U.S. SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K/A
☑ |
ANNUAL
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For
the fiscal year ended: DECEMBER 31, 2013 |
|
|
☐ |
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For
transition period from to . |
Commission File
Number: 000-33053
FASTFUNDS FINANCIAL
CORPORATION
(Name of Registrant
in its charter)
NEVADA |
87-0425514 |
(State
or other jurisdiction of |
(I.R.S.
Employer |
incorporation
or organization) |
Identification
Number) |
319 CLEMATIS
STREET, SUITE 400, WEST PALM BEACH, FLORIDA 33401
(Address of principal
executive offices)(Zip Code)
Issuer’s
telephone number: (561) 514-9042
Securities registered
under Section 12 (b) of the Exchange Act:
NONE
Securities registered
under Section 12 (g) of the Exchange Act:
COMMON STOCK,
$.001 PAR VALUE
(Title of Class)
Indicate by
check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: ☐Yes
☑No
Indicate by
check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ☐
Indicate by
check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange during
the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 Days: ☑Yes
☐No
Indicate by
check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not
be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K: ☑
Indicate by check mark whether the
Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer:
Large
Accelerated Filer ☐ |
Accelerated
Filer ☐ |
Non-Accelerated
Filer ☐ |
Smaller
Reporting Company ☑ |
Indicate by
check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ☐Yes
☑No
The aggregate market value of the voting
stock held by non-affiliates of the Registrant was approximately $929,950 based on the last sale price of the Registrant's common
stock as of the last business day of the Registrants’ most recently completed second fiscal quarter, ($0.0056 per share
as of June 30, 2013) as reported on the Over-the-Counter Bulletin Board.
The Registrant has 3,661,157,505 shares
of common stock outstanding as of March 31, 2014.
Documents incorporated by reference:
None
EXPLANATORY NOTE
This
Amendment No. 1 to the Annual Report on Form 10-K of Fastfunds Financial Corporation for the period ended December 31, 2013 (the
“Form 10-K/A”) is amending the Annual Report on Form 10-K originally filed with the Securities and Exchange Commission
on April 15, 2014 (the “Original Report”). We are filing this Form 10-K/A to reflect our responses to comments by
the Securities & Exchange Commission.
We
have amended the following sections of this report:
Part
I.
Item
1. Description of Business.
Item
1A. Risk Factors – Risks Associated with our Company and History.
Part
II.
Item
5. - Market for Registrant’s Common Equity, Related Stockholder Matters.
Part
III.
Item
10. Directors, Executive Officers and Corporate Governance.
Part
IV.
Item
15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
This
Form 10-K/A also contains currently dated certifications as Exhibits 31.1 and 32.1 by the Company’s current Chief Executive
Officer and Chief Financial Officer. This Form 10-K/A does not reflect events occurring after the filing of the Original
Report except as provided for in the amended sections listed above, and no attempt has been made herein to modify or update the
other disclosures that may have been affected by subsequent events. Accordingly, this Form 10-K/A should be read in
conjunction with our other filings with the SEC.
FASTFUNDS FINANCIAL
CORPORATION
FORM 10-K
THIS REPORT MAY CONTAIN CERTAIN “FORWARD-LOOKING”
STATEMENTS AS SUCH TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 OR BY THE SECURITIES AND EXCHANGE COMMISSION
IN ITS RULES, REGULATIONS AND RELEASES, WHICH REPRESENT THE REGISTRANT’S EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED
TO, STATEMENTS CONCERNING THE REGISTRANT’S OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL CONDITION, GROWTH AND ACQUISITION
STRATEGIES, INVESTMENTS, AND FUTURE OPERATIONAL PLANS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS
OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH
AS “MAY”, “WILL”, “EXPECT”, “BELIEVE”, “ANTICIPATE”, “INTENT”,
“COULD”, “ESTIMATE”, “MIGHT”, OR “CONTINUE” OR THE NEGATIVE OR OTHER VARIATIONS
THEREOF OR COMPARABLE TERMINOLOGY ARE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE REGISTRANT’S CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING
ON A VARIETY OF IMPORTANT FACTORS, INCLUDING UNCERTAINTY RELATED TO ACQUISITIONS, GOVERNMENTAL REGULATION, MANAGING AND MAINTAINING
GROWTH, THE OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES, VOLATILITY OF STOCK PRICE AND ANY OTHER FACTORS DISCUSSED IN THIS
AND OTHER REGISTRANT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
PART I
ITEM
1. DESCRIPTION OF BUSINESS.
| (a) | General
development of business. |
FastFunds Financial
Corporation (“FastFunds”, “FFFC” or the “Company”) is a holding company, organized in Nevada
in 1985.
In their opinion
letter for the fiscal year ended December 31, 2013, our auditors included an explanatory paragraph that disclosed conditions that
raise concerns about the Company's ability to continue as a going concern. Please refer to the audited financial statements
and accompanying auditors report within this filing.
Recent Events
On October 7,
2013, the Company formed Financiera Moderna, Inc. (“FM”) as a wholly-owned subsidiary to develop and market financial
products and services targeted for the Hispanic community. The spectrum of financial products to be offered includes insurance,
secured credit cards, debit cards, mortgage products and financial literacy tools.
On November 7,
2013, FM signed a marketing and funding agreement (“the Marketing Agreement”) with Compra Vida (“CV”)
and Compra Casa (“CS”); development stage companies that formulate, develop and implement marketing programs to the
Spanish speaking U.S. market. On November 20, 2013, the Company remitted $15,000 to the principals of CV and CS pursuant to the
Marketing Agreement. Subsequently, the parties have agreed to terminate the Marketing Agreement, to allow CV and CS to revise
their marketing concept to implement a more direct to consumer approach. Accordingly, the parties are still negotiating the final
transaction. There is no assurance that these negotiations will be successful.
As part of the
initial transaction, FFFC issued 30,000,000 shares of common stock to the principals of CV and CS. Due to the termination of that
agreement and the ongoing negotiations the common stock has not been delivered and has been recorded as Treasury Stock, pending
the outcome of the final transaction.
On January 21,
2014, the Company formed Cannabis Angel, Inc. (“CA”) as a wholly-owned subsidiary. CA was formed to assist and provide
angel funding, business development and consulting services to Cannabis related projects and ancillary ventures.
Prior Events
FFFC, formerly
operated through its wholly owned subsidiary Chex Services, Inc. (“Chex”). Chex is a Minnesota corporation formed
in 1992, and prior to the Asset Sale described and defined below, provided financial services, primarily check cashing, automated
teller machine (ATM) access and credit and debit card advances, to customers predominantly at Native American owned casinos and
gaming establishments. FastFunds previously existed under the name “Seven Ventures, Inc.” On June 7, 2004, a wholly
owned subsidiary of Seven Ventures, Inc. merged with and into Chex (the "Merger”). In the Merger, Hydrogen Power, Inc.
(“HPI”), exchanged its 100% ownership of Chex for 7,700,000 shares of the Company’s common stock; representing
approximately 93% of the Company’s outstanding common stock immediately following the Merger. On June 29, 2004, the Company
changed its name to FastFunds Financial Corporation.
On December 22,
2005, FastFunds and Chex entered into an Asset Purchase Agreement with Game Financial Corporation, pursuant to which FastFunds
and Chex agreed to sell substantially all the assets of Chex (the “Asset Sale”). Such assets also represent substantially
all of the operating assets of FastFunds on a consolidated basis. On January 31, 2006, FastFunds and Chex completed the Asset
Sale for $14 million. Additionally, FastFunds and Chex entered into a Transition Services Agreement with Game Financial pursuant
to which FastFunds and Chex agreed to provide certain services to Game Financial to ensure a smooth transition of the sale of
the cash access financial services business. HPI agreed to serve as a guarantor of FastFunds and Chex’s performance obligations
under the Transition Service Agreement.
On February 28,
2006, HPI (then known as Equitex, Inc.), held a special meeting of shareholders at which two proposals were approved authorizing
the acquisition of Hydrogen Power, Inc. (“Old HPI”), through a newly formed wholly-owned Equitex subsidiary as well
as certain related common stock issuances. Per the terms of the transaction, as amended, Equitex was obligated to deliver $5 million
to Old HPI as a condition to close. On March 14, 2006, FastFunds loaned Equitex the $5 million (the “$5 Million Loan”)
for one year at 10% per annum interest. As security for the $5 Million Loan, Equitex pledged to FastFunds all of the common stock
of Old HPI. In addition, FastFunds is to receive a profit interest from the operations of Old HPI equal to 10% of the net profit
of Old HPI, as defined in the relevant loan documents.
On January 2,
2007, pursuant to the terms of a Redemption, Stock Sale and Release Agreement (the “Redemption Agreement”) by and
between HPI and the Company, we (i) redeemed 8,917,344 shares of our common stock held by HPI, (ii) acquired from HPI an aggregate
of 5,000,000 shares of common stock of Denaris Corporation, a Delaware corporation (“Denaris”), (iii) acquired from
HPI an aggregate of 1,000 shares of common stock of Key Financial Systems, Inc., a Delaware corporation (“Key Financial”),
and (iv) acquired from HPI an aggregate of 1,000 shares of common stock of Nova Financial Systems, Inc., a Delaware corporation
(“Nova Financial”). Denaris is now a majority owned subsidiary, and Key Financial and Nova Financial are wholly owned
subsidiaries of FFFC. Denaris and Key Financial are inactive entities with no operating or intellectual property assets. Nova
has limited activity as well as limited assets. The shares of common stock of each entity transferred to us pursuant to the Redemption
Agreement constituted all of HPI holdings in each entity. In consideration of the redemption and acquisition of the shares of
Denaris, Key Financial and Nova Financial, we released HPI from all outstanding payment obligations, including obligations under
the $5 Million Note dated March 14, 2006. The outstanding balance on the $5 Million Note, including principal and interest accrued,
as of the date of the Redemption Agreement was $5,402,398. The Company received a fairness opinion from an unaffiliated third
party with respect to this transaction.
After the closing
of the Redemption Agreement, HPI held 10,500,000 shares of FFFC common stock. These shares have been pledged as collateral on
certain notes of HPI. During 2008, as a result of the assumption of this debt by HPI Partners, LLC. (“HPIP”) and the
subsequent foreclosure by the debt holders upon HPIP, HPIP owns the 10.5 million shares. One of the principal managers of HPIP
Mr. Fong, is currently the Company’s sole officer and director. As of December 31, 2013, we held 1,541,858 shares of HPI
common stock, constituting approximately 5.2% of HPI common stock. Pursuant to the Redemption Agreement, the Company and HPI each
provided the other certain registration rights relating to the common stock of such party held by the other party.
On January 18,
2008, the Company filed a complaint in the Superior Court of Washington in King County (the “Superior Court”). The
complaint was filed by FastFunds Financial Corporation, Daniel Bishop, Barbara M. Schaper, HP Services LLC, VP Development Corporation,
and Gulfstream Financial Partners, LLC (collectively, the “Plaintiffs”) against Dilbagh Singh Gujral, Ricky Gurdish
Gujral, Virendra Chaudhary, Hydrofuels Technology, Inc. (“GHTI”) and Hydrogen Power, Inc. (collectively, the “Defendants”).
Messrs.
Chaudhary and Dilawari are directors of HPI. GHTI is the majority shareholder of HPI. Ricky Gurdish Gujral is the former chief
executive officer of HPI. The complaint alleges fraud, misappropriation of corporate opportunity and breach of fiduciary duty
by the Defendants relating to the merger of Equitex, Inc. and Hydrogen Power, Inc., the Sublicense Agreement with GHTI, and payments
to Ricky Gurdish Gujral. The complaint seeks the appointment of a receiver to take possession of the property and assets of the
Company and to manage and operate the Company pending completion of the action. The complaint also seeks damages in the excess
of $3,000,000, exemplary damages, attorney’s fees plus interest and costs and any other relief the court finds just and
proper. On January 25, 2008, the Superior Court appointed a receiver of HPI with respect to HPI’s assets. Some assets have
been recovered by the Receiver. One of the defendants has filed a counterclaim asserting that the action is frivolous; the Plaintiffs
have denied the counterclaim in its entirety. GHTI has sought arbitration regarding ownership of certain patent applications and
other intellectual property. GHTI was granted a stay of this case until the arbitration is complete.
On
March 25, 2010 the Defendants and Plaintiffs entered into a Settlement Agreement and Mutual Release (the
“Settlement Agreement”). Pursuant to the Settlement Agreement, which was approved by the receiver and the Court on
September 23, 2010, the Defendants and Plaintiffs have agreed to release each other from the claims and to have no further suits
against each other. Additionally, the Defendants have agreed to assign to the Receiver for the benefits of the Plaintiffs any
and all rights, including but not limited to insurance payments and settlements for any and all officers and directors liability
insurance policies.
From time to
time we evaluate opportunities for strategic investments or acquisitions that would complement our current services and products,
enhance our technical capabilities or otherwise offer growth opportunities. As a result, acquisition discussions and, in some
cases, negotiations may take place and future investments or acquisitions involving cash, debt or equity securities or a combination
thereof may result. FastFunds Financial Corporation maintains its principal office at 319 Clematis Street, Suite 400, West Palm
Beach, Florida. You can reach us by telephone at (514) 514-9042.
| (b) | Financial
information about segments. |
Through January 31, 2006, we operated
in one industry segment, cash disbursement services. We currently have limited operations.
| (c) | Narrative
description of business. |
Nova was formed
to design, market and service credit card products aimed at the sub-prime market consisting mainly of consumers who may not qualify
for traditional credit card products. Nova charges a monthly fee on active cards and receives proceeds, if any, from Merrick Bank
after their bank charges for servicing the credit cards. Nova receives residual amounts, if any, on approximately 214 cards still
active in the Merrick Bank portfolio at December 31, 2013. The Merrick Bank portfolio should continue to see a decline in active
accounts in 2014.
FM was formed
to develop and market financial products and services targeted for the Hispanic community. The spectrum of financial products
to be offered includes insurance, secured credit cards, debit cards, mortgage products and financial literacy tools.
On November 7,
2013, FM signed a marketing and funding agreement (“the Marketing Agreement”) with Compra Vida (“CV”)
and Compra Casa (“CS”); development stage companies that formulate, develop and implement marketing programs to the
Spanish speaking U.S. market. On November 20, 2013, the Company remitted $15,000 to the principals of CV and CS pursuant to the
Marketing Agreement. Subsequently, the parties have agreed to terminate the Marketing Agreement, to allow CV and CS to revise
their marketing concept to implement a more direct to consumer approach. Accordingly, the parties are still negotiating the final
transaction. There is no assurance that these negotiations will be successful.
On January 21,
2014, the Company formed Cannabis Angel, Inc. (“CA”) as a wholly-owned subsidiary. CA was formed to assist and provide
angel funding, business development and consulting services to Cannabis related projects and ancillary ventures.
To date, CA has
signed consulting agreements with four entities.
- On January 28,
2014, CA entered into a one year Consulting Agreement with Singlepoint, Inc. (“Singlepoint”) (the “Singlepoint
Agreement”). The Singlepoint Agreement automatically renews for succeeding one year periods, provided, that the CA can terminate
the Singlepoint Agreement at any time during the initial one term or thereafter by giving Singlepoint not less than five (5) days
notice to terminate. CA is to provide consulting services including strategy and business planning, marketing and sales support,
define and support for product offerings, acquisition strategy and funding strategy.
- On February
7, 2014, CA entered into a one year consulting agreement with Colorado Cannabis Business Solutions, Inc (“CCBS”).
CA is to provide consulting services to CCBS relating to business opportunities, corporate finance activities and general business
development, in exchange for 9.9% ownership in CCBS.
- On February
18, 2014, CA entered into a month to month consulting agreement Halfar Consulting GmbH (“Halfar”). Halfar will consult
with CA regarding corporate services including identifying and assisting CA with due diligence on potential European business
partners engaged in cannabis related businesses. CA has agreed to compensate Halfar $12,000 for these services.
- On March 5,
2014, CA entered into a five (5) year Strategic Alliance Agreement (“SAA”) with Worldwide Marijuana Investments, Inc.
(“Worldwide”). Pursuant to the SAA, Worldwide and CA have agreed to market and perform certain complementary business
consulting services. The SAA automatically renews for successive one year terms, unless either party gives written notice of termination
at least thirty (30) days prior to any expiration. The SAA can also be terminated by mutual agreement, or at any time by sixty
(60) day written notice from either party.
Subsequent to
the Asset Sale, the Company has conducted limited operations and is the process of locating a business to acquire. The Company
currently has no full-time employees.
ITEM 1A. RISK FACTORS
The purchase
of shares of the Company’s common stock is very speculative and involves a very high degree of risk. An investment in the
Company is suitable only for the persons who can afford the loss of their entire investment. Accordingly, investors should carefully
consider the following risk factors, as well as other information set forth herein, in making an investment decision with respect
to securities of the Company.
RISKS ASSOCIATED
WITH OUR COMPANY AND HISTORY:
We have
a limited operating business and therefore limited revenues. We have also posted significant losses in each of the past two fiscal
years.
In January 2006,
we sold substantially all of our operating business, owned by Chex, to Game Financial Corporation. The Company currently has a
limited operating business and therefore limited revenues. In addition, we have posted significant losses in each of our past
two fiscal years including $1,425,541 and $512,144 for the years ended December 31, 2013 and 2012, respectively. As a result,
any investment in the Company must be considered purely speculative.
The
Company’s balance sheet contains certain notes payable, which are currently in default/were due February 28, 2008.
Chex previously
relied on promissory notes (the “Notes”) issued to private investors to provide operating capital for its business.
As of December 31, 2013, the balance of the Notes was $2,090,719. These Notes were initially due in February 2007 and at that
time the Company renewed $283,000 of the Promissory Notes on the same terms and conditions as previously existed. The Company
has failed to pay interest and the principal amount of these notes. The Company received complaints filed from several of these
note holders. The Company has not responded to these complaints and accordingly the plaintiffs were awarded default judgments.
In April 2007 the Company, through a financial advisor, restructured $1,825,000 of the Notes (the “Restructured Notes”).
The Restructured Notes carry a stated interest rate of 15% and matured on February 28, 2008. The Company has not paid the interest
on the Notes since June 30, 2007 and did not repay the Notes on their maturity date and does not currently have sufficient capital
to repay the Notes. In January 2008, the Company and the three guarantors received a complaint filed by the financial advisor
(acting as agent for the holders of the Restructured Notes) and the holders of the Restructured Notes. The court has ruled in
favor of a motion for summary judgment filed by certain of the plaintiffs and a judgment has been entered in the total amount
of $2,487,250 in principal and interest on the notes, $40,920 in related claims and $124,972 in attorney’s fees and expenses.
The judgment was entered on August 18, 2009. The Company has not made any payments of principal or interest since the judgment.
Chex is
a guarantor of certain debt of HPI, and the Company’s entire investment in Chex (i.e., its ownership of all outstanding
Chex stock) is subject to a security interest securing such obligation. Furthermore, all of the assets of Chex are subject to
a security interest for the same debt.
In
March 2004, HPI closed on $5 million of debt financing and issued convertible promissory notes in that principal amount to two
financial institutions (the “Lenders”). The proceeds from the promissory notes were immediately thereafter loaned
to Chex. The promissory notes are collateralized, among other things, by all of the assets of Chex, and by the 3,500,000 shares
of Company common stock owned by HPI. In conjunction with the Asset Sale, the holders of the promissory notes consented to the
sale of certain assets that secured their notes. In contemplation of the Redemption Agreement described above, on December 29,
2006, HPI and the Company obtained the consent of the Lenders to complete the transactions contemplated by the Redemption Agreement.
Contemporaneously with receipt of the consent, HPI and the Company entered into a Note and Security Amendment Agreement dated
December 29, 2006 with the Lenders, pursuant to which it was agreed to amend certain terms of the Convertible Promissory Note
dated March 8, 2004 in favor of Lenders in the principal amount of $5,000,000 to increase the interest rate applicable to the
Convertible Promissory Notes from 7% per annum to 10% per annum and the default interest rate from 10% to 13%. Accordingly, if
HPI defaults on the obligations specified under the promissory notes, and if Chex cannot cure such defaults, the Company’s
remaining assets could be lost. During 2008 as a result
of the assumption of this debt by HPI Partners, LLC., (“HPIP”) and the subsequent foreclosure by the debt holders
upon HPIP. HPIP owns the 3.5 million shares. The principal managers of HPIP are Messrs. Fong and Olson. Mr. Fong is the Chairman
and CEO of FFFC.
We may require
additional financing to complete any merger, but we are uncertain whether such financing will be available to us.
We
will require additional capital to continue or to expand our business plans. Other than disclosed in the footnotes to the accompanying
financial statements, as part of this Annual Report, we have not identified any potential candidate business with which to merge,
therefore, we cannot be certain that business will have revenues from operations that will generate cash flow sufficient to finance
our operations and growth thereafter. In addition, we require additional financing to complete any potential merger to eliminate
our current debt, or for working capital purposes to operate our business both now, and in the future, including any operations
following a successful acquisition, if any.
Additional
financing could be sought from a number of sources, including but not limited to additional sales of equity or debt securities,
or loans from banks, other financial institutions or affiliates of the Company. If additional funds are raised by the issuance
of our equity, then the ownership interest of our existing stockholders will be diluted. If additional funds are raised by the
issuance of debt or other equity instruments, we may become subject to certain operational limitations (i.e., negative operating
covenants), and such securities may have rights senior to those of the holders of our existing common stock. It is also possible
that financing will not be available to us on terms acceptable to us, if at all. If adequate funds are not available on acceptable
terms, we may be unable to fund our business including the potential acquisition of an operating company.
As of December
31, 2013, there are outstanding securities convertible into or exchangeable for an aggregate of approximately 3,630,464,687 shares
of our common stock as of December 31, 2013, which, if converted or exchanged, will substantially dilute our existing stockholders.
The
Company currently has outstanding notes and securities convertible into or exchangeable for an aggregate of 3,630,464,687 shares
of common stock under certain conditions. In addition, the effective conversion and exercise prices of such securities significantly
lower than the current market value of our common stock. If these securities are converted into or exchanged for common stock,
their issuance would have a substantial dilutive effect on the percentage ownership of our current stockholders. These securities
consist of: options to purchase 990,000 shares of our common stock at an average purchase price of $0.34 per share, 3,472,834,667
shares of common stock pursuant to the conversion terms of $520,925 outstanding convertible promissory notes and the conversion
of Class A and B Preferred stock into 156,640,020 shares of common stock.
Our common
stock trades only in an illiquid trading market, which generally results in lower prices for our common stock.
Trading
of our common stock is conducted on the Over-The-Counter Quotation Board. This has an adverse effect on the liquidity of our common
stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the
timing of transactions and the lack of security analysts’ and the media’s coverage of our Company and its common stock.
This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread
between the bid and asked prices for our common stock.
We have
not paid dividends to date, and have no intention of paying dividends to our stockholders.
To
date, we have not paid any cash dividends and do not anticipate the payment of cash dividends in the foreseeable future. Accordingly,
the only return on an investment in our common stock, if any, may occur upon a subsequent sale of the shares of common stock.
We may be subject to liability for failure
to comply with the requirements of Regulation 14C under the Securities Exchange Act of 1934 (the “Exchange Act”).
On
September 4, 2014 we filed a Form 8-K announcing the increase in our authorized common stock from 6,000,000,000 shares to 9,000,000,000
effective as of August 25, 2014. We received approval from our majority shareholder and Board, however, we did not comply with
the disclosure requirements of Regulation 14C under the Exchange Act prior to the effective date of such corporate action. As
a result of our failure to comply with Regulation 14C, the SEC may bring an enforcement action or commence litigation against
us for failure to comply with Regulation 14C. If any claims or actions were to be brought against us relating to our lack of compliance
with Regulation 14C, we could be subject to penalties, required to pay fines, make damages payments, or settlement payments. In
addition, any claims or actions could force us to expend significant financial resources to defend ourselves, could divert the
attention of our management from our core business and could harm our reputation. However, we believe that the potential for any
claims or actions is not probable.
ITEM
2. PROPERTIES.
Effective January
31, 2011 the Company leased office space in West Palm Beach, FL. on a month to month basis for $900 per month. As of January 1,
2012 the Company began to utilize office space that is leased to a Company controlled by our then Acting President.
ITEM
3. LEGAL PROCEEDINGS.
We are involved
in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition
of these matters may have a material adverse impact either individually or in the aggregate on our consolidated results of operations,
financial position or cash flows.
In January 2008
the Company and three guarantors received a complaint filed by Grace Capital, LLC (as agent) and individual noteholders in the
Fourth Judicial District in the County of Hennepin, in the State of Minnesota. The complaint seeks payment of principal and interest
of $1,946,250 as of January 22, 2008, plus default per diem interest at the rate of twenty percent (20%) per annum and $37,000
for unpaid fees to Grace Capital, LLC. The court has ruled in favor of a motion for summary judgment filed by certain of the plaintiffs
and had a judgment entered in the total amount of $2,487,250 in principal and interest on the notes, $40,920 in related claims
and $124,972 in attorney’s fees and expenses. The judgment was entered on August 18, 2009.
Pursuant to the
terms of the Asset Sale, the Company owed Game Financial Corporation (“Game”) approximately $300,000. The parties
agreed to settle the balance due for $275,000. The Company didn’t make any payments as stipulated in the settlement, and
subsequently, Game filed a complaint against the Company. The Company has agreed to a judgment of $275,000 plus interest and attorney
fees for a total of $329,146.
ITEM 4. MINE
SAFETY DISCLOSURES
None.
PART II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our common stock
is not listed on any exchange; however, market quotes for the Company’s common stock (under the symbol FFFC) may be obtained
from the Over-the-Counter Pink Marketplace. The service is a regulated quotation service that displays real-time quotes,
last-sale prices and volume information in over-the-counter securities. The table below states the quarterly high and low bid
prices for the common stock as reported by the bulletin board service. However, such Over-the-Counter market quotations reflect
inter-dealer prices without retail mark-up, mark-down or commission and may not represent actual transactions.
|
|
|
|
Quarter
Ended |
High |
|
Low |
|
|
|
|
March
31, 2013 |
$0.0095 |
|
$0.0023 |
June
30, 2013 |
$0.013 |
|
$0.002 |
September
30, 2013 |
$0.0066 |
|
$0.0008 |
December
31, 2013 |
$0.0014 |
|
$0.0001 |
|
|
|
|
Quarter
Ended |
High |
|
Low |
|
|
|
|
March
31, 2012 |
$0.02 |
|
$0.0067 |
June
30, 2012 |
$0.0333 |
|
$0.0053 |
September
30, 2012 |
$0.058 |
|
$0.0083 |
December
31, 2012 |
$0.016 |
|
$0.0026 |
The number of
record holders of our common stock as of April 6, 2014 was 156 according to our transfer agent. This figure excludes an indeterminate
number of shareholders whose shares are held in “street” or “nominee” name.
FastFunds has
not declared nor paid cash dividends on our common stock during the previous two fiscal years, nor do we anticipate paying any
cash dividends in the foreseeable future. We currently intend to retain any future earnings to fund our limited operations.
| (d) | Securities
Authorized for Issuance Under
Equity Compensation Plans. |
We have the following securities authorized
for issuance under our equity compensation plans as of December 31, 2013, including options outstanding or available for future
issuance under our 2004 Stock Option Plan.
Equity
Compensation Plan Information |
|
|
|
|
|
|
|
Plan
category |
|
Number
of securities to be issued upon exercise of outstanding options, warrants and rights |
|
Weighted-average
exercise price of outstanding options, warrants and rights |
|
Number
of securities remaining available for future issuance under equity compensation plan |
|
|
(a) |
|
(b) |
|
(c) |
Equity
compensation plans not approved by security holders |
|
990,000 |
|
$ 0.34 |
|
1,345,000 |
|
|
|
|
|
|
|
Total |
|
990,000 |
|
$ 0.34 |
|
1,345,000 |
Recent
Sales of Unregistered Securities
On March 19,
2013, Carbon exchanged 16,000,000 shares of common stock for the issuance of 266,667 shares of class B preferred stock. Pursuant
to the terms and conditions of the preferred stock (see Preferred Stock below), the Company determined there was not any additional
costs to be recognized.
On June 5, 2013,
an affiliate exchanged 10,500,000 shares of common stock for the issuance of 175,000 shares of Class B preferred stock. Pursuant
to the terms and conditions of the preferred stock (see Preferred Stock below), the Company determined there was not any additional
costs to be recognized.
On August 6,
2013, Carbon exchanged 7,000,000 shares of common stock for the issuance of 116,667 shares of class B preferred stock. Pursuant
to the terms and conditions of the preferred stock (see Preferred Stock below), the Company determined there was not any additional
costs to be recognized.
On November 27,
2013, the Company issued 15,000,000 shares of common stock to Mr. Rodriquez and 15,000,000 shares of common stock to Mr. Slentz.
The shares have been recorded as Treasury Stock, pending the final outcome of the negotiations and agreement regarding the transactions
involving FM.
During the year
ended on December 31, 2013, the Company issued 1,057,583,505 shares of common stock upon the conversion of $385,833 of debentures
payable and $9,549 of accrued and unpaid interest.
During the year
ended on December 31, 2013, the Company issued 6,690,000 shares of common stock upon the conversion of $10,400 of notes payable.
We offered and
sold the securities in reliance on an exemption from federal registration under Section 4(2) of the Securities Act of 1933 and
Rule 506 promulgated thereunder. We relied on this exemption and rule based on the fact that there were a limited number of investors,
all of whom were accredited investors and (i) either alone or through a purchaser representative, had knowledge and experience
in financial and business matters such that each was capable of evaluating the risks of the investment, and (ii) we had obtained
subscription agreements from such investors indicating that they were purchasing for investment purposes only. The securities
were not registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable
exemption from registration requirements. The disclosure contained herein does not constitute an offer to sell or a solicitation
of an offer to buy any securities of the Company, and is made only as permitted by Rule 135c under the Securities Act.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following
discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated
financial statements and notes thereto for the years ended December 31, 2013 and 2012. The financial statements presented for
the year ended December 31, 2013 and 2012 include FastFunds, Chex, Collection Solutions, FastFunds International Limited, Key,
Nova and Denaris.
In light of the
foregoing, and the Company’s sale of substantially all of its assets in January 2006, the historical data presented below
is not indicative of, and therefore, not useful for purposes of predicting future results. You should read this information in
conjunction with the audited consolidated financial statements of the Company, including the notes to those statements (Item 8),
and the following “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”.
The Company’s
financial statements for the year ended December 31, 2013 have been prepared on a going concern basis, which contemplates the
realization of its remaining assets and the settlement of liabilities and commitments in the normal course of business. The Company
has incurred significant losses since its inception and has a working capital deficit of approximately $10,108,748, and an accumulated
deficit of $24,611,757 as of December 31, 2013. Moreover, it presently has no ongoing business operations or sources of revenue,
and little available resources with which to obtain or develop new operations.
These factors
raise substantial doubt about the Company’s ability to continue as a going concern. There can be no assurance that the Company
will have adequate resources to fund future operations or that funds will be available to the Company when needed, or if available,
will be available on favorable terms or in amounts required by the Company. The consolidated financial statements do not include
any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
| (a) | Liquidity
and Capital Resources |
For the year
ended December 31, 2013, net cash used in operating activities was $161,611 compared to $144,890 for the year ended December 31,
2012. Net loss for the year ended December 31, 2013 was $1,425,541 compared to a net loss of $512,144 for the year ended December
31, 2012. The net loss for the year ended December 31, 2013 included selling, general and administrative expenses of $234,255
and other expenses of $1,196,112. Included in the net loss were non cash expenses of $603,276 for the amortization of note discounts
and $68,032 for the initial derivative liability on convertible notes. Accrued expenses increased by $469,817.The net loss for
2012 included selling general and administrative expenses of $191,432, bad debt expense of $172,382 and other expenses of $153,485.
The 2012 non cash adjustments to the net loss included includes $250,000 for the impairment of license of our wholly owned subsidiary
CCUSA, $172,382 of bad debt expense related to Nova’s credit card receivables, $98,850 for amortization of interest expense
and $16,532 for the fair market value of derivative liabilities. These amounts were partially offset by the gain recognized on
an expiration of guaranty of $648,000 and a rent debt settlement of $19,411. Accrued expenses also increased by $497,428.
Cash provided
by financing activities for the year ended December 31, 2013 was $163,450 compared to $144,855 for the year ended December 31,
2012. During the year ended December 31, 2013, the Company issued $26,500 of notes payable (of which $5,200 was to related parties)
and $295,500 of convertible promissory notes. During the year ended December 31, 2013 the Company repaid $147,450 of notes payable
(of which $140,450 were to related parties) and paid $11,100 of financing fees. During the year ended December 31, 2012, the Company
issued $25,280 of notes payable (of which $12,580 was to related parties) and $210,000 of convertible promissory notes, and received
$32,000 from the exercise of warrants to purchase 2,819,046 shares of common stock. During the year ended December 31, 2012 the
Company repaid $105,925 of notes payable (of which $102,425 were to related parties) and paid $16,500 of financing fees.
For the year
ended December 31, 2013, net cash increased $1,839 compared to a decrease of $35 for the year ended December 31, 2012. Ending
cash at December 31, 2013, was $2,057 compared to $218 at December 31, 2012.
From January
1, 2014 through April 4, 2014, the Company received $390,000 from the issuance of in the aggregate $411,000 of convertible promissory
notes, all of which may cause dilution to our stockholders.
Significant
accounting policies:
Basis
of presentation and principles of consolidation:
The
accompanying consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the
United States of America (“USGAAP”). The consolidated financial statements of the Company include the Company and
its subsidiaries. All material inter-company balances and transactions have been eliminated.
Cash
and cash equivalents:
For
the purpose of the financial statements, the Company considers all highly-liquid investments with an original maturity three-months
or less to be cash equivalents.
Accounts
receivables and revenue recognition:
Accounts
receivables are stated at cost plus refundable and earned fees (the balance reported to customers), reduced by allowances for
refundable fees and losses. As of December 31, 2011 management believed that part of this receivable would not be collected in
the next twelve months and accordingly was reclassified as non-current on the accompanying balance sheet. Fees (revenues) are
accrued monthly on active credit card accounts and included in credit card receivables, net of estimated uncollectible amounts.
Accrual of income is discontinued on credit card accounts that have been closed or charged off. Accrued fees on credit card loans
are charged off with the card balance, generally when the account becomes 90 days past due. The allowance for losses is established
through a provision for losses charged to expenses. Credit card receivables are charged against the allowance for losses when
management believes that collectability of the principal is unlikely. The allowance is an amount that management believes will
be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and
prior loss experience. This evaluation also takes into consideration such factors as changes in the volume of the loan portfolio,
overall portfolio quality and current economic conditions that may affect the borrowers’ ability to pay. While management
uses the best information available to make its evaluations, this estimate is susceptible to significant change in the near term.
Long-lived
assets:
Long-lived
assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. In the second quarter of fiscal 2012, management determined the license agreement of CCUSA, our wholly owned subsidiary,
and the Company’s related investment in CCUSA were impaired and recognized an impairment charge of $250,000.
Noncontrolling
interest:
On January
1, 2012, the Company adopted authoritative accounting guidance that requires the ownership interests in subsidiaries held by parties
other than the parent, and income attributable to those parties, be clearly identified and distinguished in the parent’s
consolidated financial statements. The Company’s noncontrolling interest is now disclosed as a separate component of the
Company’s consolidated deficiency on the balance sheets. Earnings and other comprehensive income are separately attributed
to both the controlling and noncontrolling interests. Earnings per share are calculated based on net income attributable
to the Company’s controlling interest.
Loss
per share:
Loss
per share of common stock is computed based on the weighted average number of common shares outstanding during the period. Stock
options, warrants, and common stock underlying convertible promissory notes are not considered in the calculations for the periods
ended December 31, 2013 and 2012, as the impact of the potential common shares, which total 3,630,464,687 (2013) and 196,379,829
(2012) would be antidilutive.
Use
of estimates:
Preparation
of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the dates of the balance sheets and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Fair
value of financial instruments:
The
estimated fair value of financial instruments has been determined by the Company using available market information and appropriate
methodologies; however, considerable judgment is required in interpreting information necessary to develop these estimates. Accordingly,
the Company’s estimates of fair values are not necessarily indicative of the amounts that the Company could realize in a
current market exchange.
The
fair values of cash and cash equivalents, current non-related party accounts receivable, and accounts payable approximate their
carrying amounts because of the short maturities of these instruments.
The
fair values of notes and advances receivable from non-related parties approximate their net carrying values because of the allowances
recorded as well as the short maturities of these instruments. The fair values of receivables from related parties are not practicable
to estimate, based upon the related party nature of the underlying transactions.
The
fair values of notes and loans payable to non-related parties approximate their carrying values because of the short maturities
of these instruments. The fair value of long-term debt to non-related parties approximates carrying values, net of discounts applied,
based on market rates currently available to the Company.
Fair
value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation
techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained
from sources independent of the reporting entity (“observable inputs”) and the reporting entity’s own assumptions
about market participant assumptions developed based on the best information available in the circumstances (“unobservable
inputs”).
Fair
value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”)
in an orderly transaction between market participants at the measurement date. In determining fair value, the Company primarily
uses prices and other relevant information generated by market transactions involving identical or comparable assets (“market
approach”). The Company also considers the impact of a significant decrease in volume and level of activity for an asset
or liability when compared with normal activity to identify transactions that are not orderly.
The
highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest
priority to unobservable inputs (Level 3 measurements). Securities are classified in their entirety based on the lowest level
of input that is significant to the fair value measurement.
The three
hierarchy levels are defined as follows:
Level 1 – Quoted
prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted
prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in
active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
Level 3 – Prices
or valuations that require inputs that are both significant to the fair value measurement and unobservable.
Credit
risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value.
The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s
own credit risk as observed in the credit default swap market.
Accounting
for obligations and instruments potentially settled in the Company’s common stock:
The
Company accounts for obligations and instruments potentially to be settled in the Company's stock in accordance with ASC Topic
815, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock.
This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially
settled in, the Company's stock.
Under
ASC Topic 815, contracts are initially classified as equity or as either assets or liabilities, depending on the situation. All
contracts are initially measured at fair value and subsequently accounted for based on the then current classification. Contracts
initially classified as equity do not recognize subsequent changes in fair value as long as the contracts continue to be classified
as equity. For contracts classified as assets or liabilities, the Company reports changes in fair value in earnings and discloses
these changes in the financial statements as long as the contracts remain classified as assets or liabilities. If contracts classified
as assets or liabilities are ultimately settled in shares, any previously reported gains or losses on those contracts continue
to be included in earnings. The classification of a contract is reassessed at each balance sheet date.
Stock-based
compensation:
The
Company has one stock option plan approved by FFFC’s Board of Directors in 2004, and also grants options and warrants to
consultants outside of its stock option plan pursuant to individual agreements. The Company accounts for its stock based compensation
under ASC 718 “Compensation- Stock Compensation” using the fair value based method. Under this method, compensation
cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually
the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity
instruments for goods and services. It also addresses transactions in which an entity incurs liabilities in exchange for goods
and services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance
of those equity instruments. We use the Black Scholes model for measuring the fair value of options. The stock based fair value
compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement
date) and is recognized over the vesting periods.
There
were no options granted during the years ended December 31, 2013 and 2012.
The
Company’s stock option plan is more fully described in Note 9.
Income
Taxes
Deferred
tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and
liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A
valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.
The
Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 740, “Accounting for Income Taxes. It prescribes a recognition threshold
and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. As a result, the Company has applied a more-likely-than-not recognition threshold for all tax uncertainties. The
guidance only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination
by the various taxing authorities.
The
Company classifies penalties and interest related to unrecognized tax benefits as income tax expense in the Statements of Operations
Recent Accounting Pronouncements
Not Yet Adopted:
As
of the date of this report, there are no recent accounting pronouncements that have not yet been adopted that we believe would
have a material impact on our financial statements.
Results of operations
Results of operations for the year
ended December 31, 2013 vs. December 31, 2012
REVENUES
Total revenues for 2013 were $31,462
compared to $36,518 for 2012. Revenues for the year ended December 31, 2013 and 2012 consist of fees related to Nova’s remaining
credit card portfolio.
OPERATING EXPENSES
Operating expenses
were $26,636 for the year ended December 31, 2013 compared to $31,663 for 2012. The operating expenses for the year ended December
31, 2013 and 2012 primarily consisted of expenses related to third party servicing fees of Nova’s remaining credit card
portfolio.
CORPORATE OPERATING EXPENSES
Corporate operating
expenses for 2013 were $234,255 and $363,814 for 2012. The expenses were comprised of the following:
| |
2013 | |
2012 |
| |
| | | |
| | |
Bad debt expense | |
$ | — | | |
$ | 172,382 | |
Officer and director management fees | |
| 120,000 | | |
| 92,275 | |
Accounting, legal and consulting | |
| 69,477 | | |
| 61,358 | |
Other | |
| 44,778 | | |
| 37,799 | |
| |
| | | |
| | |
| |
$ | 234,255 | | |
$ | 363,184 | |
Officer and director
fees increased for the year ended December 31, 2013 compared to the year ended December 31, 2012 as the 2013 expenses include
a full year of expensing $60,000 each for Messrs. Fong and Hollander. Accounting, legal and consulting increased for the year
ended December 31, 2013 compared to December 31, 2012 as a result of $15,000 of marketing expenses paid related to Financiera
Moderna (“FM”), as a wholly owned subsidiary of the Company. Other expenses for the year ended December 31, 2013,
are comprised of transfer agent and filing fees of $18,913, rent and other occupancy costs of $18,273 and investor relations costs
of $7,592,
OTHER INCOME (EXPENSE)
Other expense,
net for the year ended December 31, 2013 was $1,196,112 compared to net expenses of $153,485 for the year ended December 31, 2012.
Other expenses for the year ended December 31, 2013 are comprised of $1,140,199 of interest expense and $55,913 for the fair value
change of derivative liabilities. The 2012 net expense includes $576,865 of interest expense, a $250,000 impairment charge reducing
the book value of a license to zero and $16,531 for the fair value change of derivative liabilities. These expenses were partially
offset by gain recorded on the expiration of guaranty of $648,000, dividend income of $22,500 and gain on rent forgiveness of
$19,411. Interest expense for the years ended December, 2013 and 2012 is summarized as:
| |
2013 | |
2012 |
Amortization of note discount | |
$ | 603,276 | | |
$ | 92,037 | |
Amortization of deferred financing fees | |
| 17,434 | | |
| 6,314 | |
Default interest penalty on convertible notes | |
| 40,900 | | |
| — | |
Notes payable, other | |
| 456,894 | | |
| 445,707 | |
Notes payable, related parties | |
| 21,695 | | |
| 32,807 | |
| |
| | | |
| | |
| |
$ | 1,140,199 | | |
$ | 576,865 | |
OFF BALANCE
SHEET ARRANGEMENTS
None
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is
the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock
market. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company
has limited exposure to market risks related to changes in interest rates. The Company does not currently invest in equity instruments
of public or private companies for business or strategic purposes.
The principal
risks of loss arising from adverse changes in market rates and prices to which the Company and its subsidiaries are exposed relate
to interest rates on debt. The Company has only fixed rate debt. The Company has $2,818,794 of debt outstanding as of December
31, 2013, of which $2,090,719 has been borrowed at fixed rates ranging from 10% to 15%. This fixed rate debt is subject to renewal
quarterly or annually and was due February 28, 2008.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial
statements are listed under Item 15.
ITEM 9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
N/A
ITEM
9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls
and Procedures
A review and
evaluation was performed by the Company's management, including the Company's Acting Chief Executive Officer (the "CEO")
who is also the Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company's
disclosure controls and procedures as of the end of the period covered by this annual report. Based on that review and evaluation,
the CEO /CFO has concluded that as of December 31, 2013 disclosure controls and procedures, were not effective at ensuring that
the material information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported
as required in the application of SEC rules and forms.
Management’s Report on Internal Controls
over Financial Reporting
Our management
is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a set of processes designed
by, or under the supervision of, a company’s principal executive and principal financial officers, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with GAAP and includes those policies and procedures that:
| • | Pertain
to the maintenance of records
that in reasonable detail
accurately and fairly reflect
our transactions and dispositions
of our assets; |
| • | Provide
reasonable assurance our
transactions are recorded
as necessary to permit
preparation of our financial
statements in accordance
with GAAP, and that receipts
and expenditures are being
made only in accordance
with authorizations of
our management and directors;
and |
| • | Provide
reasonable assurance regarding
prevention or timely detection
of unauthorized acquisition,
use or disposition of our
assets that could have
a material effect on the
financial statement. |
Because of its
inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that
any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that
the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
Our CEO and CFO
have evaluated the effectiveness of our internal control over financial reporting as described in Exchange Act Rules 13a-15(e)
and 15d-15(e) as of the end of the period covered by this report based upon criteria established in “Internal Control-Integrated
Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).. As
a result of this evaluation, we concluded that our internal control over financial reporting was not effective as of December 31,
2013 as described below.
We assessed the
effectiveness of the Company’s internal control over financial reporting as of evaluation date and identified the following
material weaknesses:
Insufficient
Resources: We have an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.
Inadequate
Segregation of Duties: We have an inadequate number of personnel to properly implement control procedures.
Lack
of Audit Committee: We do not have a functioning audit committee, resulting in lack of independent oversight in the establishment
and monitoring of required internal controls and procedures.
We are committed
to improving the internal controls and will (1) consider to use third party specialists to address shortfalls in staffing and
to assist us with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant
accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) may consider appointing
additional outside directors and audit committee members in the future.
We have discussed
the material weakness noted above with our independent registered public accounting firm. Due to the nature of this material weakness,
there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements
could occur that would not be prevented or detected.
This Annual Report
does not include an attestation report of our independent registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant
to the rules of the SEC that permit us to provide only management’s report in this annual report.
Changes
in Internal Control over Financial Reporting
There have been
no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably
likely to materially affect, the Company’s internal controls over financial reporting.
ITEM 9B. OTHER
INFORMATION
None
PART III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
| (a)(b)(c) | Identification
of directors, executive
officers and certain significant
persons |
Name |
|
Age |
|
Offices
Held |
|
Length
of service |
|
|
|
|
|
|
|
Henry
Fong |
|
78 |
|
Chairman |
|
Since
June 2004 |
|
|
|
|
Chief
Executive Officer |
|
From
June 7, 2004 through July 2004; Since January 22, 2014 |
|
|
|
|
|
|
|
Barry
Hollander |
|
56 |
|
Acting
Chief Executive Officer |
|
From
January 2007 through January 22, 2014 |
|
|
|
|
Director |
|
From
May 25, 2013 through January 22, 2014 |
|
|
|
|
|
|
|
Our directors hold office until their respective
successors have been duly elected and qualified by our Board of Directors. Officers are appointed by our Board of
Directors and hold office until their successors are duly elected and qualified.
No arrangement
exists between any of the above officers and directors pursuant to which any one of those persons was elected or appointed to
such office or position.
None.
HENRY FONG
Mr. Fong became the Company’s chairman
and chief executive officer (“CEO”) upon the effectiveness of the Merger on June 7, 2004. In July 2004,
Mr. Fong resigned the CEO role, upon the appointment of Mr. Graham Newall as CEO. Mr. Fong assumed the role as CEO on January
22, 2014. Mr. Fong has served in a variety of roles for other public corporations. Mr. Fong has been a Director of SurgLine
International, Inc. (“SurgLine”), formerly China Nuvo Solar Energy, Inc. (“China Nuvo”) since March 2002.
Mr. Fong served as the President of China Nuvo form March 2002 through September 2011.Mr. Fong has been president and a director
of Alumifuel Power Corporation, (“Alumifuel”) formerly, Inhibiton Therapeutics, Inc. since its inception in May 2004.
Alumifuel is a publicly held company developing hydrogen generation products, and Mr. Fong was the president, treasurer and a
director of Hydrogen Power, Inc., formerly Equitex, Inc. from its inception in January 1983 to January 2007. From 1959 to 1982
Mr. Fong served in various accounting, finance and budgeting positions with the Department of the Air Force. During the period
from 1972 to 1981 he was assigned to senior supervisory positions at the Department of the Air Force headquarters in the Pentagon.
In 1978, he was selected to participate in the Federal Executive Development Program and in 1981, he was appointed to the Senior
Executive Service. In 1970 and 1971, he attended the Woodrow Wilson School, Princeton University and was a Princeton Fellow in
Public Affairs. Mr. Fong received the Air Force Meritorious Civilian Service Award in 1982. Mr. Fong has passed the uniform certified
public accountant exam. In March 1994, Mr. Fong was one of twelve CEOs selected as Silver Award winners in FINANCIAL WORLD magazine’s
corporate American “Dream Team.”
BARRY HOLLANDER
Mr. Hollander
has been our Acting Chief Executive Officer from January 2007 through his resignation on January 22, 2014. Mr. Hollander since
April 2011 has been the CFO of Mediswipe, Inc. (“Mediswipe”). MediSwipe, a publicly traded company, provides terminal-based
services for physicians, clinics, hospitals and medical dispensaries that include: digital patient records, electronic record
scanning, credit/debit card merchant services, check guarantee and elective surgery financing. Since April 2011, Mr. Hollander
has been the CFO of 800 Commerce, Inc. (“800 Commerce”). 800 Commerce has filed a Registration Statement with the
Securities and Exchange Commission (the “SEC”) to become publicly traded. The SEC declared the Registration statement
effective in August 2013. 800 Commerce markets credit card processing services and has developed on-line portals and mobile applications
offering directories of professional service providers. Mr. Hollander was the Chief Financial Officer of Quture International,
Inc. from February 2010 through February 28, 2013. Mr. Hollander has a BS degree from Fairleigh Dickinson University.
| (f) | Involvement
in certain legal proceedings. |
None.
| (g) | Promoters
and control persons. |
None.
(h) Audit
committee financial expert.
See (i) below.
(i) Identification
of the audit committee
The Company does
not currently have an audit committee of the board of directors, as none is required, and the board believes it can effectively
serve in that function and, therefore, currently does. Management believes that our sole member of the board of directors may
have the necessary attributes to serve as a financial expert on an audit committee, if required.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a)
of the Securities Exchange Act of 1934 requires executive officers and directors and persons who beneficially own more than 10%
of our common stock to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers,
directors and greater-than-10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a)
reports they file. We believe that during 2013, based solely on a review of the copies of such forms, if any, furnished to us
during 2013 and written representations from the executive officers, directors and greater-than-10% beneficial owners of our common
stock, have complied with all Section 16 filing requirements.
CODE OF ETHICS
We have adopted
a Code of Ethics for our senior financial management, which includes our chief executive officer and chief financial officer as
principal executive and accounting officers, that has been filed as an exhibit to this report.
ITEM
11. EXECUTIVE COMPENSATION.
Compensation
Discussion and Analysis
Equity
Compensation
Summary
Compensation Table
The following
table sets forth information regarding compensation paid to our officers during the years ended December 31, 2013 and 2012:
Name and Principal Position |
Year |
Salary
($) |
Bonus
($) |
All Other Compensation
($) |
Total ($) |
(a) |
(b) |
(c) |
(d) |
(i) |
(j) |
Barry Hollander (1)
Acting Chief Executive Officer |
2013
2012 |
$ 60,000
$ 0
|
$0
$0 |
$60,000
$71,025 |
$60,000
$71,025 |
(1) Mr.
Barry Hollander became Acting Chief Executive Officer in January 2007, filling a vacancy (resigned January 22, 2014). Prior to
that appointment, Mr. Hollander was providing functions related to accounting, finance and general operations of the Company as
a consultant. Pursuant to the Board of Directors resolution, The Company through June 30, 2011 has been accruing a monthly management
fee for Mr. Hollander of $10,000 per month and beginning July 1, 2011, $5,000 to $6,000 per month, and is paid when cash flow
is available. During the years ended December 31, 2013 and 2012, the Company accrued and recorded expenses of $60,000 and $71,025,
respectively. Mr. Hollander received $42,950 and $38,425 in cash payments for the years ended December 31, 2013 and 2012, respectively.
On May 25, 2012 Mr. Hollander agreed to accept 15,000,000 shares of restricted common stock in payment of $300,000 of the amount
due, and Mr. Hollander also agreed to forgive $67,500 of accrued and unpaid fees as of that date. Beginning October 1, 2012 the
Company has agreed to compensate Mr. Hollander $5,000 a month for his services. In November 2013, the Company issued a note in
the amount of $30,000 in satisfaction of accrued and unpaid fees and as of December 31, 2013, Mr. Hollander is owed $2,050 for
these services.Mr. Hollander resigned on January 22, 2104.
Cash
Incentive Bonuses
We
had no cash incentive bonus program in effect for 2013.
Severance
and Change-in-Control Benefits
We
had no provisions for mandatory severance benefits in the event of a termination of change of control of the Company.
Effective
January 21, 2014, the Board of Directors of the Company approved the issuance of 1,000 shares of Class C Preferred Stock (the
“Class C Preferred Stock Shares”) to Mr. Fong or his assigns in consideration for services rendered to the Company
and continuing to work for the Company without receiving significant payment for services and without the Company at that time
of issuance having the ability to issue shares of common stock as the Company does not have sufficient authorized but unissued
shares of common stock to allow for any such issuances.
As
a result of the issuance of the Class C Preferred Stock Shares to Mr. Fong, or his assigns and the Super Majority Voting Rights
(described below), Mr. Fong obtained voting rights over the Company’s outstanding voting stock which provides him the right
to vote up to 51% of the total voting shares able to vote on any and all shareholder matters. As a result, Mr. Fong
will exercise majority control in determining the outcome of all corporate transactions or other matters, including the election
of Directors, mergers, consolidations, the sale of all or substantially all of the Company’s assets, and also the power
to prevent or cause a change in control. The interests of Mr. Fong may differ from the interests of the other stockholders and
thus result in corporate decisions that are adverse to other shareholders. Additionally, it may be impossible for shareholders
to remove Mr. Fong as an officer or Director of the Company due to the Super Majority Voting Rights.
Other
Benefits
Through
the Asset Sale on January 31, 2006, our executives were eligible to participate in all of our employee benefit plans, such as
medical, dental, vision, group life and disability insurance on the same basis as our other employees.
We
currently have no benefit plan.
Grant of Plan-Based Awards
None.
Outstanding Equity Awards at Fiscal
Year-End Table
None.
Option Exercises and Stock Vested
Table
None.
Non-Qualified Deferred Compensation
Plans
We have no non-qualified deferred
compensation plans currently in effect.
Director Compensation
The following table shows the compensation
earned by each of our non-officer directors for the year ended December 31, 2013:
Name
(1) |
Fees
Earned or Paid in Cash ($) (2) |
Stock
Awards ($) |
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation ($) |
Change
in Pension Value and Non-Qualified Deferred Compensation Earnings |
All
Other Compensation |
Total
($) |
(a) |
(b)
|
(c) |
(d) |
(e) |
(f) |
(g) |
(h) |
Henry
Fong |
$60,000 |
- |
- |
- |
- |
- |
$60,000 |
| (1) | As
of
December
31,
2013,
Mr.
Hollander
was
Acting
Chief
Executive
Officer
and
a
member
of
the
Board
of
Directors
(resigned
January
22,
2014).
Mr.
Hollander’s
compensation
is
included
in
the
Officer’s
Compensation
Tables. |
| (2) | Amount
reflects
the
dollar
amount
recognized
for
financial
statement
reporting
purposes
for
the
fiscal
year
ended
December
31,
2013
in
accordance
with
SFAS
123(R)
of
stock
option
awards,
and
may
include
amounts
from
awards
granted
in
and
prior
to
fiscal
year
2012.
|
During
the year ended December 31, 2012, Mr. Fong received 15,000,000 shares of the Company’s common stock in satisfaction of $160,409
of accrued and unpaid director fees as well as $51,146 for reimbursement of Company expenses previously paid by and owed to Mr.
Fong and accrued and unpaid interest of $46,994 on loans made to the Company from Mr. Fong and/or his affiliates., For the years
ended December 31, 2012 and 2013, the Company accrued expenses of $21,250 and $60,000, respectively, Mr. Fong’s services.
Mr. Fong received $14,500 in cash payments for the year ended December 31, 2013. In November 2013, the Company issued a convertible
promissory note to Mr. Fong in payment of $35,000 of accrued and unpaid fees. As of December 31, 2013, Mr. Fong is owed $25,500
for these services, included in accrued expenses on the balance sheet.
|
Option
Awards |
Stock
Awards |
Name |
Number
of
Securities
Under-lying
Unexer-cised
Options
(#)
Exer-cisable |
Number
of
Securities
Under-lying
Unexer-cised
Options
(#)
Unexer-cisable |
Equity
Incentive
Plan
Awards:
Number
of
Securities
Under-lying
Unexer-cised
Unearned
Options
(#) |
Option
Exercise
Price
($) |
Option
Expiration
Date |
Number
of
Securities
That
Have
Not
Vested
(#) |
Market
Value
of
Securities
That
Have
Not
Vested
($) |
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Securities
or
Other
Rights
That
Have
Not
Vested
(#) |
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Securities
or
Other
Rights
That
Have
Not
Vested
($) |
(a) |
(b) |
(c) |
(d) |
(e) |
(f) |
(g) |
(h) |
(i) |
(j) |
Henry
Fong |
180,000 |
0 |
0 |
$0.37 |
9/1/2015 |
0 |
$0 |
0 |
$0 |
Henry
Fong |
90,000 |
0 |
0 |
$0.25 |
2/9/2017 |
0 |
$0 |
0 |
$0 |
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
| (a) | Security
Ownership
of
Certain
Beneficial
Owners
and
Security
Ownership
of
Management. |
Not updated
The following
table contains information at April 5, 2014, as to the beneficial ownership of shares of our common stock and preferred stock
by each person who, to our knowledge at that date, was the beneficial owner of five percent or more of the outstanding shares
of the class, each person who is a director or a named executive officer of the Company under the summary compensation table and
all persons as a group who are current executive officers and directors, and as to the percentage of outstanding shares so held
by them at March 31, 2014. The number of shares beneficially held is determined under rules promulgated by the SEC, and the information
is not necessarily indicative of beneficial ownership for any other purpose. Including the number of shares below does not, however,
constitute an admission that the named stockholder is a direct or indirect beneficial owner of the shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
and Address of Beneficial Owner |
|
Shares
of Common Stock Owned (1) |
|
Shares
of Common Stock Underlying Options (1) |
|
Total |
|
Percentage
of Common Stock Owned (2) |
Shares
of Class B Preferred Stock(1) |
Percentage
of Class B Preferred Stock Owned (3) |
Shares
of Class C Preferred Stock(1) |
Percentage
of Class C Preferred Stock Owned (4) |
Henry
Fong (5) |
|
116,946,175 |
|
270,000 |
|
117,161,175 |
|
3.1% |
1,791,666 |
100.0% |
1,000 |
100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry
Hollander (6) |
|
230,085,638 |
|
- |
|
230,085,638 |
|
6.3% |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
HPI
Partners, LLC (7) |
|
10,500,000 |
|
- |
|
10.500,000 |
|
0.3% |
175,000 |
9.8% |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Carbon
Capture, Inc. (8) |
|
97,000,000 |
|
- |
|
97,000,000 |
|
2.6% |
1,616,667 |
90.2% |
- |
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
officers and directors as a group (one person) |
|
116,946,175 |
|
270,000 |
|
117,946,175 |
|
3.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The beneficial
owners exercise sole voting and investment power.
(2) As of
April 5, 2014, 3,661,157,505 shares of our common stock were outstanding
(3) As of
April 5, 2014 there were 1,791,667 shares of our Class B preferred stock outstanding.
(4) As of April
5, 2014, there were 1,000 shares of Class C Preferred stock outstanding.
(5)
The
address of the beneficial owner
is 7315 E. Peakview Avenue, Centennial,
Co. 80111. Common stock owned
includes 9,000,000 shares owned
by Mr. Fong’s spouse and
107,500,000 shares of common stock
assumes the conversion of 1,791,666
shares of Class B Preferred Stock.
Class B Preferred stock includes
1,616,667 shares owned by Carbon
Capture, Inc.(“CCC”)
and 175,000 shares owned by HPI
Partners, LLC (“HPIP”).
CCC and HPIP are controlled by
Mr. Fong. The Class B Preferred
Stock converts to 60 shares of
common stock for each share.
(6) The
address of the beneficial owner
is 319 Clematis Street, Suite
1008, West Palm Beach, Fl. 33401.
Common stock owned included 230,000,000
shares owned by Venture Equity,
LLC. a Florida Limited Liability
Company, controlled by Mr. Hollander.
(7) The
address of the beneficial owner
is 7315 E. Peakview Avenue, Centennial,
Co. 80111. Common stock includes
10,500,000 from the conversion
of 175,000 shares of Class B Preferred
Stock. Class B Preferred Stock
converts to 60 shares of common
stock for each share.
(8) The
address of the beneficial owner
is 7315 E. Peakview Avenue, Centennial,
Co. 80111. Common stock includes
the 97,000,000 from the conversion
of Class b Preferred Stock. Class
B Preferred Stock converts to
60 shares of common stock for
each share.
(c) Changes
in control.
Effective
January 21, 2014, the Board of Directors of the Company approved the issuance of 1,000 shares of Class C Preferred Stock (as defined
and described below) (the “Class C Preferred Stock Shares”) to Mr. Fong or his assigns in consideration for services
rendered to the Company and continuing to work for the Company without receiving significant payment for services and without
the Company having the ability to issue shares of common stock as the Company does not have sufficient authorized but unissued
shares of common stock to allow for any such issuances.
As
a result of the issuance of the Class C Preferred Stock Shares to Mr. Fong, or his assigns and the Super Majority Voting Rights
(described below), Mr. Fong obtained voting rights over the Company’s outstanding voting stock which provides him the right
to vote up to 51% of the total voting shares able to vote on any and all shareholder matters. As a result, Mr. Fong
will exercise majority control in determining the outcome of all corporate transactions or other matters, including the election
of Directors, mergers, consolidations, the sale of all or substantially all of the Company’s assets, and also the power
to prevent or cause a change in control. The interests of Mr. Fong may differ from the interests of the other stockholders and
thus result in corporate decisions that are adverse to other shareholders. Additionally, it may be impossible for shareholders
to remove Mr. Fong as an officer or Director of the Company due to the Super Majority Voting Rights.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
(a)
Transactions with Related Persons.
None.
Transactions
with Directors
DIRECTOR INDEPENDENCE
Our board of
directors has one director and has no standing sub-committees at this time due to the associated expenses and the small size of
our board. We are not currently listed on a national securities exchange that has requirements that a majority of the board of
directors be independent.
In performing
the functions of the audit committee, our board oversees our accounting and financial reporting process. In this function, our
board performs several functions. Our board, among other duties, evaluates and assesses the qualifications of the Company’s
independent auditors; determines whether to retain or terminate the existing independent auditors; meets with the independent
auditors and financial management of the Company to review the scope of the proposed audit and audit procedures on an annual basis;
reviews and approves the retention of independent auditors for any non-audit services; reviews the independence of the independent
auditors; reviews with the independent auditors and with the Company’s financial accounting personnel the adequacy and effectiveness
of accounting and financial controls and considers recommendations for improvement of such controls; reviews the financial statements
to be included in our annual and quarterly reports filed with the Securities and Exchange Commission; and discusses with the Company’s
management and the independent auditors the results of the annual audit and the results of our quarterly financial statements.
While we do not currently have a standing compensation committee, our non-employee director considers executive officer compensation,
and our entire board participates in the consideration of director compensation. Our non-employee board members oversee our compensation
policies, plans and programs. Our non-employee board members further review and approve corporate performance goals and objectives
relevant to the compensation of our executive officers; review the compensation and other terms of employment of our Chief Executive
Officer and our other executive officers; and administer our equity incentive and stock option plans. Each of our directors participates
in the consideration of director nominees. In addition to nominees recommended by directors, our board will consider nominees
recommended by shareholders if submitted in writing to our secretary. Our board believes that any candidate for director, whether
recommended by shareholders or by the board, should be considered on the basis of all factors relevant to our needs and the credentials
of the candidate at the time the candidate is proposed. Such factors include relevant business and industry experience and demonstrated
character and judgment.
ITEM 14. PRINCIPAL ACCOUNTANT FEES
AND SERVICES.
D. Brooks and
associates CPA’s, P.A. (“Brooks”) served as our independent registered public accounting firm for December 31,
2013 and 2012..
Audit Fees
Fees billed and
expected to be billed by Brooks for audit services related to the year ended December 31, 2013 and 2012 were approximately $17,000
and $8,000, respectively, which includes out-of-pocket costs incurred in connection with these services.
Tax Fees
Fees billed and
expected to be billed by Brooks for tax return preparation services related to the year ended December 31, 2013 and 2012 were
$0.
All Other Fees
The Company incurred no other fees
to Brooks for 2013 and 2012.
Preapproval Policy
Pursuant to our
Audit Committee Charter, before the accountant is engaged by us to render audit or non-audit services, our audit committee approves
the engagement. In absence of a standing audit committee, such approval is made by our entire board of directors.
PART IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
| (a) | The
following documents are filed
as a part of this report immediately
following the signature page. |
| 1. | Financial
Statements and Supplementary Data |
FASTFUNDS
FINANCIAL CORPORATION.
Financial
Statements
For
the Years Ended December 31, 2013 and 2012
Index
to Financial Statements |
|
Page |
Report of Independent Registered Public Accounting Firm |
|
F-1 |
Consolidated Balance Sheets - December 31, 2013
and 2012 |
|
F-2 |
Consolidated Statements of Operations for the Years ended December
31, 2013 and 2012 |
|
F-3 |
Consolidated Statements of Stockholders' Deficit for the Years ended
December 31, 2013 and 2012 |
|
F-4-F-5 |
Consolidated Statements of Cash Flows for the Years ended December
31, 2013 and 2012 |
|
F-6 |
Notes to Consolidated Financial Statements |
|
F-7-F-17 |
D. Brooks and Associates CPA’s, P.A.
Certified Public Accountants • Valuation Analyst • Advisors
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and
Stockholders of Fastfunds Financial Corp.
We have audited the accompanying balance
sheets of Fastfunds Financial Corp. as of December 31, 2013 and 2012, and the related statements of operations, stockholders’
deficit, and cash flows for the years then ended. Fastfunds Financial Corp.’s management is responsible for these financial
statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinions.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fastfunds
Financial Corp. as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended
in conformity with accounting principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company has incurred operating losses, has incurred negative cash flows from operations
and has a working capital deficit. These and other factors raise substantial doubt about the Company’s ability to continue
as a going concern. Management’s plan regarding these matters is also described in Note 1 to the financial statements. The
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
D. Brooks and Associates CPA’s, P.A.
West Palm Beach, Florida
April 15, 2014
FASTFUNDS FINANCIAL CORPORATION
AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECEMBER 31, |
|
|
|
|
|
2013 |
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,057 |
|
$ |
218 |
|
Accounts receivable |
|
|
51,551 |
|
|
47,406 |
|
Deferred financing costs |
|
|
4,409 |
|
|
10,743 |
|
Other current assets |
|
|
1,143 |
|
|
126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
59,160 |
|
|
58,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
200 |
|
|
200 |
Long term investments (Note 3) |
|
|
89,575 |
|
|
89,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,775 |
|
|
89,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
148,935 |
|
$ |
148,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
724,387 |
|
$ |
716,137 |
|
License fee payable |
|
|
250,000 |
|
|
250,000 |
|
Due to related party |
|
|
75,000 |
|
|
75,000 |
|
Accrued expenses, including related parties $101,419 (2013) and $32,175 (2012)
(Note 4) |
|
|
3,481,723 |
|
|
3,021,455 |
|
Convertible promissory notes (Note 5), including related parties |
|
|
|
|
|
|
|
|
of $237,063 (2013) and $333,363 (2012) |
|
|
2,282,932 |
|
|
2,442,282 |
|
Litigation contingency (Note 6) |
|
|
2,484,922 |
|
|
2,484,922 |
|
Convertible debentures payable, net |
|
|
333,082 |
|
|
74,739 |
|
Derivative liabilities (Note 5) |
|
|
535,862 |
|
|
489,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
10,167,908 |
|
|
9,553,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Notes 4, 6,and 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit (Note 8): |
|
|
|
|
|
|
|
Preferred stock, $.001 par value; 5,000,000 shares authorized; |
|
|
|
|
|
|
|
|
Class A preferred stock, $0.001 par value; 1,000,000 shares authorized; 819,000
shares |
|
|
|
|
|
|
|
|
|
issued and outstanding |
|
|
819 |
|
|
819 |
|
|
Class B preferred stock, $0.001 par value; 2,000,000 shares authorized; 1,791,667
(2013) and |
|
|
|
|
|
|
|
|
297,667 (2012) shares issued and outstanding |
|
|
1,792 |
|
|
298 |
|
Common stock, $0.001 par value; 6,000,000,000 shares authorized; 1,192,337,314
(2013) and |
|
|
|
|
|
- |
|
|
131,944,761 (2012) shares issued and 1,162,337,314 (2013) and 131,944,761 (2012)
outstanding |
|
1,192,338 |
|
|
131,946 |
|
Additional paid-in capital |
|
|
13,340,216 |
|
|
13,589,861 |
|
Treasury stock, 30,000,000 (2013) shares |
|
|
- |
|
|
- |
|
Accumulated deficit |
|
|
(24,611,757) |
|
|
(23,186,216) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total company stockholders' deficit |
|
|
(10,076,592) |
|
|
(9,463,292) |
|
|
|
Less noncontrolling interest |
|
|
57,619 |
|
|
57,619 |
|
|
|
Total deficit |
|
|
(10,018,973) |
|
|
(9,405,673) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and deficit |
|
$ |
148,935 |
|
$ |
148,268 |
See notes to consolidated financial statements.
FASTFUNDS FINANCIAL CORPORATION
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED DECEMBER 31, |
|
|
|
|
2013 |
|
2012 |
|
|
|
|
|
|
|
|
|
Fee revenue, net |
$ |
31,462 |
|
$ |
36,518 |
Operating expenses: |
|
|
|
|
|
|
Processing fees |
|
26,503 |
|
|
28,850 |
|
Returned checks (collected) |
|
(1,554) |
|
|
(705) |
|
Other |
|
1,687 |
|
|
3,518 |
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
26,636 |
|
|
31,663 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
4,826 |
|
|
4,855 |
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
234,255 |
|
|
191,432 |
Bad debt expense |
|
- |
|
|
172,382 |
Loss from operations |
|
(229,429) |
|
|
(358,959) |
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
Interest expense |
|
(1,140,199) |
|
|
(576,865) |
|
Derivative liability income (expense) |
|
(55,913) |
|
|
(16,531) |
|
Dividend and fee income |
|
- |
|
|
22,500 |
|
Gain on debt settlement |
|
- |
|
|
19,411 |
|
Impairment of license |
|
- |
|
|
(250,000) |
|
Gain on expiration of guaranty |
|
- |
|
|
648,000 |
|
|
|
Total other expense |
|
(1,196,112) |
|
|
(153,485) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(1,425,541) |
|
$ |
(512,444) |
|
|
|
|
|
|
|
|
|
Net loss per share |
$ |
(0.00) |
|
$ |
(0.00) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
Basic and diluted |
|
317,084,342 |
|
|
117,306,058 |
See notes to consolidated financial statements.
FASTFUNDS FINANCIAL CORPORATION
AND SUBSIDIARIES |
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' DEFICIT |
FOR THE YEARS ENDED DECEMBER
31, 2013 AND 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
Class B |
|
Additional |
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
Common stock |
|
|
Preferred
stock |
|
|
Preferred
stock |
|
paid-in |
|
|
Noncontrolling |
|
Common stock |
|
Accumulated |
|
stockholders' |
|
|
|
|
Shares |
|
Amount |
|
|
Shares |
|
Amount |
|
|
Shares |
|
Amount |
|
capital |
|
|
interest |
|
treasury |
|
deficit |
|
deficiency |
Balances, January 1, 2012 |
|
57,389,400 |
|
$ |
57,390 |
|
|
- |
|
$ |
- |
|
|
- |
|
$ |
- |
|
$ |
17,178,455 |
|
$ |
57,619 |
|
$ |
(4,547,845) |
|
$ |
(22,673,772) |
|
$ |
(9,928,153) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of convertible debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and accrued interest |
|
9,605,733 |
|
|
9,606 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
27,394 |
|
|
- |
|
|
- |
|
|
- |
|
|
37,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for exercises of warrants |
|
3,200,000 |
|
|
3,200 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
28,800 |
|
|
- |
|
|
- |
|
|
- |
|
|
32,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation and return of treasury stock |
|
(26,752,032) |
|
|
(26,752) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(4,521,093) |
|
|
|
|
|
4,547,845 |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock pursuant to merger agreement |
|
90,000,000 |
|
|
90,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(90,000) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred stock in exchange for cancellation of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock |
|
(67,000,000) |
|
|
(67,000) |
|
|
819,000 |
|
|
819 |
|
|
297,667 |
|
|
298 |
|
|
65,883 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in exchange for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cancellation of accounts payable and accured expenses |
|
30,000,000 |
|
|
30,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
646,049 |
|
|
- |
|
|
- |
|
|
- |
|
|
676,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for loan origination fees |
|
35,714 |
|
|
36 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
464 |
|
|
- |
|
|
- |
|
|
- |
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in exchange for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cancellation of notes payable |
|
35,465,946 |
|
|
35,466 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
200,259 |
|
|
- |
|
|
- |
|
|
- |
|
|
235,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of embedded derivatives upon conversion of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
convertible debt |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
53,651 |
|
|
- |
|
|
- |
|
|
- |
|
|
53,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(512,444) |
|
|
(512,444) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2012 |
|
131,944,761 |
|
|
131,946 |
|
|
819,000 |
|
|
819 |
|
|
297,667 |
|
|
298 |
|
|
13,589,861 |
|
|
57,619 |
|
|
- |
|
|
(23,186,216) |
|
|
(9,405,673) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of convertible debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and accrued interest |
|
1,057,202,553 |
|
|
1,057,203 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(620,921) |
|
|
- |
|
|
- |
|
|
- |
|
|
436,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for exercises of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation and return of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock pursuant to merger agreement |
|
30,000,000 |
|
|
30,000 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(30,000) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
and held in treasury |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred stock in exchange for cancellation of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock |
|
(33,500,000) |
|
|
(33,500) |
|
|
- |
|
|
- |
|
|
558,333 |
|
|
558 |
|
|
32,942 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Class B Preferred Stock as colateral for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
convertible debt |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
935,666 |
|
|
936 |
|
|
(936) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in exchange for |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
conversion of notes payable |
|
6,690,000 |
|
|
6,690 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
3,710 |
|
|
- |
|
|
- |
|
|
- |
|
|
10,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Default penaly on convertible notes |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
0 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of embedded derivatives upon conversion of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
convertible debt |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
365,559 |
|
|
- |
|
|
- |
|
|
- |
|
|
365,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,425,541) |
|
|
(1,425,541) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2013 |
|
1,192,337,314 |
|
$ |
1,192,338 |
|
|
819,000 |
|
$ |
819 |
|
|
1,791,666 |
|
$ |
1,792 |
|
$ |
13,340,216 |
|
$ |
57,619 |
|
$ |
- |
|
$ |
(24,611,757) |
|
$ |
(10,018,973) |
See notes to consolidated financial statements.
FASTFUNDS FINANCIAL CORPORATION
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED DECEMBER 31, |
|
|
|
|
|
|
|
2013 |
|
2012 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,425,541) |
|
$ |
(512,444) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Bad debt expense |
|
|
- |
|
|
172,382 |
|
|
Stock issued for loan origination fee |
|
|
- |
|
|
500 |
|
|
Amortization of discounts on convertible notes |
|
|
603,276 |
|
|
92,036 |
|
|
Amortization on converted debentures |
|
|
- |
|
|
53,651 |
|
|
Initial derivative liability expense on convertible debentures |
|
|
68,032 |
|
|
27,154 |
|
|
Fair value change in derivative liability |
|
|
(12,119) |
|
|
(64,273) |
|
|
Amortization of deferred financing costs |
|
|
17,434 |
|
|
6,314 |
|
|
Gain on debt settlements |
|
|
- |
|
|
(19,411) |
|
|
Increase in face value of convertible notes for default penalty |
|
|
40,900 |
|
|
- |
|
|
Impairment of license |
|
|
- |
|
|
250,000 |
|
|
Gain on expiration of guaranty |
|
|
- |
|
|
(648,000) |
|
|
Decrease (increase) in assets: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(4,145) |
|
|
7,204 |
|
|
|
Other current assets |
|
|
(1,017) |
|
|
87 |
|
|
Increase (decrease) in liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
81,752 |
|
|
(7,518) |
|
|
|
Accrued expenses |
|
|
469,817 |
|
|
497,428 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(161,611) |
|
|
(144,890) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from exercise of warrants |
|
|
- |
|
|
32,000 |
|
Borrowings on convertible notes |
|
|
295,500 |
|
|
210,000 |
|
Borrowings on notes and loans payable, related |
|
|
5,200 |
|
|
12,580 |
|
Borrowings on notes and loans payable, other |
|
|
21,300 |
|
|
12,700 |
|
Repayments on notes and loans payable, related |
|
|
(140,450) |
|
|
(102,425) |
|
Repayments on notes and loans payable, other |
|
|
(7,000) |
|
|
(3,500) |
|
Payment of deferred financing costs |
|
|
(11,100) |
|
|
(16,500) |
Net cash provided by financing activities |
|
|
163,450 |
|
|
144,855 |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
1,839 |
|
|
(35) |
Cash and cash equivalents, beginning |
|
|
218 |
|
|
253 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, ending |
|
$ |
2,057 |
|
$ |
218 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
- |
|
$ |
32,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Schedule of Non-Cash Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of convertible debt in settlement of accounts and notes payable |
|
$ |
142,400 |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible notes to common stock |
|
$ |
10,400 |
|
$ |
235,725 |
|
|
|
|
|
|
|
|
|
|
|
|
Reclass of derivative liability to equity upon conversion of convertible debt |
|
$ |
365,559 |
|
$ |
53,651 |
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible debentures to common stock |
|
$ |
385,833 |
|
$ |
37,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of accounts payable, accrued liabilities and |
|
|
|
|
|
|
|
accrued interest to common stock |
|
$ |
9,549 |
|
$ |
600,000 |
See notes to consolidated financial statements.
FASTFUNDS FINANCIAL
CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1. Business
and organization, asset sale, and going concern and management’s plans:
Business and organization:
FastFunds
Financial Corporation (the “Company” or “FFFC”) is a holding company, and through January 31, 2006, operated
primarily through its wholly-owned subsidiary Chex Services, Inc. (“Chex”). FFFC was previously organized as Seven
Ventures, Inc. (“SVI”). Effective June 7, 2004, Chex merged with SVI (the “Merger”), a Nevada corporation
formed in 1985. At the date of the Merger, SVI was a public shell with no significant operations. The
acquisition of Chex by SVI was recorded as a reverse acquisition based on factors demonstrating that Chex represents the accounting
acquirer. The historical stockholders’ equity of Chex prior to the exchange was retroactively restated (a recapitalization)
for the equivalent number of shares received in the exchange after giving effect to any differences in the par value of the SVI
and Chex common stock, with an offset to additional paid-in capital. The restated consolidated accumulated deficit of the accounting
acquirer (Chex) has been carried forward after the exchange. On June 29, 2004, SVI changed its name
to FFFC.
On
May 25, 2012, the Company entered into an Agreement Concerning the Exchange of Securities (the “Agreement”) by and
among Advanced Technology Development, Inc., a Colorado corporation ("ATD"), and Carbon Capture USA, Inc., a Colorado
corporation ("Carbon") and Carbon Capture Corporation, a Colorado corporation ("CCC"). ATD is a 100% wholly
owned subsidiary of the Company. Carbon is a 100% wholly owned subsidiary of CCC, which is privately held. Mr. Henry Fong, the
sole officer and director of the Company is the control person of CCC. Pursuant to the Agreement, ATD acquired from CCC all of
the issued and outstanding common stock of Carbon in exchange for ninety million (90,000,000) newly issued unregistered shares
of the Company’s common stock. ATD has also assumed an unpaid license fee of $250,000 due from Carbon to CCC.
Carbon
has an exclusive US license related to provisional patent Serial number 61/077,376 and a US Patent to be issued. The patent titled,
“METHOD OF SEPARATING CARBON DIOXIDE”, related to methods of decomposing a gaseous medium, more specifically, relating
to methods of utilizing radio frequency energy to separate the elemental components of gases such as carbon dioxide. ATD plans
to commence research and development with a goal of potential commercialization; subject to financing.
On
July 6, 2012 The Financial Industry Regulatory Authority approved the Company's 3 for 1 forward stock split on its common stock
outstanding in the form of a dividend, with a Record Date of June 18, 2012. The stock split entitled each common stock holder
as of the Record Date to receive two (2) additional shares of common stock for each one (1) share owned. Additional shares issued
as a result of the stock split were distributed on July 9, 2012. All share amounts in these consolidated financial statements
have been retroactively adjusted to reflect the stock split.
On
October 7, 2013, the Company formed Financiera Moderna, Inc. (“FM”) as a wholly-owned subsidiary to develop and market
financial products and services targeted for the Hispanic community. The spectrum of financial products to be offered includes
insurance, secured credit cards, debit cards, mortgage products and financial literacy tools.
On
November 7, 2013, FM signed a marketing and funding agreement (“the Marketing Agreement”) with Compra Vida (“CV”)
and Compra Casa (“CS”); development stage companies that formulate, develop and implement marketing programs to the
Spanish speaking U.S. market. On November 20, 2013, the Company remitted $15,000 to the principals of CV and CS pursuant to the
Marketing Agreement. Subsequently, the parties have agreed to terminate the Marketing Agreement, to allow CV and CS to revise
their marketing concept to implement a more direct to consumer approach. Accordingly, the parties are still negotiating the final
transaction. There is no assurance that these negotiations will be successful.
As
part of the initial transaction, FFFC issued 30,000,000 shares of common stock to the principals of CV and CS. Due to the termination
of that agreement and the ongoing negotiations the common stock has not been delivered and has been recorded as Treasury Stock,
pending the outcome of the final transaction.
On
March 5, 2013, the Company and its’ wholly owned subsidiary NET LIFE Processing Inc., (“NET LIFE”) entered into
an Agreement Concerning the Exchange of Securities (the “Agreement”) with Net Life Financial Processing Trust (“Net
Life Trust”) and the Trustee of Net Life Trust pursuant to which NET LIFE will acquire the exclusive mortgage servicing
rights (the “Rights”) from Net Life Trust. Net Life Trust holds the exclusive mortgage servicing rights from Net Life
Financial Holdings Trust.
The
consideration for the Rights will be thirty three percent (33%) of the Company on a post issuance basis (the “Share Consideration”).
The parties have agreed that the Share Consideration can be in a Class of newly formed Preferred Stock which Certificate of Designation,
will include among other things, the right for the Preferred Stock to convert to thirty three percent (33%) of the outstanding
shares of common stock, post issuance.
The
closing of the transaction contemplated by the Agreement (the “Closing”) is subject to the satisfaction or waiver
of customary closing conditions, including that the representations and warranties given by the Parties are materially true and
correct as of the Closing, and the exchanging and approval by each party of the other party’s schedules and exhibits. The
Company is conducting ongoing due diligence and there is no assurance the closing conditions will be met and that this transaction
will ever close.
NET
LIFE is a development stage enterprise that has developed and is offering an innovative new mortgage product that is not based
on credit history (no doc) or personal guarantees. It is only secured by the underlying collateral and a life insurance policy
on the borrower.
Since
its formation in 2012, NET LIFE has represented that it had conducted testing via a number of successful closings, however, to
date the Company has been unable to verify these occurrences.
Going
concern and management’s plans:
The
Company’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course of business. The Company reported a net loss
of $1,425,541 and $512,444 for the years ended December 31, 2013 and 2012, respectively and has a working capital deficit of $10,108,747
and accumulated deficit of $24,611,756 as of December 31, 2013. Moreover, the Company presently has no significant ongoing business
operations or sources of revenue and has little resources with which to obtain or develop new operations. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
The
Company has received $390,000 upon the issuance on convertible notes from January 1, 2014 through April 4, 2014.
Additionally,
the Company was to receive approximately $30,000 annually pursuant to the Preferred Stock it holds of an unaffiliated party (see
note 3), as well as minimal cash from the Nova remaining credit card portfolio. However, the Company has not received the quarterly
dividend from its investment since the quarter ended June 30, 2012, and has not received any cash from the Nova portfolio since
2012. There can be no assurance that the Company will have adequate resources to fund future operations, if any, or that funds
will be available to the Company when needed, or if available, will be available on favorable terms or in amounts required by
the Company. Currently, the Company does not have a revolving loan agreement with any financial institutions, nor can the Company
provide any assurance it will be able to enter into any such agreement in the future. The consolidated financial statements do
not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going concern.
The
Company evaluates, on an ongoing basis, potential business acquisition/restructuring opportunities that become available from
time to time, which management considers in relation to its corporate plans and strategies.
2. Summary
of significant accounting policies:
Basis
of presentation and principles of consolidation:
The
accompanying consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the
United States of America (“USGAAP”). The consolidated financial statements of the Company include the Company and
its subsidiaries. All material inter-company balances and transactions have been eliminated.
Cash
and cash equivalents:
For
the purpose of the financial statements, the Company considers all highly-liquid investments with an original maturity three-months
or less to be cash equivalents.
Accounts
receivables and revenue recognition:
Accounts
receivables are stated at cost plus refundable and earned fees (the balance reported to customers), reduced by allowances for
refundable fees and losses. Fees (revenues) are accrued monthly on active credit card accounts and included in accounts receivables,
net of estimated uncollectible amounts. Accrual of income is discontinued on credit card accounts that have been closed or charged
off. Accrued fees on credit card loans are charged off with the card balance, generally when the account becomes 90 days past
due. The allowance for losses is established through a provision for losses charged to expenses. Credit card receivables are charged
against the allowance for losses when management believes that collectability of the principal is unlikely. The allowance is an
amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the
collectability of the accounts and prior loss experience. This evaluation also takes into consideration such factors as changes
in the volume of the loan portfolio, overall portfolio quality and current economic conditions that may affect the borrowers’
ability to pay. While management uses the best information available to make its evaluations, this estimate is susceptible to
significant change in the near term.
Long-lived
assets:
Long-lived
assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
Noncontrolling
interest:
On January
1, 2012, the Company adopted authoritative accounting guidance that requires the ownership interests in subsidiaries held by parties
other than the parent, and income attributable to those parties, be clearly identified and distinguished in the parent’s
consolidated financial statements. The Company’s noncontrolling interest is now disclosed as a separate component of the
Company’s consolidated deficiency on the balance sheets. Earnings and other comprehensive income are separately attributed
to both the controlling and noncontrolling interests. Earnings per share are calculated based on net income attributable
to the Company’s controlling interest.
Loss
per share:
Loss
per share of common stock is computed based on the weighted average number of common shares outstanding during the period. Stock
options, warrants, and common stock underlying convertible promissory notes are not considered in the calculations for the years
ended December 31, 2013 and 2012, as the impact of the potential common shares, which total 3,630,464,687
(2013) and 286,994,713 (2012), would be antidilutive.
Use
of estimates:
Preparation
of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the dates of the balance sheets and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Fair
value of financial instruments:
The
estimated fair value of financial instruments has been determined by the Company using available market information and appropriate
methodologies; however, considerable judgment is required in interpreting information necessary to develop these estimates. Accordingly,
the Company’s estimates of fair values are not necessarily indicative of the amounts that the Company could realize in a
current market exchange.
The
fair values of cash and cash equivalents, current non-related party accounts receivable, and accounts payable approximate their
carrying amounts because of the short maturities of these instruments.
The
fair values of notes and advances receivable from non-related parties approximate their net carrying values because of the allowances
recorded as well as the short maturities of these instruments.
The
fair values of notes and loans payable to non-related parties approximate their carrying values because of the short maturities
of these instruments. The fair value of long-term debt to non-related parties approximates carrying values, net of discounts applied,
based on market rates currently available to the Company.
Fair
value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation
techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained
from sources independent of the reporting entity (“observable inputs”) and the reporting entity’s own assumptions
about market participant assumptions developed based on the best information available in the circumstances (“unobservable
inputs”).
Fair
value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”)
in an orderly transaction between market participants at the measurement date. In determining fair value, the Company primarily
uses prices and other relevant information generated by market transactions involving identical or comparable assets (“market
approach”). The Company also considers the impact of a significant decrease in volume and level of activity for an asset
or liability when compared with normal activity to identify transactions that are not orderly.
The
highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest
priority to unobservable inputs (Level 3 measurements). Securities are classified in their entirety based on the lowest level
of input that is significant to the fair value measurement.
The three
hierarchy levels are defined as follows:
Level 1 – Quoted
prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted
prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in
active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
Level 3 – Prices
or valuations that require inputs that are both significant to the fair value measurement and unobservable.
Credit
risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value.
The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s
own credit risk as observed in the credit default swap market.
Accounting for obligations
and instruments potentially settled in the Company’s common stock:
The
Company accounts for obligations and instruments potentially to be settled in the Company's stock in accordance with ASC Topic
815, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock.
This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially
settled in, the Company's stock.
Under
ASC Topic 815, contracts are initially classified as equity or as either assets or liabilities, depending on the situation. All
contracts are initially measured at fair value and subsequently accounted for based on the then current classification. Contracts
initially classified as equity do not recognize subsequent changes in fair value as long as the contracts continue to be classified
as equity. For contracts classified as assets or liabilities, the Company reports changes in fair value in earnings and discloses
these changes in the financial statements as long as the contracts remain classified as assets or liabilities. If contracts classified
as assets or liabilities are ultimately settled in shares, any previously reported gains or losses on those contracts continue
to be included in earnings. The classification of a contract is reassessed at each balance sheet date.
Stock-based
compensation:
The
Company has one stock option plan approved by FFFC’s Board of Directors in 2004, and also grants options and warrants to
consultants outside of its stock option plan pursuant to individual agreements. The Company accounts for its stock based compensation
under ASC 718 “Compensation- Stock Compensation” using the fair value based method. Under this method, compensation
cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually
the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity
instruments for goods and services. It also addresses transactions in which an entity incurs liabilities in exchange for goods
and services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance
of those equity instruments. The Company uses the Black Scholes model for measuring the fair value of options. The stock based
fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed
(measurement date) and is recognized over the vesting periods.
There
were no options granted during the years ended December 31, 2013 and 2012.
The
Company’s stock option plan is more fully described in Note 8.
Income
Taxes
Deferred
tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and
liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A
valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.
The
Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 740, “Accounting for Income Taxes. It prescribes a recognition threshold
and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. As a result, the Company has applied a more-likely-than-not recognition threshold for all tax uncertainties. The
guidance only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination
by the various taxing authorities. The Company’s tax years subsequent to 2006 remain subject to examination by federal and
state tax jurisdictions.
The
Company classifies penalties and interest related to unrecognized tax benefits as income tax expense in the Statements of Operations
Reclassifications:
Certain
prior period balances have been reclassified to conform to the current period's financial statement presentation. These reclassifications
had no impact on previously reported results of operations or stockholders' deficiency.
Recent Accounting
Pronouncements Not Yet Adopted:
As
of the date of this report, there are no recent accounting pronouncements that have not yet been adopted that we believe would
have a material impact on our financial statements
3.
Long term investments:
On
March 30, 2011, the Company and Paymaster Limited (“Paymaster”) agreed to restructure a note receivable (the “Note”).
Pursuant to the agreement, the parties agreed to convert the remaining balance of $339,575 of the Note receivable into Cumulative
Convertible Redeemable Preference Shares (the Preference Shares”) with a value of $400,000, and an annual dividend of 7.5%
over thirty-six (36) months. Paymaster, at any time prior to maturity, may elect to redeem some or all of the Preference Shares
at an effective dividend rate of 10% per annum. The Company, upon maturity and with not less than ninety (90) days prior notice,
may elect to convert some or all of Preference Shares into the pro rata equivalent of 11,100 ordinary shares of Paymaster (equal
to 10% of the issued and outstanding capital of the Company based on the conversion of all Preference Shares on a fully diluted
basis). The Company has recorded the investment at $89,575, net of a valuation allowance of $250,000, the same historical carrying
value on the Company’s balance sheet as the note. The last dividend the Company has received was the quarterly dividend
for the quarter ended June 30, 2012.
4. Accrued
liabilities:
| | Accrued liabilities
at December 31, 2013 and December 31, 2012 were $3,481,723 and $3,021,455,
respectively, and were comprised of: |
|
2013 |
|
2012 |
|
|
|
|
|
|
Legal
fees |
$ |
215,218 |
|
$ |
215,218 |
Interest |
|
2,896,763 |
|
|
2,427,746 |
Consultants
and advisors |
|
166,600 |
|
|
175,750 |
Registration
rights |
|
98,013 |
|
|
98,013 |
Other |
|
105,119 |
|
|
104,728 |
|
|
|
|
|
|
|
$ |
3,481,723 |
|
$ |
3,021,455 |
5.
Promissory notes, including related parties and debenture payable:
Promissory
notes, including related parties at December 31, 2013 and December 31, 2012, consist of the following:
|
2013 |
|
2012 |
|
|
|
|
|
|
Promissory
notes payable: |
|
|
|
|
|
|
|
|
|
|
|
Various,
including related parties of $173,113 (2013) and $333,363 (2012); interest rate ranging from 8% to 10% [A] |
$ |
192,213 |
|
$ |
351,563 |
|
|
|
|
|
|
Notes
payable; interest rates ranging from 9% to 15%; interest payable quarterly; the notes are unsecured, matured on February 28,
2008; currently in default and past due [B] |
|
2,090,719 |
|
|
2,090,719 |
|
|
|
|
|
|
|
$ |
2,282,932 |
|
$ |
2,442,282 |
|
|
|
|
|
|
.
[A] Pursuant to a November 4, 2011 Board of director resolution, these notes are convertible
at conversion rates, determined at the discretion of the board of directors. During the year ended December 31, 2013 the Company
issued notes of $26,500 (including related parties of $5,200), made payments of $147,450 (including $140,450 to related parties),
converted $10,400 to shares of common stock and reclassed $28,000 to convertible notes on the balance sheet herein.
| [B] | These
notes payable (the “Promissory
Notes”) originally
became due on February
28, 2007. The Company
renewed $283,000 of the
Promissory Notes on the
same terms and conditions
as previously existed.
In April 2007 the Company,
through a financial advisor,
restructured $1,825,000
of the Promissory Notes
(the “Restructured
Notes”). The Company
has accrued an expense
of $36,500 to compensate
the financial advisor
2% of the Restructured
Notes as well as having
issued 150,000 shares
of common stock to the
financial advisor. The
Restructured Notes carry
a stated interest rate
of 15% (a default rate
of 20%) and matured on
February 28, 2008. The
Company has not paid
the interest due since
June 2007, and no principal
payments on the Promissory
Notes have been made
since 2008 and accordingly,
they are in default.
Accrued interest on these
notes total $2,804,686
and $2,384,686 as of
December 31, 2013 and
2012, respectively is
included in accrued expenses
on the consolidated balance
sheets. |
The
chairman of the board of the Company has personally guaranteed up to $1 million of the Restructured Notes and two other non-related
individuals each guaranteed $500,000 of the Restructured Notes. In consideration of their guarantees the Company granted warrants
to purchase a total of 1,600,000 shares of common stock of the Company at an exercise price of $0.50 per share. The warrants were
valued at $715,200 using the Black-Scholes option pricing model and were amortized over the one-year term of the Restructured
Notes. The warrants expired in March 2010.
In
January 2008, the Company and the three guarantors received a complaint filed by the financial advisor (acting as agent for the
holders of the Restructured Notes) and the holders of the Restructured Notes. The claim is seeking $1,946,250 plus per diem interest
beginning January 22, 2008 at the rate of twenty percent (20%) per annum plus $37,000 due the financial advisor for unpaid fees.
The court has ruled in favor of a motion for summary judgment filed by certain of the plaintiffs and a judgment was entered on
August 18, 2009 in the total amount of $2,487,250 in principal and interest on the notes, $40,920 in related claims and $124,972
in attorney’s fees and expenses. The Company is not aware of any payments being made by any of the guarantors and accordingly,
the Company includes these liabilities on the December 31, 2013 and 2012 consolidated balance sheets in promissory notes payable
and accrued expenses.
Debenture
payable:
2012
Notes
During
2012, the Company issued three convertible notes aggregating $105,000 (“2012 Asher Notes”) to Asher Enterprises, Inc.
(“Asher”). Among other terms the 2012 Asher Notes are due nine months from their issuance date, bear interest at 8%
per annum, are payable in cash or shares at the Conversion Price as defined herewith, and are convertible at a conversion price
(the “Conversion Price”) for each share of common stock equal to 50% of the average of the lowest three trading prices
(as defined in the note agreements) per share of the Company’s common stock for the ten trading days immediately preceding
the date of conversion. Upon the occurrence of an event of default, as defined in the Note, the Company is required to pay interest
at 22% per annum and the holders may at their option declare the 2012 Notes, together with accrued and unpaid interest, to be
immediately due and payable. In addition, the 2012 Asher Notes provides for adjustments for dividends payable other than is shares
of common stock, for reclassification, exchange or substitution of the common stock for another security or securities of the
Company or pursuant to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Company.
During the year ended December 31, 2012, Asher converted $11,000 of principal of the 2012 Asher Notes and the balance of the 2012
Asher Notes as of December 31, 2012 was $94,000. During 2013, the Company incurred an event of default on a portion of the 2012
Asher Notes as the Company did not maintain sufficient authorized shares reserved for issuance under the 2012 Asher Notes. The
default resulted in the Company increasing the 2012 Asher Notes by $40,900 (the “Default Principal”). During the year
ended December 31, 2013, the holder of the Asher Notes converted an aggregate of $134,900 of principal (including the Default
Principal) and $5,400 of accrued and unpaid interest into 179,342,389 shares of common stock. As of December 31, 2013,no amounts
remain outstanding on the 2012 Asher Notes.
On
October 9, 2012, the Company issued a $5,000 convertible promissory note to Carebourn Capital LP (“Carebourn”). The
Carebourn note is due on demand, bears interest at 8% per annum and has a conversion feature similar to the 2012 Asher Notes.
As of December 31, 2013, the outstanding balance of the Carebourn note is $5,000, which is past due.
On
October 17, 2012, the Company issued a $25,000 convertible promissory note to Continental Equities, LLC (“Continental”).
On March 26, 2013, Carebourn acquired the Continental note from Continental. During the year ended December 31, 2013, the Company
issued 18,737,288 shares of common stock to Carebourn Partners, LLC. (“Carebourn Partners”) and Carebourn Partners’
assignee upon the conversion of the acquired Continental note. No amounts remain open as of December 31, 2013.
On
October 24 and 29, 2012, the Company issued convertible promissory notes of $9,000 and $16,000 (“the 2012 Gel Notes”)
respectively, to GEL Properties, LLC (“Gel”) The conversion price for the 2012 Gel
Notes is equal to 50% of the lowest closing bid price of the Common Stock as reported on the exchange which the Company’s
shares are traded or any exchange upon which the Common Stock may be traded in the future with a floor of $0.0001 per share,
for any of the five trading days including the day upon which a Notice of Conversion is received by the Company. If the shares
have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Accrued but unpaid interest shall be
subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number
of shares issuable shall be rounded to the nearest whole share. During the year ended December 31, 2013, the Company issued
23,901,776 shares of common stock upon the conversion of the 2012 Gel Notes.
On
November 1, 2012, the Company issued a convertible promissory note in the amount of $269,858 in exchange for previously accrued
legal fees. The note bears interest at 8% per annum and is convertible at a conversion price for each share of common stock equal
to 50% of the average of the lowest three trading prices (as defined in the note agreements) per share of the Company’s
common stock for the ten trading days immediately preceding the date of conversion. During the year ended December 31, 2013, the
Company issued 419,203,501 shares of common stock upon the conversion of $103,188 of the Note. As of December 31, 2013, the balance
of the note is $166,670.
On
December 24, 2012, the Company issued a $50,000 convertible promissory note to Flux Carbon Starter Fund, LLC (“Flux”).
The note matured on June 30, 2013 and bears interest at 12% per annum. The Flux note has a conversion price equal to 50% of the
lowest volume weighted average closing bid price for the 90 days preceding conversion. On June 24, 2013, Flux sold and assigned
the note to 112359 Factor Fund, LLC (“Factor Fund”). During the year ended December 31, 2013, the Company issued 82,923,686
shares of common stock to Factor Fund and Factor Funds transferee upon the conversion of $50,000 of principal and $4,149 of accrued
and unpaid interest. No amounts remain open as of December 31, 2013.
The
Company received net proceeds of $193,500 for the 2012 Notes, after debt issuance costs of $16,500. These debt issuance costs
have been amortized over the earlier of the terms of the Note or any redemptions and accordingly $5,757 and $10,743 has been expensed
as debt issuance costs (included in interest expense) for the years ended December 31, 2012 and 2013, respectively.
2013
Notes
On
March 14, 2013 the Company issued a convertible promissory note for $46,000 to an accredited investor (the “March 2013 Note”).
The March 2013 Note, is due eight months from issuance and bears an interest rate of 8% per annum, and in the case of an event
of default increases to 12% per annum (“the Default Rate”). The conversion feature of the 2013 Note is a 50% discount
to the average of the three lowest day closing bid prices for the ten trading days prior to conversion. The Company received net
proceeds of $41,400, after debt issuance costs of $4,600. These debt issuance costs were amortized over the earlier of the terms
of the Note or any redemptions and accordingly $4,600 has been expensed as debt issuance costs (included in interest expense)
for the year ended December 31, 2013. The Mach 2013 Note matured November 14, 2014, is in default, and the Default Rate was effective
at that date. The balance of the March 2013 Note is $46,000 as of December 31, 2013.
The
following notes issued in 2013, bear interest at 8% per annum and other than as described below have a conversion feature similar
to the 2012 Asher Notes. The notes issued in 2013 are referred to as the 2013 Notes.
On
April 8, 2013, the Company issued convertible a convertible promissory note to Schaper for $5,000. The outstanding principal balance
on this note is $5,000 as of December 31, 2013.
On
April 26, 2013, the Company issued a convertible promissory note for $50,000 to an unaffiliated accredited investor. The outstanding
principal balance on this note is $50,000 as of December 31, 2013.
On
June 3, 2013, the Company issued a $15,000 convertible promissory note to Gel, under the same terms and conditions as the 2012
Gel Notes. During the year ended December 31, 2013, the Company issued 35,665,775 shares of common stock in full satisfaction
of this note.
On
June 6, 2013 ($12,000), July 12, 2013 ($12,500) and August 9, 2013 ($6,250) the Company issued convertible promissory notes to
Carebourn Partners. Each of these notes remain unpaid as of December 31, 2013.
On
August 9, 2013, the Company issued a $6,250 note to Linrick Industries, LLC. The outstanding principal balance on this note is
$6,250 as of December 31, 2013.
On
August 22, 2013, the Company issued a $6,000 convertible promissory note to Schaper. The outstanding principal balance on this
note is $6,000 as of December 31, 2013.
On
September 3, 2013, the Company issued a $32,500 convertible promissory note to Asher. The outstanding principal balance on this
note is $32,500 as of December 31, 2013.
On
October 7, 2013, the Company issued a $3,500 convertible note to AU Funding, LLC in exchange for the cancellation of accounts
payable of $3,500. The outstanding principal balance on this note is $3,500 as of December 31, 2013.
On
October 7, 2013, the Company issued a $5,000 convertible note to Corizona Mining Partners, LLC in exchange for the cancellation
of $5,000 of accounts payable. The outstanding principal balance on this note is $5,000 as of December 31, 2013.
On
October 18, 2013, the Company issued a $10,000 and $20,000 convertible note to Gel, under the same terms and conditions as the
2012 Gel Notes. During the year ended December 31, 2013, the Company issued 228,900,000 shares of common stock in satisfaction
of $23,145 of these two notes. The outstanding principal balance on the notes is $6,855 as of December 31, 2013.
On
November 19, 2013, the Company issued a $16,500 convertible note to Carebourn Capital L.P. The outstanding principal balance on
this note is $16,500 as of December 31, 2013.
On
November 22, 2013, the Company issued a $35,000 and $30,000 convertible note to Mr. Fong and Mr. Hollander, respectively, for
the cancellation of accrued and unpaid fees. The outstanding principal balances of the notes are $35,000 and $30,000 respectively,
as of December 31, 2013.
On
December 31, 2013, the Company issued a $20,000 convertible note to Gel, under the same terms and conditions as the 2012 Gel Notes.
The outstanding principal balance on this note is $20,000 as of December 31, 2013.
The
Company has determined that the conversion features of the 2012 and 2013 Notes represent embedded derivatives since the Notes
are convertible into a variable number of shares upon conversion. Accordingly, the Notes are not considered to be conventional
debt under EITF 00-19 and the embedded conversion features must be bifurcated from the debt hosts and accounted for as derivative
liabilities. Accordingly, the fair value of these derivative instruments have been recorded as liabilities on the consolidated
balance sheet with the corresponding amounts recorded as a discounts to the Notes. Such discounts will be accreted from the date
of issuance to the maturity dates of the Notes. The change in the fair value of the liabilities for derivative contracts will
be recorded to other income or expenses in the consolidated statement of operations at the end of each quarter, with the offset
to the derivative liability on the balance sheet.
The
embedded conversion features included in the 2012 Notes resulted in initial debt discounts of $479,858 and an initial loss on
the valuation of derivative liabilities of $27,154 for an initial derivative liability balance of $507,012. During the year ended
December 31, 2012, Asher converted $11,000 of the 2012 Notes and the Company reduced the derivative liability by $8,761 for the
conversion. As of December 31, 2012, the Company revalued the balance of $468,857 of the 2012 Notes and based on their fair value
of $489,408, adjusted the derivative liability balance by $8,845 for the 2012 Notes. During the year ended December 31, 2013,
noteholders converted in the aggregate $338,088 of the 2012 Notes and the Company reduced the derivative liability by $318,814
for the conversions. As of December 31, 2013 the Company revalued the balance of $171,670 of the 2012 Notes and based on their
fair value of $172,604, increased the derivative liability balance by $1,010 for the 2012 Notes.
The
embedded conversion features included in the 2013 Notes resulted in an initial debt discount of $397,000 and an initial loss on
the valuation of derivative liabilities of $27,132 for a derivative liability initial balance of $424,132. During the year ended
December 31, 2013, noteholders converted in the aggregate $47,745 of the 2013 Notes and the Company reduced the derivative liability
by $47,745 for the conversions. As of December 31, 2013 the Company revalued the balance of $349,255 of the 2013 Notes and based
on their fair value of $363,260, decreased the derivative liability balance by $13,127 for the 2013 Notes.
The
fair value of the 2012 and 2013 Notes as of their dates of issuance, settlement and in their entirety as of December 31, 2013
was calculated utilizing the following assumptions:
Issuance
Date |
Initial
Term |
Assumed
Conversion Price at Issuance |
Volatility
Percentage |
Risk-free
Interest
Rate |
6/8/12 |
9
months |
$0.0103 |
380% |
0.09 |
6/25/12 |
9
months |
$0.0066 |
341% |
0.09 |
8/23/12 |
9
months |
$0.05 |
295% |
0.09 |
10/9/12 |
9
months |
$0.0076 |
292% |
0.16 |
10/17/12 |
12
months |
$0.00435 |
295% |
0.17 |
10/24/12 |
12
months |
$0.00267 |
305% |
0.18 |
10/29/12 |
12
months |
$0.0025 |
306% |
0.18 |
11/1/12 |
6
months |
$0.003 |
297% |
0.10 |
12/24/12 |
6
months |
$0.00197 |
303% |
0.12 |
3/14/13 |
9
months |
$0.001978 |
338% |
0.12 |
4/8/13 |
6
months |
$0.0025 |
297% |
0.10 |
4/26/13 |
12
months |
$0.00165 |
308% |
0.11 |
6/3/13 |
2
years |
$0.0035 |
320% |
0.13 |
6/6/13 |
9
months |
$0.00305 |
338% |
0.11 |
7/12/13 |
9
months |
$0.0023 |
236% |
0.12 |
8/9/13 |
9
months |
$0.00125 |
238% |
0.11 |
8/22/13 |
9
months |
$0.0029 |
245% |
0.13 |
9/3/13 |
9
months |
$0.0004 |
236% |
0.14 |
10/7/13 |
9
months |
$0.00055 |
267% |
0.10 |
10/18/13 |
9
months |
$0.002 |
274% |
0.14 |
11/19/13 |
9
months |
$0.0002 |
292% |
0.10 |
11/22/13 |
9
months |
$0.00015 |
294% |
0.10 |
12/31/13 |
1-8
months |
$0.0001 |
327% |
.02-.10 |
The inputs used
to estimate the fair value of the derivative liabilities are considered to be level 2 inputs within the fair value hierarchy.
A summary of
the derivative liabilities related to convertible notes as of December 31, 2012 and 2013 is as follows:
Fair
Value |
Derivative
Liability
Balance
12/31/11 |
Initial
Derivative Liability |
Redeemed
convertible notes |
Fair
value change- year ended 12/31/12 |
Derivative
Liability Balance 12/31/12 |
2011
Notes |
$46,667 |
- |
$(44,890) |
$(1,777) |
$ - |
2012
Notes |
- |
$507,012 |
(8,761) |
(8,845) |
489,406 |
Total |
$46,667 |
$507,012 |
$(53,651) |
$(10,622) |
$489,406 |
Fair
Value |
Derivative
Liability
Balance
12/31/12 |
Initial
Derivative Liability |
Redeemed
convertible notes |
Fair
value change- year ended 12/31/13 |
Derivative
Liability Balance 12/31/13 |
2012
Notes |
$489,406 |
- |
$(317,814) |
$1,010 |
$172,602 |
2013
Notes |
- |
$424,132 |
(47,745) |
(13,127) |
363,260 |
Total |
$489,406 |
$424,132* |
$(365,559) |
$(12,117)* |
$535,862 |
* $68,032 included
in the initial derivative liability is included in derivative liability expense of $55,913 for the year ended December 31, 2013.
A summary of
debentures payable as of December 31, 2012 and December 31, 2013 is as follows:
|
Balances
12/31/11 |
Issuance
of new convertible notes |
Amortization
of discount on convertible
Notes |
Debenture
conversions year ended 12/31/12 |
Balances
12/31/12 |
2011
Notes, face value |
$ 25,000 |
$ - |
$ - |
$ (25,000) |
$ - |
2012
Notes, face value |
- |
479,858 |
- |
(11,000) |
468,858 |
Note
discount |
(6,297) |
(479,858) |
92,036 |
- |
(394,119) |
Total |
$ 18,703 |
$ - |
$ 92,036 |
$ (36,000) |
$ 74,739 |
|
Balances
12/31/12 |
Increase
to face value due to default |
Issuance
of new convertible notes |
Amortization
of discount on convertible
Notes |
Debenture
conversions year ended 12/31/13 |
Balances
12/31/13 |
2012
Notes, face value |
$ 468,858 |
$40,900 |
$ - |
$ - |
$(338,088) |
$
171,670 |
2013
Notes, face value |
- |
- |
397,000 |
- |
(47,745) |
349,255 |
Note
discount |
(394,119) |
- |
(397,000) |
603,276 |
- |
(187,843) |
Total |
$ 74,739 |
$40,900 |
$ - |
$603,276 |
$(385,833) |
$333,082 |
| 6. | Commitments
and contingencies: |
Litigation:
The
Forest County Potawatomi Community (“FCPC”) has initiated an action against Chex, an inactive subsidiary of the Company,
in the FCPC tribal court asserting that Chex breached a contract with FCPC during the 2002 to 2006 time period. Chex is inactive
and did not defend this action. On October 1, 2009 a judgment was entered against Chex in the FCPC Tribal Court in the amount
of $2,484,922. The Company has included $2,484,922 in litigation contingency on the consolidated balance sheets as of December
31, 2013 and 2012.
The
Company is involved in various claims and legal actions arising in the ordinary course of business. The ultimate disposition of
these matters may have a material adverse impact either individually or in the aggregate on future consolidated results of operations,
financial position or cash flows of the Company.
Operating
lease:
Effective
January 1, 2012 the Company is utilizing space in an office leased through February 28, 2014, by a Company controlled by our former
Acting President. Effective January 1, 2013 the monthly rent is approximately $1,066. The lease, as amended, expires in April
2014, and the Company has made arrangements to lease new space from the same company through March 31, 2015 for a monthly rent
of $600.
7. Income
taxes:
The
operations of the Company for periods subsequent to its acquisition by HPI and through August 2004, at which time HPI’s
ownership interest fell below 80% are included in consolidated federal income tax returns filed by HPI. Subsequent to August 2004
and through January 29, 2006 the Company will file a separate income tax return. As of January 30, 2006, HPI’s ownership
interest again exceeded 80% and the operations of the Company will be included in a consolidated federal income tax from that
date through October 29, 2006 when the ownership fell below 80%. As of October 30, 2006, the Company will be filing separate income
tax returns. For financial reporting purposes, the Company’s provision for income taxes has been computed, and current and
deferred taxes have been allocated on a basis as if the Company has filed a separate income tax return for each year presented.
Management assesses the realization of its deferred tax
assets to determine if it is more likely than not that the Company's deferred tax assets will be realizable. The Company adjusts
the valuation allowance based on this assessment.
Income
tax expense for 2013 and 2012 is as follows:
|
2013 |
|
2012 |
|
Current: |
|
|
|
|
|
|
Federal |
$ |
- |
|
$ |
- |
|
State |
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
Federal |
|
241,000 |
|
|
272,000 |
|
State |
|
26,000 |
|
|
30,000 |
|
Valuation
allowance |
|
(267,000) |
|
|
(302,000) |
|
|
|
|
|
|
|
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
$ |
- |
|
$ |
- |
|
The
following is a summary of the Company’s deferred tax assets and liabilities at December 31, 2013 and 2012:
|
2013 |
|
2012 |
|
|
|
|
|
|
Deferred
tax assets - current: |
|
|
|
|
|
Stock-based
compensation and other |
$ |
874,000 |
|
$ |
874,000 |
Net
operating loss carry forwards |
|
821,000 |
|
|
554,000 |
|
|
1,695,000 |
|
|
1,428,000 |
|
|
|
|
|
|
Less
valuation allowance |
|
(1,695,000) |
|
|
(1,428,000) |
|
|
|
|
|
|
Net
deferred tax assets |
$ |
- |
|
$ |
- |
A
reconciliation between the expected tax expense (benefit) and the effective tax rate for
the years ended December 31, 2013 and 2012 are as follows:
| |
2013 | |
2012 |
| |
| | | |
| | |
Statutory
federal income tax rate | |
| (34 | %) | |
| (34 | %) |
State
taxes, net of federal income tax | |
| (4 | %) | |
| (4 | %) |
Effect
of change in valuation allowance | |
| (7 | %) | |
| (21 | %) |
Non
deductible expenses and other | |
| 45 | % | |
| 59 | % |
| |
| | | |
| | |
| |
| 0 | % | |
| 0 | % |
As
of December 31, 2013, the Company had a tax net operating loss carry forward of approximately $5,229,000.
Any unused portion of this carry forward expires in 2029. Utilization of this loss may be limited in
the event of an ownership change pursuant to IRS Section 382.
8. Stockholders’
deficit:
Common
stock:
On
May 25, 2012 the Company issued 15,000,000 shares of restricted common stock in satisfaction of $367,500 of accrued and unpaid
fees to Barry Hollander, the Company’s Acting President. The shares were issued at $0.02 per share. Mr. Hollander agreed
to forgive the remaining $67,500.
On
May 25, 2012, the Company issued 15,000,000 shares of restricted common stock in satisfaction of $308,549, comprised of accrued
and unpaid fees owed to Mr. Henry Fong, a Director of the Company, legal fee reimbursement and accrued and unpaid interest on
loans from Mr. Fong. The shares were issued at $0.02 per share. Mr. Fong agreed to forgive the remaining $8,549.
On
May 25, 2012, pursuant to the Agreement in Note 1 above, the Company issued 90,000,000 shares of restricted common stock to Carbon
Capture Corporation (“CCC”) in exchange for 100% of the common stock of their wholly owned subsidiary, Advanced Technology
Development, Inc.
On
May 25, 2012 the Company issued 1,410,255 shares of common stock to Asher upon the conversion of $5,500 of the 2011 Note. The
shares were issued at an average price of approximately $0.0039 per share.
On
June 14, 2012 the Company issued 1,434,264 shares of common to stock to Asher upon the conversion of $12,000 of the 2011 Note.
The shares were issued at an average price of approximately $0.0084 per share.
On
June 27, 2012 the Company issued 507,246 shares of common stock to Asher upon the conversion of $7,000 of the 2011 Note. The shares
were issued at an average price of approximately $0.0138 per share.
In
June 2012, the Company issued 3,200,000 shares of common stock pursuant to the exercise of warrants to purchase 3,200,000 shares
of common stock. The exercise price of the warrants was $0.01 and the Company received $32,000.
On
July 9, 2012 the Company issued 142,857 shares of common stock to Asher upon the conversion of the remaining balance of $500 of
the 2011 Note and accrued and unpaid interest of $1,000. The shares were issued at an average price of approximately $0.0105 per
share.
On
October 9, 2012 the Company issued 35,714 shares of restricted common stock to Carebourn in consideration of fees related to the
issuance of the Company’s $5,000 convertible note to Carebourn. The shares were valued at $0.014 per share and the Company
recorded interest expense of $500 for the year ended December 31, 2012.
In
October and December 2012, the Company issued 819,000 shares of Series A Preferred stock and 297,667 shares of Series B Preferred
stock to CCC in exchange for their cancellation of 67,000,000 shares of common stock.
On
December 10, 2012 the Company issued 6,111,111 shares of common to stock to Asher upon the conversion of $11,000 of the June 2012
Note. The shares were issued at an average price of approximately $0.0018 per share.
On
March 19, 2013, Carbon exchanged 16,000,000 shares of common stock for the issuance of 266,667 shares of class B preferred stock.
Pursuant to the terms and conditions of the preferred stock (see Preferred Stock below), the Company determined there was not
any additional costs to be recognized.
On
June 5, 2013, an affiliate exchanged 10,500,000 shares of common stock for the issuance of 175,000 shares of Class B preferred
stock. Pursuant to the terms and conditions of the preferred stock (see Preferred Stock below), the Company determined there was
not any additional costs to be recognized.
On
August 6, 2013, Carbon exchanged 7,000,000 shares of common stock for the issuance of 116,666 shares of class B preferred stock.
Pursuant to the terms and conditions of the preferred stock (see Preferred Stock below), the Company determined there was not
any additional costs to be recognized.
On
November 27, 2013, the Company issued 15,000,000 shares of common stock to Mr. Rodriquez and 15,000,000 shares of common stock
to Mr. Slentz for marketing services.
During
the year ended on December 31, 2013, the Company issued 1,057,202,553 shares of common stock upon the conversion of $385,833 of
debentures payable and $9,549 of accrued and unpaid interest.
During
the year ended on December 31, 2013, the Company issued 6,690,000 shares of common stock upon the conversion of $10,400 of notes
payable.
Preferred
stock
The
Company is authorized to issue 5,000,000 shares of preferred stock. On October 19, 2012, the
Board of Directors approved the filing of a Certificate of Designation (“COD”) establishing the designations, preferences,
limitations and relative rights for 1,000,000 shares of the Company’s Class A Preferred Stock.
As
of December 31, 2013 there are 819,000 shares of Class A preferred stock outstanding. The shares have been pledged as collateral
by CCC (the sole holder of the shares) subsequently pledged the 819,000 shares of Class A Preferred stock they own as collateral
in conjunction with the issuance of the $50,000 convertible note issued to Flux Carbon Starter Fund, LLC.
The
COD for Class A Preferred stock states; each share of the Class A Preferred Stock shall be entitled to a number of votes determined
at any time and from time to time determined as follows: any holder of Class A Preferred Stock can vote such shares as if converted
based on the Conversion Rights in below. The Class A Preferred Stock shall have a right to vote on all matters presented or submitted
to the Corporation’s stockholders for approval in pari passu with holders of the Corporation’s common stock, and not
as a separate class. Each share of the Class A Preferred Stock shall automatically convert (the “Conversion”) into
shares of the Corporation’s common stock at the moment there are sufficient authorized and unissued shares of common stock
to allow for the Conversion. The number of shares of common stock to which a holder of Class A Preferred Stock shall be entitled
upon a conversion shall equal the product obtained by (a) multiplying the number of fully diluted common shares by twenty five
hundredths (0.25), then (b) multiplying the result by a fraction, the numerator of which will be the number of shares of Class
A Preferred stock being converted and the denominator of which will be the number of authorized shares of Class A Preferred stock.
As of December 31, 2012 and 2013 there are 819,000 shares of Class A Preferred stock outstanding.
On
December 14, 2012, Board of Directors approved the filing of a COD establishing the designations,
preferences, limitations and relative rights of the Company’s Class B Preferred Stock. The COD allows the Board of Directors
in its sole discretion to issue up to 2,000,000 shares of Class B Preferred Stock. The COD for
Class B Preferred stock states; each share of the Class B Preferred Stock shall be entitled to a number of votes determined at
any time and from time to time determined as follows: any holder of Class B Preferred Stock can vote such shares as if converted
based on the Conversion Rights in below. The Class B Preferred Stock shall have a right to vote on all matters presented or submitted
to the Corporation’s stockholders for approval in pari passu with holders of the Corporation’s common stock, and not
as a separate class. Each share of the Class B Preferred Stock shall automatically convert (the “Conversion”) into
shares of the Corporation’s common stock at the moment there are sufficient authorized and unissued shares of common stock
to allow for the Conversion. The Class B Preferred Stock will convert in their entirety, simultaneously to equal the amount of
shares of common stock resulting from the amount of series B Preferred Stock outstanding multiplied by sixty (60). The Conversion
shares will be issued pro rata so that each holder of the Class B Preferred Stock will receive the appropriate number of shares
of common stock equal to their percentage ownership of their Class B Preferred Stock. As of December 31, 2012 and 2013 there are
297,667 and 1,791,667, respectively, shares of Class B Preferred stock outstanding.
In
October 2012 1,000,000 shares of Class A Preferred Stock Shares were issued to CCC in exchange
for their cancellation of 60,000,000 shares of common stock. Pursuant to the terms and conditions of the preferred stock, the
Company determined there were not any additional costs to be recognized.
On
December 14, 2012, the Company issued 181,000 shares of Class B Preferred stock to CCC, in
exchange for CCC cancelling 181,000 shares of Class A Preferred Stock. Pursuant to the terms and conditions of the preferred stock,
the Company determined there were not any additional costs to be recognized.
Also
on December 14, 2012 the Company issued 116,667 shares of Class B Preferred stock in exchange for the
CCC cancelling 7,000,000 shares of common stock. Pursuant to the terms and conditions of the preferred stock, the Company
determined there were not any additional costs to be recognized.
On
March 19, 2013 Carbon exchanged 16,000,000 shares of common stock for the issuance of 266,667 shares of class B preferred stock.
Pursuant to the terms and conditions of the preferred stock, the Company determined there were not any additional costs to be
recognized.
On
April 29, 2013 the Company issued 935,666 shares of Class B preferred stock to Carbon to replace the 819,000 Series A preferred
stock they pledged as collateral to Flux. Pursuant to the terms and conditions of the preferred stock, the Company determined
there were not any additional costs to be recognized.
On
June 5, 2013, the Company issued 175,000 shares of Class B preferred stock in exchange for the cancellation and return to treasury
of 10,500,000 shares of common stock from a related party. Pursuant to the terms and conditions of the preferred stock, the Company
determined there were not any additional costs to be recognized.
On
August 6, 2013, Carbon exchanged 7,000,000 shares of common stock for the issuance of 116,667 shares of class B preferred stock.
Pursuant to the terms and conditions of the preferred stock, the Company determined there were not any additional costs to be
recognized.
Stock options:
The
Company has a stock option plan (the “Plan”) which was approved by the Board of Directors in July 2004 and which permits
the grant of shares to attract, retain and motivate employees, directors and consultants of up to 1.8 million shares of common
stock. Options are generally granted with an exercise price equal to the Company’s market price of its common stock on the
date of the grant and vest immediately upon issuance.
There
were no options granted during the years ended December 31, 2013 and 2012.
All
options outstanding at December 31, 2013 are fully vested and exercisable. A summary of outstanding balances at December 31, 2012
and 2013 is as follows:
|
|
|
Weighted- |
|
Weighted- |
|
Aggregate |
|
|
|
Average |
|
Average |
|
Intrinsic |
|
Options |
|
exercise
price |
|
Remaining
contractual life |
|
Value |
Outstanding
at December 31, 2012 |
990,000 |
|
$0.34 |
|
2.98 |
|
$0 |
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2013 |
990,000 |
|
$0.34 |
|
1.98 |
|
$0 |
9. Prior
events:
Asset
sale:
On
December 22, 2005, FFFC and Chex entered into an Asset Purchase Agreement (the “APA”) with Game Financial Corporation
(“Game”), pursuant to which FFFC and Chex agreed to sell all of its cash access contracts and certain related assets,
which represented substantially all the assets of Chex. Such assets also represented substantially all of the operating assets
of the Company on a consolidated basis. On January 31, 2006, FFFC and Chex completed the sale (the “Asset Sale”) for
$14 million pursuant to the APA and received net cash proceeds of $12,642,784, after certain transaction related costs and realized
a pre-tax book gain of $4,145,835. As a result of the Asset Sale, the Company has no substantial continuing operations. Therefore,
the Company is not reporting and accounting for the sale of Chex’s assets as discussed in discontinued operations.
Additionally,
FFFC and Chex entered into a Transition Services Agreement (the “TSA”) with
Game pursuant to which FFFC and Chex agreed to provide certain services to Game to ensure a smooth transition of the sale of the
cash-access financial services business.
Pursuant
to the APA and the TSA, FFFC and Chex owed Game approximately $300,000. Game, FFFC and Chex agreed to settle the balance due for
$275,000 (included in accounts payable on the balance sheet presented herein) with payment terms. FFFC and Chex have not made
any of the payments stipulated in the settlement and subsequently Game filed a complaint against Chex, FFFC and Hydrogen Power
Inc. (“HPI”) seeking approximately $318,000. The Company has agreed to a judgment of $329,146, comprised of the $275,000,
attorney fees of $15,277 (included in accounts payable on the balance sheet presented herein, and attorney fees of $38,869 (included
in accrued liabilities on the balance sheet presented herein). FFFC and Chex have agreed to indemnify HPI.
10. Related
party transactions:
Management
and director fees:
During
the years ended December 31, 2012 and 2013 the Company accrued expenses of $71,025 and $60,000, respectively, for the services
of Mr. Barry Hollander as our Acting President (resigned January 22, 2014). Mr. Hollander received $38,425 and $42,950 in cash
payments for the years ended December 31, 2012 and 2013, respectively. In November 2013, the Company issued a convertible promissory
note to Mr. Hollander in payment of $30,000 of accrued and unpaid fees. As of December 31, 2013, Mr. Hollander is owed $2,050
for these services, included in accrued expenses on the balance sheet.
For
the years ended December 31, 2012 and 2013, the Company accrued expenses of $21,250 and $60,000, respectively, for our Chairman,
Mr. Fong’s services. Mr. Fong received $14,500 in cash payments for the year ended December 31, 2013. In November 2013,
the Company issued a convertible promissory note to Mr. Fong in payment of $35,000 of accrued and unpaid fees. As of December
31, 2013, Mr. Fong is owed $25,500 for these services, included in accrued expenses on the balance sheet.
Acquisition
of Carbon Capture:
On
May 25, 2012, the Company’s newly formed subsidiary ATD acquired Carbon Capture USA (“Carbon”) from Carbon Capture
Corporation, a Colorado corporation ("CCC"). CCC is privately held by Mr. Henry Fong, a director of the Company and
is the control person of CCC. Pursuant to the Agreement, ATD acquired from CCC all of the issued and outstanding common stock
of Carbon in exchange for ninety million (90,000,000) newly issued unregistered shares of the Company’s common stock. As
of December 31, 2013, Carbon has exchanged the 90,000,000 shares of common stock for 1,500,000 shares of Class B preferred stock.
The Class B preferred stock automatically converts to 90,000,000 shares of common stock whenever there are sufficient shares of
common stock to allow for the conversion. Pursuant to the terms and conditions of the preferred stock, the Company determined
there were not any additional costs to be recognized.
Notes
payable:
As
disclosed in Note 5, the Company has issued notes payable to various related parties. The balances of December 31, 2012 and 2013,
and the activity for the years ended December 31, 2102 and 2013 follows:
Noteholder | |
Balance
1/1/13 | |
Additions | |
Payments | |
Sold | |
Balance
12/31/13 |
Gulfstream
Financial Partners (1) | |
$ | 25,900 | | |
$ | 3,000 | | |
$ | 27,150 | | |
$ | — | | |
$ | 1,750 | |
HPI Partners (1) | |
| 169,725 | | |
| — | | |
| — | | |
| 25,000 | | |
| 144,725 | |
AFPW (1) | |
| 102,603 | | |
| 1,900 | | |
| 97,550 | | |
| — | | |
| 6,953 | |
Henry Fong (2) | |
| 17,538 | | |
| 300 | | |
| 15,750 | | |
| — | | |
| 2,088 | |
HF Services (1) | |
| 4,150 | | |
| — | | |
| — | | |
| — | | |
| 4,150 | |
Barry Hollander (2) | |
| 2,775 | | |
| — | | |
| — | | |
| — | | |
| 2,775 | |
SurgLine Int’l
(1) | |
| 10,672 | | |
| — | | |
| — | | |
| — | | |
| 10,672 | |
Total | |
$ | 333,363 | | |
$ | 5,200 | | |
$ | 140,450 | | |
$ | 25,000 | | |
$ | 173,113 | |
All
of the notes are due on demand and have interest rates of 8% to 10% per annum.
| (1) | Mr.
Henry
Fong,
an
officer
and
director
of
the
Company,
is
also
an
officer,
director
or
control
person
of
these
entities. |
| (2) | An
officer
or
director
of
the
Company. |
Preferred
stock:
On
March 19, 2013 Carbon exchanged 16,000,000 shares of common stock for the issuance of 266,667 shares of Class B preferred stock.
On
April 29, 2013 the Company issued 935,666 shares of Class B preferred stock to Carbon to replace the 819,000 Series A preferred
stock they pledged as collateral to Flux.
On
August 6, 2013, Carbon exchanged 7,000,000 shares of common stock for the issuance of 116,667 shares of Class B preferred stock.
On
June 5, 2013, the Company issued 175,000 shares of Class B preferred stock in exchange for the cancellation and return to treasury
of 10,500,000 shares of common stock from a related party.
11. Subsequent
events:
Between
January 1, 2014 and March 31, 2014, the Company issued 2,468,821,039 shares of common stock upon the conversion of $340,597 debentures
payable and $22,934 of accrued and unpaid interest. The shares were issued at approximately $0.00015 per share.
Between
January 1, 2014 and April 4, 2014, the Company issued new convertible notes for in the aggregate $411,000 and has received proceeds
of $390,000.
Effective
January 21, 2014, the Board of Directors of the Company approved the issuance of 1,000 shares of Class C Preferred Stock (as defined
and described below) (the “Class C Preferred Stock Shares”) to Mr. Fong or his assigns in consideration for services
rendered to the Company and continuing to work for the Company without receiving significant payment for services and without
the Company having the ability to issue shares of common stock as the Company does not have sufficient authorized but unissued
shares of common stock to allow for any such issuances.
As
a result of the issuance of the Class C Preferred Stock Shares to Mr. Fong, or his assigns and the Super Majority Voting Rights
(described below), Mr. Fong obtained voting rights over the Company’s outstanding voting stock which provides him the right
to vote up to 51% of the total voting shares able to vote on any and all shareholder matters. As a result, Mr. Fong
will exercise majority control in determining the outcome of all corporate transactions or other matters, including the election
of Directors, mergers, consolidations, the sale of all or substantially all of the Company’s assets, and also the power
to prevent or cause a change in control. The interests of Mr. Fong may differ from the interests of the other stockholders and
thus result in corporate decisions that are adverse to other shareholders. Additionally, it may be impossible for shareholders
to remove Mr. Fong as an officer or Director of the Company due to the Super Majority Voting Rights.
On
January 21, 2014, the Company formed Cannabis Angel, Inc. (“CA”) as a wholly-owned subsidiary. CA was formed to assist
and provide angel funding, business development and consulting services to Cannabis related projects and ancillary ventures. CA
has entered into the following agreements:
- On January
28, 2014, CA entered into a one year Consulting Agreement with Singlepoint, Inc. (“Singlepoint”) (the “Singlepoint
Agreement”). The Singlepoint Agreement automatically renews for succeeding one year periods, provided, that the CA can terminate
the Singlepoint Agreement at any time during the initial one term or thereafter by giving Singlepoint not less than five (5) days
notice to terminate. CA is to provide consulting services including strategy and business planning, marketing and sales support,
define and support for product offerings, acquisition strategy and funding strategy.
- On February
7, 2014, CA entered into a one year consulting agreement with Colorado Cannabis Business Solutions, Inc (“CCBS”).
CA is to provide consulting services to CCBS relating to business opportunities, corporate finance activities and general business
development, in exchange for 9.9% ownership in CCBS.
- On February
18, 2014, CA entered into a month to month consulting agreement Halfar Consulting GmbH (“Halfar”). Halfar will consult
with CA regarding corporate services including identifying and assisting CA with due diligence on potential European business
partners engaged in cannabis related businesses. CA has agreed to compensate Halfar $12,000 for these services.
- On March 5,
2014, CA entered into a five (5) year Strategic Alliance Agreement (“SAA”) with Worldwide Marijuana Investments, Inc.
(“Worldwide”). Pursuant to the SAA, Worldwide and CA have agreed to market and perform certain complementary business
consulting services. The SAA automatically renews for successive one year terms, unless either party gives written notice of termination
at least thirty (30) days prior to any expiration. The SAA can also be terminated by mutual agreement, or at any time by sixty
(60) day written notice from either party.
On
February 17, 2014, the Company and CA entered into a consulting agreement with Merchant Business Solutions, Inc.
(“MBS”). CA will provide consulting services to MBS regarding seeking potential business opportunities,
financial opportunities, and general business development in exchange for 49% of Cannabis Merchant Financial Solutions, Inc.
a new subsidiary of MBS.
On
February 25, 2014, the Company and CA entered into an Asset Purchase Agreement (the “APA”) with Green
Information Systems, Inc. (“GIS”). Pursuant to the APA the Company and CA will acquire from GIS certain domain
names and trade names, including www.greenenergytv.com. The
closing of the APA has not yet occurred.
Also
on February 25, 2014, the Company entered into a six (6) month agreement with Aeson Ventures, LLC. Pursuant to the agreement Aeson
will develop an online marketing service and redevelop and thereafter maintain Company websites. The Company compensated Aeson
$4,500 upon signing the agreement and has agreed to a monthly fee of $2,250 thereafter. Additionally, Aeson will receive 20,000,000
shares of Company common stock, upon the completion of the six month agreement. After the initial six month term, the agreement
becomes a month to month employment agreement, which either party can terminate with written notice to the other.
Management
has determined that there are no further events subsequent to the balance sheet date that should be disclosed in these financial
statements.
| 2. | Financial
Statements Schedules. |
Financial
statements and exhibits – Schedule 11, Valuation and Qualifying Accounts, are omitted because the information is included
in the consolidated financial statements and notes.
2.1 |
Asset Purchase Agreement among Game Financial
Corporation, Chex Services, Inc. and FastFunds Financial Corporation, dated as of December 22, 2005 (incorporated by reference
to Exhibit 10.1 to the registrant’s Current Report filed on December 27, 2005). |
|
|
3.1 |
Articles of Incorporation of FastFunds Financial Corporation (incorporated
by reference to Exhibit 3.(I) of the registrant's Registration Statement on Form 10-SB filed on August 7, 2001). |
|
|
3.2 |
Bylaws of FastFunds Financial Corporation (incorporated by reference
to Exhibit 3 of the registrant's Registration Statement on Form 10-SB filed on August 7, 2001). |
|
|
9.1 |
Voting Agreement between Game Financial Corporation, FastFunds Financial
Corporation and Equitex, Inc., dated December 22, 2005 (incorporated by reference to Exhibit 10.2 to the registrant’s
Current Report filed on December 27, 2005). |
|
|
10.7 |
Transition Service Agreement between Game Financial Corporation,
Chex Services, Inc. and FastFunds Financial Corporation, dated as of January 31, 2006 (incorporated by reference to Exhibit
10.1 to the registrant’s Current Report filed on February 6, 2006). |
|
|
10.8 |
$5 million Secured Promissory Note of Equitex, Inc. in favor of
FastFunds Financial Corporation, dated as of March 14, 2006 (incorporated by reference to Exhibit 10.2 to the registrant’s
Current Report filed on March 20, 2006). |
|
|
10.9 |
Stock Pledge Agreement between Equitex, Inc. and FastFunds Financial
Corporation, dated as of March 14, 2006 (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report
filed on March 20, 2006). |
|
|
10.10 |
Agreement (for profit participation) between Equitex, Inc. and FastFunds
Financial Corporation, dated as of March 14, 2006 (incorporated by reference to Exhibit 10.3 to the registrant’s
Current Report filed on March 20, 2006). |
|
|
14.1 |
Code of Ethics |
|
|
21.1 |
List of Subsidiaries (Filed herewith). |
|
|
31.1 |
Certification of Chief Executive Officer Pursuant to Section 302
of Sarbanes-Oxley Act of 2002 (filed herewith). |
|
|
32.1 |
Certifications under Section 906 of Sarbanes-Oxley Act of 2002 (filed
herewith). |
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Date:
October 31, 2014 |
FASTFUNDS
FINANCIAL CORPORATION
(Registrant)
|
|
By
/S/ HENRY FONG |
|
Principal
Executive Officer |
|
Principal
Accounting Officer |
|
Director |
EXHIBIT
31.1
CERTIFICATION
PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES
EXCHANGE
ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF
THE
SARBANES-OXLEY ACT OF 2002
I, Henry
Fong, certify that:
| 1. | I
have reviewed this Annual Report on Form 10-K of FastFunds Financial Corporation; |
| 2. | Based
on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
| 3. | Based
on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the Company as of, and for, the periods presented in
this report; |
| 4. | I
am responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company
and have: |
| (a) | Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under my supervision, to ensure that material information relating to
the Company, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed
such internal controls and procedures, or caused such internal controls and procedures
to be designed under my supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles; |
| (c) | Evaluated
the effectiveness of the Registrant's disclosure controls and procedures and presented
in this report my conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
and |
| (d) | Disclosed
in this report any change in the Registrants internal control over financial reporting
that occurred during the Company's most recent fiscal quarter (the Company's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial reporting;
and |
| 5. | I
have disclosed, based on my most recent evaluation of internal control over financial
reporting, to the Registrant's auditors and the Registrant's board of directors (or persons
performing the equivalent functions): |
| (a) | All
significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
Company's ability to record, process, summarize and report financial information; and |
| (b) | Any
fraud, whether or not material, that involves management or other employees who have
a significant role in the Company's internal control over financial reporting. |
Date: October
31, 2014 |
/s/
Henry Fong |
|
Henry Fong |
|
Chief Executive
Officer and Chief Financial Officer |
|
Principal Executive
Officer and Principal Accounting Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the
Annual Report of FastFunds Financial Corporation (the “Company”) on Form 10-K for the period ended December 31, 2013,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Henry Fong, Chief Executive
Officer and Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
- The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
- The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company, as of, and for the periods presented in the Report.
|
/s/
Henry Fong |
|
Henry Fong |
|
Chief Executive Officer
Chief Financial Officer |
|
October
31, 2014 |
A signed original of this written statement
required by Section 906 has been provided to FastFunds Financial Corporation. and will be retained by FastFunds Financial Corporation
and furnished to the Securities and Exchange Commission or its staff upon request.