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CARDIFF INTERNATIONAL INC - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 20, 2014

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, 2013 and December 31, 2012. For detailed financial information, see the audited Financial Statements included in this report.

Balance Sheet Data: Fiscal year ended December 31, 2013 2012 Cash $ 4,676 1,852 Total assets $ 6,935 4,266 Total liabilities $ 1,815,893 4,812,843 Shareholders' deficiency $ (1,808,959 ) (4,808,577 ) Operating Data: Revenues $ - 839 Operating Expenses $ 2,908,877 820,069 Net Income (Loss) $ (10,982,795 ) 596,245 Results of Operations



From our inception on August 29, 2001 through December 31, 2013, 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 2013 and 2012 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 acquire new established businesses that generate revenues.

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Operating Expenses. Operating expenses, which consisted of research and development and general and administrative expenses for the year ended December 31, 2013, were $2,908,877, as compared to the operating expenses for the year ended December 31, 2012 of $820,069. The difference is related to a decrease of staff members and marketing costs and officer stock based compensation of $2,257,018 was issued during 2013. Operating expenses for the period from August 29, 2001 through December 31, 2013 were $16,296,022.

Non-employee stock compensation. In December 2013, the Company issued 3,248,919 shares of Series B preferred stock and 54 shares of Series C preferred stock to certain investors of the organization. The aggregate costs amounted to a non-operating expense of $8,131,481. There was no such issuance in the prior year 2012.

Gain on conversion of debt. In December 2013, the Company issued 1,232,300 shares of Series B preferred stock and 21 shares of Series C preferred stock in exchange for outstanding debt of the organization. The aggregate exchange amounted a reduction of accounts payable related party of $273,565, a reduction of severance payable of $47,250, a reduction of officer salary payable of $857,942 and a reduction of principal and accrued interest of $1,485,580 and $1,028,528, respectively. The company recorded a gain on the conversion of debt in the amount of $520,558 for the year end December 31, 2013. There was no such issuance in the prior year 2012.

Change in value of derivative liability. During the year ended December 31, 2013, income resulting from the change in value of derivative liability amounted to $41,945 compared to a loss resulting from the change in value of derivative liability of $1,936,878 for the year ended December 31, 2012.

Interest Expense. During the year end December 31, 2013 and 2012, interest expense amounted to $505,586 and $521,403, respectively. The increase in interest was a result of additional borrowings in 2013 and write-off of the debt discount upon the conversion of the notes payable to preferred stock.

As a result of the foregoing, we had a net loss of $10,982,795 for the fiscal year ended December 31, 2013, which is compared to the net income for the year ended December 31, 2012 of $596,245.

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, 2014 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, 2013, we had cash and cash equivalents of $4,676. As of December 31, 2012, we had cash and cash equivalents of $1,852.

Net cash used for operating activities was $204,926 for the fiscal year ended December 31, 2013, which was comparable to the net cash used in operating activities of $255,822 for the fiscal year ended December 31, 2012.

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Cash flows used for investing activities were $0 for the fiscal year ended December 31, 2013 and 2012, respectively.

Cash flows provided by financing activities were $207,750 for the fiscal year ended December 31, 2013, which compares to cash flows provided by financing activities of $248,800 for the fiscal year ended December 31, 2012. These cash flows were all related to sales of common stock of $107,750 and Series B preferred stock of $100,000 and loans from shareholders.

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.

Plan of Operation



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

In first quarter of 2013, it was decided to restructure CDIF into a new holding company who adopted a new business model known as "Collaborative Commonwealth™" a new form of governance enabling businesses to take advantage of the power of a public Company. Targeting the acquisition of undervalued, niche companies with high growth potential, income-producing commercial real estate properties and high return investments, all designed to pay a dividend to our shareholders. The reason for this was to protect our shareholders by acquiring small to minimum size businesses seeking support with both financing and management. The plan was to establish new classes of Preferred stock to streamline voting rights, negate debt and acquire new businesses. By December of 2013 the Company negated 90% plus of all debt; by May of 2014 the Company acquired four businesses, We Three, LLC; Romeo's NY Pizza and Edge View Properties, Inc.

Recent Developments



As of this filing the Company has acquired We Three, LLC, Romeo's NY Pizza Chain and Edge View Properties, Inc. with combined assets of approximately of $3,000,000.

Current Business Operations

Cardiff International, Inc., is currently structured as a Holding Company with holdings of several companies:

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Recently Issued Accounting Pronouncements.

On June 10, 2014, the Financial Accounting Standards Board ("FASB") issued update ASU 2014-10, Development Stage Entities (Topic 915). Amongst other things, the amendments in this update removed the definition of development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from US GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows and shareholders equity, (2) label the financial statements as those of a development stage entity; (3) disclose a description of the development stage activities in which the entity is engaged and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments are effective for annual reporting periods beginning after December 31, 2014 and interim reporting periods beginning after December 15, 2015, however entities are permitted to early adopt for any annual or interim reporting period for which the financial statements have yet to be issued. The Company has elected to early adopt these amendments and accordingly have not labeled the financial statements as those of a development stage entity and have not presented inception-to-date information on the respective financial statements

Seasonality.



We do not expect our revenues to be impacted by seasonal demands for our services.


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Source: Edgar Glimpses


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