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The accompanying notes are an integral part of
these consolidated financial statements
The accompanying notes are an integral part of
these consolidated financial statements
The accompanying notes are an integral part of
these consolidated financial statements
The accompanying notes are an integral part of
these consolidated financial statements
The accompanying notes are an integral part of
these consolidated financial statements
The accompanying notes are an integral part of
these consolidated financial statements
The accompanying notes are an integral part of
these consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Organization and Nature of Operations
Legacy Card Company, LLC (“Legacy”)
was formed as a Limited Liability Company on August 29, 2001. On April 18, 2005, Legacy converted from a California Limited Liability
Company to a Nevada Corporation. On November 10, 2005, Legacy merged with Cardiff Lexington Corporation (“Cardiff Lexington”,
the “Company”), a publicly held corporation. On April 13, 2021, Cardiff Lexington Corporation converted from a Florida Corporation
to a Nevada Corporation.
In the first quarter of 2013, it was decided to
restructure Cardiff Lexington into a holding company that adopted a new business model known as "Collaborative Governance,"
a form of governance enabling businesses to take advantage of the potential access to capital markets provided by affiliation with a publicly-traded
company. Cardiff Lexington began targeting the acquisition of niche companies with high growth potential. The reason for this strategy
was to protect the Company’s shareholders by acquiring businesses with little to no debt, seeking support with both financing and
management that had the ability to offer a return to investors.
Description of Business
Cardiff Lexington consists of the following wholly owned subsidiaries:
We Three, LLC dba Affordable Housing Initiative (“AHI”),
acquired May 15, 2014
Romeo’s Alpharetta, LLC dba Romeo’s NY Pizza (“Romeo’s
Pizza”), acquired September 30, 2014; Sold July 1, 2020.
Edge View Properties, Inc., (“Edge View”) acquired
July 16, 2014
Repicci’s Franchise Group, LLC (“Repicci’s
Group”), acquired August 10, 2016; Sold June 1, 2020.
Platinum Tax Defenders, LLC (“Platinum Tax”),
acquired July 31, 2018
JM Enterprises 1, Inc. dba Key Tax Group (“Key Tax”),
acquired May 8, 2019; Sold December 31, 2021
Red Rock Travel Group, LLC (“Red Rock”), acquired
July 31, 2018, discontinued May 31, 2019
Nova Ortho and Spine, PLLC (“Nova”), acquired
May 31, 2021
Principles of Consolidation
The consolidated
financial statements include the accounts of Cardiff, and its wholly-owned subsidiaries: AHI, Edge View, Platinum Tax, Nova Ortho and
Spine and subsidiaries shown as discontinued operations includes Red Rock, Romeo’s, Repicci’s and Key Tax. 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 consolidated financial results.
Subsidiaries discontinued are shown as discontinued operations.
Use of Estimates
The preparation of financial statements in conformity
with U.S. 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.
Change in Capital Structure
In the first quarter of 2020, the Company announced
a reverse split of several of its Preferred Stock Classes effective December 31, 2020.
In May 2020,
the Company affected a 10,000:1 reverse split of Common Stock effective March 31, 2020.
In the second
quarter of 2021, the Company completed a change in domicile from a Florida corporation to a Nevada Corporation.
COVID-19
Pandemic
The outbreak
of a novel coronavirus throughout the world, including the United States, during early calendar year 2020 has caused widespread business
and economic disruption through mandated and voluntary business closings and restrictions on the movement and activities of people (“COVID-19
Pandemic”). The extent of the impact of the COVID-19 Pandemic on the Company's business is highly uncertain and difficult to predict,
as the response to the COVID-19 Pandemic is rapidly evolving in many countries, including the United States and other markets where the
Company operates. It is expected that many of the Company's customers and suppliers could be impacted by these closings and restrictions
which could materially and adversely affect demand for our products, our ability to obtain or deliver inventory or services, and our ability
to collect accounts receivables as customers face higher liquidity and solvency risk. Furthermore, capital markets and economies worldwide
have also been negatively impacted by the COVID-19 Pandemic, and it is possible that it could cause an economic downturn, recession, or
depression. Such economic disruption could have a material adverse effect on our business. Policymakers around the world have responded
with fiscal and monetary policy actions to support the economy. The magnitude and overall effectiveness of these actions remains uncertain.
Accounts Receivable
Accounts receivable is reported on the balance
sheet at the net amounts expected to be collected by the Company. Management closely monitors outstanding accounts receivable and charges
off to expense any balances that are determined to be uncollectible which was $0 and $21,870 as of December 31, 2021 and December 31,
2020, respectively. As of December 31, 2021, and December 31, 2020, the Company had accounts receivable of $4,948,796 and $16,377, respectively.
Accounts receivables are primarily generated from our subsidiaries in their normal course of business.
Property and Equipment
Property and equipment are carried at cost. Expenditures
for renewals and betterments that extend the useful lives of property, equipment or leasehold improvements are capitalized. Expenditures
for maintenance and repairs are charged to expense as incurred. Depreciation is calculated using the straight-line method for financial
reporting purposes based on the following estimated useful lives:
| Schedule of estimated useful lives |
|
| Classification |
Useful Life |
| Equipment, furniture, and fixtures |
5 - 7 years |
| Medical equipment |
10 years |
| Leasehold improvements |
10 years or lease term, if shorter |
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived brands are not amortized,
but are evaluated for impairment annually or when indicators of a potential impairment are present. Our impairment testing of goodwill
is performed separately from our impairment testing of indefinite-lived intangibles. The annual evaluation for impairment of goodwill
and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future
cash flows and operating plans. The Company believes such assumptions are also comparable to those that would be used by other marketplace
participants. During the years ended December 31, 2021 and 2020, the Company did not recognize any goodwill impairment. The Company based
this decision on impairment testing of 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.
Revenue Recognition
On January 1, 2018, we adopted ASC 606, Revenue
from contracts with customers (“Topic 606”) using the modified retrospective method applied to those contracts which were
not completed as of January 1, 2018.
The Company applies the following five-step model
to determine revenue recognition:
| |
· |
Identification of a contract with a customer |
| |
· |
Identification of the performance obligations in the contact |
| |
· |
Determination of the transaction price |
| |
· |
Allocation of the transaction price to the separate performance allocation |
| |
· |
Recognition of revenue when performance obligations are satisfied |
The Company only applies the five-step model when
it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers
to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, the Company assesses services
promised within each contract and determines those that are performance obligations and assesses whether each promised service is distinct.
The Company’s financial services sector
reports revenues as services are performed and its healthcare sector reports revenues at the time control of the services transfer to
the customer and from providing licensed and/or certified orthopedic procedures. Our healthcare subsidiary does not have contract liabilities
or deferred revenue as there are no amounts prepaid for services.
Established billing rates are not the same as
actual amounts recovered for our healthcare subsidiary. They generally do not reflect what the Company is ultimately paid and
therefore are not reported in our consolidated financial statements. The Company is typically paid amounts based on established
charges per procedure with guidance from the annually updated Current Procedural Terminology (“CPT”) guidelines (a code set
maintained by the American Medical Association through the CPT Editorial Panel), that designates relative value units (“RVU's”)
and a suggested range of charges for each procedure which is then assigned a CPT code.
This fee is discounted to reflect the percentage
paid to the Company “using a modifier” recognized by each insurance carrier for services, less deductible, co-pay, and contractual
adjustments which are deducted from the calculated fee. The net revenue is recorded at the time the services are rendered.
Contract Fees (Non-PIP)
The Company has contract fees for amounts earned
from its Non-Personal Injury Protection (“PIP”) related procedures, typically car accidents, and are collected on a contingency
basis. These cases are sold to a factor, who bears the risk of economic benefit or loss. After selling patient cases to the factor, any
additional funds collected by the Company are remitted to the factor.
Service Fees – Net (PIP)
The Company generates services fees from performing
various procedures on the date the services are performed. These services primarily include slip and falls as well as smaller nominal
Non-PIP services. Fees are collected primarily from third party insurance providers. These revenues are based on established insurance
billing rates less allowances for contractual adjustments and uncollectible amounts. These contractual adjustments vary by insurance company
and self-pay patients. The Company computes these contractual adjustments and collection allowances based on its historical collection
experience.
Completing the paperwork for each case and preparing
it for billing takes approximately ten business days after a procedure is performed. The majority of claims are then filed electronically
except for those remaining insurance carriers requiring paper filing. An initial response is usually received within four weeks from electronic
filing and up to six weeks from paper filing. Responses may be a payment, a denial, or a request for additional information.
Historical collection rates are estimated using
the most current prior 12-month historical payment and collection percentages. The Company generally receives all of its collections within
12 months from the date of service. The Company accounts for chargebacks as they occur and records an estimate for expected chargebacks
as they are received from insurance companies.
For the years ended December 31, 2021 and
2020, the Company recorded $0 and $21,870 of bad debt expense, respectively. Additionally, the Company has not recorded any estimate for
expected chargebacks.
The Company’s contracts for both its contract
and service fees each contain a single performance obligation (providing orthopedic services), as the promise to transfer the individual
services is not separately identifiable from other promises in the contracts and, therefore, not distinct, as a result, the entire transaction
price is allocated to this single performance obligation.
Accordingly, the Company recognizes revenues (net)
when the patient receives orthopedic care services. Our patient service contracts generally have performance obligations which are satisfied
at a point in time. The performance obligation is for onsite or off-site care provided. Patient service contracts are generally fixed-price,
and the transaction price is in the contract. Revenue is recognized when obligations under the terms of the contract with our patients
are satisfied; generally, at the time of patient care.
Financial Services Income
The Company generates revenue from providing tax
resolution services to individuals and business owners that have federal and state tax liabilities
by assisting its clients to settle outstanding tax debts. Additionally, services include back taxes, offer in compromise, audit representation,
amending tax returns, tax preparation, wage garnishment relief, removal of bank levies and liens, and other financial challenges.
The Company recognizes revenues for these services as services are performed.
Rental Income
The Company’s rent revenue is derived from
the mobile home leases. The expired leases are considered month-to-month leases. In accordance with section ASC 842, 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, 2021 and December 31, 2020. There are no contingent rentals
included in income in the accompanying consolidated statements of operations. With the exception of the month-to-month leases, revenue
was recognized on a straight-line basis and amortized into income on a monthly basis, over the lease term.
Advertising Costs
Advertising costs are expensed as incurred. Advertising
costs are included as a component of cost of sales in the consolidated statements of operations and changes in members’ equity.
The Company recognized advertising and marketing expense of $1,301,050 and $1,511,955 for the years ended December 30, 2021 and 2020, respectively.
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 Black-Scholes 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”) discount against
the face amount of the respective debt instrument (offset to additional paid in capital).
When the Company records a BCF which is not a
conventional convertible, the fair value of the BCF is recorded as a derivative liability with an offset against the face amount of the
respective debt instrument which is amortized to interest expense over the term of the debt.
Fair Value Measurements
Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment
associated with the inputs used to measure their fair value. The fair value hierarchy distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources (observable inputs), and (2) an entity’s own assumptions about
market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair
value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy
are described below:
Level Input Definition
| Level 1 |
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. |
| |
|
| Level 2 |
Inputs, other than quoted prices included in Level 1, which are observable for the asset or liability through corroboration with market data at the measurement date. |
| |
|
| Level 3 |
Unobservable inputs that reflect management's
best estimate of what market participants would use in pricing the asset or liability at the measurement date.
|
Stock-Based Compensation
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.
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 consolidated statements of operations.
Equity Instruments Issued to Parties Other Than Employees for Acquiring
Goods or Services
The Company early adopted ASU No 2018-07 for equity
instruments issued to parties other than employees.
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 periods ended December 31, 2021 and 2020,
the Company did not have any interest and penalties associated with tax positions and did not have any significant unrecognized uncertain
tax positions.
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.
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, 2021, the Company has sustained recurring losses and accumulated a working capital deficit of approximately
$5,975,487. 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.
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 fund its cash flow shortfalls and 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.
Recent Accounting Standards
In August
2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the
number of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion accounting models.
As a result, the Company’s convertible debt instruments will be accounted for as a single liability measured at its amortized cost
as long as no other features require bifurcation and recognition as derivatives. For contracts in an entity’s own equity, the type
of contracts primarily affected by this update are freestanding and embedded features that are accounted for as derivatives under the
current guidance due to a failure to meet the settlement conditions of the derivative scope exception. Management has adopted ASU 2020-06
as of the filing of this December 31, 2021 Form 10-K. Upon adoption of ASU 2020-06, we reclassified the previously
identified beneficial conversion features to the associated debt. We also determined, that in accordance with ASU 2017-11, such
beneficial conversion features are not considered a liability classified derivative.
Changes to accounting principles are established
by the FASB in the form of Accounting Standards Update (“ASU”) to the FASB's Codification. We consider the applicability and
impact of all ASU's on our financial position, results of operations, shareholders’ deficit. cash flows, or presentation thereof.
In June 2016, the Financial Accounting
Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses
on Financial Instruments, which supersedes current guidance by requiring recognition of credit losses when it is probable that a
loss has been incurred. The new standard requires the establishment of an allowance for estimated credit losses on financial assets
including trade and other receivables at each reporting date. The new standard will result in earlier recognition of allowances for
losses on trade and other receivables and other contractual rights to receive cash. In November 2019, the FASB issued ASU No.
2019-10, Financial Instruments -- Credit Losses (Topic 326), Derivatives and hedging (Topic 815) and Leases (Topic 842), which
extends the effective date of Topic 326 for certain companies until fiscal years beginning after December 15, 2022. The new standard
will be effective for the Company in the first quarter of fiscal year beginning January 1, 2023, and early adoption is
permitted.
Management does not expect that the adoption of
this standard will have a material effect on the Company's financial statements.
Reclassifications
Certain accounts relating to the prior year have
been reclassified to conform to the current period’s presentation. These reclassifications had no effect on the net income or net
assets as previously reported.
| 2. |
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS |
Subsequent to the initial issuance of the Company's 2020 financial
statements on March 31, 2021, management reconsidered the methodology previously applied in its valuation of derivative liabilities contained
in its matured convertible notes which are in default, to include all inputs to measure the time value component to the application of
the Black-Scholes Model. In addition, management also discovered that it did not reflect the impact of amendments which resulted in modifications
in certain rights and privileges for certain classes of its preferred stock, which should have been accounted for as a deemed dividend
at the time of modification.
The restatement primarily relates to the accounting for (1) the valuation
of embedded derivative liabilities in certain matured convertible notes and (2) the accounting treatment for changes in certain rights
and privileges with respect to certain classes of preferred stock on January 10, 2020.
| |
(1) |
For certain convertible notes in default containing embedded derivatives (the “Notes”), the Company originally valued the derivative liability using a Black-Scholes Model, but without consideration to a time value component (the term, volatility, or discount rates), because these notes had matured and were immediately due. As a result, the embedded derivatives for expired notes were measured using a valuation methodology which was analogous to the use of intrinsic value. Company management has reconsidered the methodology previously applied, and determined that the use of all inputs to the Black-Scholes Model is more appropriate in the determination to measure the fair value of all derivative liabilities. |
| |
(2) |
The Company originally did not reflect the impact of amendments which resulted in modifications in certain rights and privileges for certain classes of its preferred stock. Subsequent to the issuance of its financial statements for the year ended December 31, 2020, Company management determined that these modifications resulted in changes to the carrying value of certain classes of preferred stock, which should have been accounted for as a deemed dividend at the time of modification. |
The following table summarizes
the impacts of the error corrections on the Company's financial statements for each of the periods presented below:
i. Balance sheet
| Schedule of financial statements | |
| | | |
| | | |
| | |
| | |
Impact of correction of error | |
| December 31, 2020 | |
As previously reported | | |
Adjustments | | |
As restated | |
| | |
| | |
| | |
| |
| Total assets | |
$ | 4,930,147 | | |
$ | – | | |
$ | 4,930,147 | |
| | |
| | | |
| | | |
| | |
| Derivative liability | |
| 2,405,358 | | |
| 498,305 | | |
| 2,903,663 | |
| Net, liabilities of discontinued operations | |
| 2,441,965 | | |
| 249,730 | | |
| 2,691,695 | |
| Other | |
| 8,207,123 | | |
| – | | |
| 8,207,123 | |
| Total liabilities | |
| 13,054,446 | | |
| 748,035 | | |
| 13,802,481 | |
| | |
| | | |
| | | |
| | |
| Accumulated deficit | |
| (64,835,220 | ) | |
| (748,035 | ) | |
| (65,583,255 | ) |
| Others | |
| 56,710,921 | | |
| – | | |
| 56,710,921 | |
| Total deficiency in shareholders' equity | |
$ | (8,124,299 | ) | |
$ | (748,035 | ) | |
$ | (8,872,334 | ) |
ii. Statement of operations
| | |
| | | |
| | | |
| | |
| | |
Impact of correction of error | |
| Year ended December 31, 2020 | |
As previously reported | | |
Adjustments | | |
As restated | |
| | |
| | |
| | |
| |
| Loss from operations | |
$ | (1,804,151 | ) | |
$ | – | | |
$ | (1,804,151 | ) |
| Change in value of derivative liability | |
| 379,892 | | |
| 54,822 | | |
| 434,714 | |
| Others | |
| (1,550,148 | ) | |
| – | | |
| (1,550,148 | ) |
| Other income (expense) | |
| (1,170,256 | ) | |
| 54,822 | | |
| (1,115,434 | ) |
| Net loss before discontinued operations | |
| (2,974,407 | ) | |
| 54,822 | | |
| (2,919,585 | ) |
| Loss from discontinued operations | |
| (125,599 | ) | |
| 13,418 | | |
| (112,181 | ) |
| Gain from discontinued operations | |
| 194,873 | | |
| – | | |
| 194,873 | |
| Income (loss) from discontinued operations | |
| 69,274 | | |
| 13,418 | | |
| 82,692 | |
| Net loss | |
| (2,905,133 | ) | |
| 68,240 | | |
| (2,836,893 | ) |
| Deemed dividend on preferred stock | |
| – | | |
| (1,605,266 | ) | |
| (1,605,266 | ) |
| Net loss attributable to common stockholders | |
$ | (2,905,133 | ) | |
$ | (1,537,026 | ) | |
$ | (4,442,159 | ) |
| Basic Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
$ | (3.20 | ) | |
| | | |
$ | (4.98 | ) |
| Discontinued Operations | |
$ | 0.08 | | |
| | | |
$ | 0.09 | |
| Diluted Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
$ | (3.20 | ) | |
| | | |
$ | (4.98 | ) |
| Discontinued Operations | |
$ | – | | |
| | | |
$ | 0.00 | |
| Weighted Average Shares Outstanding - Basic Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
| 908,485 | | |
| | | |
| 908,485 | |
| Discontinued Operations | |
| 908,485 | | |
| | | |
| 908,485 | |
| Weighted Average Shares Outstanding - Diluted Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
| 908,485 | | |
| | | |
| 908,485 | |
| Discontinued Operations | |
| 1,444,295,967,109 | | |
| | | |
| 1,444,295,967,109 | |
Nova Ortho and Spine, LLC
On May 31, 2021 the Company completed the acquisition
of Nova Ortho and Spine LLC. Sellers received a cash payment in the amount of $2,500,000 and were issued 894,834 shares of Series J Preferred
Stock of the Company with a par value of $0.001 and a stated value of $4.00 with an aggregate stated value equal to $3,579,334 for a total
transaction of $6,079,334. The Preferred J stock rights and privileges include voting rights, a conversion ratio of 1:2:00. The Preferred
J shares have a lock-up/leak-out limiting the sale of stock for 6 months after which conversions and sales are limited to 20% of their
portfolio per year, pursuant to the terms of the Stock Purchase Agreement. The parties further agreed to performance based contingent
supplement payment to Sellers in 2022 should one year from the closing date the Company’s trailing twelve months minimum Pre-Tax
Net Income exceed $1,979,320, the “Milestone”, which in that event would cause the issuance to Sellers of 818,750 additional
shares of Preferred J Stock, with an aggregate stated value equal to Three Million Two Hundred Seventy-Five Thousand Dollars ($3,275,000).
The preliminary purchase price allocation of the net assets acquired is as follows:
| Schedule of preliminary purchase price allocation | |
| | |
| | |
| Nova
Ortho and Spine, PLLC | |
| Cash | |
$ | 177,977 | |
| Accounts receivable | |
| 4,052,213 | |
| Property and equipment | |
| 92,064 | |
| Other assets | |
| 342,493 | |
| Goodwill | |
| 2,391,608 | |
| Liabilities | |
| (977,021 | ) |
| Total | |
$ | 6,079,334 | |
| 4. |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
| Schedule of accrued expenses | |
| | | |
| | |
| | |
December 31, | |
| | |
2021 | | |
2020 | |
| Accounts payable | |
$ | 170,914 | | |
$ | 119,653 | |
| Accrued credit cards | |
| 16,466 | | |
| 28,548 | |
| Accrued expense – previously factored liability | |
| 846,754 | | |
| – | |
| Accrued income taxes, and other taxes | |
| 7,553 | | |
| 282,798 | |
| Accrued professional fees | |
| 270,827 | | |
| 27,727 | |
| Accrued advertising | |
| 39,886 | | |
| 75,963 | |
| Accrued payroll | |
| 39,959 | | |
| 27,569 | |
| Accrue expense - other | |
| 363 | | |
| 54,815 | |
| Total | |
$ | 1,392,722 | | |
$ | 617,073 | |
The Company is delinquent paying certain income
and property taxes. As of December 31, 2021 and 2020, the balance for these taxes, penalties and interest is $7,553 and $282,798.
| 5. |
PLANT AND EQUIPMENT, NET |
Property and equipment as of December 31, 2021
and December 31, 2020 is as follows:
| Schedule of Property and Equipment | |
| | |
| |
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Residential housing | |
$ | 319,856 | | |
$ | 341,205 | |
| Medical equipment | |
| 35,974 | | |
| – | |
| Computer Equipment | |
| 9,189 | | |
| – | |
| Furniture, fixtures and equipment | |
| 96,532 | | |
| 76,017 | |
| Leasehold Improvement | |
| 15,950 | | |
| – | |
| | |
| | | |
| | |
| Total | |
| 477,501 | | |
| 417,222 | |
| Less: accumulated depreciation | |
| (218,471 | ) | |
| (205,443 | ) |
| Property and equipment, net | |
$ | 259,030 | | |
$ | 211,799 | |
For the years ended December 31, 2021 and 2020,
depreciation expense was $35,334 and $23,100, respectively. For the years end December 31, 2021 and 2020, the Company recorded depreciation
expense of $13,886 and $1,274 in operations expense and $21,448 and $21,826 in cost of goods sold, respectively.
During the year ended December 31, 2021, the
Company sold 3 lots for $152,000,
and had 27 acres of land of approximately $540,000 as
of December 31, 2021. As of December 31, 2020, the Company had 30 acres of land of approximately $603,000
located in Salmon, Idaho, 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. The land is currently vacant and is expected to be developed
into a residential community.
At December 30, 2021 and December 31, 2020, the
Company had a revolving line of credit with a financial institution for $92,500, expires February 2, 2021, which was personally guaranteed
by the manager of the subsidiary, accrues interest at prime (3.25% at December 30, 2021 and December 31, 2020) plus 3.45%, for a total
rate of 6.70%. As of December 31, 2021 and 2020, the Company had balance of $0 and $51,927, respectively.
| 8. |
RELATED PARTY TRANSACTIONS |
On February
11, 2021, the Chairman of the Board and the Chief Executive Officer each converted 62,500 Preferred Series I shares into 25,000,000 restricted
common shares for a total of 125,000 Preferred Series I shares into 50,000,000 restricted common shares.
Effective
December 28, 2021, the Chairman of the Board and Chief Executive Officer each forfeit and surrendered for no consideration 90,000,000
Preferred I shares each, totaling 180,000,000.
The Company assumed notes payable from the previous
owners of which are currently managers of certain subsidiaries related to the acquisition of Key Tax on May 8, 2019. These notes and loans
are due on demand and do not bear interest. The balance of these notes and loans are $153,925 due from the previous owners at December
31, 2021 and $35,164 due to the previous owners at December 31, 2020, respectively.
From time to time, the previous owner which is
currently the manager of Platinum Tax Defenders loans funds to the Company to cover short term operating needs. Amounts owed as of December
31, 2021 and 2020 were $37 and $2,721 respectively.
The Company assumed amounts due to previous
owners who are current managers Edge View Properties Inc. related to the acquisition on July 16, 2014. These amounts are due on
demand and do not bear interest. The balance of these amounts are $4,979
due from the previous owners as of December 31, 2021 and $50,021
due to the previous owners at December 31, 2020, respectively. On August 6, 2021, a Board Resolution was executed to terminate one
of the two employees of Edge View Properties for fraud, deceit, larceny, and thievery for selling property belonging to the Company
and personally taking the $162,598
in proceeds. The Company hired counsel to terminate the employee and handle all legal matters for return of monies and criminal
prosecution.
The Company agreed to pay $360,000 per year and
a $200,000 of target annual incentive granted in 2020 to the Chief Executive Officer based on his employment agreement since July 1, 2020
of which currently 50% is paid in cash and 50% is accrued. The Company previously paid the Chief Executive Officer $300,000 per year.
The total outstanding accrued compensation as of December 31, 2021 and 2020 were $1,415,000 and $1,035,000, respectively.
The Company agreed to pay $360,000 per year and
a $200,000 of target annual incentive to the Chairman of the Board based on his employment agreement since July 1, 2020 of which currently
50% is paid in cash and 50% is accrued. The Company previously paid the Chairman of the Board $300,000 per year. The total outstanding
accrued compensation as of December 31, 2021 and 2020 were $1,400,000 and $1,020,000, respectively.
The Company agreed to pay $120,000 per year to
the Chief Operating Officer based on his amended employment agreement executed on May 15, 2019. In the third quarter of 2021, the Chief
Operating Officer received 61,000 shares of preferred stock series B in exchange for accrued salaries of $244,000. The total outstanding
accrued compensation as of December 31, 2021 and 2020 was $159,000 and $120,000, respectively.
The Company pays $156,000 per year to the Chief
Financial Officer based on his amended employment agreement executed on May 15, 2021. The total outstanding accrued compensation as of
December 31, 2021 and 2020 was $17,057.
The Company entered into
a Management Agreement effective May 31, 2021 for compensation to the Principals of the Company’s Nova Ortho and Spine subsidiary
in the form of an annual base salaries of $372,000 to one of the 3 doctors, $450,000 to the second, and $372,000 to the third doctor.
Collectively, as a group,
Principals will receive an annual cash bonus and stock equity set forth below (the “Annual Bonus”). The Annual Bonus will
be conditioned upon the Company achieving 100% of the annual objectives of financial performance goals as set forth below.
The Company obtained short-term advances from
the Chairman of the Board that are non-interest bearing and due on demand. As of December 31, 2021 and 2020, the Company owed the Chairman
$126,765 and $126,849, respectively.
| 9. |
NOTES AND LOANS PAYABLE |
Notes payable at December 31, 2021 and 2020, respectively,
are summarized as follows:
| Schedule of notes payable | |
| | |
| |
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Notes and Loans Payable | |
$ | 600,932 | | |
$ | 1,347,690 | |
| Less current portion | |
| (458,177 | ) | |
| (947,912 | ) |
| Long-term portion | |
$ | 142,755 | | |
$ | 399,778 | |
Long-term debt matures as follows:
| Schedule of Maturities of Long-term Debt | |
| |
| | |
Amount | |
| 2022 | |
$ | 458,177 | |
| 2023 | |
| 4,923 | |
| 2024 | |
| 4,923 | |
| 2025 | |
| 4,923 | |
| 2026 | |
| 4,923 | |
| Thereafter | |
| 123,063 | |
| Total | |
$ | 600,932 | |
Notes and Loans Payable – Related Party
The Company assumed notes payable from the
previous owners of which are currently managers of Key Tax related to the acquisition of Key Tax on May 8, 2019 and these amounts
have been divested and returned to the previous owners. The notes are due on demand and do not bear interest. The balance of these
notes and loans are zero 0 as of December 31, 2021 and $36,642 as of December 31, 2020. From time to time, the previous owner which
is currently the manager of Platinum Tax Defenders loans funds to the Company to cover short term operating needs. Amounts owed as
of December 31, 2021 and 2020, were $37 and $2,721 respectively. The amounts due to the previous owners of Edge View were from the
original acquisition of the subsidiary and the balance at December 31, 2021 is a receivable of $8,209 and at December 31, 2020 is a
liability of $50,021, respectively.
Loans and Notes Payable – Unrelated Party
On March 12, 2009, the Company entered into a
preferred debenture agreement for $20,000. The note bore interest at 12% per year and matured on September 12, 2009. The Company assigned
all of its receivables from consumer activations of the rewards program as collateral on this debenture. No warrants had been exercised
before the expiration. The balance of the note was $10,989 at December 31, 2021 and 2020. The accrued interest of the note was $4,910
and $3,591 at December 31, 2021 and 2020, respectively.
On September 7, 2011, the Company entered into
a Promissory Note agreement for $50,000. The note bore interest at 8% per year and matured on September 7, 2016. Effective March 29, 2021,
the principal balance of $50,000 and accrued interest of $37,282 were converted into shares of preferred stock. This note was converted
to preferred stock in the first quarter. See footnote 12, Capital Stock. The balance of the note was -0- at December 31, 2021 and $50,000
at December 31, 2020. The accrued interest of the note was -0- and $37,822 at December 31, 2021 and December 31, respectively.
On November 17, 2011, the Company entered
into a Promissory Note agreement for $50,000. The note bore interest at 8% per year and matured on November 17, 2016. Effective
March 29, 2021, the principal balance of $50,000 and accrued interest of $36,505 were converted into shares of preferred stock. This
note was converted to preferred stock in the first quarter. See footnote 12, Capital Stock. The balance of the note was -0-
at December 31, 2021 and $50,000
December 31, 2020. The accrued interest of the note was -0-
and $55,500
at December 31, 2021 and 2020, respectively.
On March 11, 2009, the Company entered into a
Promissory Note agreement for $15,000. The note bore interest at 12% per year and matured on April 29, 2014. Effective March 29, 2021,
the principal balance of $15,000 and accrued interest of $19,465 were converted into shares of preferred stock. This note was converted
to preferred stock in the first quarter. See footnote 12, Capital Stock. The balance of the note was -0- at December 31, 2021 and $15,000
at December 31, 2020. The accrued interest of the note was -0- and $21,265 at December 31, 2021 and 2020, respectively.
On September 9, 2019, the Company obtained a promissory
note for $410,000 at 10% interest and matured on September 9, 2020. On November 10, 2020, the Company entered into addendum No. 1 on the
note extending the maturity date until December 31, 2020. On May 4, 2021, the Company entered into addendum No. 2, whereby the maturity
date shall be amended to be November 3, 2021, accrued interest of $22,266 was added to the principal balance of $410,000 resulting in
a new principal balance of $432,266 at May 4, 2021 and interest accruing at the rate of 24%. The principal balance was $432,266 and $410,000
at December 31, 2021 and 2020, respectively. The accrued interest of the note was $137,345 and $53,805 at December 31, 2021 and 2020,
respectively.
The Company obtained short-term loans from unsecured sources. These
short-term loans were due on demand and accrue interest at 18%. This subsidiary was divested 12-31-21 and these loans were eliminated.
Paycheck Protection Program (“PPP”)
Loans
On April 14, 2020, the Company obtained a PPP
loan for $127,400 at an interest rate of 1% with a maturity date of April 14, 2022. This loan has been forgiven as part of the Coronavirus
Aid, Relief and Economic Security Act (“CARES Act”) and was recognized as a gain from forgiveness of debt in the amount of
$128,640 recorded in other income and expenses in the consolidated statement of operations. The principal and accrued interest at December
31, 2021 was -0- and the principal and accrued interest at December 31, 2020 was $127,400 and $923 respectively.
On May 8, 2020, the Company obtained a PPP loan
for $257,500
at an interest rate of 1%
with a maturity date of May
8, 2022. This loan has been forgiven as part of the CARES Act and was recognized as a gain from forgiveness of debt in the amount
of $261,675 recorded in other income and expenses in the consolidated statement of operations. The principal and accrued interest at
December 31, 2021 was -0-
and the principal and accrued interest at December 31, 2020 was $257,500.
On February 19, 2021, the Company obtained a PPP
loan of $229,500 at an interest rate of 1% with a maturity date of February 19, 2023. This loan has been forgiven as part of the CARES
Act and was recognized as a gain from forgiveness of debt in the amount of $231,374 recorded in other income and expenses in the consolidated
statement of operations. The principal and accrued interest at December 31, 2021 was -0-.
On February 23, 2021, the Company obtained a PPP
loan of $117,550 at an interest rate of 1% with a maturity date of February 23, 2023. This loan has been forgiven as part of the CARES
Act and was recognized as a gain from forgiveness of debt in the amount of $118,130 recorded in other income and expenses in the consolidated
statement of operations. The principal balance and accrued interest at December 31, 2021 was -0-. This note was forgiven in the third
quarter of 2021.
Small Business Administration (“SBA”)
Loans
On June 2, 2020, The Company obtained an SBA loan
of $150,000 at an interest rate of 3.75% with a maturity date of June 2, 2050. The principal balance and accrued interest at December
31, 2021 was $147,677 and $5,723, respectively, and principal and accrued interest at December 31, 2020 was $149,900 and $3,310, respectively.
On October 7, 2020, the Company obtained an SBA
loan for $150,000 at an interest rate of 3.50% with a maturity date of October 7, 2050. On August 31, 2021, this SBA loan was amended
to add an additional $200,000 of principal to the original note and the new interest rate was increased to 3.75%. The principal balance
and accrued interest at December 31, 2021 was $349,900 and $9,608, respectively, and principal and accrued interest at December 31, 2020
was $149,900 and $1,239 respectively.
On April 12, and June 16, 2020, the Company obtained
SBA grants totaling $20,000 at interest rate of 5% and mature in one year from advance, if not forgiven. The principal balance and accrued
interest at December 31, 2021 was $10,000 and $860, respectively, and principal and accrued interest at December 31, 2020 was $20,000
and $628 respectively.
| 10. |
CONVERTIBLE NOTES PAYABLE |
Some of the Convertible Notes issued as described
below included anti-dilution provisions 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.
As of December 31, 2021, and 2020, the Company
had convertible debt outstanding of $2,077,753 and $2,584,967, respectively. During the year ending December 31, 2021, the Company had
proceeds of $444,500 from convertible notes and repaid $66,315 to convertible noteholders. There are debt discounts associated with the
convertible debt of $0 and $108,320 at December 31, 2021, and 2020, respectively. For the year ended December 31, 2021 and 2020, the Company
recorded amortization of debt discounts of $1,051,264 and $1,192,044, respectively.
During the year ended December 31, 2021, the Company
converted $885,691 of convertible debt principal, $388,143 in accrued interest and $13,000 in penalties and fees into 109,234,241 shares
of the company’s Common Stock.
During the years ended December 31, 2020, the
Company converted $196,291 of convertible debt, $49,466 in accrued interest, and $53,255 in penalties and fees into 5,014,696 shares of
the company’s Common Stock.
In addition to the conversions of convertible
debt into common stock, the Company converted convertible debt principal of $150,000 and accrued interest of $225,800 into 140,799 shares
of preferred series B stock. The series B stock has a par value of $.001 and a stated value of $4.00 per share.
Convertible notes as of December 31, 2021 and 2020 are summarized as
follows:
| Schedule of convertible notes summary | |
| | |
| |
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Convertible notes payable | |
$ | 2,077,753 | | |
$ | 2,584,967 | |
| Discounts on convertible notes payable | |
| – | | |
| (108,320 | ) |
| Total convertible debt less debt discount | |
| 2,077,753 | | |
| 2,476,647 | |
| Current portion | |
| 2,077,753 | | |
| 2,476,647 | |
| Long-term portion | |
$ | – | | |
$ | – | |
Convertible Notes Payable – Unrelated Party
Note 1
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 bore interest at
12% per year, matured on March 11, 2014. All principal and unpaid accrued interest was due at maturity. The Company was in default on
Debenture 2. The note is in default and currently accrues interest at the default interest rate of 12%.
Note 7
On February 9, 2016, the Company entered into
a 15% convertible line of credit 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, which matured on February 9, 2017. Note 7, is currently in default and accrues at a default interest rate
of 20%.
Note 7-1
On October 28, 2016, the Company received $25,000
cash pursuant to the terms of Note 7, which matured on October 28, Note 7-1 is currently in default and accrues at a default interest
rate of 20%.
Note 8
On March 8, 2016, the Company entered into a 15%
convertible promissory note in the principal of $50,000 with an unrelated entity for services rendered. Note 8 is matured on March 8,
2017. Note 8 is currently in default and accrues at a default interest rate of 20%.
Note 9
On September 12, 2016, the Company entered into
a 10% convertible promissory note in the principal of $80,000 with an unrelated entity for services rendered. Note 9 is matured on September
12, 2017 Note 9 is currently in default and accrues at a default interest rate of 20%.
Note 10
On January 24, 2017, the Company entered into
a 10% convertible promissory note in the principal of $80,000 with an unrelated entity for services rendered. Note 10 is matured on January
24, 2018. Note 10 is currently in default and accrues at a default interest rate of 20%.
Note 11-1
On February 21, 2017, the Company received $25,000
cash pursuant to the terms of Note 11, which matured on February 21, 2018. Note 11-1 is currently in default and accrues at a default
interest rate of 20%.
Note 11-2
On March 16, 2017, the Company received $40,000
cash pursuant to the terms of Note 11-2, which matured on March 16, 2018. Note 11-2 is currently in default and accrues at a default interest
rate of 20%.
Note 13-1 & -2
On April 21, 2017, the Company entered into a
convertible promissory note with an unrelated entity in the amount $330,000, with original issue discount of $30,000 for net cash to the
company of $300,000 . Note 13-1 matured on April 21, 2018.
On July 24, 2018, Note 13-1 was purchased by an
unrelated party with a new Replacement Convertible Promissory Note (“Note 13-2”) in the amount of $237,909. The note is in
default and currently accrues interest at the default interest rate of 18%.
Note 22, 22-1 and 22-3
On July 10, 2018, the Company entered into a Senior
Secured Convertible Promissory Note with an unrelated entity in the amount $1,040,000, with original issue discount of $103,000, expenses
of $64,160 and an interest deposit of $20,000 resulting in net cash to the company of $852,840. The notes 22, 22-1 and 22-3 are in default
and currently accrues interest at the default interest rate of 24%. On February 20, 2019, the Company executed an addendum to Note 22,
whereby the Company will receive 2 additional tranches. The first upon closing, the Company received $55,216 less expenses of $5,216 resulting
in net cash to the Company of $50,000 and on April 10, 2019, the Company received the second tranche, upon completing certain events,
of $55,616 less expenses of $5,616 resulting in net cash of $50,000 which was paid directly to a certain vendor.
Note 25
On August 13, 2018, the Company entered into a
Convertible Promissory Note with an unrelated entity in the amount $126,560, with original issue discount of $13,560 and expenses of $13,000
resulting in net cash to the company of $100,000. Note 25 matured February 13, 2019 and is currently in default. The default interest
rate is 18%.
Note 26
On August 10, 2017, the Company entered into a
Debt Purchase Agreement with an unrelated entity in the amount $20,000. The Note matured January 27, 2018 and is currently in default.
The default interest rate is 15%.
Note 29, 29-1 and 29-2
On May 10, 2019, the Company entered into an 8%
Convertible Secured Redeemable Note with an unrelated entity in the amount $150,000 and expenses of $7,500 resulting in net cash to the
company of $142,500. Note 29 secured, prior to maturity of May 10, 2020.
On November 8, 2019, Note 29 was purchased by
and assigned to an unrelated party upon execution of Amendment No. 1 to Convertible Promissory Note. The amount assigned was the existing
principal amount of the Note 29 of $150,000 and accrued interest of $5,917.81 (“Note 29-1”) plus a new 8% Convertible Secured
Redeemable Note (“Note 29-2). The total amount assigned to the new note holder is $218,284.93. Note 29-2 bears interest at 8%, matured
on November 8. The note is in default and currently accrues interest at the default interest rate of 24%.
Note 31
On August 28, 2019, the Company entered into an
8% Convertible Secured Redeemable Note with an unrelated entity in the amount $120,000, with expenses of $6,000 resulting in net cash
to the company of $114,000. Note 31 matured August 28, 2020. The note is in default and currently accrues interest at the default interest
rate of 24%.
Note 32
On May 22, 2019, the Company received $25,000
from a draw on the line of credit. Note 32 matured May 22, 2020. The note is in default and currently accrues interest at the default
interest rate of 20%.
Note 33
On February 11, 2020, the Company entered into
a 6% Convertible Promissory Note with an unrelated entity in the amount $157,500, with original issue discount of $7,500 and expenses
of $7,500 resulting in net cash to the company of $142,500. The note is in default and currently accrues interest at 6%.
Note 34
On May 18, 2020, the Company entered into a 6%
Convertible Promissory Note with an unrelated entity in the amount $63,000 and expenses of $3,000 resulting in net cash to the company
of $60,000. The note is in default and currently accrues interest at the default interest rate of 22%.
Note 35
On August 24, 2020, the Company entered into a
6% Convertible Promissory Note with an unrelated entity in the amount $85,000 with expenses of $3,500 resulting in net cash to the company
of $81,500. The note is in default and currently accrues interest at the default interest rate of 22%.
Note 36-1
On September 3, 2020, the Company entered into
a 10% Senior Secured Convertible Promissory Note (“10% Senior Secured Note”) with an unrelated entity in the amount of $733,500,
with a gross amount of original issue discount of $183,500 resulting in a gross net cash available to the company of $550,000. Note 36-1
matures September 03, 2021 The first tranche (Note 36-1) executed upon closing was a principal amount of $122,400, less original issue
discount of $30,000 and expenses of $7,500 resulting in net cash of $84,900. The note is in default and currently accrues interest at
the default interest rate of 18%.
Note 36-2
On November 3, 2020, the Company executed the
second tranche of the 10% Senior Secured Note The second tranche was a principal amount of $120,000, less original issue discount of $30,000
resulting in net cash of $90,000. The note is in default and currently accrues interest at the default interest rate of 18%.
Note 36-3
On December 29, 2020, the Company executed the
third tranche of the 10% Senior Secured Note The third tranche was a principal amount of $120,000, less original issue discount of $30,000
resulting in net cash of $90,000. The note is in default and currently accrues interest at the default interest rate of 18%.
Note 36-4
On May 5, 2021, the Company executed the fourth
tranche of the 10% Senior Secured Note The fourth tranche was a principal amount of $187,500, less original issue discount of $37,500
resulting in net cash of $150,000. The note is in default and currently accrues interest at the default interest rate of 18%.
Note 37-1
On September 03, 2020, the Company entered into a 10% Senior Secured
Convertible Promissory (“Second 10% Senior Secured Note”) Note with an unrelated entity in the amount $200,000, with original
issue discount of $50,000 resulting in net cash available to the company of $150,000. The note is in default. This Note became eligible
to convert March 31, 2021 and is convertible into shares of the Company’s common stock as defined in the agreement The first tranche
executed upon closing was a principal amount of $67,000, less original issue discount of $17,000 and expenses of $1,500 resulting in net
cash of $48,500. The note is in default and currently accrues interest at the default interest rate of 18%.
Note 37-2
On November 02, 2020, the Company executed the
second tranche of the 10% Senior Secured Note. The second tranche was a principal amount of $66,500, less original issue discount of $16,500
resulting in net cash of $50,000 The note is in default and currently accrues interest at the default interest rate of 18%.
Note 37-3
On December 29, 2020, the Company executed the
second tranche of the 10% Senior Secured Note. The second tranche was a principal amount of $66,500, less original issue discount of $16,500
resulting in net cash of $50,000. The note is in default and currently accrues interest at the default interest rate of 18%.
Note 38
On February 9, 2021, the Company entered into
a 6% Convertible Promissory Note with an unrelated entity in the amount $103,500 and expenses of $3,500 resulting in net cash to the company
of $100,000.
Note 39
On April 26, 2021, the Company entered into a
6% Convertible Promissory Note with an unrelated entity in the amount $153,500 and expenses of $3,500 resulting in net cash to the company
of $150,000.
Previously, the valuation of the derivative liabilities
attached to the convertible debt was arrived at through the use of the Black-Scholes Option Pricing Model (“Black-Scholes Model”).
| Schedule of derivative liabilities | |
| | | |
| | | |
| | |
| | |
Original Account Balance at 1-1-21 | | |
Adjustment to Remove the Derivative Liability | | |
Original Account Balance at 1-1-21 | |
| | |
| (Restated) | | |
| | | |
| | |
| Derivative Liability | |
| 2,903,663 | | |
| (2,903,663 | ) | |
| – | |
Upon
adoption of ASU 2020-06, we reclassified the previously identified beneficial conversion features to the associated debt. We also
determined, that in accordance with ASU 2017-11, such beneficial conversion features are not considered a liability classified derivative.
The following is a schedule of convertible notes payable as of and
for the year ended December 31, 2021.
| Schedule of convertible notes details | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Note # | |
Issuance | |
Maturity | |
Principal Balance 12/31/20 | |
New Loan | |
Cash Paydown | |
Principal Conversions | |
Shares Issued Upon Conversion | |
Principal Balance 12/31/21 | |
Accrued Interest on Convertible Debt at 12/31/20 | |
Interest Expense On Convertible Debt For the Period Ended 12/31/21 | |
Accrued Interest on Convertible Debt at 12/31/21 | |
Unamortized Debt Discount At 12/31/21 |
| 1 | |
8/21/2008 | |
8/21/2009 | |
$ | 150,000 | |
$ | – | |
$ | – | |
$ | (150,000 | ) |
| 140,799 | |
$ | – | |
$ | 222,608 | |
$ | – | |
$ | – | |
$ | – |
| 7 | |
2/9/2016 | |
On demand | |
| 8,485 | |
| – | |
| – | |
| (8,485 | ) |
| 18,024,012 | |
| – | |
| 4,109 | |
| 1,167 | |
| – | |
| – |
| 7-1 | |
10/28/2016 | |
10/28/2017 | |
| 25,000 | |
| – | |
| – | |
| (15,000 | ) |
| – | |
| 10,000 | |
| 29,963 | |
| 4,190 | |
| 10,899 | |
| – |
| 9 | |
9/12/2016 | |
9/12/2017 | |
| 80,000 | |
| – | |
| – | |
| (29,920 | ) |
| 17,278,267 | |
| 50,080 | |
| 63,876 | |
| 12,639 | |
| 4,141 | |
| – |
| 10 | |
1/24/2017 | |
1/24/2018 | |
| 55,000 | |
| – | |
| – | |
| (42,355 | ) |
| 4,714,626 | |
| 12,646 | |
| 29,736 | |
| 3,166 | |
| 14,831 | |
| – |
| 11-2 | |
3/16/2017 | |
3/16/2018 | |
| 21,345 | |
| – | |
| – | |
| (4,000 | ) |
| – | |
| 17,345 | |
| 6,374 | |
| 3,469 | |
| 9,843 | |
| – |
| 13-2 | |
7/24/2018 | |
1/24/2019 | |
| 43,961 | |
| – | |
| – | |
| – | |
| – | |
| 43,961 | |
| 26,200 | |
| 7,913 | |
| 34,113 | |
| – |
| 22 | |
7/10/2018 | |
1/10/2021 | |
| 838,433 | |
| – | |
| (66,315 | ) |
| – | |
| – | |
| 772,118 | |
| 75,040 | |
| – | |
| – | |
| – |
| 22-1 | |
2/20/2019 | |
1/10/2021 | |
| 61,704 | |
| – | |
| – | |
| – | |
| – | |
| 61,704 | |
| 13,754 | |
| 14,768 | |
| 28,523 | |
| – |
| 22-3 | |
4/10/2019 | |
1/10/2021 | |
| 56,095 | |
| – | |
| – | |
| – | |
| – | |
| 56,095 | |
| 11,877 | |
| 13,426 | |
| 25,303 | |
| – |
| 25 | |
8/13/2018 | |
2/13/2019 | |
| 118,292 | |
| – | |
| – | |
| (118,292 | ) |
| 17,823,255 | |
| – | |
| 5,788 | |
| 4,169 | |
| – | |
| – |
| 26 | |
8/10/2017 | |
1/27/2018 | |
| 20,000 | |
| – | |
| – | |
| – | |
| – | |
| 20,000 | |
| 7,533 | |
| 2,992 | |
| 10,525 | |
| – |
| 29-1 | |
11/8/2019 | |
11/8/2020 | |
| 101,374 | |
| – | |
| – | |
| (101,374 | ) |
| 13,561,809 | |
| – | |
| 19 | |
| 3,683 | |
| 2,283 | |
| – |
| 29-2 | |
11/8/2019 | |
11/8/2020 | |
| 62,367 | |
| – | |
| – | |
| (25,763 | ) |
| – | |
| 36,604 | |
| 14,968 | |
| 9,283 | |
| 11,374 | |
| – |
| 31 | |
8/28/2019 | |
8/28/2020 | |
| 61,839 | |
| – | |
| (9 | ) |
| (61,830 | ) |
| 5,247,042 | |
| – | |
| 14,059 | |
| 1,447 | |
| 8,385 | |
| – |
| 32 | |
5/22/2019 | |
5/22/2020 | |
| 25,000 | |
| – | |
| – | |
| – | |
| – | |
| 25,000 | |
| 7,291 | |
| 4,986 | |
| 12,277 | |
| – |
| 33 | |
2/11/2020 | |
2/11/2021 | |
| 153,672 | |
| – | |
| 500 | |
| (154,172 | ) |
| 15,522,516 | |
| – | |
| 8,214 | |
| 1,277 | |
| – | |
| – |
| 34 | |
5/18/2020 | |
5/18/2021 | |
| 50,200 | |
| – | |
| (200 | ) |
| (50,000 | ) |
| 4,121,766 | |
| – | |
| 1,876 | |
| 233 | |
| 219 | |
| – |
| 35 | |
8/24/2020 | |
8/24/2021 | |
| 85,000 | |
| – | |
| – | |
| (85,000 | ) |
| 5,759,130 | |
| – | |
| 1,811 | |
| 813 | |
| 74 | |
| – |
| 36-1 | |
9/3/2020 | |
1/3/2021 | |
| 122,400 | |
| – | |
| – | |
| – | |
| – | |
| 122,400 | |
| 3,934 | |
| 21,972 | |
| 25,906 | |
| – |
| 36-2 | |
11/3/2020 | |
3/3/2021 | |
| 122,400 | |
| – | |
| – | |
| – | |
| – | |
| 122,400 | |
| 1,934 | |
| 21,972 | |
| 23,906 | |
| – |
| 36-3 | |
12/29/2020 | |
4/29/2021 | |
| 122,400 | |
| – | |
| – | |
| – | |
| – | |
| 122,400 | |
| 98 | |
| 21,972 | |
| 22,070 | |
| – |
| 36-4 | |
5/5/2020 | |
9/5/2021 | |
| – | |
| 187,500 | |
| – | |
| – | |
| – | |
| 187,500 | |
| – | |
| 22,131 | |
| 22,131 | |
| – |
| 37-1 | |
9/3/2020 | |
6/30/2021 | |
| 67,000 | |
| – | |
| – | |
| – | |
| – | |
| 67,000 | |
| 2,197 | |
| 6,682 | |
| 8,878 | |
| – |
| 37-2 | |
11/2/2020 | |
8/31/2021 | |
| 66,500 | |
| – | |
| – | |
| – | |
| – | |
| 66,500 | |
| 1,090 | |
| 6,632 | |
| 7,722 | |
| – |
| 37-3 | |
12/29/2020 | |
9/30/2021 | |
| 66,500 | |
| – | |
| – | |
| – | |
| – | |
| 66,500 | |
| 55 | |
| 6,632 | |
| 6,686 | |
| – |
| 38 | |
2/9/2021 | |
2/9/2022 | |
| – | |
| 103,500 | |
| – | |
| (39,500 | ) |
| 7,181,818 | |
| 64,000 | |
| – | |
| 4,614 | |
| 4,614 | |
| – |
| 39 | |
5/10/2021 | |
5/10/2022 | |
| – | |
| 153,500 | |
| – | |
| – | |
| – | |
| 153,500 | |
| – | |
| 5,915 | |
| 5,915 | |
| – |
| | |
| |
| |
$ | 2,584,967 | |
$ | 444,500 | |
$ | (66,024 | ) |
$ | (885,691 | ) |
| 109,375,040 | |
$ | 2,077,753 | |
$ | 554,404 | |
$ | 208,143 | |
$ | 300,618 | |
$ | – |
Preferred Stock
During January 2020, we facilitated a reverse
split of several classes our Preferred Stock which has been given retrospective treatment in these financial statements. In addition to
the reverse stock split, management established new rights and privileges for certain classes of preferred stock. The reverse split ratio
ranges from 1.6:1 to 307.7:1 resulting in a reclassification of $11,837,482 from preferred stock to additional paid in capital. The rights
and privileges were changed with unanimous consent of all parties. All holders agreed to replace existing rights and privileges with new
uniform conditions and a simplified uniform preferred $4.00 per share stated value.
Holders of Series B, D, D1, E, E1, F, F1, G, G1,
H, H1, I, J, J1, L, L1, M, and P Preferred Stock shall have conversion rights that are affected by the closing common share market price
on the date of conversion as reported on such national exchange where the Company’s common stock is traded:
i. If the closing market price is less
than $4 per share one (1) share of the respective Series of Preferred Stock described in this Section 4(a) shall convert into an amount
of common stock equal to: two (2) times the Stated Value, as defined herein, divided by the closing market price as reported on such national
exchange where the Company’s common stock is traded on the date of conversion. For Example. If the closing price of the common
stock as reported on such national exchange where the Company’s common stock is traded is $1.00 and the Stated Value is $4.00, one
(1) preferred share would convert into eight (8) shares of common stock.
ii. If the closing market price is equal
to or greater than $4 per share one (1) share of the respective Series of Preferred Stock described in this Section 4(a) shall convert
into two (2) shares of common stock. For Example. If the closing price of the common stock as reported on such national exchange where
the Company’s common stock is traded is $5.00 one (1) preferred share would convert into two (2) shares of common stock.
Holders of Series C Preferred Stock shall have
Conversion Rights such that upon Conversion each one (1) share of Series C Preferred Stock shall convert into one hundred thousand (100,000)
shares of the Common Stock. In the event that the Company should up list to a national exchange as defined by the U.S. Securities and
Exchange Commission, each share of Series C Preferred Stock shall automatically be redeemed by the Company in exchange for a total of
Fifty Thousand Dollars ($50,000.00) worth of the Common Stock, valued at the time of redemption.
Holders of the Series K and K1 Preferred Stock
shall have Conversion Rights such that upon Conversion each one (1) share of Series K and K1 Preferred Stock shall convert into 1.25 shares
of the Common Stock.
Holders of Series R Preferred Stock shall be the
amount equal to $0.30; provided, however if the price of the Common Stock closes below $0.30 for the five (5) consecutive Trading Days
immediately prior to the Conversion Date, then the Conversion Price shall be adjusted to $0.20, and if the price of the Common Stock closes
below $0.20 for the five (5) consecutive Trading Days immediately prior to the Conversion Date, then the Conversion Price shall be adjusted
to $0.10.
On February
11, 2021, the Chairman of the Board and the Chief Executive Officer each converted 62,500 Preferred Series I shares into 25,000,000 restricted
common shares for a total of 125,000 Preferred Series I shares into 50,000,000 restricted common shares.
Effective March 29, 2021, $265,000 in principle
from convertible debt and conventional debt and $298,195 in accrued interest was converted into 140,799 shares of preferred stock series
B with a $4.00 stated value per share. This has been reflected in the statement of deficiency in shareholders’ equity.
As part of the Nova Ortho acquisition, on May
31, 2021, the Company issued 894,834 shares of preferred stock series J with par value $.001 and a stated value of $4.00, for $3,579,334.
Also. as part of the Nova Ortho acquisition, the
Company issued 868,056 shares of preferred stock series N with par value $.001 and a stated value of $4.00, for $3,000,000 including a
discount of $472,224 which was recorded as a reduction to APIC.
On July 22, 2021, the Chief Operating Officer
received 61,000 shares of preferred stock series B in exchange for accrued salaries of $244,000.
Effective
December 28, 2021, the Chairman of the Board and Chief Executive Officer each forfeit and surrendered for no consideration 90,000,000
Preferred I shares each, totally 180,000,000.
The Company and Key Tax managers have entered
into a Buyback Agreement (“Agreement”) which is effective December 31, 2021. Pursuant to the Agreement, Key Tax managers resigned
employment from the Company effective December 31, 2021 and has purchased back the subsidiary in exchange for returning 325,244 Preferred
Shares Series G stock (“Preferred G”) which is 100% of Preferred G shares. The Key Tax managers will retain zero shares of
Preferred G shares subject to the terms of the Agreement. There was a loss on disposal in the amount of $1,201,169 which represented net
assets and liabilities at the time of sale back
Common Stock
During the twelve months ended December 31, 2021,
we executed the following transactions:
| |
· |
109,234,241 shares of common stock were issued upon conversion of certain convertible notes. |
| |
· |
50,000,000 shares of common stock were issued in exchange for 125,000 preferred shares series I. |
| |
· |
1,627,031 shares of common stock were issued in exchange for professional services. |
During the twelve months ended December 31, 2020,
we executed the following transactions:
| |
· |
5,014,697 shares of common stock were issued upon conversion of certain convertible notes payable. |
| |
· |
On January 9, 2020, we issued 25,000 warrants and a free trading common share certificate in the amount of 3,500 shares of common stock for settlement of a threatened lawsuit, refer to Note 14. |
| |
· |
On May 11, 2020, the Company completed a reverse stock split of 10,000:1 for common shares. |
| |
· |
On August 24, 2020, 163,814 shares were issued to a financial advisor for services. |
| |
|
· On November 5, 2020, 18,000 shares were issued to investor relations advisor for services.
· On February 10, 2020, 320 shares were purchased in exchange for 119,101 preferred series H shares. |
The initial and ending valuation of the warrants
as of December 31, 2021 are as follows:
| Valuation of warrants | |
| | |
| | |
Year Ended
December 31,
2021 | |
| Initial Valuation | |
$ | 3,795 | |
| Ending Value | |
$ | 296 | |
The table below set forth the assumptions for
the Black-Scholes Model on each initial date and December 31, 2021:
| Schedule of warrant assumptions |
|
|
|
| |
|
Year Ended
December 31, 2021 |
|
| Volatility |
|
935.98% |
|
| Risk-free interest rate |
|
126.0% |
|
| Expected term |
|
5.0 |
|
The initial and ending valuation of the warrants
as of December 31, 2020 are as follows:
| | |
Year Ended
December 31, 2020 | |
| Initial Valuation | |
$ | 6,135 | |
| Ending Value | |
$ | 3,795 | |
The table below set forth the assumptions for
the Black-Scholes Model on each initial date and December 31, 2020:
| |
|
Year Ended
December 31, 2020 |
|
| Volatility |
|
1.847% - 1.861% |
|
| Risk-free interest rate |
|
1.60% - 1.83% |
|
| Expected term |
|
0.5 – 7.0 |
|
Accordingly, the Company recorded warrant expense
of $2,340 during the year ended December 31, 2020.
The following tables summarize all warrant outstanding
as of December 31, 2021, and the related changes during this period. The warrants expire three years from grant date, which as of December
31, 2021 is 1.31
years. The intrinsic value of the warrants as of December 31, 2021 was $2.96.
| Schedule of warrant activity | |
| | | |
| | |
| | |
Number of
Warrants | | |
Weighted
Average
Exercise
Price | |
| Stock Warrants | |
| | | |
| | |
| Balance at January 1, 2021 | |
| 14,274,477 | | |
$ | 0.105 | |
| Granted | |
| 231,481,466 | | |
| 0.015 | |
| Exercised | |
| – | | |
| – | |
| Expired | |
| (1,335,000 | ) | |
| 0.030 | |
| Balance at December 31, 2021 | |
| 244,420,943 | | |
| 0.200 | |
| Warrants Exercisable at December 31, 2021 | |
| 244,420,943 | | |
$ | 0.200 | |
| 13. |
DISCONTINUED OPERATIONS |
Management has decided to divest from the food
services sector due primarily to a shift in strategy to focus time and resources on opportunities in the financial services sector to
build upon its tax subsidiaries with related debt, credit, billing, real estate and healthcare. The Company’s restaurant franchise
operations have been hard hit by the economic pressure of the COVID-19 pandemic and the subsequent directives and responses to this crisis
taken by federal, state, and local governments. In light of current circumstances arising from the COVID-19 pandemic, the Company, as
a public reporting company, must evaluate what the Company should and are obligated to do in order to protect shareholders from the negative
effects of this pandemic.
As a result, management entered into agreements
with the existing managers who were the original owners of Romeo’s NY Pizza (“Romeo’s”) and Repicci’s Franchise
Group (“Repicci’s”) to buyback the subsidiaries previously purchased by Cardiff Lexington Corporation
The Company and the Repicci’s manager have
entered into a Resignation, Release & Buyback Agreement and a Resignation, Release & Buyback Agreement Addendum (“Repicci’s
Agreements”) which was effective June 1, 2020. Pursuant to the Repicci’s Agreement, the Repicci’s manager resigned employment
from the Company effective June 1, 2020 and has purchased the Repicci’s subsidiary in exchange for returning 81,601 Preferred Shares
Series H stock (“Preferred H”) which is held by the Company as treasury stock. The Repicci’s manager retained 37,500
shares of Preferred H shares subject to the terms of the Repicci’s Agreements. There was a gain on disposal in the amount of $216,013
in June 2020 which represented net assets and liabilities at the time of sale back.
The Company and the Romeo’s manager have
entered into a Resignation, Release & Buyback Agreement and a Resignation, Release & Buyback Agreement Addendum (“Romeo
Agreements”) which is effective July 1, 2020. Pursuant to the Romeo Agreement, Romeo’s manager resigned employment from the
Company effective July 1, 2020 and has purchased back the Romeo’s subsidiary in exchange for returning 212,500 Preferred Shares
Series D stock (“Preferred D”). The Romeo’s manager will retain 37,500 shares of Preferred D shares subject to the terms
of the Romeo Agreements. There was a loss on disposal in the amount of $21,140 in July 2020 which represented net assets and liabilities
at the time of sale back
On May 1, 2018, the Company entered into a stock
for stock purchase agreement with the sellers of Red Rock Travel, LLC and a related management agreement to manage Red Rock Travel, LLC
(“Red Rock”). The terms and conditions of those agreements were subsequently violated causing the transaction to be reversed
and dissolved on May 31, 2019. Red Rock reverted to its previous ownership, the Company canceled the preferred series K shares related
to the aborted acquisition and the Company filed notice with the State of Florida of the dissolution.
The Company continued to carry Red Rock liabilities
on its balance sheet including accounts payables and accrued expenses of $1,872,086, convertible notes payable of $240,000, accrued interest
of $214,318 and a derivative liability of $378,877 as of September 30, 2021. The party responsible for the convertible notes and related
accrued interest is in dispute and is currently in litigation. The derivative liability is a function of the convertible notes and accrued
interest. And the accounts payable and accrued expenses of $1,872,086 is deemed to be the responsibility of the current owners of Red
Rock and was written-off by the Company in the third quarter of 2021 resulting in a gain of $1,872,086 which is recorded in discontinued
operation.
On April 26, 2020, the Company filed a lawsuit
against Investors of Red Rock seeking a judgment declaring that convertible secured notes totaling $240,000 issued by Red Rock and purportedly
convertible into the Company’s common stock, be deemed null and void. The Company continues to maintain the liability of these Red
Rock Investor notes on its balance sheet under discontinued operations together with corresponding accrued interest and related derivative
liability. Subsequently, in the first quarter of 2022, the company settled a $40,000 note with one Red Rock Investor. Litigation and settlement
discussions continue on the remaining $200,000 of Red Rock Investor notes.
| Schedule of Red Rock Travel | |
| | |
| |
| | |
December 31, 2021 | | |
December 31, 2020 | |
| | |
| | | |
| (Restated) | |
| Net liabilities of discontinued operations | |
| | | |
| | |
| Accounts payable and accrued expenses | |
$ | – | | |
$ | 1,869,961 | |
| Accrued interest | |
| 231,318 | | |
| 165,065 | |
| Convertible debt | |
| 240,000 | | |
| 240,000 | |
| Derivative liability | |
| – | | |
| 416,669 | |
| Net liabilities of discontinued operations | |
$ | 471,318 | | |
$ | 2,691,695 | |
| | |
| | |
| |
| | |
Year Ended December 31, | |
| | |
2021 | | |
2020 | |
| (Gain) Loss from discontinued operations | |
| | | |
| | |
| Selling, general and administrative expenses | |
$ | – | | |
$ | 28,148 | |
| Interest expense | |
| 68,378 | | |
| 68,756 | |
| Change in derivative liability | |
| (37,792 | ) | |
| 15,277 | |
| Gain on elimination of derivative liability | |
| (378,877 | ) | |
| – | |
| Gain on reversal of RRT liability | |
| (1,872,086 | ) | |
| – | |
| Loss from discontinued operations | |
$ | (2,220,377 | ) | |
$ | 112,181 | |
| 14. |
GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS, NET |
The following table shows our goodwill balances
by reportable segment. We review goodwill for impairment on a reporting unit basis quarterly and whenever events or changes in circumstances
indicate the carrying value of goodwill may not be recoverable. Since the date of our last quarterly assessment, we have not identified
any changes in circumstances that would indicate the carrying value of goodwill is not recoverable.
Allocation of Goodwill to Reporting Segments
The following table shows our goodwill balances by reportable segment:
| Schedule of goodwill balances | |
| | | |
| | | |
| | | |
| | |
| | |
Affordable Housing Rentals | | |
Financial Services | | |
Healthcare | | |
Total | |
| | |
| | |
| | |
| | |
| |
| Gross carrying value at December 31, 2020 | |
$ | – | | |
$ | 3,499,963 | | |
$ | – | | |
$ | 3,499,963 | |
| Accumulated impairment | |
| – | | |
| – | | |
| – | | |
| – | |
| Carrying value at December 31, 2020 | |
| – | | |
| 3,499,963 | | |
| – | | |
| 3,499,963 | |
| Acquisition | |
| – | | |
| – | | |
| 2,391,608 | | |
| 2,391,608 | |
| Accumulated impairment | |
| – | | |
| | |
| – | | |
| – | |
| Carrying value at December 31, 2021 | |
$ | – | | |
$ | 2,092,048 | | |
$ | 2,391,608 | | |
$ | 4,483,656 | |
| 15. |
COMMITMENTS AND CONTINGENCIES |
Leases
ASC 842, “Leases”, requires that a
lessee recognize the assets and liabilities that arise from operating leases, A lessee should recognize in the statement of financial
position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying
asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by
class of underlying asset not to recognize lease assets and lease liabilities. In transaction, lessees and lessors are required to recognize
and measure leases at either the effective date (the “effective date method”) or the beginning of the earliest period presented
(the “comparative method”) using a modified retrospective approach. Under the effective date method, the Company’s comparative
period reporting is unchanged. In contrast, under the comparative method, the Company’s date of initial application is the beginning
of the earliest comparative period presented, and the Topic 842 transition guidance is then applied to all comparative periods presented.
Further, under either transition method, the standard includes certain practical expedients intended to ease the burden of adoption. The
Company adopted ASC 842, January 1, 2020, using the effective date method and elected certain practical expedients allowing the Company
not to reassess:
| |
· |
whether expired or existing contracts contain leases under the new definition of a lease; |
| |
|
|
| |
· |
lease classification for expired or existing leases; and |
| |
|
|
| |
· |
whether previously capitalized initial direct costs would qualify for capitalization under Topic 842. |
The Company also made the accounting policy decision
not to recognize lease assets and liabilities for leases with a term of 12 months or less.
The Company recorded operating lease expense of
$185,831 and $87,649 for the years ended December 31, 2021 and 2020, respectively.
The Company has operating leases with future commitments
as follows:
| Schedule of property leases | |
| |
| | |
Amount | |
| 2022 | |
$ | 166,568 | |
| 2023 | |
| 77,697 | |
| 2024 | |
| 35,527 | |
| 2025 | |
| 22,215 | |
| Total | |
$ | 302,007 | |
Employees
The Company agreed to pay $360,000 per year and
a $200,000 of target annual incentive granted in 2020 to the Chief Executive Officer based on his employment agreement since July 1, 2020
of which currently 50% is paid in cash and 50% is accrued. The Company previously paid the Chief Executive Officer $300,000 per year.
The total outstanding accrued compensation as of December 31, 2021 and 2020 were $1,385,000 and $1,035,000, respectively.
The Company agreed to pay $360,000 per year and
a $200,000 of target annual incentive to the Chairman of the Board based on his employment agreement since July 1, 2020 of which currently
50% is paid in cash and 50% is accrued. The Company previously paid the Chairman of the Board $300,000 per year. The total outstanding
accrued compensation as of September 30, 2021 and December 31, 2020 were $1,400,000 and $1,020,000, respectively.
The Company agreed to pay $120,000 per year to
the Chief Operating Officer based on his amended employment agreement executed on May 15, 2019. In the third quarter of 2021, the Chief
Operating Officer received 61,000 shares of preferred stock series B in exchange for accrued salaries of $244,000. The total outstanding
accrued compensation as of September 30, 2021 and December 31, 2020 was $159,000 and $120,000, respectively.
The Company agreed to pay $156,000 per year to
the Chief Financial Officer based on his amended employment agreement executed on May 15, 2021. The total outstanding accrued compensation
as of December 31, 2021 and December 31, 2020 was $17,057.
The Company entered into
a Management Agreement effective May 31, 2021 for compensation to the Principals of the Company’s Nova Ortho and Spine (“Nova”)
subsidiary in the form of an annual base salaries of $372,000 to one of the 3 doctors, $450,000 to the second, and $372,000 to the third
doctor.
Collectively, as a group,
Principals of Nova will receive an annual cash bonus and stock equity set forth in footnote 8 (the “Annual Bonus”). The Annual
Bonus will be conditioned upon the Company achieving 100% of the annual objectives of financial performance goals as set forth in footnote
8.
We have an employment agreement with subsidiary
managers, effective May 31, 2019 with a term of 5 years, whereby we provide for compensation of $17,333 per month along with a bonus incentive
if financial performance measures are met.
We have an employment agreement with a subsidiary
manager, effective July 1, 2018 with a term of 5 years, whereby we provide for compensation of $20,000 per month along with a bonus incentive
if financial performance measures are met.
We acquired Redrock Travel
on May 1, 2018. After numerous violations of the Management Agreement it was determined by our board of directors to terminate the acquisition
agreement and to file for the cancelation of the Redrock Stock Class with the State of Florida. A declaration has been served notifying
Red Rock and its investors the Board nor officer of the Company approved any transactions entered into with Red Rock. The Company is waiting
for a response.
On August 6, 2021, a Board Resolution was executed
to terminate one of the two employees of Edge View Properties for fraud, deceit, larceny, and thievery for selling property belonging
to the Company and personally taking the $162,598 in proceeds. The Company hired counsel to terminate the employee and handle all legal
matters for return of monies and criminal prosecution.
At December 31, 2021, the Company had federal
and state net operating loss carry forwards of approximately $17,330,000 that expire in various years through the year 2038.
Due to operating losses, there is no provision
for current federal or state income taxes for the years ended December 31, 2021 and 2020.
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, 2021 and 2020 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately
$4,991,000 and $4,391,000, respectively, less a valuation allowance in the amount of approximately $4,991,000 and $4,391,000, respectively.
Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance in both
2021 and 2020. The valuation allowance increased by approximately $600,000 from the year ended December 31, 2020.
The Company’s total deferred tax asset
as of December 31, 2021 and 2020 is as follows:
| Schedule of deferred tax assets | |
| | | |
| | |
| | |
2021 | | |
2020 | |
| Deferred tax assets | |
$ | 4,991,000 | | |
$ | 4,391,000 | |
| Valuation allowance | |
| (4,991,000 | ) | |
| (4,391,000 | ) |
| | |
| | | |
| | |
| Net deferred tax asset | |
$ | – | | |
$ | – | |
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.
General Matters
February 17, 2022 - The Company concluded that
the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020 included in its
Annual Report on Form 10-K (the “2020 10-K”) and unaudited condensed consolidated financial statements for the three months
ended and year-to-date period ended March 31, 2021 (the “2021 Q-1 10-Q”) (the periods covered by the 2020 10-K and the 2021
Q-1 10-Q being referred to herein as the “Affected Periods”) should no longer be relied upon. The Company filed an amendment
to its 2020 10-K to restate its financial annual statements and disclose the impact of the restatement on previously reported quarterly
amounts for the Affected Periods. The restatement primarily related to the accounting for (1) the valuation of embedded derivative liabilities
in certain matured convertible notes and (2) the accounting treatment for changes in certain rights and privileges with respect to certain
classes of preferred stock on January 10, 2020. The quantification of this restatement is summarized in Note 2.
On March 15, 2022 the Company settled a $40,000 promissory note between
Red Rock Travel and note holder. The settlement amount was $13,333 payable by the issuance of common shares of stock.
June 27, 2022 – The
Board of Directors confirms the transfer of 1,000,000,000 share from Cardiff Acquisition & Growth Fund to treasury.
July 15, 2022 –
Entered into a new agreement to represent the Company in the Edge View Properties lawsuit.
July 29, 2022 Settlement Agreement
Signed by Red Rock Travel all parties agreed to the negotiated terms.
Stock Issuances:
March 31,
2022 – 1,275,427 preferred shares were returned to treasury.
April 28,
2022 – 37,500 preferred shares were issued in exchange for 37,500 preferred shares of a different class of preferred. Same Rights
& Privileges.
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) | Affordable Housing (We Three), |
| (2) | Tax Resolution Services (Platinum Tax and Key Tax (Divested as of December 31, 2021)) |
| (3) | Real Estate (Edge View) |
| (4) | Healthcare (Nova Ortho) |
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 Affordable Housing segment leases and sells
mobile homes as an option for a homeowner wishing to avoid large down payments, expensive maintenance costs, large monthly mortgage payments
and high property taxes and insurance which is a common trait of brick and mortar homes. Additionally, if bad credit is an issue preventing
potential homeowners from purchasing a traditional house, the Company will provide a "lease to own" option so people secure
their family home.
Platinum Tax and Key Tax (divested as of December
31, 2021) provides tax resolution services to individuals and companies that have federal and state tax liabilities. The company collects
fees based on efforts to negotiate and assist in the settlement of outstanding tax debts.
Edge View 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).
Nova Ortho and Spine is a group of doctors that
provide a full range of diagnostic and surgical services for injuries and disorders of the skeletal system and associated bones, joints,
tendons, muscles, ligaments, and nerves.
Management uses numerous tools and methods to
evaluate and measure of its subsidiaries success. To help succeed, management retains the prior owners of the subsidiaries and allow
them to do what they do best is run the business. Additionally, management monitors key metrics primarily revenues and net income from
operations.
| Schedule of segment reporting | |
| | | |
| | |
| | |
As of | | |
As of | |
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Assets: | |
| | | |
| | |
| Affordable Housing Rentals | |
$ | 213,876 | | |
$ | 258,813 | |
| Financial Services | |
| 2,212,379 | | |
| 4,369,195 | |
| Healthcare | |
| 8,092,820 | | |
| – | |
| Real Estate | |
| 611,900 | | |
| – | |
| Others | |
| 28,940 | | |
| 302,139 | |
| Consolidated assets | |
$ | 11,159,915 | | |
$ | 4,930,147 | |
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Revenues: | |
| | | |
| | |
| Affordable Housing Rentals | |
$ | 129,803 | | |
$ | 138,832 | |
| Financial Services | |
| 4,313,167 | | |
| 3,314,226 | |
| Healthcare | |
| 5,413,890 | | |
| – | |
| Real Estate | |
| 152,000 | | |
| – | |
| Consolidated revenues | |
$ | 10,008,860 | | |
$ | 3,453,058 | |
| | |
| | | |
| | |
| Cost of Sales: | |
| | | |
| | |
| Affordable Housing Rentals | |
$ | 79,953 | | |
$ | 156,191 | |
| Financial Services | |
| 1,942,411 | | |
| 1,511,955 | |
| Healthcare | |
| 1,746,561 | | |
| – | |
| Real Estate | |
| 79,481 | | |
| – | |
| Consolidated cost of sales | |
$ | 3,848,406 | | |
$ | 1,668,146 | |
| | |
| | | |
| | |
| Income (Loss) from operations from subsidiaries | |
| | | |
| | |
| Affordable Housing Rentals | |
$ | (36,022 | ) | |
$ | (40,378 | ) |
| Financial Services | |
| 187,027 | | |
| (190,338 | ) |
| Healthcare | |
| 3,272,241 | | |
| – | |
| Real Estate | |
| 68,744 | | |
| – | |
| Income (loss) from operations from subsidiaries | |
$ | 3,491,990 | | |
$ | (230,716 | ) |
| | |
| | | |
| | |
| Loss from operations from Cardiff Lexington | |
$ | (1,865,888 | ) | |
$ | (1,573,435 | ) |
| Total income (loss) from operations | |
$ | 1,626,102 | | |
$ | (1,804,151 | ) |
| Income (Loss) before taxes | |
| | |
| |
| Affordable Housing Rentals | |
$ | (36,022 | ) | |
$ | (40,378 | ) |
| Financial Services | |
| 187,027 | | |
| (187,943 | ) |
| Healthcare | |
| 3,272,241 | | |
| – | |
| Real Estate | |
| 68,744 | | |
| – | |
| Corporate, admin and other non-operating items | |
| (3,901,697 | ) | |
| (2,608,572 | ) |
| Consolidated loss before taxes | |
$ | (409,707 | ) | |
$ | (2,836,893 | ) |