SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
☑ |
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30,
2015 |
|
OR
|
☐ |
TRANSITION REPORT UNDER SECTION 13 OR 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to_______ |
Commission File No. 000-33053
FASTFUNDS FINANCIAL CORPORATION
(Exact name of registrant
as specified in its charter)
Nevada |
87-0425514 |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
319 Clematis Street, Suite 400
West Palm Beach, Florida 33401
(Address of principal executive offices) (Zip
code)
(561) 514-9042
(Registrant's telephone number including area
code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No
Indicate by check mark whether the Registrant has submitted electronically
and posted on it corporate web site, if any, every Interactive data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post
such files). ☑ Yes ☐ No
Indicate by a check mark whether the Registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
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
Number
of shares of outstanding of the Registrant’s $0.0001 par value common stock as of November 15, 2015 was 1,751,829,015 shares.
FASTFUNDS
FINANCIAL CORPORATION AND SUBSIDIARIES
NINE MONTHS ENDED SEPTEMBER 30, 2015
AND 2014
INDEX TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
|
Page |
Part I. Financial Information |
|
|
|
Item 1. Financial Statements |
|
|
|
Condensed Consolidated Balance Sheets at September 30, 2015 (Unaudited) and December 31, 2014 |
2 |
|
|
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2015 and 2014 (Unaudited) |
3 |
|
|
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014 (Unaudited) |
4 |
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited) |
5 |
|
|
Item 2. Management’s Discussion and
Analysis |
25 |
|
|
Item 3. Quantitative and Qualitative Disclosures about Market Risks |
27 |
|
|
Item 4. Controls and Procedures |
27 |
|
|
Part II. Other Information |
|
|
|
Item 1. Legal Proceedings |
28 |
|
|
Item 1A. Risk Factors |
28 |
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
28 |
|
|
Item 3. Defaults Upon Senior Securities |
28 |
|
|
Item 5. Other Information |
28 |
|
|
Item 6. Exhibits |
28 |
|
|
Item 7. Signatures |
29 |
FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES |
| |
| |
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
| |
| |
|
| |
September 30, | |
December 31, |
| |
2015 | |
2014 |
| |
(unaudited) | |
|
| |
| |
|
ASSETS |
|
| |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 3,415 | | |
$ | 3,367 | |
Accounts receivable | |
| 109,083 | | |
| 169,702 | |
Notes receivable | |
| 22,050 | | |
| 62,050 | |
Prepaid expenses | |
| 25,701 | | |
| 38,212 | |
Deferred financing costs | |
| 11,750 | | |
| 8,931 | |
Other current assets | |
| 76 | | |
| 76 | |
| |
| | | |
| | |
Total current assets | |
| 172,075 | | |
| 282,338 | |
| |
| | | |
| | |
Fixed assets, net | |
| 1,769 | | |
| 2,313 | |
Investment in unconsolidated investee (Note 6) | |
| 188,228 | | |
| 15,000 | |
Other assets | |
| 3,323 | | |
| 1,850 | |
Goodwill | |
| 85,362 | | |
| 85,362 | |
Long term investments (Note 5) | |
| 89,575 | | |
| 89,575 | |
| |
| | | |
| | |
Total other assets | |
| 368,257 | | |
| 194,100 | |
| |
| | | |
| | |
Total assets | |
$ | 540,332 | | |
$ | 476,438 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' DEFICIENCY | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Bank Overdraft | |
$ | — | | |
$ | 1,860 | |
Accounts payable | |
| 817,475 | | |
| 881,086 | |
License fee payable | |
| 250,000 | | |
| 250,000 | |
Due to related party | |
| 75,000 | | |
| 75,000 | |
Accrued expenses, including related parties $71,845 (2015) and $41,898 (2014) (Note 7) | |
| 4,135,304 | | |
| 3,734,029 | |
Note Payable | |
| 60,000 | | |
| 60,000 | |
Convertible promissory notes (Note 8), including related parties of $13,867 (2015) and $74,597
(2014) | |
| 2,227,630 | | |
| 2,198,391 | |
Litigation contingency (Note 8) | |
| 2,484,922 | | |
| 2,484,922 | |
Convertible debentures payable, net | |
| 807,523 | | |
| 662,643 | |
Derivative liabilities (Note 8) | |
| 1,135,628 | | |
| 1,057,602 | |
| |
| | | |
| | |
Total current liabilities | |
| 11,993,482 | | |
| 11,405,533 | |
| |
| | | |
| | |
| |
| | | |
| | |
Commitments and contingencies (Notes 5, 7,and 9) | |
| 11,453,150 | | |
| | |
| |
| | | |
| | |
Stockholders' deficiency (Note 11): | |
| | | |
| | |
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 shares issued and outstanding | |
| 1,792 | | |
| 1,792 | |
Class C preferred stock, $0.001 par value; 1,000 shares authorized; 1,000
shares shares issued and outstanding (2014) | |
| 1 | | |
| 1 | |
Common stock, $.001 par value; 9,000,000,000 shares authorized; 1,583,209,603 (2015) and
14,414,581 (2014) shares issued and outstanding | |
| 1,583,209 | | |
| 14,415 | |
Additional paid-in capital | |
| 15,401,923 | | |
| 16,305,314 | |
Treasury stock, 50,000 shares of common stock | |
| — | | |
| — | |
Accumulated deficit | |
| (28,453,170 | ) | |
| (27,292,757 | ) |
| |
| | | |
| | |
Total stockholders' deficiency | |
| (11,465,426 | ) | |
| (10,970,416 | ) |
Less noncontrolling interests | |
| 12,276 | | |
| 41,321 | |
Total deficit | |
| (11,453,150 | ) | |
| (10,929,095 | ) |
| |
| | | |
| | |
Total liabilities and stockholders' deficit | |
$ | 540,332 | | |
$ | 476,438 | |
FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES |
| |
| |
| |
| |
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| |
| |
| |
| |
|
(Unaudited) |
| |
| |
| |
| |
|
| |
Three months ended
September 30, | |
Nine months ended
September 30, |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | | |
| | | |
| | | |
| | |
Revenue, net | |
$ | 203,619 | | |
$ | 235,560 | | |
$ | 605,889 | | |
$ | 249,926 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Cost of Sales | |
| 188,372 | | |
| 186,559 | | |
| 448,911 | | |
| 186,559 | |
Processing fees | |
| 5,718 | | |
| 6,259 | | |
| 17,551 | | |
| 19,112 | |
Returned checks (collected) | |
| — | | |
| — | | |
| — | | |
| (1,420 | ) |
Other | |
| 334 | | |
| 356 | | |
| 1,071 | | |
| 1,150 | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 194,424 | | |
| 193,174 | | |
| 467,533 | | |
| 205,401 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 9,195 | | |
| 42,386 | | |
| 138,356 | | |
| 44,525 | |
| |
| | | |
| | | |
| | | |
| | |
Selling, general and administrative | |
| 139,316 | | |
| 235,675 | | |
| 518,662 | | |
| 582,277 | |
Loss from operations | |
| (130,121 | ) | |
| (193,289 | ) | |
| (380,306 | ) | |
| (537,752 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (373,124 | ) | |
| (583,353 | ) | |
| (844,707 | ) | |
| (1,403,876 | ) |
Derivative liability income (expense) | |
| 189,140 | | |
| 13,229 | | |
| 113,372 | | |
| 54,344 | |
Loss from unconsolidated investee | |
| (48,772 | ) | |
| — | | |
| (48,772 | ) | |
| — | |
Total other expense | |
| (232,756 | ) | |
| (570,124 | ) | |
| (780,107 | ) | |
| (1,349,532 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (362,877 | ) | |
$ | (763,413 | ) | |
$ | (1,160,413 | ) | |
$ | (1,887,284 | ) |
| |
| | | |
| | | |
| | | |
| | |
Less net loss attributable to non controlling interest | |
| 7,074 | | |
| 15,292 | | |
| 12,279 | | |
| 15,292 | |
| |
| | | |
| | | |
| | | |
| | |
Net loss attributable to common stockholders | |
$ | (355,803 | ) | |
$ | (748,121 | ) | |
$ | (1,148,134 | ) | |
$ | (1,871,992 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share | |
$ | (0.00 | ) | |
$ | (0.08 | ) | |
$ | (0.00 | ) | |
$ | (0.26 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of common shares outstanding
Basic and diluted | |
| 820,129,587 | | |
| 9,329,128 | | |
| 345,111,856 | | |
| 7,136,973 | |
FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES |
| |
| |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| |
| |
|
(Unaudited) |
| |
| |
|
| |
Nine Months Ended September 30, |
| |
2015 | |
2014 |
Cash flows from operating activities: | |
| | | |
| | |
Net loss | |
$ | (1,160,413 | ) | |
$ | (1,887,284 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization on fixed assets | |
| 544 | | |
| — | |
Issuance of preferred stock as compensation | |
| — | | |
| 106,673 | |
Amortization of discount on convertible notes | |
| 430,019 | | |
| 918,750 | |
Initial derivative liability expense on convertible debentures | |
| (113,372 | ) | |
| — | |
Change in fair value of derivative liability | |
| — | | |
| (54,344 | ) |
Amortization of deferred financing costs | |
| 20,931 | | |
| 11,792 | |
Loss from unconsolidated investee | |
| 48,772 | | |
| | |
Decrease (increase) in assets: | |
| | | |
| | |
Accounts receivable | |
| 60,619 | | |
| 20,989 | |
Other current assets | |
| 11,038 | | |
| (24,933 | ) |
Increase in liabilities | |
| | | |
| | |
Accounts payable and accrued expenses | |
| 406,241 | | |
| 270,317 | |
| |
| | | |
| | |
Net cash used in operating activities | |
| (295,622 | ) | |
| (638,039 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Investment in unconsolidated subsidiary | |
| (222,000 | ) | |
| — | |
Payments on issuance of notes receivable | |
| — | | |
| (25,000 | ) |
Cash paid for acquisition | |
| — | | |
| (100,000 | ) |
Cash acquired in acquisition | |
| — | | |
| 133,806 | |
| |
| | | |
| | |
Net cash used in investing activities | |
| (222,000 | ) | |
| 8,806 | |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Borrowings on convertible notes, net | |
| 536,500 | | |
| 672,295 | |
Repayments on convertible notes, net | |
| (7,500 | ) | |
| — | |
Borrowings on notes and loans payable, related | |
| 27,500 | | |
| — | |
Borrowings on notes and loans payable, other | |
| 117,100 | | |
| — | |
Repayments on notes and loans payable, related | |
| (88,036 | ) | |
| — | |
Repayments on notes and loans payable, other | |
| (67,894 | ) | |
| — | |
Payment of deferred financing costs | |
| — | | |
| — | |
| |
| | | |
| | |
Net cash provided by financing activities | |
| 517,670 | | |
| 672,295 | |
| |
| | | |
| | |
Net increase in cash and cash equivalents | |
| 48 | | |
| 43,062 | |
Cash and cash equivalents, beginning | |
| 3,367 | | |
| 2,057 | |
| |
| | | |
| | |
Cash and cash equivalents, ending | |
$ | 3,415 | | |
$ | 45,119 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
| |
| | | |
| | |
Cash paid for interest | |
$ | 225 | | |
$ | — | |
| |
| | | |
| | |
Cash paid for income taxes | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
Schedule of Non-Cash Investing and Financing Activities | |
| | | |
| | |
| |
| | | |
| | |
Conversion of convertible notes and interest to common stock | |
$ | — | | |
$ | 724,164 | |
| |
| | | |
| | |
Reclass of derivative liability to equity upon conversion of convertible debt | |
$ | 316,553 | | |
$ | 756,556 | |
| |
| | | |
| | |
Conversion of convertible debentures to common stock | |
$ | 298,907 | | |
$ | — | |
FASTFUNDS FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
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. Henry Fong, the Company’s sole officer and Director, or his assigns
in consideration for services rendered to the Company and continuing to work for the Company without receiving significant payment
for services.
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 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, but has not commenced these activities as of the
date of this report
On October 7, 2013, the Company
formed Financiera Moderna (“FM”), as a wholly-owned subsidiary to develop and market financial products and services
target 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. 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 year
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 with 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. (“CMFS”) a new subsidiary of MBS. CMFS has had
no activity through the date of this report.
On April 3, 2014, the Company and
its wholly-owned subsidiary CA announced the launch of GreenEnergyMedia.TV.
GreenEnergyMedia.TV caters to broadcasting real-time news and social media feeds relating exclusively to the medical and recreational
marijuana communities.GreenEnergyMedia.TV broadcasts stock quotations and intraday charts on
over 40 leading companies competing within the medical marijuana industry.
On April
29, 2014, Cannabis Live was launched, which will focus exclusively on hosting and broadcasting
video of on-demand events. As this area of GreenEnergyMedia.TV’s website progresses, the Company plans to include the development
of an exclusive interactive online channel. This future development will allow for several sources of revenue to be derived
for the Company; including premium access membership fees, sponsorship and endorsement fees, and advertising revenue.
On April
17, 2014, the Company and its wholly-owned subsidiary CA announced a Merchant Payment Processing Agreement
to offer a debit card payment solution for retail cannabis dispensaries. This program will be offered through CMFS, the Company's
49% owned subsidiary. This payment solution allows dispensaries to accept debit and credit cards by using the PIN number associated
with the card being used. The company has not yet offered this program to customers.
On July
8, 2014, The Company announced the formation of The 420 Development Corporation, a newly formed wholly owned subsidiary of the
Company that will focus exclusively on the acquisition of operational companies that support the development of the ever-expanding
cannabis industry. The 420 Development Corporation will seek to identify acquisition candidates within the industry that
have the potential to add significant shareholder value once completed.
On July
24, 2014, the Company and its wholly-owned subsidiary, The 420 Development Corporation, announced the closing of a purchase agreement
with Ohio-based Brawnstone Security, LLC (“Brawnstone”). Brawnstone is a licensed
armed security, private investigation, security technology solution provider and tactical training company servicing active accounts
with several Government affiliated HUD housing establishments, schools, and industrial facilities across the Ohio region. Under
the terms of the purchase agreement, the Company, through its subsidiaries, now owns a 70% interest in Brawnstone. The purchase
price, disclosed in the Membership Interest Purchase Agreement and Assignment of Membership Interest Agreement dated July 23, 2014,
was $160,000. The Company remitted $100,000 in cash and issued a $60,000 note payable bearing 8% interest to complete the purchase.
The company also assumed accrued expenses of $181,083. The total purchase price of $341,083 was allocated to cash of $133,806,
accounts receivable of $120,965, prepaid expenses of $950, and goodwill of $85,362.
On October 30, 2014, FastFunds Financial Corporation
announced that they have entered into a distribution and marketing agreement for its Cannabis GreenCard product with WMII, Inc.
("WMII"). Through the Company's 49% ownership in Cannabis Merchant Financial Solutions, Inc. ("CMFS"), WMII
has agreed to market the Company's Cannabis GreenCard through an extensive database developed over the past several months that
contains over 1,000 medical and recreational dispensaries throughout the Colorado, Washington State and California regions. WMII
has access to a large community of companies that service the cannabis industry. By leveraging these existing relationships, WMII
will allow CMFS to gain access to their extensive list of prospective customers for the Company's Cannabis GreenCard product.
On November 5, 2014, FastFunds Financial Corporation
announced the acquisition of a 49% equity stake in WMII, Inc. ("WMII"), a marketing and product distribution firm that
specializes in cannabis related services. WMII is an early-stage company that is currently not generating any revenues. Developed
over the past several months, WMII has built an extensive database of prospective customers and retail relationships that exceed
over 1,000 medical and recreational dispensaries throughout the Colorado, Washington State and California regions. In addition
to marketing the Company's Cannabis GreenCard, WMII will market several other products that it retains distribution rights to,
such as the THC Test Kit. The company paid $15,000 for its interest in WMII.
On November 14, 2014, FastFunds
Financial Corporation entered into a definitive licensing agreement with Nevada-based Chongson, Inc. pertaining to the production,
promotion and sale of the Tommy Chong branded Cannabis GreenCard product. The Tommy Chong Cannabis Green Card functions as a pre-paid
loyalty debit card with a turnkey customer rewards technology. In addition, the card functions as a re-buildable stored value card
that can be used to purchase merchandise at the participating dispensary. The Company also intends to launch a Tommy Chong Frequent
Buyers program including a loyalty card offering retailer sponsored discounts and/or other amenities.
On May 15, 2015, FastFunds Financial Corporation (“FFFC”)
acquired a 49% Limited Liability Company interest in Pure Grow Systems, LLC (“Pure Grow”) for $250,000. Financing for
this transaction was provided through a $128,000 convertible note issued to CareBourn Capital, LP on May 15, 2015 and a $125,000
convertible note issued to Pure Energy Inc. on May 29, 2015. As of September 30, 2015, $222,000 has been remitted by the company
in acquisition of a minority stake of Pure Grow. Pure Grow Systems, LLC will be dedicated to the healthy production of raw materials
used for medicinal or other health-related purposes. The Company is developing a line of environmentally friendly products using
ingredients that have a strong track record of sanitation and disinfection in buildings, on furniture, and other items found in
medical, manufacturing and warehouse settings. Pure Grow Systems anticipates launching its website and first product line within
the next 60 days.
The Company currently has thirty-six full and part time
employees at Brawnstone Security. None of our employees are currently covered by collective bargaining agreements.
Going concern and management’s
plans:
In the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2014, the Report of the Independent Registered Public Accounting
Firm includes an explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going
concern. The Company’s interim financial statements for the three and nine months ended September 30, 2015 and 2014 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 $1,148,134 for the nine months ended September 30, 2015, and has a working capital deficit of $11,453,150 and an
accumulated deficit of $28,453,170 as of September 30, 2015. 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 financial statements do not contain
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 was
to receive approximately $30,000 annually pursuant to the Preferred Stock it holds of an unaffiliated party (see Note 4), 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 received limited cash from the Nova portfolio since 2012. 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, 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 condensed 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
condensed consolidated financial statements have been prepared by the Company without audit and include the consolidated accounts
of Fastfunds Financial Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated
in consolidation. In the opinion of management, all adjustments necessary to present the financial position, results of operations
and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring
adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared
in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These
condensed financial statements should be read in conjunction with a reading of the Company’s consolidated financial statements
and notes thereto included in the Company’s Form 10-K annual report filed with the Securities and Exchange Commission (SEC)
on April 19, 2015. Interim results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative
of future results for the full year. Certain amounts from the 2014 period have been reclassified to conform to the presentation
used in the current period.
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.
The Company recognizes sale
and service revenue when there is persuasive evidence of an arrangement with the customer which states a fixed or determinable
price and terms, delivery of the product has occurred or the service performed in accordance with the terms of the sale, and collectability
of the sale is reasonably assured. The Company has entered into agreements calling for services to be available to the customer
for a period of time. In these cases, revenue is recognized over the life of the agreement. Prepaid services are shown as deferred
revenues until services are performed.
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.
Goodwill:
Goodwill represents the excess
of the purchase price over the fair value of the identifiable tangible and intangible assets acquired and the fair value of liabilities
assumed in an acquisition. Accounting Standards Codification (“ASC”)-350-30-50 “Goodwill and Other Intangible
Assets” requires the testing of goodwill and indefinite-lived intangible assets for impairment at least annually. The Company
tests goodwill for impairment at least annually.
Investment in Unconsolidated
Investee
The Company accounts for investments
in which the Company owns more than 20% of the investee, using the equity method in accordance with ASC Topic 323, Investments—Equity
Method and Joint Ventures. Under the equity method, an investor initially records an investment in the stock of an investee at
cost, and adjusts the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee
after the date of acquisition. The amount of the adjustment is included in the determination of net income by the investor, and
such amount reflects adjustments similar to those made in preparing consolidated statements including adjustments to eliminate
intercompany gains and losses, and to amortize, if appropriate, any difference between investor cost and underlying equity in net
assets of the investee at the date of investment. The investment of an investor is also adjusted to reflect the investor's share
of changes in the investee's capital. Dividends received from an investee reduce the carrying amount of the investment. A series
of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred which
is other than temporary and which should be recognized even though the decrease in value is in excess of what would otherwise be
recognized by application of the equity method.
Non-controlling 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 non-controlling 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 non-controlling 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 nine month periods ended September
30, 2015 and 2014, as the impact of the potential common shares related to convertible debt, warrants, and stock options, which
total 19,937,533,079 and 21,495,866, respectively, would be anti-dilutive.
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. 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 three and nine months ended September 30, 2015 and 2014.
The Company’s
stock option plan is more fully described in Note 10.
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
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. Concentration of revenue:
A significant portion of the Company's
revenues for the nine months ended September 30, 2015 were generated from five customers as follows:
|
|
|
|
|
|
Accounts Receivable |
|
|
% of Total Revenues |
|
|
|
as of September 30, 2015 |
|
|
|
|
|
|
|
Customer A |
|
16.50 |
% |
|
$ |
2,075 |
Customer B |
|
12.67 |
% |
|
$ |
12,918 |
Customer C |
|
9.59 |
% |
|
$ |
14,339 |
Customer D |
|
8.09 |
% |
|
$ |
0 |
Customer E |
|
6.26 |
% |
|
$ |
7,621 |
4. Notes receivable:
On March 19, 2014, the Company advanced
$25,000 to Worldwide Marijuana Investments, Inc. (“WMI”) in exchange for a $25,000 promissory note. Interest of 12%
per annum is payable in monthly installments, along with a monthly principal amount of $500 beginning April 1, 2014 for twelve
months, at which time the remaining principal amount and interest will be due in full. As of September 30, 2015, the outstanding
principal amount on the promissory note is $22,050.
5. 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.
On July
24, 2014, the Company, through its wholly-owned subsidiary, The 420 Development Corporation, acquired a 70% interest in Brawnstone.
Brawnstone is a licensed armed security, private investigation, security technology solution provider
and tactical training company servicing active accounts with several Government affiliated HUD housing establishments, schools,
and industrial facilities across the Ohio region. The purchase price, disclosed in the Membership Interest Purchase Agreement and
Assignment of Membership Interest Agreement dated July 23, 2014, was $160,000. The Company remitted $100,000 in cash and issued
a $60,000 note payable bearing 8% interest in the closing of the acquisition. On the acquisition date, the company assumed the
assets of Brawnstone, including $133,805 in cash and cash equivalents, $120,965 in accounts receivable, all of which is classified
as current and collectable, and $950 in other assets, as well as liabilities including accounts payable of $181,083. The Company
also recognized goodwill of $85,362, included on the September 30, 2015 balance sheet, as a result of the acquisition.
On November 5, 2014, the company
acquired a 49% equity stake in WMII, Inc. ("WMII"), a marketing and product distribution firm that specializes in cannabis
related services. WMII is an early-stage company. The company paid $15,000 in cash in closing the acquisition. Since acquisition
and until the period ended September 30, 2015, WMII has not begun any significant operating activities and has generated no revenues
for the Company.
6. Equity-method investment:
On May 15, 2015, the company acquired a 49% Limited Liability
Company interest in Pure Grow Systems, LLC (“Pure Grow”) for $250,000 in cash. Financing for this transaction was provided
through a $128,000 convertible note issued to CareBourn Capital, LP on May 15, 2015 and a $125,000 convertible note issued to Pure
Energy Inc. on May 29, 2015. As of September 30, 2015, $222,000 has been remitted by the company in acquisition of a minority stake
of Pure Grow. The company has accounted for its 49% interest in Pure Grow utilizing the equity method of accounting. As of September
30, 2015, the carrying value in Pure Grow was $173,288. During the three and nine month periods ended September 30, 2015, $48,772
was recognized as an equity method loss. Condensed unaudited summary financial information
for Pure Grow as of September 30, 2015 and for the three and nine months ended September 30, 2015 is as follows:
| |
| September
30, | |
| |
| 2015 | |
| |
| (Unaudited) | |
ASSETS | |
| | |
Cash and cash equivalents | |
$ | 90,463 | |
Inventory | |
| 23,202 | |
| |
| | |
Total assets | |
$ | 113,665 | |
| |
| | |
LIABILITIES AND MEMBERS' EQUITY | |
| | |
Accounts payable and accrued expenses | |
$ | 13,500 | |
Members' equity | |
| 199,700 | |
Net Loss | |
| (99,535 | ) |
| |
| | |
Total liabilities and members' equity | |
$ | 113,665 | |
| |
For the three and
nine |
| |
months ended |
| |
September
30, 2015 |
| |
(Unaudited) |
STATEMENT OF OPERATIONS | |
| | |
Revenues | |
$ | 20 | |
Cost of sales | |
| 0 | |
Gross profit | |
| 20 | |
Operating expenses | |
| 78,838 | |
Operating loss | |
| (78,818 | ) |
Other expense | |
| (20,717 | ) |
Net loss | |
$ | (99,535 | ) |
Ownership interest (rounded) | |
| 49 | % |
Share of net loss | |
$ | (48,772 | ) |
Investment | |
$ | 173,228 | |
7. Accrued liabilities:
Accrued liabilities at September 30, 2015 and December 31, 2014 were $4,135,303 and $3,734,029, respectively, and were comprised of:
| |
2015 | |
2014 |
Legal fees | |
$ | 23,594 | | |
$ | 23,594 | |
Interest | |
| 3,718,639 | | |
| 3,336,669 | |
Consultants and advisors | |
| 176,329 | | |
| 157,024 | |
Registration rights | |
| 98,013 | | |
| 98,013 | |
Other | |
| 118,729 | | |
| 118,729 | |
| |
$ | 4,135,303 | | |
$ | 3,734,029 | |
8. Promissory notes, including related parties and debenture
payable:
Promissory notes, including
related parties at September 30, 2015 and December 31, 2014, consist of the following:
| |
2015 | |
2014 |
Promissory notes payable: | |
| | | |
| | |
| |
| | | |
| | |
Various, including related parties of $13,867 (2015) and $157,322 (2014); interest rate ranging from 8% to 10% [A] | |
$ | 136,911 | | |
$ | 171,422 | |
| |
| | | |
| | |
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 | |
| |
$ | 2,227,630 | | |
$ | 2,198,391 | |
| [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 nine months ended September 30, 2015 the Company issued notes of $144,600
($5,000 to related parties) and made payments of $153,230 (including $85,530 to related parties). |
| | |
| [B] | These notes payable (the “Promissory Notes”) originally became due on February 28,
2007. In April 2007 the Company, through a financial advisor, restructured $1,825,000 of the Promissory Notes (the “Restructured
Notes”). 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 $3,434,686 and is included in accrued expenses
on the consolidated balance sheets. |
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 $2,482,922 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 September 30, 2015 and December 31, 2014 balance sheet items promissory notes payable and accrued expenses.
Debenture
payable:
2012 Notes
On November 1,
2012, the Company issued a convertible promissory note to David Schaper (“Schaper”) 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, 2014, the Company issued 2,240,336 shares of common stock upon the conversion of $163,670 of the Note. As of September
30, 2015, the balance of the note is $3,000.
2013 Notes
The following
notes issued in 2013, bear interest at 8% per annum and other than as described below are 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. The notes issued
in 2013 are referred to as the 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, was 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 March 2013 Note matured
November 14, 2013, is in default, and the Default Rate was effective at that date. During the nine months ended September 30, 2015,
the Company issued 41,325,963 shares of common stock upon conversion of $9,250 of the note. The balance of the March 2013 Note
is $17,326 as of September 30, 2015.
On August 22, 2013, the Company
issued a $6,000 convertible promissory note to Schaper. During the year ended December 31, 2014, the Company issued 66,667 shares
of common stock upon conversion of $4,000 of this note. The outstanding principal balance on this note is $2,000 as of September
30, 2015.
On October 18, 2013, the Company
issued four (4) convertible notes each in the amount of $25,625 to Gel (the 2013 Gel Notes). The conversion price for the 2013
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. Also on October 18, 2013, Gel issued the Company four secured
promissory notes, each in the amount of $25,000, due April 21, 2014. The Company received the $100,000 on March 6, 2014. During
the year ended December 31, 2014, the Company issued 944,260 shares upon conversion of $83,295 of the notes. As of September 30,
2015, the four convertible promissory notes in the aggregate of $19,205 of principal amount owed Gel was outstanding.
On November 22, 2013, the Company
issued a $35,000 (the Fong Note) and $30,000 (the Hollander Note) convertible notes to Mr. Fong and Mr. Hollander, respectively,
in satisfaction of unpaid fees. During the nine months ended September 30, 2015, the Company issued 18,030,303 shares of common
stock in satisfaction of $6,000 of the Hollander note. The outstanding principal balances of the Fong and Hollander notes as of
September 30, 2015 are $35,000 and $2,000 respectively.
2014 Notes
On January 28, 2014, the Company issued a convertible promissory note to Mr. Fong for $25,500 in satisfaction of accrued and unpaid
fees due Mr. Fong. Also on January 28, 2014, the Company entered into a Debt Settlement and Release Agreement (the “DSR”)
with Mr. Fong, Mary Virginia Knight (“Knight”) or Knight assigns. This note matured January 28, 2015 and is in default.
Pursuant to the DSR, the Company has issued 500,000 shares of common stock to the Knight assign, in cancellation and satisfaction
of $15,000 of the convertible note due Mr. Fong. As of September 30, 2015, the outstanding principal balance of this note is $10,500.
On February 10, 2014, the Company
issued two (2) convertible promissory notes in the amounts of $95,814 and $95,813 in exchange for previously accrued legal fees.
The notes bear interest at 8% per annum and are 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. This note matured February 10, 2015 and is in default. During
the year ended December 31, 2014, the company issued 416,667 shares of common stock in settlement of $12,500 of the notes. During
the nine months ended September 30, 2015, $35,000 in note principal was assigned to a third party in the form of a new convertible
promissory note, with the same terms as the prior note. During the nine months ended September 30, 2015, the Company issued 194,518,463
shares of common stock in satisfaction of $17,958 in principal and $137 of accrued and unpaid interest of the third-party portion
of the note. As of September 30, 2015, the balances of the notes, including amounts now held by third parties, totaled $161,169.
On February 20, 2014, the Company
issued two (2) convertible promissory notes, each in the amount of $40,000 to LG Capital (“LG”). The Company received
$38,000 after debt issuance costs of $2,000 and a $40,000 secured promissory note. The debt issuance costs will be amortized over
the earlier of the twelve month term of the Note or any redemptions and $2,000 was expensed as debt issuance costs (included in
interest expense) for the year ended December 31, 2014. This note matured February 20, 2015 and is in default. During the nine
months ended September 30, 2015, the Company issued 167,326,230 shares of common stock in full satisfaction of convertible note
principal and $1,673 of accrued and unpaid interest. As of September 30, 2015, the outstanding principal balance of these notes
has been satisfied.
On March 6, 2014 the Company issued
a $50,000 convertible promissory note to Gel, under the same terms and conditions as the 2012 Gel Notes. This note matured March
6, 2015 and is in default. During the nine months ended September 30, 2015, the Company issued 24,979,349 shares of common stock
in satisfaction of $19,205 in convertible note principal and $2,863 in accrued and unpaid interest. As of September 30, 2015, the
outstanding principal balance of this note is $30,795.
On March 27, 2014, the Company issued
an $831,000 secured convertible promissory note (the “Note”) to Typenex (the “Lender”). The Typenex Note
carries an original issuer discount of $75,000. In addition, the Company agreed to pay $6,000 to cover the Lender’s legal
and other fees. At the option of the Lender, the note converts at $0.0025 per share. The conversion by the Lender of any portion
of the Outstanding Balance shall only be exercisable in ten (10) tranches (each, a “Tranche”), consisting of an initial
Tranche in an amount equal to $88,500 and nine (9) additional Tranches, each in the amount of $82,500, plus any interest, costs,
fees or charges accrued thereon or added thereto under the terms of this Note. The Note carries a ten (10) percent interest rate
and matures on the seventeenth month after funding. Typenex funded $75,000 on April 1, 2014 and also delivered nine (9) secured
promissory notes to the Company, each in the amount of $75,000. Each payment received will constitute an “Issue Date”.
The Company also granted Typenex the right to purchase at any time on or after each Issue Date until the date which is the last
calendar day of the month in which the fifth anniversary of the Issue Date occurs (the “Expiration Date”), a number
of fully paid and non-assessable shares (the “Warrant Shares”) of the Company’s common stock, par value $0.001
per share equal to $41,250 divided by the Market Price (as defined in the Note). This note matured April 1, 2015 and is in default.
During the year ended December 31, 2014, the company issued 558,333 shares of common stock upon conversion of $16,500 of the note.
During the nine months ended September 30, 2015, the company issued 4,405,110 shares of common stock upon conversion of $17,078
of note principal. In addition, during the nine months ended September 30, 2015, the company issued 40,535,699 shares upon conversion
of $18,000 in warrants outstanding. As of September 30, 2015, the outstanding principal balance of this note is $69,426. Amortization
for the nine months ended September 30, 2015, totaled $39,600 and the carrying value of the note as of September 30, 2015, is $54,672,
net of unamortized discount of $0.
On April 1, 2014 ($15,000) and April
23, 2014 ($12,500), the Company issued convertible promissory notes to Carebourn Capital. During the year ended December 31, 2014,
the Company issued 851,467 shares of common stock in satisfaction of $25,544 in convertible note principal. During the nine months
ended September 30, 2015, the Company issued 1,528,123 shares in satisfaction of $1,956 in convertible note principal. As of September
30, 2015, the principal balance of these notes has been satisfied.
On May 16, 2014, the Company issued
a $27,000 convertible promissory note, bearing interest at 12% per annum, to WHC Capital, LLC. The Company received $25,000 after
debt issuance costs of $2,000, which was amortized over the earlier of the one year term of the Note or any redemption. The note
matured on February 16, 2015 and is in default. During the nine months ended September 30, 2015, the company issued 42,974,921
shares of common stock upon conversion of $18,425 of note principal. As of September 30, 2015, the principal balance of this note
has been fully satisfied.
On July 11, 2014, the Company issued
a $42,750 convertible promissory note to Auctus Private Equity Fund, LLC. . The note is due on demand, bears interest at 8% and
is convertible at a 45% discount of the average of the two lowest day’s closing prices for the twenty five (25) days preceding
conversion. The conversion price may be adjusted downward if, within three (3) business days of the transmittal of the Notice of
Conversion, the Common Stock has a closing bid which is 5% or lower than that set forth in the Notice of Conversion. The company
received $37,750 after debt issuance costs of $5,000, which was amortized over the earlier of the 9 month term of the Note or any
redemptions. Accordingly, $288 has been expensed for the nine months ended September 30, 2015, as debt issuance costs (included
in interest expense). The Company recorded an initial derivative liability of $44,460, debt discount of $42,750 and derivative
expense of $1,710. The debt discount of $42,750 was amortized into interest expense over the term of the note. The note matured
on April 11, 2015 and is in default. During the nine months ended September 30, 2015, the company issued 2,564,562 shares of common
stock upon conversion of $7,028 of note principal and $2,155 of accrued note interest. As of September 30, 2015, a principal balance
of $35,676 remains outstanding. . Amortization for the nine months ended September 30,
2015, totaled $2,372 and the carrying value of the note as of September 30, 2015, is $35,676, net of unamortized discount of $0.
On July 16, 2014, the Company issued
a convertible promissory note for $50,000 to an unaffiliated accredited investor. The note is due on demand, bears interest at
8% and is convertible at 50% discount of the average of the three lowest day’s closing prices for the ten (10) days preceding
conversion. The Company recorded an initial derivative liability of $52,000, debt discount of $50,000 and derivative expense of
$2,000. The debt discount of $50,000 was amortized into interest expense over the term of the note. The note matured on April 16,
2015 and is in default. As of September 30, 2015, the full principal balance of $50,000 remains outstanding. Amortization for the
nine months ended September 30, 2015, totaled $4,167 and the carrying value of the note as of September 30, 2015, is $50,000, net
of unamortized discount of $0.
On July 22, 2014 ($52,500), August
28, 2014 ($27,500), September 19, 2014 ($27,500), and November 3, 2014 (27,500) the Company issued convertible promissory notes
to Carebourn Capital. The notes are due on demand, bear interest at 12% and are convertible at a 50% discount of the average of
the three lowest day’s closing prices for the ten (10) days preceding conversion. The Company received $125,000 after debt
issuance costs of $10,000, which was amortized over the earlier of the term of the Notes or any redemptions. The July note matured
on April 22, 2015 and is in default. The rest of the notes matured on May 28, 2015 and are in default. The Company recorded an
initial derivative liability of $143,100, debt discount of $125,000 and derivative expense of $18,100. The debt discount of $125,000
was amortized into interest expense over the term of the notes. During the nine months ended September 30, 2015, the company issued
321,518,056 shares of common stock upon conversion of $101,413 of note principal. As of September 30, 2015, a principal balance
of $35,543 remains outstanding. Amortization for the nine months ended September 30, 2015, totaled $38,258 and the carrying value
of the notes as of September 30, 2015, is $50,186, net of unamortized discount of $0.
On October 9, 2014, the
Company issued a convertible promissory note for $26,500 to LG Capital (“LG”). The note bears interest at 8% and
is convertible at a 50% discount of the lowest closing price for the ten (10) days preceding conversion The Company recorded
an initial derivative liability of $28,090, debt discount of $26,500 and derivative expense of $1,590. The debt discount of
$26,500 was amortized into interest expense over the term of the note. The Company received $25,000 after debt issuance costs
of $1,500. The debt issuance costs will be amortized over the earlier of the twelve month term of the Note or any redemptions
and accordingly $1,250 has been expensed as debt issuance costs (included in interest expense) for the nine months ended
September 30, 2015. The note matures on October 9, 2015. During the nine months ended September 30, 2015, the company issued
15,200,000 shares of common stock upon conversion of $760 of note principal. As of September 30, 2015, a principal balance of
$25,740 remains outstanding. Amortization for the nine months ended September 30, 2015, totaled $14,863 and the carrying
value of the notes as of September 30, 2015, is $25,105, net of unamortized discount of $635.
On December 2, 2014, the Company
issued a convertible promissory note for $25,000 to an unaffiliated accredited investor. The note bears interest at 8% and is convertible
at 50% discount of the average of the three lowest day’s closing prices for the ten (10) days preceding conversion. The Company
recorded an initial derivative liability of $26,000, debt discount of $25,000 and derivative expense of $1,000. The debt discount
of $25,000 is being amortized into interest expense over the term of the note. The note matured on September 2, 2015 and is in
default. As of September 30, 2015, the full principal balance of $25,000 remains outstanding. Amortization for the nine months
ended September 30, 2015, totaled $21,111 and the carrying value of the notes as of September 30, 2015, is $25,000, net of unamortized
discount of $0.
On December 23, 2014, the Company
issued a $7,500 convertible promissory note to Carebourn Capital. The note is due on demand, bears interest at 8% and is convertible
at a 50% discount of the average of the three lowest day’s closing prices for the ten (10) days preceding conversion. During
the nine months ended September 30, 2015, the Company paid $7,500 in settlement of the note principal and $190 in settlement of
accrued interest. As of September 30, 2015, this note has been fully satisfied.
On December 29, 2014, the Company
issued a $25,000 convertible promissory note to Pure Energy 714, a New Jersey LLC. The proceeds from this note were received on
January 6, 2015. The note is due on demand, bears interest at 10% and is convertible at a 50% discount of the average of the three
lowest day’s closing prices for the ten (10) days preceding conversion and matures September 29, 2015. The Company recorded
an initial derivative liability of $26,250, debt discount of $25,000 and derivative expense of $1,250. The debt discount of $25,000
is being amortized into interest expense over the term of the note. On August 10, 2015, the entirety of the note outstanding, including
$25,000 in principal and $1,520 in accrued and unpaid interest, was assigned to Stark Capital Investments, a Florida LLC. During
the nine months ended September 30, 2015, the company issued 503,960,000 shares of common stock upon conversion of $20,159 of note
principal. As of September 30, 2015, a principal balance of $4,841 remains outstanding.
2015 Notes
On February 6, 2015, the
Company issued a convertible promissory note for $26,500 to LG Capital (“LG”). The Company received $25,000 after
debt issuance costs of $1,500. The debt issuance costs will be amortized over the earlier of the twelve month term of the
Note or any redemptions and accordingly $441 has been expensed as debt issuance costs (included in interest expense) for the
nine months ended September 30, 2015. The Company recorded an initial derivative liability of $28,620, debt discount of
$26,500 and derivative expense of $2,120. The debt discount of $26,500 is being amortized into interest expense over the term
of the note. The note is due on demand, bears interest at 8% and is convertible at a 50% discount of the lowest closing price
for the ten (10) days preceding conversion and matures February 6, 2016. As of September 30, 2015, the outstanding principal
balance of this note is $26,500. Amortization for the nine months ended September 30, 2015, totaled $17,134 and the carrying
value of the notes as of September 30, 2015, is $17,134, net of unamortized discount of $9,366.
On April 10, 2015, the Company issued
a $40,500 convertible promissory note to Carebourn Capital. The April 10 Carebourn Note carries an original issuer discount of
$3,000. The company paid $3,000 in debt issuance costs related to this note on June 16, 2015. The note is due on demand, bears
interest at 12% and is convertible at a 50% discount of the average of the three lowest day’s closing prices for the ten
(10) days preceding conversion. The Company recorded an initial derivative liability of $45,360, debt discount of $40,500 and derivative
expense of $4,860. The debt discount of $40,500 is being amortized into interest expense over the term of the note. The note matures
on January 10, 2016. As of September 30, 2015, the full principal balance of $40,500 remains outstanding. Amortization for the
nine months ended September 30, 2015, totaled $25,478, and the carrying value of the notes as of September 30, 2015, is $25,478,
net of unamortized discount of $15,022.
On April 15, 2015, the Company
issued a convertible promissory note for $26,500 to LG Capital (“LG”). The note is due on demand, bears interest
at 8% and is convertible at a 50% discount of the lowest closing price for the ten (10) days preceding conversion. The
Company recorded an initial derivative liability of $28,090, debt discount of $26,500 and derivative expense of $1,590. The
debt discount of $26,500 is being amortized into interest expense over the term of the note. The Company received $25,000
after debt issuance costs of $1,500. The debt issuance costs will be amortized over the earlier of the twelve month term of
the Note or any redemptions and accordingly $1,383 has been expensed as debt issuance costs (included in interest expense)
for the nine months ended September 30, 2015. The note matures on October 9, 2015. As of September 30, 2015, the outstanding
principal balance of this note is $26,500. Amortization for the nine months ended September 30, 2015, totaled $25,847 and the
carrying value of the notes as of September 30, 2015, is $25,847, net of unamortized discount of $653.
On May 6, 2015, the Company
issued a $40,000 convertible promissory note to Pure Energy 714, a New Jersey LLC. The note is due on demand, bears interest
at 12% and is convertible at a 50% discount of the average of the three lowest day’s closing prices for the ten (10)
days preceding conversion and matures November 6, 2015. The Company received $37,500 after debt issuance costs of $2,500. The
debt issuance costs will be amortized over the earlier of the five month term of the Note or any redemptions and accordingly
$764 has been expensed as debt issuance costs (included in interest expense) for the nine months ended September 30, 2015.
The Company recorded an initial derivative liability of $42,400, debt discount of $40,000 and derivative expense of $2,450.
The debt discount of $40,000 is being amortized into interest expense over the term of the note. Amortization for the nine
months ended September 30, 2015, totaled $39,895 and the carrying value of the notes as of September 30, 2015, is $39,895,
net of unamortized discount of $105. During the nine months ended September 30, 2015, the company issued 138,552,217 shares
of common stock upon conversion of $39,477 of note principal. As of September 30, 2015, the outstanding principal balance of
this note is $523
On May 15, 2015, the Company
issued a $128,000 convertible promissory note to Carebourn Capital. The note is due on demand, bears interest at 12% and is
convertible at a 50% discount of the average of the three lowest day’s closing prices for the twenty (20) days
preceding conversion and matures February 15, 2016. The Company received $125,000 after debt issuance costs of $3,000. The
debt issuance costs will be amortized over the earlier of the nine month term of the Note or any redemptions and accordingly
$2,267 has been expensed as debt issuance costs (included in interest expense) for the nine months ended September 30, 2015.
The Company recorded an initial derivative liability of $143,360, debt discount of $128,000 and derivative expense of
$15,360. The debt discount of $128,000 is being amortized into interest expense over the term of the note. Amortization for
the nine months ended September 30, 2015, totaled $21,333 and the carrying value of the notes as of September 30, 2015, is
$64,000, net of unamortized discount of $64,000. As of September 30, 2015, the outstanding principal balance of this note is
$64,000.
On May 27, 2015, the Company
issued a $28,000 convertible promissory note to Carebourn Capital. The note is due on demand, bears interest at 12% and is
convertible at a 50% discount of the average of the three lowest day’s closing prices for the twenty (20) days
preceding conversion and matures February 27, 2016. The Company received $25,000 after debt issuance costs of $3,000. The
debt issuance costs will be amortized over the earlier of the nine month term of the Note or any redemptions and accordingly
$2,067 has been expensed as debt issuance costs (included in interest expense) for the nine months ended September 30, 2015.
The Company recorded an initial derivative liability of $31,360, debt discount of $28,000 and derivative expense of $3,360.
The debt discount of $28,000 is being amortized into interest expense over the term of the note. Amortization for the nine
months ended September 30, 2015, totaled $12,783 and the carrying value of the notes as of September 30, 2015, is $12,783,
net of unamortized discount of $15,217. As of September 30, 2015, the outstanding principal balance of this note is
$28,000.
On May 29, 2015, the Company issued
a $125,000 convertible promissory note to Pure Energy 714, a New Jersey LLC. The note is due on demand, bears interest at 12% and
is convertible at a 60% discount of the average of the three lowest day’s closing prices for the fifty (50) days preceding
conversion and matures November 29, 2015. The Company recorded an initial derivative liability of $132,500, debt discount of $125,000
and derivative expense of $7,500. The debt discount of $125,000 is being amortized into interest expense over the term of the note.
Amortization for the nine months ended September 30, 2015, totaled $84,239 and the carrying value of the notes as of September
30, 2015, is $84,239, net of unamortized discount of $40,761. As of September 30, 2015, the outstanding principal balance of this
note is $125,000.
On June 9, 2015, the Company issued
a $28,000 convertible promissory note to Pure Energy 714, a New Jersey LLC.. The note is due on demand, bears interest at 12% and
is convertible at a 50% discount of the average of the three lowest day’s closing prices for the twenty (20) days preceding
conversion and matures February 27, 2016. The Company received $25,000 after debt issuance costs of $3,000. The debt issuance costs
will be amortized over the earlier of the seven month term of the Note or any redemptions and accordingly $1,850 has been expensed
as debt issuance costs (included in interest expense) for the nine months ended September 30, 2015. The Company recorded an initial
derivative liability of $29,680, debt discount of $28,000 and derivative expense of $1,680. The debt discount of $28,000 is being
amortized into interest expense over the term of the note. Amortization for the nine months ended September 30, 2015, totaled $12,030
and the carrying value of the notes as of September 30, 2015, is $12,030, net of unamortized discount of $15,970. As of September
30, 2015, the outstanding principal balance of this note is $28,000.
On June 19, 2015, the Company
issued a convertible promissory note for $36,750 to LG Capital (“LG”). The note is due on demand, bears interest
at 8% and is convertible at a 50% discount of the lowest closing price for the ten (10) days preceding conversion and matures
on June 19, 2016. The Company recorded an initial derivative liability of $39,690, debt discount of $36,750 and derivative
expense of $1,590. The debt discount of $26,500 is being amortized into interest expense over the term of the note. The
Company received $25,000 after debt issuance costs of $1,500. The debt issuance costs will be amortized over the earlier of
the twelve month term of the Note or any redemptions and accordingly $544 has been expensed as debt issuance costs (included
in interest expense) for the nine months ended September 30, 2015. Amortization for the nine months ended September 30, 2015,
totaled $10,342, and the carrying value of the notes as of September 30, 2015, is $10,342, net of unamortized discount of
$26,408. As of September 30, 2015, the outstanding principal balance of this note is $36,750.
On June 24, 2015, the Company issued
a convertible promissory note for $25,000 to Service Trading Company, LLC (“SVC”). The note is due on demand, bears
interest at 8% and is convertible at a 50% discount of the lowest closing price for the ten (10) days preceding conversion and
matures on June 24, 2016. The Company received $23,500 after debt issuance costs of $1,500. The debt issuance costs will be amortized
over the earlier of the twelve month term of the Note or any redemptions and accordingly $800 has been expensed as debt issuance
costs (included in interest expense) for the nine months ended September 30, 2015. The Company recorded an initial derivative liability
of $27,000, debt discount of $25,000 and derivative expense of $2,000. The debt discount of $25,000 is being amortized into interest
expense over the term of the note. Amortization for the nine months ended September 30, 2015, totaled $6,694 and the carrying value
of the notes as of September 30, 2015, is $6,694, net of unamortized discount of $10,069. As of September 30, 2015, the outstanding
principal balance of this note is $25,000.
On June 26, 2015, the Company issued
a $15,500 convertible promissory note to Carebourn Capital. The note is due on demand, bears interest at 12% and is convertible
at a 50% discount of the average of the three lowest day’s closing prices for the twenty (20) days preceding conversion and
matures March 26, 2016. The Company received $12,500 after debt issuance costs of $3,000. The debt issuance costs will be amortized
over the earlier of the nine month term of the Note or any redemptions and accordingly $1,567 has been expensed as debt issuance
costs (included in interest expense) for the nine months ended September 30, 2015. The Company recorded an initial derivative liability
of $17,360, debt discount of $15,500 and derivative expense of $1,860. The debt discount of $15,500 is being amortized into interest
expense over the term of the note. Amortization for the nine months ended September 30, 2015, totaled $5,431 and the carrying value
of the notes as of September 30, 2015, is $5,431, net of unamortized discount of $11,442. As of September 30, 2015, the outstanding
principal balance of this note is $15,500.
On July 20, 2015, the Company issued
a $15,500 convertible promissory note to Carebourn Capital. The note is due on demand, bears interest at 12% and is convertible
at a 50% discount of the average of the three lowest day’s closing prices for the twenty (20) days preceding conversion and
matures April 20, 2016. The Company received $12,500 after debt issuance costs of $3,000. The debt issuance costs will be amortized
over the earlier of the nine month term of the Note or any redemptions and accordingly $1,067 has been expensed as debt issuance
costs (included in interest expense) for the nine months ended September 30, 2015. The Company recorded an initial derivative liability
of $17,360, debt discount of $15,500 and derivative expense of $1,860. The debt discount of $15,500 is being amortized into interest
expense over the term of the note. Amortization for the nine months ended September 30, 2015, totaled $4,058 and the carrying value
of the notes as of September 30, 2015, is $4,058, net of unamortized discount of $11,442. As of September 30, 2015, the outstanding
principal balance of this note is $15,500.
The Company has
determined that the conversion features of the 2012, 2013, 2014 and 2015 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 fair value of the conversion
features embedded in the 2015 Notes as of their dates of issuance and in their entirety as of September 30, 2015 was determined
to approximate their fair intrinsic value due to the terms of conversion.
The inputs used to estimate the
fair value of the derivative liabilities are considered to be level 3 inputs within the fair value hierarchy.
A summary of the derivative liabilities
related to convertible notes as of September 30, 2015 and December 31, 2015 is as follows:
| Derivative
Liability Balance
1/1/15 | | |
| Initial Derivative
Liability | | |
| Redeemed
convertible notes | | |
| Fair value
change-
three months
ended
9/30/15 | | |
| Derivative
Liability Balance
9/30/15 | |
$ | 1,057,602 | | |
| 582,780 | | |
| (316,553 | ) | |
| (188,201 | ) | |
$ | 1,135,628 | |
| | | |
| | | |
| | | |
| | | |
| | |
A summary of debentures payable as of September
30, 2015 and December 30, 2014 is as follows:
|
2015
Face Value |
2014
Face Value |
2013 Notes |
$ 72,826 |
$ 88,075 |
2014 Notes |
$ 437,800 |
$709,999 |
2015 Notes |
$ 513,399 |
— |
Note discount |
$(216,512) |
$(135,431) |
Total |
$807,513 |
$662,643 |
9. 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 September 30, 2015 and December 31,
2014.
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.
10. 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.
As of September 30, 2015, the Company
had a tax net operating loss carry forward of approximately $9,481,000.Any unused portion of this carry forward expires in 2030.
Utilization of this loss may be limited in the event of an ownership change pursuant to IRS Section 382.
11. Stockholders’
deficiency:
Common stock:
During the
nine months ended September 30, 2015, the Company issued 1,528,259,323 shares of common stock upon the conversion of $295,257
of debentures payable and $6,752 of accrued and unpaid interest.
During the nine months ended September 30, 2015, the company issued
40,535,699 shares of common stock upon the cashless exercise of warrants.
Effective February
2, 2015, the Company completed a one share for six hundred share (1 for 600) reverse split of its common stock. All per share figures
in these statements have been adjusted to reflect the effects of the reverse split.
Preferred stock
There were no
shares of Class A or B preferred stock issued during the nine months ended September 30, 2015.
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 September
30, 2015 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 September 30, 2015 there are 1,791,667,
shares of Class B Preferred stock outstanding.
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. The Class C preferred stock provides no other rights to their holder(s)
other than voting rights.
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 3,000 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 nine months ended September 30, 2015.
All options outstanding at September
30, 2015 are fully vested and exercisable. A summary of outstanding balances at September 30, 2015 and December 31, 2014 is as
follows:
|
|
Weighted- |
|
Weighted- |
|
Aggregate |
|
|
Average |
|
Average Remaining |
|
Intrinsic |
Options |
|
exercise price |
|
contractual life |
|
Value |
1,650 |
|
$0.34 |
|
0.98 |
|
$0 |
|
|
|
|
|
|
|
12. 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.
13. Related party transactions:
Management and director fees:
For
the three and nine months ended September 30, 2015, the Company accrued expenses of $37,500 and $112,500, respectively, for Mr.
Fong, the Company’s President and Chairman. Mr. Fong received $12,600 in cash payments for the three months ended September
30, 2015 and $93,195 for the nine months ended September 30, 2015. In January 2014, the Company issued a convertible note to Mr.
Fong in payment of $25,500 of accrued and unpaid fees. As of September 30, 2015, Mr. Fong is owed $1,424 for these services, included
in accrued expenses on the consolidated 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 one-hundred fifty thousand (150,000) newly issued unregistered shares of the Company’s common stock. As of December 31,
2013, Carbon has exchanged the 150,000 shares of common stock for 1,500,000 shares of Class B preferred stock. The Class B preferred
stock automatically converts to 150,000 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 6, the Company
has issued notes payable to various related parties. The balances of December 31, 2014 and September 30, 2015, and the activity
for the three months ended September 30, 2015 follows:
Noteholder |
|
Balance
6/30/15 |
|
Additions |
|
Payments |
|
Sold |
|
Balance
9/30/15 |
HPI
Partners (1) |
$ |
10,895 |
$ |
— |
$ |
10,700 |
$ |
— |
$ |
195 |
Henry
Fong (2) |
|
3,000 |
|
— |
|
— |
|
— |
|
3,000 |
SurgLine
Int’l (1) |
|
10,672 |
|
— |
|
— |
|
— |
|
10,672 |
Total |
$ |
24,567 |
$ |
— |
$ |
10,700 |
$ |
— |
$ |
13,867 |
The activity for the nine months
ended September 30, 2015 is as follows:
Noteholder |
|
Balance
1/1/15 |
|
Additions |
|
Payments |
|
Sold |
|
Balance
9/30/15 |
HPI
Partners (1) |
$ |
63,925 |
$ |
— |
$ |
63,730 |
$ |
— |
$ |
195 |
AFPW
(1) |
|
— |
|
22,000 |
|
22,000 |
|
— |
|
— |
Henry
Fong (2) |
|
— |
|
3,000 |
|
— |
|
— |
|
3,000 |
SurgLine
Int’l (1) |
|
10,672 |
|
— |
|
— |
|
— |
|
10,672 |
Total |
$ |
74,597 |
$ |
25,000 |
$ |
85,730 |
$ |
— |
$ |
13,867 |
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. |
14. Subsequent events:
From
October 1, 2015, through November 15, 2015, the Company has issued 250,650,293 shares of common stock upon conversion of $12,451
of convertible promissory note principal.
Management has determined that there
are no further events subsequent to the balance sheet date that should be disclosed in these financial statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
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 COMPANY'S EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED TO, STATEMENTS
CONCERNING THE COMPANY'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 INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANY'S
CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON THE VARIETY OF IMPORTANT FACTORS, INCLUDING UNCERTAINTY RELATED
TO THE COMPANY'S OPERATIONS, MERGERS OR ACQUISITIONS, GOVERNMENTAL REGULATION, THE VALUE OF THE COMPANY'S ASSETS AND ANY OTHER
FACTORS DISCUSSED IN THIS AND OTHER COMPANY FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
GENERAL
FastFunds Financial Corporation (“FFFC”)
is a holding company and through January 31, 2006 operated primarily through its wholly-owned subsidiary Chex Services, Inc. (“Chex”).
As disclosed in the December 31, 2014 10-K, FFFC also has several other non-operating wholly-owned subsidiaries. FFFC and its subsidiaries
are referred to as (the “Company”).
OVERVIEW
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, 2014 and 2013. The financial statements presented for the nine months ended September
30, 2015 and 2014 include FFFC and its subsidiaries.
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 future results.
You should read this information in conjunction with the audited consolidated financial statements of the Company, including the
notes to those statements for the year ended December 31, 2013, filed with the SEC on April 15, 2014, and the following “Management’s
Discussion and Analysis of Financial Conditions and Results of Operations”.
The Company’s financial statements for
the nine months ended September 30, 2015 and 2014 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 $11,453,150 and an accumulated deficit
of approximately $28,453,170 as of September 30, 2015. Moreover, it presently has minimal 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.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 2015,
net cash used in operating activities was $295,622 compared to $638,039 for the nine months ended September 30, 2014. Net loss
was $1,160,413 and $1,887,284 for the nine months ended September 30, 2015 and 2014, respectively. Included in the net loss for
the nine months ended September 30, 2015 was $430,019 for the amortization of debt discounts. The current period loss also included
operating expenses of approximately $467,533 and selling, general and administrative, interest expense of $844,707 related to convertible
promissory notes and derivative liability income of $113,372 due to the change in fair value of derivative liabilities.
Included in the net loss for the nine months
ended September 30, 2014 was $930,542 for the amortization of debt discounts and deferred financing costs related to convertible
notes and $106,673 of stock compensation expense related to the issuance of 1,000 shares of Class C preferred stock. The current
period loss also included operating expenses of approximately $205,401 and interest expense of $1,403,876 related to convertible
promissory notes and convertible debentures. These amounts were partially offset by a credit to derivative liability expense of
$54,344 due to the change in fair value of derivative liabilities.
Net cash used in investing activities for the
nine months ended September 30, 2015, was solely related to the Company’s payment of $222,000 in cash for a 49% minority
stake in Pure Grow LLC.
Net cash used in investing activities for the
nine months ended September 30, 2014, primarily consisted of an advance of $25,000 in exchange for a note receivable. Additionally,
the Company paid $100,000 for the Brawnstone, LLC acquisition and received $133,806 in cash from the newly purchased subsidiary.
Net cash provided by financing activities for
the nine months ended September 30, 2015 was $517,670 compared to $672,295 for the nine months ended September 30, 2014. During
the nine months ended September 30, 2015, the Company received $536,500 from the issuance of convertible notes, $27,500 from borrowings
on notes and loans payable from related parties, and $117,100 from the issuance of notes payable to third parties. The company
repaid $163,430 of notes payable ($88,036 related parties).
During the nine months ended September 30,
2014, the Company received $672,295 from the issuance of convertible notes.
For the nine months ended September 30, 2015,
cash and cash equivalents increased by $48 compared to an increase of $43,062 for the nine months ended September 30, 2014. Ending
cash and cash equivalents at September 30, 2015 was $3,415 compared to $45,119 at September 30, 2014.
We have limited cash and cash equivalents on
hand and need to raise funds to continue to be able to support our operating expenses and to meet our other obligations as they
become due.
REVENUES
Total revenues for the three and nine months
ended September 30, 2015 were $203,619 and $605,889 compared to $235,560 and $249,926 for the three and nine months ended
September 30, 2014. Revenues in the three and nine month periods ended September 30, 2015 and September 30, 2014 consist of Brawnstone
sales revenue and of credit card income on Nova’s remaining portfolio.
OPERATING EXPENSES
Operating expenses for the three and nine months
ended September 30, 2015, were $194,424 and $467,533, respectively compared to $193,174 and $205,401 for the three and nine months
ended September 30, 2014. Operating expenses incurred during the three and nine month periods ended September 30, 2015 and September
30, 2014 were primarily comprised of the Brawnstone subsidiary’s cost of sales as well as third party servicing fees of Nova’s
remaining credit card portfolio.
SELLING GENERAL AND ADMINISTRATIVE EXPENSES
Corporate operating expenses for the three
and nine months ended September 30, 2015 were $139,316 and $518,662 compared to $235,675 and $582,277 for the three and nine months
ended September 30, 2014, respectively. The expenses were comprised of the following:
| |
Three months ended
September 30, | |
Nine months ended
September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Accounting and legal | |
$ | 3,038 | | |
$ | 8,190 | | |
$ | 6,715 | | |
$ | 37,339 | |
Stock compensation expense | |
| — | | |
| — | | |
| — | | |
| 106,673 | |
Management and director fees | |
| 37,500 | | |
| 37,500 | | |
| 112,500 | | |
| 75,000 | |
Consulting and other professional | |
| 26,579 | | |
| 78,500 | | |
| 109,807 | | |
| 202,925 | |
Transfer agent and filing fees | |
| 2,402 | | |
| 10,270 | | |
| 12,276 | | |
| 22,027 | |
Other | |
| 69,797 | | |
| 101,215 | | |
| 277,366 | | |
| 138,313 | |
| |
$ | 139,316 | | |
$ | 235,675 | | |
$ | 518,662 | | |
$ | 582,277 | |
| |
| | | |
| | | |
| | | |
| | |
Effective October 1, 2012, the Company has
agreed to compensate Mr. Fong $5,000 each per month for services being provided. On June 1, 2014, the Company increased Mr. Fong’s
monthly compensation to $12,500 (management and director fees). Included in three and nine months ended September 30, 2015, were
accounting and auditing fees of $3,038 and $6,715, respectively. Included in three and nine months ended September 30, 2014, were
accounting and auditing fees of $8,190 and $37,339, respectively. Stock compensation expense is as a result of 1,000 shares of
Class C preferred stock issued to Mr. Fong.
Consulting and other professional fees decreased
for the three and nine months periods ended September 30, 2015, compared to the three and nine months ended September 30, 2014.
The current period expenses included 8,250 (three months) and $48,710 (nine months) in consulting fees, $6,594 (three months) and
$14,798 (nine months) as part of a marketing agreement to increase the Company’s social media presence, $2,420 (three months)
and $6,375 (nine months) in investor relations costs and $9,315 (three months) and $39,924 (nine months) in additional outside
consulting fees.
Consulting and other professional fees for
the three and nine month periods ended September 30, 2014 included $23,000 (three months) and $47,175 (nine months) of costs related
to Cannabis Angel initiatives, $12,000 (nine months) as part of a marketing agreement to increase the Company’s social media
presence, $2,750 (three months) and $58,000 (nine months) in investor relations costs and $52,750 (three months) and 85,750 (nine
months) in additional outside consulting fees. The 2013 periods include consulting expenses of $19,712 (nine months) and transfer
agent fees of $2,874 (three months) and $7,997 (nine months).
General and other administrative costs for
the three and nine months ended September 30, 2015 were $69,797 and $277,366, respectively, compared to $101,215 and $138,313,
respectively for the three and nine months ended September 30, 2014. Expenses for the nine months ended September 30, 2015 include
rent expense of $3,982 (three months) and $11,222 (nine months), travel expense of $1,047 (three months) and $6,842 (nine months),
royalty fees of $15,000 (three months) and $30,000 (nine months) and Brawnstone specific operating costs of $24,637 (three months)
and $211,403 (nine months).
Expenses for the nine months ended September
30, 2014 include rent expense of $3,619 (three months) and $23,843 (nine months), travel expense of $2,027 (three months) and $11,950
(nine months), internet expenses of $9,160 (nine months), moving expense of $3,800 (nine months), and Brawnstone’s operating
costs of 93,388 (three and nine months).
OTHER INCOME (EXPENSE)
Other expense, net for the three and nine months
ended September 30, 2015 was $232,756 and $780,107 respectively, compared to $570,124 and $1,349,532 for the three and nine months
ended September 30, 2014, respectively.
The three and nine months ended September
30, 2015, included derivative liability income of $189,140 and $113,372 respectively mainly due to the initial derivative income
recognized as a consequence of the issuance of convertible debentures. Interest expense for the three and nine month periods totaled
$373,124 and $844,707, respectively. Loss from unconsolidated investee, Pure Grow, recognized as a result of equity method accounting
for an investee, totaled $48,772 for the three and nine month periods ending September 30, 2015.
The three and nine
months ended September 30, 2014, included derivative liability income of $13,229 and $54,344. The debit was predominantly a result
of the change in fair value of the conversion features in the Typenex note of $86,292 for the three and nine months ended September
30, 2014, based on the Black Scholes valuation as of September 30, 2014.
CONTRACTUAL OBLIGATIONS
Not Applicable
CRITICAL ACCOUNTING POLICIES
Our financial statements have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements
requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and
expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including
those related to income taxes, contingencies and litigation. We base our estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
Our significant accounting policies are described
in more detail in our 2014 Annual Report on Form 10-K.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
Not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
The Company maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that
are designed to ensure that information required to be disclosed in the Company’s filings under the Exchange Act is recorded,
processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated
to allow our management to make timely decisions regarding required disclosure. Our President, who serves as our principal executive
officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of
the period covered by this report and he determined that our disclosure controls and procedures were not effective due to a control
deficiency. During the period the Company did not have additional personnel to allow segregation of duties to ensure the completeness
or accuracy of our information. Due to the size and operations of the Company, we are unable to remediate this deficiency until
we acquire or merge with another company.
Changes in Internal Control Over Financial Reporting
During the quarter ended September 30, 2015, there were no changes in the Company's internal control over financial reporting (as
defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect,
its internal control over financial reporting.
Changes in Internal Control over Financial
Reporting. There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Refer to Note 6 of the Condensed Consolidated Financial Statements
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the nine months ended September 30,
2015, the Company issued 1,528,259,323 shares of common stock upon the conversion of $295,257 of debentures payable and $6,752
of accrued and unpaid interest. The shares were issued at approximately $0.0001 per share.
Item 3. Defaults upon Senior Securities
None.
Item 4. Other Information
None.
Item 5. Exhibits
Exhibit Number |
Description |
|
|
31.1 |
CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith) |
|
|
32.1 |
CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith) |
SIGNATURES
Pursuant to the requirements 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.
|
FastFunds Financial Corporation |
|
(Registrant) |
|
|
Date: November 19, 2015 |
By: /s/ Henry Fong |
|
Henry Fong |
|
Chief Executive Officer |
29
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 Quarterly Report on Form 10-Q 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. | The Company's other certifying officer and I are 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 our
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 control over financial reporting, or caused such internal control over financial reporting to be designed
under our 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 Company's disclosure controls and procedures and presented in this report our 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 Company's 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; |
| 5. | The Company's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the Company's auditors and the audit committee of the Company'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: November 19, 2015 |
/s/ Henry Fong |
|
Henry Fong |
|
Chief Executive 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 Quarterly Report of
FastFunds Financial Corporation (the "Company") on Form 10-Q for the period ended September 30, 2015, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"). I, Henry Fong, Chief Executive Officer, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| 2) | 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 |
|
November 19, 2015 |
|
|
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION
906 HAS BEEN PROVIDED TO FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES AND WILL BE RETAINED BY FASTFUNDS FINANCIAL CORPORATION
AND SUBSIDIARIES AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.