This Management's Discussion and Analysis or Plan of Operation contains forward-looking statements that involve future events, our future performance and our expected future operations and actions. In some cases, you can identify forward-looking statements by the use of words such as "may", "will", "should", "anticipate", "believe", "expect", "plan", "future", "intend", "could", "estimate", "predict", "hope", "potential", "continue", or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including, but not limited to, the matters discussed in this report under the caption "Risk Factors". We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. We undertake no obligation to publicly update any forward looking-statements, whether as a result of new information, future events or otherwise. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included in this report. The following table provides selected financial data about us for the fiscal years ended December 31, 2012 and December 31, 2011 . For detailed financial information, see the audited Financial Statements included in this report. Balance Sheet Data: Fiscal year ended December 31, 2012 2011 Cash $ 1,852 8,874 Total assets $ 4,266 46,116 Total liabilities $ 4,812,843 8,229,768 Shareholders' deficiency $ (4,808,577 ) (8,183,652 ) Operating Data: Revenues $ 839 262 Operating Expenses $ 820,069 1,089,344 Net Income (Loss) $ 596,245 (2,834,811 ) Results of Operations From our inception on August 29, 2001 through December 31, 2012 , we have generated $1,869 of revenue. As a result we have very little operating history upon which to evaluate our intended business. In addition, we have a history of losses. As a result, the Company's independent registered public accounting firm, in its report on the Company's 2012 and 2011 consolidated financial statements, has raised substantial doubt about the Company's ability to continue as a going concern.. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully develop and market our software and our ability to generate revenues. Operating expenses, which consisted of research and development and general and administrative expenses for the year ended December 31, 2012 , were $820,069 , as compared to the operating expenses for the year ended December 31, 2011 of $1,089,344 . The difference is related to a decrease of staff members and marketing costs. Operating expenses for the period from August 29, 2001 through December 31, 2012 were $13,389,660 . 8 During the year ended December 31, 2012 , income resulting from the change in value of derivative liability amounted to $1,936,878 compared to a loss resulting from the change in value of derivative liability of $839,167 for the year ended December 31, 2011 . As a result of the foregoing, we had a net income of $596,245 for the fiscal year ended December 31, 2012 , which is compared to the net loss for the year ended December 31, 2011 of $2,834,811 . Our activities have been completely directed at developing our business plan for eventually generating revenue. We operated at a loss in all relevant periods. To try to operate at a break-even level based upon our current level of proposed business activity, we believe that we must generate approximately $800,000 in revenue per year. Each dollar of revenue is not directly tied to increasing costs. We believe that we can become profitable without incurring additional costs under our current operating cost structure. However, if our forecasts are inaccurate, we will need to raise additional funds. In the event that we need additional capital, our directors have orally agreed to loan such funds as may be necessary through December 31, 2013 for working capital purposes, although they have no obligation to do so. On the other hand, if we decide that we cannot operate at a profit in our current configuration, we may choose to scale back our operations to operate at break-even with a smaller level of business activity, while adjusting our overhead to meet the revenue from current operations. In such event, we will probably not be profitable. In addition, we expect that we will need to raise additional funds if we decide to pursue more rapid expansion, the development of new or enhanced services or products, appropriate responses to competitive pressures, or the acquisition of complementary businesses or technologies, or if we must respond to unanticipated events that require us to make additional investments. We cannot assure that additional financing will be available when needed on favorable terms, or at all. We expect to incur operating losses in future periods because we will be incurring expenses and not generating sufficient revenues. We expect approximately $800,000 in operating costs over the next twelve months. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover these operating costs. Failure to generate sufficient revenues or additional financing when needed could cause us to go out of business. Liquidity and Capital Resources As of December 31, 2012 , we had cash and cash equivalents of $1,852 . As of December 31, 2011 , we had cash and cash equivalents of $8,874 . Net cash used for operating activities was $255,822 for the fiscal year ended December 31, 2012 , which was comparable to the net cash used in operating activities of $300,718 for the fiscal year ended December 31, 2011 . Net cash used for operating activities was $6,767,836 from our inception on August 29, 2001 through December 31, 2012 . Cash flows used for investing activities were $0 for the fiscal year ended December 31, 2012 as compared to net cash used for investing activities of $43,000 for the fiscal year ended December 31, 2011 . Cash flows used for investing activities were $241,571 from our inception on August 29, 2001 through December 31, 2012 . Cash flows provided by financing activities were $248,800 for the fiscal year ended December 31, 2012 , which compares to cash flows provided by financing activities of $350,770 for the fiscal year ended December 31, 2011 . These cash flows were all related to sales of stock and loans from shareholders. From our inception on August 29, 2001 through December 31, 2012 , cash flows provided by financing activities were $7,011,259 . Over the next twelve months we do not expect any material capital costs to develop operations. Our operating costs of $800,000 will be used for operations, but none will be used to pay salaries. Our principal source of liquidity will be our operations or from additional financings. We expect variation in revenues to account for the difference between a profit and a loss. Also business activity is closely tied to the stock market and trading industry as a whole. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully develop our products and our ability to generate revenues. In any case, we try to operate with minimal overhead. Our primary activity will be to seek to develop clients for our services and, consequently, our sales. If we succeed in developing clients for our services and generating sufficient sales, we will become profitable. We cannot guarantee that this will ever occur. Our plan is to build our company in any manner which will be successful. If we are unable to obtain such profitability we will need to obtain additional financing. We cannot assure that additional financing will be available when needed on favorable terms, or at all. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements with any party. 9 Plan of Operation The following milestones are estimates only. The working capital requirements and the projected milestones are approximations only and subject to adjustment based on sales, costs and needs. Cardiff International, Inc. , a tech company who has developed a proprietary software system to track and manage consumer purchases from unlimited businesses: service companies, retailers, merchants, health industry, insurance industry, most consumer orientated businesses. Our software infrastructure tracks all commissions, rebates, discounts providing the public the ability to track all savings regardless of what program they participate in as long as the program utilizes the Cardiff technology. Cardiff's first national program launched during the fourth quarter 2011 is "Mission Tuition" a rewards program that helps solve a real need for families - saving for education. The Mission Tuition program is easy to understand and use, and is emotionally positioned to appeal to all consumers. The Mission Tuition Rewards program will become the rewards program of preference for every day spending for families with young children. The program leverages the two biggest economic forces in society - consumer spending and consumer savings -to create the most unique value-added rewards program in decades. The potential success of the Mission Tuition program involves the participation of three groups: (i) Cardiff as the marketer, (ii) The merchant coalition, (iii) the member. As a result of our merchant coalition and cash rebate program we expect that the member will become loyal customers of the coalition merchants and participating banks. Participating merchants will provide both a member discount and a cash rebate on total purchases between 1% to 30% to our member's educational savings account. The retailer contribution can be supplemented by additional cash rebates by using the Mission Tuition MasterCard. This issuing bank contribution is applicable no matter where the cardholder shops, therefore encouraging regular and daily usage of the Mission Tuition MasterCard. The Mission Tuition program launched during the fourth quarter 2011 but has had no revenues to date. As such, Management has determined to restructure Cardiff International, Inc. into a Holding company by purchasing new companies who meet the following criteria: (1) in business for a minimum of 3 years; (2) profitable; (3) good management team; (4) little to no debt; (5) assets of a minimum of $1,000,000 . In addition, we will continue to move forward with Mission Tuition. There are no assurances that such companies will become available to us for purchase or that we will be able to obtain necessary financing. Recently Issued Accounting Pronouncements. We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our net results of operations, financial position, or cash flows. Seasonality. We do not expect our revenues to be impacted by seasonal demands for our services.
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