       
| | /s/ Alex Cunningham                                                   
| | Alex Cunnningham                                                      
| | (Duly Authorized, Principal Executive and Principal Financial Officer)









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



|Signature           |  | Title                              |  | Date         
|------------------- |  | ---------------------------------- |  | -------------
|                    |  |                                    |  |              
|/s/ Daniel Thompson |  | Chairman of the Board of Directors |  | June 29, 2018
|Daniel Thompson     |  |                                    |  |              











72