The accompanying notes are an integral part of
these condensed consolidated financial statements
The accompanying notes are an integral part of
these condensed consolidated financial statements
The accompanying notes are an integral part of
these condensed consolidated financial statements
The accompanying notes are an integral part of
these condensed consolidated financial statements
The accompanying notes are an integral part of
these condensed consolidated financial statements
NOTES TO CONDENSED 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 June 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
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
Basis of Presentation and Principles of Consolidation
The accompanying June 30, 2021 interim condensed
consolidated financial statements (“financial statements”) have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note disclosures normally included in the annual financial statements prepared
in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those
rules and regulations, but we believe the disclosures made are adequate to make the information presented not misleading. In the opinion
of management, all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation have been included
in the condensed consolidated financial statements included herein. These statements should be read in conjunction with the audited condensed
consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.
The results of operations for the periods presented are not necessarily indicative of results to be expected for the full fiscal year
or any other periods.
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, 2019.
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 June 30, 2021 and December 31, 2020,
respectfully. As of June 30, 2021 and December 31, 2020, the Company had accounts receivable of $545,718 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 quarters ended June 30, 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 it’s 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 condensed unaudited 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 three and six months ended June 30, 2021
and 2020, respectively, the Company did not record any bad debt expense. 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 condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020. There are no contingent
rentals included in income in the accompanying condensed 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 condensed consolidated statements of operations and changes in members’
equity. The Company recognized advertising and marketing expense of $352,354 and $627,336 for the three and six months ended June 30,
2021 and $296,292 and $563,692 for the three and six months ended June 30, 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 condensed consolidated balance sheets are categorized based upon the level
of judgment associated with the inputs used to measure their fair value. The fair value hierarchy distinguishes between (1) market participant
assumptions developed based on market data obtained from independent sources (observable inputs), and (2) an entity’s own assumptions
about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The
fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value
hierarchy are described below:
Level Input Definition
| Level 1 |
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. |
| Level 2 |
Inputs, other than quoted prices included in Level 1, which are observable for the asset or liability through corroboration with market data at the measurement date. |
| Level 3 |
Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. |
The following table presents certain investments
and liabilities of the Company’s financial assets measured and recorded at fair value on the Company’s condensed consolidated
balance sheets on a recurring basis and their level within the fair value hierarchy as of June 30, 2021 and December 31, 2020.
| Schedule of fair value of derivative liability |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
| Fair Value of BCF Derivative Liability – June 30, 2021 |
|
$ |
– |
|
|
$ |
– |
|
|
$ |
3,418,904 |
|
|
$ |
3,418,904 |
|
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
| Fair Value of BCF Derivative Liability – December 31, 2020 |
|
$ |
– |
|
|
$ |
– |
|
|
$ |
2,903,663 |
|
|
$ |
2,903,663 |
|
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 condensed 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 June 30, 2021 and December
31, 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 condensed 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 June 30, 2021, the Company has sustained recurring losses and accumulated a working capital deficit
of approximately $12 million. The accompanying condensed 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 is still evaluating
the impact of adoption of ASU 2020-06 and has not adopted ASU 2020-06 as of the filing of this June 30, 2021 Form 10-Q.
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 the valuation of embedded derivative liabilities 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.
The following table summarizes the impacts of
the error corrections on the Company's financial statements for each of the periods presented below:
| Schedule of financial statements | |
| | |
| | |
| |
| | |
Impact of correction of error | |
| | |
As previously | | |
| | |
| |
| June 30, 2020 (Unaudited) | |
reported | | |
Adjustments | | |
As restated | |
| | |
| | |
| | |
| |
| Total assets | |
$ | 5,146,980 | | |
$ | – | | |
$ | 5,146,980 | |
| | |
| | | |
| | | |
| | |
| Derivative liability | |
| 6,936,309 | | |
| 903,272 | | |
| 7,839,581 | |
| Net, liabilities of discontinued operation | |
| 2,374,181 | | |
| 368,349 | | |
| 2,742,530 | |
| Other | |
| 6,016,924 | | |
| – | | |
| 6,016,924 | |
| Total liabilities | |
| 15,327,414 | | |
| 1,271,621 | | |
| 16,599,035 | |
| | |
| | | |
| | | |
| | |
| Accumulated deficit | |
| (66,800,912 | ) | |
| (1,271,621 | ) | |
| (68,072,533 | ) |
| Others | |
| 56,620,478 | | |
| – | | |
| 56,620,478 | |
| Total deficiency in shareholders' equity | |
$ | (10,180,434 | ) | |
$ | (1,271,621 | ) | |
$ | (11,452,055 | ) |
| | |
| | |
| | |
| |
| | |
Impact of correction of error | |
| | |
As previously | | |
| | |
| |
| December 31, 2020 (Audited) | |
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 operation | |
| 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 | ) |
| | |
| | | |
| | | |
| | |
| | |
Impact of correction of error - quarter | |
Quarter ended June 30, 2020
(Unaudited) | |
As previously reported | | |
Adjustments | | |
As restated | |
| Loss from operations | |
$ | (126,833 | ) | |
$ | – | | |
$ | (126,833 | ) |
| Change in value of derivative liability | |
| (28,750 | ) | |
| (1,079,579 | ) | |
| (1,108,329 | ) |
| Others | |
| (347,536 | ) | |
| – | | |
| (347,536 | ) |
| Other income (expense) | |
| (376,286 | ) | |
| (1,079,579 | ) | |
| (1,455,865 | ) |
| Net loss before discontinued operations | |
| (503,119 | ) | |
| (1,079,579 | ) | |
| (1,582,698 | ) |
| Loss from discontinued operations | |
| (103,390 | ) | |
| (304,804 | ) | |
| (408,194 | ) |
| Gain from disposal from discontinued operations | |
| 216,013 | | |
| – | | |
| 216,013 | |
| Income (loss) from discontinued operations | |
| 112,623 | | |
| (304,804 | ) | |
| (192,181 | ) |
| Net loss | |
| (390,496 | ) | |
| (1,384,383 | ) | |
| (1,774,879 | ) |
| Deemed dividend on preferred stock | |
| – | | |
| – | | |
| – | |
| Net loss attributable to common stockholders | |
| (390,496 | ) | |
| (1,384,383 | ) | |
| (1,774,879 | ) |
| Basic Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
| (3.19 | ) | |
| | | |
| (10.03 | ) |
| Discontinued Operations | |
| 0.71 | | |
| | | |
| (1.22 | ) |
| Diluted Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
| (3.19 | ) | |
| | | |
| (10.03 | ) |
| Discontinued Operations | |
| 0.71 | | |
| | | |
| (1.22 | ) |
| Weighted Average Shares Outstanding - | |
| | | |
| | | |
| | |
| Basic Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
| 157,856 | | |
| | | |
| 157,856 | |
| Discontinued Operations | |
| 157,856 | | |
| | | |
| 157,856 | |
| Weighted Average Shares Outstanding - | |
| | | |
| | | |
| | |
| Diluted Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
| | | |
| | | |
| | |
| Discontinued Operations | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| | |
Impact of correction of error - year to date | |
| | |
As | | |
| | |
| |
| Six months ended June 30, 2020 | |
previously | | |
| | |
| |
| (Unaudited) | |
reported | | |
Adjustments | | |
As restated | |
| Loss from operations | |
$ | (361,066 | ) | |
$ | – | | |
$ | (361,066 | ) |
| Change in value of derivative liability | |
| (3,992,316 | ) | |
| (350,144 | ) | |
| (4,342,460 | ) |
| Others | |
| (654,502 | ) | |
| – | | |
| (654,502 | ) |
| Other income (expense) | |
| (4,646,818 | ) | |
| (350,144 | ) | |
| (4,996,962 | ) |
| Net loss before discontinued operations | |
| (5,007,884 | ) | |
| (350,144 | ) | |
| (5,358,028 | ) |
| Loss from discontinued operations | |
| (78,956 | ) | |
| (105,201 | ) | |
| (184,157 | ) |
| Gain from disposal from discontinued operations | |
| 216,013 | | |
| | | |
| 216,013 | |
| Income (loss) from discontinued operations | |
| 137,057 | | |
| (105,201 | ) | |
| 31,856 | |
| Net loss | |
| (4,870,827 | ) | |
| (455,345 | ) | |
| (5,326,172 | ) |
| Deemed dividend on preferred stock | |
| – | | |
| (1,605,266 | ) | |
| (1,605,266 | ) |
| Net loss attributable to common stockholders | |
| (4,870,827) | | |
| (2,060,611 | ) | |
| (6,931,438 | ) |
| Basic Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
| (38.43 | ) | |
| | | |
| (53.44 | ) |
| Discontinued Operations | |
| 1.05 | | |
| | | |
| 0.24 | |
| Diluted Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
| (38.43 | ) | |
| | | |
| (53.44 | ) |
| Discontinued Operations | |
| 0.00 | | |
| | | |
| 0.00 | |
| Weighted Average Shares Outstanding - Basic Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
| 130,309 | | |
| | | |
| 130,309 | |
| Discontinued Operations | |
| 130,309 | | |
| | | |
| 130,309 | |
| Weighted Average Shares Outstanding - Diluted Earnings (loss) per Share | |
| | | |
| | | |
| | |
| Continued Operations | |
| 130,309 | | |
| | | |
| 130,309 | |
| Discontinued Operations | |
| 6,391,483,108 | | |
| | | |
| 6,391,483,108 | |
Nova Ortho and Spine, PLLC
On May 31, 2021 the Company completed the acquisition
of Nova Ortho and Spine PLLC. 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 | |
| 653,134 | |
| Property and equipment | |
| 136,750 | |
| Accumulated Depreciation | |
| (44,686 | ) |
| Other assets | |
| 342,493 | |
| Goodwill | |
| 5,790,687 | |
| Liabilities | |
| (977,021 | ) |
| | |
| | |
| Total | |
$ | 6,079,334 | |
| 4. |
PROPERTY AND EQUIPMENT, NET |
Property and equipment as of June 30, 2021 and
December 31, 2020 is as follows:
| Schedule of Property and Equipment | |
| | |
| |
| | |
June 30, 2021 | | |
December 31, 2020 | |
| Residential housing | |
$ | 344,755 | | |
$ | 341,205 | |
| Medical equipment | |
| 96,532 | | |
| – | |
| Computer Equipment | |
| 9,188 | | |
| – | |
| Furniture, fixture and equipment | |
| 91,096 | | |
| 76,017 | |
| Leasehold Improvement | |
| 15,950 | | |
| – | |
| | |
| | | |
| | |
| Total | |
| 557,521 | | |
| 417,222 | |
| Less: accumulated depreciation | |
| (263,091 | ) | |
| (205,443 | ) |
| Property and equipment, net | |
$ | 294,430 | | |
$ | 211,779 | |
For the three and six months ended June 30, 2021,
depreciation expense was $7,374 and $12,820, respectively. And for the three and six months ended June 30, 2020, depreciation expense
was $5,764 and $11,571, respectively. Of this, depreciation expense recorded as cost of sales for the three and six months ended June
30, 2021 was $5,446 and $10,892 and depreciation expense recorded in cost of sales for the three and six months ended June 30, 2020 was
$5,488 and $10,934, respectively.
As of June 30, 2021 and December 31, 2020, the
Company had land of $603,000 located in Salmon, Idaho with area of approximately 30 acres, which was in connection with the acquisition
of Edge View Properties, Inc. in July 2014. The Company issued 241,199 shares of Series E Preferred Stock as consideration for this acquisition.
The land is currently vacant and is expected to be developed into a residential community.
| 6. |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
| Schedule of accrued expenses |
|
|
|
|
|
|
| |
|
June 30,
2021 |
|
|
December 31,
2020 |
|
| Accounts payable |
|
$ |
82,963 |
|
|
$ |
119,653 |
|
| Accrued previously factored receivables |
|
|
260,783 |
|
|
|
– |
|
| Accrued credit cards |
|
|
11,053 |
|
|
|
28,548 |
|
| Accrued income and taxes |
|
|
149,507 |
|
|
|
282,798 |
|
| Accrued advertising |
|
|
94,667 |
|
|
|
75,963 |
|
| Accrued payroll wages |
|
|
32,544 |
|
|
|
27,569 |
|
| Accrued professional fees |
|
|
65,532 |
|
|
|
27,727 |
|
| Accrued expenses other |
|
|
110,758 |
|
|
|
54,815 |
|
| Total |
|
$ |
807,807 |
|
|
$ |
617,073 |
|
The Company is delinquent paying certain income
and property taxes. As of June 30, 2021 and December 31, 2020 the balance for these taxes, penalties and interest is $149,507 and $282,798.
At June 30, 2021 and December 31, 2020, the Company
had a revolving line of credit with a financial institution for $92,500 which accrues interest at prime (3.25% at June 30, 2021 and December
31, 2020) plus 3.45%, for a total rate of 6.70%. As of June 30, 2021 and December 31, 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 CEO 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.
The Company assumed notes payable from previous
owners of which are currently managers of certain subsidiaries related to the acquisition of Key Tax on May 8, 2019. The notes are due
on demand and do not bear interest. The balance of these notes are $27,675 and $35,164 at June 30, 2021 and 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 June
30, 2021 and December 31, 2020 were $1,886 and $2,721 respectively.
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 June 30, 2021 and December 31, 2020 were $1,110,000 and $1,020,000, 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 June 30, 2021 and December 31, 2020 were $1,095,000 and $1,035,000, 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. The total outstanding accrued compensation
as of June 30, 2021 and December 31, 2020 was $315,000 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 June 30, 2021 and December 31, 2020 was $17,057.
The Company
entered into a Management Agreement effective May 31st, 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 June 30, 2021 and December 31, 2020, the Company owed
the Chairman $126,849.
| 9. |
NOTES AND LOANS PAYABLE |
Notes payable at June 30, 2021 and December 31,
2020 are summarized as follows:
| Schedule of notes payable | |
| | |
| |
| | |
June 30, 2021 | | |
December 31, 2020 | |
| Notes and Loans Payable - Unrelated parties | |
$ | 1,191,059 | | |
$ | 1,347,690 | |
| Notes and Loans Payable - Related party | |
| 29,561 | | |
| 37,885 | |
| Total | |
| 1,220,620 | | |
| 1,385,575 | |
| Less current portion | |
| 787,848 | | |
| 985,797 | |
| Long-term portion | |
$ | 432,772 | | |
$ | 399,778 | |
Long-term debt matures as follows:
| Schedule of Maturities of Long-term Debt | |
| |
| | |
Amount | |
| 2022 | |
$ | 787,848 | |
| 2023 | |
| 134,515 | |
| 2024 | |
| 29,094 | |
| 2025 | |
| 9,969 | |
| 2026 | |
| 9,969 | |
| Thereafter | |
| 249,225 | |
| Total | |
$ | 1,220,620 | |
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. The notes are due on demand and
do not bear interest. The balance of these notes are $22,347 and $37,885 at June 30, 2021 and 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 June 30, 2021 and December 31, 2020 were $1,886 and $2,721 respectively.
Loans and Notes Payable – Unrelated Parties
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 June 30, 2021 and December 31, 2020. The accrued interest of the note was
$4,245 and $3,591 at June 30, 2021 and December 31, 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 10, Capital Stock. The balance of the note was -0- at June 30, 2021 and $50,000
December 31, 2020. The accrued interest of the note was -0- and $37,282 at June 30, 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 10, Capital Stock. The balance of the note was -0- at June 30, 2021 and $50,000
December 31, 2020. The accrued interest of the note was -0- and $55,500 June 30, 2021 and December 31, 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 10, Capital Stock. The balance of the note was -0- at June 30, 2021 and $15,000
at December 31, 2020. The accrued interest of the note was -0- and $1,800 at June 30, 2021 and December 31, 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 an
extension on the note until December 31, 2020. The balance of the note, was $432,266
at June 30, 2021 and $410,000
at and December 31, 2020, respectively. The accrued interest of the note was $74,137
and $53,805
at June 30, 2021 and December 31, 2020, respectively.
The Company obtained short-term loans from unsecured
sources. These short-term loans are due on demand and accrue interest at 18%. These short-term loans were $81,684 and $119,129 at June
30, 2021 and December 31, 2020, respectively. The accrued interest of these short-term loans was $14,569 and $29,544 at June 30, 2021
and December 31, 2020, respectively.
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
$128,698 recorded in other income and expenses in the condensed consolidated statement of operations. The principal and accrued interest
at June 30, 2021 was zero 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 $260,131 recorded in other income and expenses in the condensed consolidated
statement of operations. The principal and accrued interest at June 30, 2021 was zero and the principal and accrued interest at December
31, 2020 was $257,500 and $3,531 respectively.
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 not been forgiven as part of the CARES
Act. The principal balance and accrued interest at June 30, 2021 was $229,500 and $824, respectively. This note was forgiven subsequent to June 30, 2021.
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 not been forgiven as part of the CARES Act. The principal balance and accrued interest at June 30, 2021
was $117,550
and $2,045,
respectively. This note was forgiven subsequent to June 30, 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 June 30,
2021 was $149,900 and $6,137, 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 of $150,000 at an interest rate of 3.75% with a maturity date of October 7, 2050. The principal balance and accrued interest at June
30, 2021 was $149,900 and $1,415, respectively, and principal and accrued interest at December 31, 2020 was $149,900 and $1,239 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 June 30, 2021 and December 31, 2020, the
Company had convertible debt outstanding of $2,191,691 and $2,584,967. During the six month period ending June 30, 2021, the Company had
proceeds of $444,500 from convertible notes and repaid $15,362 to convertible noteholders. There are debt discounts associated with the
convertible debt of $20,000 and $108,320 as of June 30, 2021 and December 31, 2020, respectively. For the six months ending June 30, 2021
and 2020, the Company recorded amortization of debt discounts of $1,031,264 and $455,930, respectively. The Company recorded amortization
of debt discounts of $315,863 and $209,745 during the three months ending June 30, 2021 and 2020, respectively.
During the six months ended June 30, 2021, the
Company converted $822,705 of convertible debt principal, $359,613 in accrued interest and $10,000 in penalties and fees into 84,028,411
shares of the company’s Common Stock. During the six months ended June 30, 2020, the Company converted $112,887 of convertible debt,
$61,804 in accrued interest and $7,000 penalties and fees into 231,491 shares (post reverse split of 10,000:1) of the company’s
Common Stock and reclassified a $15,000 convertible note to conventional notes payable. 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 at stated value of $4.00 per share.
Convertible notes at June 30, 2021 and December 31, 2020 are summarized
as follows:
| Schedule of convertible notes summary | |
| | |
| |
| | |
June 30, 2021 | | |
December 31, 2020 | |
| Convertible notes payable - unrelated party | |
$ | 2,191,691 | | |
$ | 2,584,967 | |
| Discounts on convertible notes payable | |
| (20,000 | ) | |
| (108,320 | ) |
| Total convertible debt less debt discount | |
| 2,171,691 | | |
| 2,476,647 | |
| Current portion | |
| 2,171,691 | | |
| 2,476,647 | |
| Long-term portion | |
$ | – | | |
$ | – | |
The following is a schedule of convertible notes payable from December
31, 2020 to June 30, 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 6/30/21 |
|
|
Accrued Interest on Convertible
Debt at 12/31/20 |
|
|
Interest Expense On Convertible
Debt For the Period Ended 6/30/21 |
|
|
Accrued Interest on Convertible
Debt at 6/30/21 |
|
|
Unamortized Debt Discount
At 6/30/21 |
|
| 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 |
|
|
|
4,109 |
|
|
|
841 |
|
|
|
4,950 |
|
|
|
– |
|
| 7-1 |
|
10/28/2016 |
|
10/28/2017 |
|
|
|
25,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
25,000 |
|
|
|
15,321 |
|
|
|
2,479 |
|
|
|
17,800 |
|
|
|
– |
|
| 9 |
|
9/12/2016 |
|
9/12/2017 |
|
|
|
80,000 |
|
|
|
– |
|
|
|
– |
|
|
|
(29,920 |
) |
|
|
17,278,267 |
|
|
|
50,080 |
|
|
|
74,039 |
|
|
|
- |
|
|
|
58,263 |
|
|
|
– |
|
| 10 |
|
1/24/2017 |
|
1/24/2018 |
|
|
|
55,000 |
|
|
|
– |
|
|
|
– |
|
|
|
(42,354 |
) |
|
|
4,714,626 |
|
|
|
12,646 |
|
|
|
29,736 |
|
|
|
2,294 |
|
|
|
29,736 |
|
|
|
– |
|
| 11-2 |
|
3/16/2017 |
|
3/16/2018 |
|
|
|
21,345 |
|
|
|
– |
|
|
|
– |
|
|
|
(4,000 |
) |
|
|
– |
|
|
|
17,345 |
|
|
|
10,853 |
|
|
|
1,720 |
|
|
|
6,200 |
|
|
|
– |
|
| 13-2 |
|
7/24/2018 |
|
1/24/2019 |
|
|
|
43,961 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
43,961 |
|
|
|
26,200 |
|
|
|
3,924 |
|
|
|
30,124 |
|
|
|
– |
|
| 22 |
|
7/10/2018 |
|
1/10/2021 |
|
|
|
838,433 |
|
|
|
– |
|
|
|
(15,071 |
) |
|
|
– |
|
|
|
– |
|
|
|
823,071 |
|
|
|
75,040 |
|
|
|
– |
|
|
|
- |
|
|
|
– |
|
| 22-1 |
|
2/20/2019 |
|
1/10/2021 |
|
|
|
61,704 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
61,704 |
|
|
|
13,754 |
|
|
|
7,324 |
|
|
|
21,078 |
|
|
|
– |
|
| 22-3 |
|
4/10/2019 |
|
1/10/2021 |
|
|
|
56,095 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
56,095 |
|
|
|
11,877 |
|
|
|
6,658 |
|
|
|
18,535 |
|
|
|
– |
|
| 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 |
|
|
|
1,484 |
|
|
|
9,017 |
|
|
|
– |
|
| 29-1 |
|
11/8/2019 |
|
11/8/2020 |
|
|
|
101,374 |
|
|
|
– |
|
|
|
– |
|
|
|
(101,374 |
) |
|
|
13,561,809 |
|
|
|
– |
|
|
|
19 |
|
|
|
3,683 |
|
|
|
– |
|
|
|
– |
|
| 29-2 |
|
11/8/2019 |
|
11/8/2020 |
|
|
|
62,367 |
|
|
|
– |
|
|
|
– |
|
|
|
(25,763 |
) |
|
|
– |
|
|
|
36,604 |
|
|
|
14,968 |
|
|
|
5,593 |
|
|
|
7,792 |
|
|
|
– |
|
| 31 |
|
8/28/2019 |
|
8/28/2020 |
|
|
|
61,839 |
|
|
|
– |
|
|
|
– |
|
|
|
(61,830 |
) |
|
|
5,247,042 |
|
|
|
– |
|
|
|
14,059 |
|
|
|
1,447 |
|
|
|
– |
|
|
|
– |
|
| 32 |
|
5/22/2019 |
|
5/22/2020 |
|
|
|
25,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
25,000 |
|
|
|
7,291 |
|
|
|
2,473 |
|
|
|
9,764 |
|
|
|
– |
|
| 33 |
|
2/11/2020 |
|
2/11/2021 |
|
|
|
153,672 |
|
|
|
– |
|
|
|
– |
|
|
|
(154,172 |
) |
|
|
15,522,516 |
|
|
|
– |
|
|
|
8,214 |
|
|
|
1,277 |
|
|
|
– |
|
|
|
– |
|
| 34 |
|
5/18/2020 |
|
5/18/2021 |
|
|
|
50,200 |
|
|
|
– |
|
|
|
– |
|
|
|
(50,000 |
) |
|
|
4,121,766 |
|
|
|
– |
|
|
|
1,876 |
|
|
|
233 |
|
|
|
– |
|
|
|
– |
|
| 35 |
|
8/24/2020 |
|
8/24/2021 |
|
|
|
85,000 |
|
|
|
– |
|
|
|
– |
|
|
|
(85,000 |
) |
|
|
5,759,130 |
|
|
|
– |
|
|
|
1,811 |
|
|
|
812 |
|
|
|
– |
|
|
|
– |
|
| 36-1 |
|
9/3/2020 |
|
1/3/2021 |
|
|
|
127,200 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
122,400 |
|
|
|
3,934 |
|
|
|
10,896 |
|
|
|
14,830 |
|
|
|
– |
|
| 36-2 |
|
11/3/2020 |
|
3/3/2021 |
|
|
|
120,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
122,400 |
|
|
|
1,934 |
|
|
|
10,896 |
|
|
|
12,830 |
|
|
|
– |
|
| 36-3 |
|
12/29/2020 |
|
4/29/2021 |
|
|
|
120,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
122,400 |
|
|
|
98 |
|
|
|
10,896 |
|
|
|
10,994 |
|
|
|
– |
|
| 36-4 |
|
5/5/2020 |
|
9/5/2021 |
|
|
|
– |
|
|
|
187,500 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
187,500 |
|
|
|
– |
|
|
|
5,164 |
|
|
|
5,164 |
|
|
|
20,000 |
|
| 37-1 |
|
9/3/2020 |
|
6/30/2021 |
|
|
|
67,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
67,000 |
|
|
|
2,197 |
|
|
|
3,313 |
|
|
|
5,510 |
|
|
|
– |
|
| 37-2 |
|
11/2/2020 |
|
8/31/2021 |
|
|
|
66,500 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
66,500 |
|
|
|
1,090 |
|
|
|
3,289 |
|
|
|
4,379 |
|
|
|
– |
|
| 37-3 |
|
12/29/2020 |
|
9/30/2021 |
|
|
|
66,500 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
66,500 |
|
|
|
55 |
|
|
|
3,289 |
|
|
|
3,343 |
|
|
|
– |
|
| 38 |
|
2/9/2021 |
|
2/9/2022 |
|
|
|
– |
|
|
|
103,500 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
103,500 |
|
|
|
– |
|
|
|
2,392 |
|
|
|
2,392 |
|
|
|
– |
|
| 39 |
|
5/10/2021 |
|
5/10/2022 |
|
|
|
– |
|
|
|
153,500 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
153,500 |
|
|
|
– |
|
|
|
1,283 |
|
|
|
1,283 |
|
|
|
– |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
$ |
2,584,967 |
|
|
$ |
444,500 |
|
|
$ |
(15,071 |
) |
|
$ |
(822,705 |
) |
|
|
84,169,210 |
|
|
$ |
2,191,691 |
|
|
$ |
554,404 |
|
|
$ |
97,828 |
|
|
$ |
273,983 |
|
|
$ |
20,000 |
|
| 11. |
FAIR VALUE MEASUREMENT |
The Company measures assets and liabilities at
fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount
that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between
market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability.
The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring
or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
Fair value is defined as the price that would
be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date, A three level hierarchy is applied to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest
priority to unobservable inputs (Level 3 measurements).
The following are the hierarchical levels of inputs
to measure fair value:
| |
· |
Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. |
| |
· |
Level 2 – Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| |
· |
Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. |
The carrying amounts of the Company’s financial
assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable
and notes payable – related party, approximate their fair values because of the short maturity of these instruments.
The Company recognizes its derivative liabilities
as level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate
and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair
value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions
that would significantly affect the fair values using terms in the notes that are subject to volatility and market price of the underlying
common stock of the Company.
As of June 30, 2021 and December 31, 2020, the
Company did not have any derivative instruments that were designated as hedges.
The derivative liabilities as of June 30, 2021
and December 31, 2020 have a level 3 classification.
Fluctuations in the Company’s stock price
are a primary driver for the changes in the derivative valuation. During the three months ended June 30, 2021, the Company’s stock
price decreased from its initial valuation and thus, the derivative liability also decreased. Although, this decrease is offset by an
increase in derivative liabilities from new convertible notes that an embedded derivative liability. Generally, as the stock price decreases
for each of the related convertible notes that have an embedded derivative liability, the value of the derivative liability decreases.
Stock price is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s convertible
notes with an embedded derivative liability.
The Company used the Black-Scholes Model to measure
the fair value of the derivative liabilities as $3,443,485 and $2,903,663 on June 30, 2021 and December 31, 2020, respectively, and will
subsequently remeasures the fair value at the end of each reporting period, and record the change of fair value in the condensed consolidated
statement of operation during the corresponding period.
The following table provides a summary of changes
in fair value of our Level 3 financial liabilities for the six months ended June 30, 2021:
| Schedule of changes in fair value | |
| | |
| Derivative Liability, December 31, 2020 | |
$ | 2,903,663 | |
| Discount on derivatives | |
| 645,000 | |
| Derivatives settled | |
| (1,262,372 | ) |
| Mark to market adjustment | |
| 1,132,614 | |
| Derivative Liability, June 30, 2021 | |
$ | 3,418,904 | |
The above table also includes derivative liabilities
related to warrants to purchase common stock of $5.00 at June 30, 2021. The net loss for the period includes mark-to-market adjustments
relating to the liabilities held during the six months ended June 30, 2021 in the amounts of $1,132,614.
The valuation of the derivative liabilities attached
to the convertible debt was arrived at through the use of the Black-Scholes Option Pricing Model using the following assumptions:
| Assumptions for fair value of derivative liabilities |
|
|
|
|
|
|
|
|
| |
|
|
For the Periods Ended |
|
| |
|
|
June 30, 2021 |
|
|
|
December 31, 2020 |
|
| Volatility |
|
|
81.41 - 757.29% |
|
|
|
204.5% - 1,005.9% |
|
| Risk-free interest rate |
|
|
0.46% - 0.5% |
|
|
|
0.099% - 0.18% |
|
| Expected term |
|
|
.34 – 3.5 |
|
|
|
.33 – 2.5 |
|
Preferred Stock
As part of the Nova Ortho acquisition, 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.
And 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.
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.
On
February 11, 2021 the Chairman of the Board and the CEO and 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.
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 & 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 of common
stock is less than $4 per share one (1) share the Preferred Stock 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 of common
stock is equal to or greater than $4 per share one (1) share the Preferred Stock 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 have
conversion rights to common stock 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.
Common Stock
During the six months ended June 30, 2021, 84,028,411
shares of common stock were issued upon conversion of certain convertible notes payable and 1,275,427 shares of common stock were issued
for services.
On
February 11, 2021 the Chairman of the Board and the CEO and 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.
The initial and ending valuation of the warrants
accounted for as derivatives and marked to fair value, as of June 30, 2021 are as follows:
| Valuation of warrants | |
| |
| | |
June 30, 2021 | |
| Initial Valuation | |
$ | 3,795 | |
| Ending Value | |
$ | 4.80 | |
The table below set forth the assumptions for
the Black-Scholes Model on each initial date and June 30, 2021:
| Schedule of warrant assumptions |
|
|
|
|
| |
|
|
June 30, 2021 |
|
| Volatility |
|
|
757.29% |
|
| Risk-free interest rate |
|
|
1.12% |
|
| Expected term |
|
|
5 |
|
The following tables summarize all warrant outstanding
as of June 30, 2021, and the related changes during this period. The warrants expire eight years from grant date, which as of June 30,
2021 is 5.0
years. The intrinsic value of the warrants as of June 30, 2021 was $5.00.
| Schedule of warrant activity | |
| | |
| |
| | |
Number of
Warrants | | |
Weighted
Average
Exercise
Price | |
| Stock Warrants | |
| | | |
| | |
| Balance at December 31, 2020 | |
| 14,274,477 | | |
$ | 0.105 | |
| Granted | |
| 231,481,466 | | |
| 0.015 | |
| Exercised | |
| – | | |
| – | |
| Expired | |
| (1,335,000 | ) | |
| (0.030 | ) |
| Balance at June 30, 2021 | |
| 244,420,943 | | |
| 0.0195 | |
| Warrants Exercisable at June 30, 2021 | |
| 244,420,943 | | |
$ | 0.020 | |
| 14. |
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.
In April 2019, the Company discontinued operating
Red Rock Travel due to continuing operating losses.
| Schedule of Red Rock Travel | |
| | |
| |
| | |
June 30, 2021 | | |
December 31, 2020 | |
| Net liabilities of discontinued operations | |
| | | |
| | |
| Accounts payable and accrued expenses | |
$ | 1,868,367 | | |
$ | 1,869,961 | |
| Accrued interest | |
| 201,037 | | |
| 165,065 | |
| Convertible debt | |
| 240,000 | | |
| 240,000 | |
| Derivative liability | |
| 436,643 | | |
| 416,669 | |
| Net liabilities of discontinued operations | |
$ | 2,746,047 | | |
$ | 2,691,695 | |
| | |
| | | |
| | | |
| | | |
| | |
| | |
Three Months Ended June, | | |
Six Months Ended June, | |
| | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
| Loss from discontinued operations | |
| | | |
| | | |
| | | |
| | |
| Interest expense | |
$ | 17,189 | | |
$ | 17,189 | | |
$ | 34,378 | | |
$ | 34,378 | |
| Change in derivative liability | |
| 17,367 | | |
| 391,005 | | |
| 19,974 | | |
| 149,779 | |
| Loss from discontinued operations | |
$ | 34,556 | | |
$ | 408,194 | | |
$ | 54,352 | | |
$ | 184,157 | |
| 15. |
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 | |
| – | | |
| – | | |
| 5,790,687 | | |
| 5,790,687 | |
| Accumulated impairment | |
| – | | |
| – | | |
| – | | |
| – | |
| Carrying value at June 30, 2021 | |
$ | – | | |
$ | 3,499,963 | | |
$ | 5,790,687 | | |
$ | 9,290,650 | |
| 16. |
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
$19,528 and $23,431 for the three months ended June 30, 2021 and 2020, respectively, and operating lease expense of $36,781 and $42,387
for the six months ended June 30, 2021 and 2020, respectively.
The Company has property leases with future commitments
as follows:
| Schedule of property leases | |
| | |
| | |
Amount | |
| 2022 | |
$ | 224,485 | |
| 2023 | |
| 77,994 | |
| 2024 | |
| 35,282 | |
| 2025 | |
| 22,215 | |
| 2026 | |
| 11,108 | |
| Total | |
$ | 371,084 | |
Employees
We have an employment agreement effective July
15, 2020 to December 31, 2025 with the Chairman of the Board, Mr. Thompson. with automatic extension for additional successive one (1)
year renewals terms unless terminated as defined in the agreement. We provide for compensation of $30,000 per month along with additional
incentives.
We have an employment agreement effective July
15, 2020 to December 31, 2025 with the Chief Executive Officer, Mr. Cunningham with automatic extension for additional successive one
(1) year renewals terms unless terminated as defined the agreement. We provide for compensation of $30,000 per month.
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. The
total outstanding accrued compensation as of June 30, 2021 and December 31, 2020 were $30,000 and $120,000, respectively to be paid in
common shares.
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.
In April 2021, the Company’s previous Chief
Financial Officer was terminated and replaced and the new Chief Financial Officer is provided for compensation of $13,000 per month along
with a bonus of preferred share and stock options.
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.
At June 30, 2021 the Company had federal and state
net operating loss carry forwards of approximately $18,000,000 that expire over various years through the year 2038.
Due to operating losses, there is no provision
for current federal or state income taxes for the year ended December 31, 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.
General Matters
August 6, 2021, a Board Resolution was executed to terminate one of
the two employees of Edgeview 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.
August 27, 2021 – the Board of Directors adopted a Plan of Domestication
which changes corporate domicile to Nevada.
December 7, 2021 – The Company executed a Buyback Agreement finalizing
the sale of JM Enterprises1, Inc., acquired May 8, 2019, back to the original sellers.
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 our Annual Report on Form
10-K (the “2020 10-K”) and the Company’s 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. As a result, the Company restated
the financial statements for the Affected Periods. 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.
Subsequent to June 30, 2021, Paycheck Protection
Program Loans totaling $347,050 have been forgiven.
Stock Issuances:
In the third
quarter of 2021, the Company issued 25,205,830 shares of common stock in connection with conversion of convertible debt.
July 22,
2021 - the Company issued 61,000 preferred shares for services rendered.
August 2, 2021 - the
Company issued 5,640,000 shares of common stock in connection with conversion of convertible debt.
August 12, 2021 - the
Company issued 7,181,818 shares of common stock in connection with conversion of convertible debt.
September 10, 2021- the
Company issued 7,220,935 shares of common stock in connection with conversion of convertible debt.
October
12, 2021 - the Company issued 5,163,077 shares of common stock in connection with conversion of convertible debt.
November
9, 2021 - the Company issued 351,604 shares of common stock in connection with a service agreement.
December
28, 2021 – 180,000,000 shares were surrendered back to the treasury.
December
29, 2021 - the Company issued 1,275,427 shares of common stock in connection with a service agreement.
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 three 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) and |
| |
(2) |
Financial Resolution Services (Platinum Tax and
Key Tax)
|
| |
(3) |
Healthcare (Nova Ortho and Spine) |
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, bookkeeping and general
accounting.
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 home owners 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 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.
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 it’s 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 June 30,
2021 | | |
As of December 31,
2020 | |
| Assets: | |
| | | |
| | |
| Affordable Housing Rentals | |
$ | 247,105 | | |
$ | 258,813 | |
| Financial Services | |
| 4,659,386 | | |
| 4,369,195 | |
| Healthcare | |
| 6,946,164 | | |
| – | |
| Others | |
| 603,000 | | |
| 302,139 | |
| Consolidated assets | |
$ | 12,455,655 | | |
$ | 4,930,147 | |
| | |
For the Three
Months Ended
June 30, 2021 | | |
For the Three
Months Ended
June 30, 2020 | |
| Revenues: | |
| | | |
| | |
| Affordable Housing Rentals | |
$ | 27,844 | | |
$ | 40,615 | |
| Financial Services | |
| 1,505,450 | | |
| 952,896 | |
| Healthcare | |
| 649,574 | | |
| – | |
| Total revenues | |
$ | 2,182,868 | | |
$ | 993,511 | |
| | |
| | | |
| | |
| Cost of Sales: | |
| | | |
| | |
| Affordable Housing Rentals | |
$ | 25,158 | | |
$ | 31,663 | |
| Financial Services | |
| 422,602 | | |
| 395,591 | |
| Healthcare | |
| 199,450 | | |
| – | |
| Total cost of sales | |
$ | 647,210 | | |
$ | 427,254 | |
| | |
| | | |
| | |
| Income (Loss) from Operations From Subsidiaries: | |
| | | |
| | |
| Affordable Housing Rentals | |
$ | (10,344 | ) | |
$ | (3,348 | ) |
| Financial Services | |
| 470,311 | | |
| 99,943 | |
| Healthcare | |
| 404,279 | | |
| – | |
| Total Income (Loss) from operations from subsidiaries | |
$ | 864,246 | | |
$ | 96,595 | |
| | |
| | | |
| | |
| Loss From Operations from Cardiff Lexington | |
$ | (3,220,879 | ) | |
$ | (223,428 | ) |
| Total loss from operations | |
$ | (2,356,633 | ) | |
$ | (126,833 | ) |
| | |
For the Six Months Ended June 30, 2021 | | |
For the Six Months Ended June 30, 2020 | |
| Revenues: | |
| | | |
| | |
| Affordable Housing Rentals | |
$ | 66,823 | | |
$ | 78,827 | |
| Financial Services | |
| 2,398,397 | | |
| 1,875,410 | |
| Healthcare | |
| 649,574 | | |
| – | |
| Total revenues | |
$ | 3,114,794 | | |
$ | 1,954,237 | |
| | |
| | | |
| | |
| Cost of Sales: | |
| | | |
| | |
| Affordable Housing Rentals | |
$ | 45,988 | | |
$ | 55,484 | |
| Financial Services | |
| 874,390 | | |
| 790,389 | |
| Healthcare | |
| 199,450 | | |
| – | |
| Total cost of sales | |
$ | 1,119,828 | | |
$ | 845,873 | |
| | |
| | | |
| | |
| Income (Loss) from Operations From Subsidiaries: | |
| | | |
| | |
| Affordable Housing Rentals | |
$ | (11,708 | ) | |
$ | (3,348 | ) |
| Financial Services | |
| 388,476 | | |
| 99,943 | |
| Healthcare | |
| 404,279 | | |
| – | |
| Total Income (Loss) from operations from subsidiaries | |
$ | 781,047 | | |
$ | 96,595 | |
| | |
| | | |
| | |
| Loss From Operations from Cardiff Lexington | |
$ | (3,513,527 | ) | |
$ | (457,661 | ) |
| Total loss from operations | |
$ | (2,732,480 | ) | |
$ | (361,066 | ) |