U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

 X .          ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: DECEMBER 31, 2010

     .          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from            to           .

Commission File Number: 000-33053

FASTFUNDS FINANCIAL CORPORATION

(Name of Registrant in its charter)

NEVADA	87-0425514
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

319 CLEMATIS STREET, SUITE 703, WEST PALM BEACH, FLORIDA 33401

(Address of principal executive offices)(Zip Code)

Issuer’s telephone number: (561) 514-9042

Securities registered under Section 12 (b) of the Exchange Act:

NONE

Securities registered under Section 12 (g) of the Exchange Act:

COMMON STOCK, $.001 PAR VALUE

(Title of Class)

___________________________________________________________________________________________________

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes      . No  X .

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.      .

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 Days: Yes  X . No      .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K:      .

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer:

Large accelerated filer	.	Accelerated filer	.
Non-accelerated filer	. (Do not check if a smaller reporting company)	Smaller reporting company	X .

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes      . No  X .

The aggregate market value of the voting stock held by non-affiliates of the Registrant was $845,000 based on the last sale price of the Registrant's common stock as of the last business day of the Registrants’ most recently completed second fiscal quarter, ($0.13 per share as of June 30, 2010) as reported on the Over-the-Counter Bulletin Board.

The Registrant had 10,212,456 shares of common stock outstanding as of March 31, 2011.

Documents incorporated by reference: None

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FASTFUNDS FINANCIAL CORPORATION

FORM 10-K

THIS REPORT MAY CONTAIN CERTAIN “FORWARD-LOOKING” STATEMENTS AS SUCH TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 OR BY THE SECURITIES AND EXCHANGE COMMISSION IN ITS RULES, REGULATIONS AND RELEASES, WHICH REPRESENT THE REGISTRANT’S EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED TO, STATEMENTS CONCERNING THE REGISTRANT’S OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL CONDITION, GROWTH AND ACQUISITION STRATEGIES, INVESTMENTS, AND FUTURE OPERATIONAL PLANS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH AS “MAY”, “WILL”, “EXPECT”, “BELIEVE”, “ANTICIPATE”, “INTENT”, “COULD”, “ESTIMATE”, “MIGHT”, OR “CONTINUE” OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE REGISTRANT’S CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF IMPORTANT FACTORS, INCLUDING UNCERTAINTY RELATED TO ACQUISITIONS, GOVERNMENTAL REGULATION, MANAGING AND MAINTAINING GROWTH, THE OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES, VOLATILITY OF STOCK PRICE AND ANY OTHER FACTORS DISCUSSED IN THIS AND OTHER REGISTRANT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.

PART I

ITEM 1.

DESCRIPTION OF BUSINESS.

(a)

General development of business.

FastFunds Financial Corporation (“FastFunds”, “FFFC” or the “Company”) is a holding company, organized in Nevada in 1985, formerly operating through its wholly owned subsidiary Chex Services, Inc. (“Chex”).  Chex is a Minnesota corporation formed in 1992, and prior to the Asset Sale described and defined in the paragraph below, provided financial services, primarily check cashing, automated teller machine (ATM) access and credit and debit card advances, to customers predominantly at Native American owned casinos and gaming establishments.  FastFunds previously existed under the name “Seven Ventures, Inc.”  On June 7, 2004, a wholly owned subsidiary of Seven Ventures, Inc. merged with and into Chex (the "Merger”).  In the Merger, Hydrogen Power, Inc. (“HPI”), exchanged its 100% ownership of Chex for 7,700,000 shares of the Company’s common stock; representing approximately 93% of the Company’s outstanding common stock immediately following the Merger.  On June 29, 2004, the Company changed its name to FastFunds Financial Corporation.

On December 22, 2005, FastFunds and Chex entered into an Asset Purchase Agreement with Game Financial Corporation, pursuant to which FastFunds and Chex agreed to sell substantially all the assets of Chex (the “Asset Sale”). Such assets also represent substantially all of the operating assets of FastFunds on a consolidated basis. On January 31, 2006, FastFunds and Chex completed the Asset Sale for $14 million. Additionally, FastFunds and Chex entered into a Transition Services Agreement with Game Financial pursuant to which FastFunds and Chex agreed to provide certain services to Game Financial to ensure a smooth transition of the sale of the cash access financial services business. HPI agreed to serve as a guarantor of FastFunds and Chex’s performance obligations under the Transition Service Agreement.

On February 28, 2006, HPI (then known as Equitex, Inc.), held a special meeting of shareholders at which two proposals were approved authorizing the acquisition of Hydrogen Power, Inc. (“Old HPI”), through a newly formed wholly-owned Equitex subsidiary as well as certain related common stock issuances.  Per the terms of the transaction, as amended, Equitex was obligated to deliver $5 million to Old HPI as a condition to close.  On March 14, 2006, FastFunds loaned Equitex the $5 million (the “$5 Million Loan”) for one year at 10% per annum interest.  As security for the $5 Million Loan, Equitex pledged to FastFunds all of the common stock of Old HPI.  In addition, FastFunds is to receive a profit interest from the operations of Old HPI equal to 10% of the net profit of Old HPI, as defined in the relevant loan documents.

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On January 2, 2007, pursuant to the terms of a Redemption, Stock Sale and Release Agreement (the “Redemption Agreement”) by and between HPI and the Company, we (i) redeemed 8,917,344 shares of our common stock held by HPI, (ii) acquired from HPI an aggregate of 5,000,000 shares of common stock of Denaris Corporation, a Delaware corporation (“Denaris”), (iii) acquired from HPI an aggregate of 1,000 shares of common stock of Key Financial Systems, Inc., a Delaware corporation (“Key Financial”), and (iv) acquired from HPI an aggregate of 1,000 shares of common stock of Nova Financial Systems, Inc., a Delaware corporation (“Nova Financial”). Denaris is now a majority owned subsidiary, and Key Financial and Nova Financial are wholly owned subsidiaries of FFFC. Denaris and Key Financial are inactive entities with no operating or intellectual property assets. Nova has limited activity as well as limited assets.  The shares of common stock of each entity transferred to us pursuant to the Redemption Agreement constituted all of HPI holdings in each entity. In consideration of the redemption and acquisition of the shares of Denaris, Key Financial and Nova Financial, we released HPI from all outstanding payment obligations, including obligations under the $5 Million Note dated March 14, 2006.  The outstanding balance on the $5 Million Note, including principal and interest accrued, as of the date of the Redemption Agreement was $5,402,398. The Company received a fairness opinion from an unaffiliated third party with respect to this transaction.

After the closing of the Redemption Agreement, HPI held 3,500,000 shares of FFFC common stock, constituting approximately 34.3% of FFFC’ s outstanding common stock at December 31, 2010.  These shares have been pledged as collateral on certain notes of HPI.  During 2008, as a result of the assumption of this debt by HPI Partners, LLC., (“HPIP”) and the subsequent foreclosure by the debt holders upon HPIP, HPIP owns the 3.5 million shares.  The principal managers of HPIP are Messrs. Fong and Olson.  As of December 31, 2010, we held 1,541,858 shares of HPI common stock, constituting approximately 5.2% of HPI common stock.  Pursuant to the Redemption Agreement, the Company and HPI each provided the other certain registration rights relating to the common stock of such party held by the other party.

On January 18, 2008, the Company filed a complaint in the Superior Court of Washington in King County (the “Superior Court”). The complaint was filed by FastFunds Financial Corporation, Daniel Bishop, Barbara M. Schaper, HP Services LLC, VP Development Corporation, and Gulfstream Financial Partners, LLC (collectively, the “Plaintiffs”) against Dilbagh Singh Gujral, Ricky Gurdish Gujral, Virendra Chaudhary, Hydrofuels Technology, Inc. (“GHTI”) and Hydrogen Power, Inc. (collectively, the “Defendants”).

   Messrs. Chaudhary and Dilawari are directors of HPI. GHTI is the majority shareholder of HPI. Ricky Gurdish Gujral is the former chief executive officer of HPI. The complaint alleges fraud, misappropriation of corporate opportunity and breach of fiduciary duty by the Defendants relating to the merger of Equitex, Inc. and Hydrogen Power, Inc., the Sublicense Agreement with GHTI, and payments to Ricky Gurdish Gujral. The complaint seeks the appointment of a receiver to take possession of the property and assets of the Company and to manage and operate the Company pending completion of the action. The complaint also seeks damages in the excess of $3,000,000, exemplary damages, attorney’s fees plus interest and costs and any other relief the court finds just and proper.  On January 25, 2008, the Superior Court appointed a receiver of HPI with respect to HPI’s assets. Some assets have been recovered by the Receiver. One of the defendants has filed a counterclaim asserting that the action is frivolous; the Plaintiffs have denied the counterclaim in its entirety.  GHTI has sought arbitration regarding ownership of certain patent applications and other intellectual property.  GHTI was granted a stay of this case until the arbitration is complete.

   On March 25, 2010 the Defendants and Plaintiffs entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”).  Pursuant to the Settlement Agreement, which was approved by the receiver and the Court on September 23, 2010, the Defendants and Plaintiffs have agreed to release each other from the claims and to have no further suits against each other.  Additionally, the Defendants have agreed to assign to the Receiver for the benefits of the Plaintiffs any and all rights, including but not limited to insurance payments and settlements for any and all officers and directors liability insurance policies.

From time to time we evaluate opportunities for strategic investments or acquisitions that would complement our current services and products, enhance our technical capabilities or otherwise offer growth opportunities. As a result, acquisition discussions and, in some cases, negotiations may take place and future investments or acquisitions involving cash, debt or equity securities or a combination thereof may result. FastFunds Financial Corporation maintains its principal office at 319 Clematis Street, Suite 703, West Palm Beach, Florida. You can reach us by telephone at (514) 514-9042.

(b)

Financial information about segments.

Through January 31, 2006, we operated in one industry segment, cash disbursement services.  We currently have limited operations.

(c)

Narrative description of business.

Nova was formed to design, market and service credit card products aimed at the sub-prime market consisting mainly of consumers who may not qualify for traditional credit card products. Nova processes payments on a single remaining portfolio which provides the company with limited operations.  Nova continues to receive residual payments on approximately 300 cards still active in the Merrick Bank portfolio at December 31, 2010. The Merrick Bank portfolio should continue to see a decline in active accounts in 2011.

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Subsequent to the Asset Sale, the Company has not conducted limited operations and is the process of locating a business to acquire.  The Company currently has no full-time employees.

ITEM 1A. RISK FACTORS

The purchase of shares of the Company’s common stock is very speculative and involves a very high degree of risk.  An investment in the Company is suitable only for the persons who can afford the loss of their entire investment. Accordingly, investors should carefully consider the following risk factors, as well as other information set forth herein, in making an investment decision with respect to securities of the Company.

RISKS ASSOCIATED WITH OUR COMPANY AND HISTORY:

We have a limited operating business and therefore limited revenues.  We have also posted significant losses in each of the past two fiscal years.

In January 2006, we sold substantially all of our operating business, owned by Chex, to Game Financial Corporation.  The Company currently has a limited operating business and therefore limited revenues.  In addition, we have posted significant losses in each of our past two fiscal years including $3,562,393 for the year ended December 31, 2009 and $875,389 for the year ended December 31, 2010.  As a result, any investment in the Company must be considered purely speculative.

 

The Company’s balance sheet contains certain notes payable, which are currently in default/were due February 28, 2008.

Chex previously relied on promissory notes (the “Notes”) issued to private investors to provide operating capital for its business.  As of December 31, 2010, the balance of the Notes was $2,090,719.  These Notes were due in February 2007 and at that time the Company renewed $283,000 of the Promissory Notes on the same terms and conditions as previously existed.  The Company has failed to pay interest and the principal amount of these notes. The Company received complaints filed from several of these note holders.  The Company has not responded to these complaints and accordingly the plaintiffs were awarded default judgments.   In April 2007 the Company, through a financial advisor, restructured $1,825,000 of the Notes (the “Restructured Notes”).  The Restructured Notes carry a stated interest rate of 15% and matured on February 28, 2008.  The Company has not paid the interest on the Notes since June 30, 2007 and did not repay the Notes on their maturity date and does not currently have sufficient capital to repay the Notes.  In January 2008, the Company and the three guarantors received a complaint filed by the financial advisor (acting as agent for the holders of the Restructured Notes) and the holders of the Restructured Notes.  The 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 has been entered in the total amount of $2,487,250 in principal and interest on the notes, $40,920 in related claims and $124,972 in attorney’s fees and expenses.  The judgment was entered on August 18, 2009. The Company has not made any payments of principal or interest since the judgment.

Chex is a guarantor of certain debt of HPI, and the Company’s entire investment in Chex (i.e., its ownership of all outstanding Chex stock) is subject to a security interest securing such obligation.  Furthermore, all of the assets of Chex are subject to a security interest for the same debt.

In March 2004, HPI closed on $5 million of debt financing and issued convertible promissory notes in that principal amount to two financial institutions (the “Lenders”).  The proceeds from the promissory notes were immediately thereafter loaned to Chex.  The promissory notes are collateralized, among other things, by all of the assets of Chex, and by the 3,500,000 shares of Company common stock owned by HPI.  In conjunction with the Asset Sale, the holders of the promissory notes consented to the sale of certain assets that secured their notes.  In contemplation of the Redemption Agreement described above, on December 29, 2006, HPI and the Company obtained the consent of the Lenders to complete the transactions contemplated by the Redemption Agreement. Contemporaneously with receipt of the consent, HPI and the Company entered into a Note and Security Amendment Agreement dated December 29, 2006 with the Lenders, pursuant to which it was agreed to amend certain terms of the Convertible Promissory Note dated March 8, 2004 in favor of Lenders in the principal amount of $5,000,000 to increase the interest rate applicable to the Convertible Promissory Notes from 7% per annum to 10% per annum and the default interest rate from 10% to 13%.  Accordingly, if HPI defaults on the obligations specified under the promissory notes, and if Chex cannot cure such defaults, the Company’s remaining assets could be lost. During 2008 as a result of the assumption of this debt by HPI Partners, LLC., (“HPIP”) and the subsequent foreclosure by the debt holders upon HPIP. HPIP owns the 3.5 million shares. The principal managers of HPIP are Messrs. Fong and Olson.  Mr. Fong is the Chairman and CEO of FFFC and Mr. Olson is the secretary of FFFC.  

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We may require additional financing to complete any merger, but we are uncertain whether such financing will be available to us.  

We will require additional capital to continue or to expand our business plans.  We have not identified any potential candidate business with which to merge, therefore, we cannot be certain that business will have revenues from operations that will generate cash flow sufficient to finance our operations and growth thereafter.  In addition, we require additional financing to complete any potential merger to eliminate our current debt, or for working capital purposes to operate our business both now, and in the future, including any operations following a successful acquisition, if any.

Additional financing could be sought from a number of sources, including but not limited to additional sales of equity or debt securities, or loans from banks, other financial institutions or affiliates of the Company.  If additional funds are raised by the issuance of our equity, then the ownership interest of our existing stockholders will be diluted.  If additional funds are raised by the issuance of debt or other equity instruments, we may become subject to certain operational limitations (i.e., negative operating covenants), and such securities may have rights senior to those of the holders of our existing common stock.  It is also possible that financing will not be available to us on terms acceptable to us, if at all.  If adequate funds are not available on acceptable terms, we may be unable to fund our business including the potential acquisition of an operating company.

There are currently outstanding securities convertible into or exchangeable for an aggregate of 2,213,824 shares of our common stock which, if converted or exchanged, will substantially dilute our existing stockholders.

The Company currently has outstanding notes and securities convertible into or exchangeable for an aggregate of 2,213,824 shares of common stock under certain conditions.  In addition, the effective conversion and exercise prices of such securities significantly lower than the current market value of our common stock.  If these securities are converted into or exchanged for common stock, their issuance would have a substantial dilutive effect on the percentage ownership of our current stockholders.  These securities consist of:  (i) options to purchase 330,000 shares of our common stock at an average purchase price of $1.03 per share; and (ii) warrants to purchase an aggregate of 1,883,824 shares of our common stock at a weighted average purchase price of $0.25 per share.

Our common stock trades only in an illiquid trading market, which generally results in lower prices for our common stock.

Trading of our common stock is conducted on the Over-The-Counter Bulletin Board.  This has an adverse effect on the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and the lack of security analysts’ and the media’s coverage of our Company and its common stock.  This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock.

We have not paid dividends to date, and have no intention of paying dividends to our stockholders.

To date, we have not paid any cash dividends and do not anticipate the payment of cash dividends in the foreseeable future.  Accordingly, the only return on an investment in our common stock, if any, may occur upon a subsequent sale of the shares of common stock.

ITEM 2.

PROPERTIES.

FastFunds leases approximately 1,300 square feet for its executive office in West Palm Beach, Florida, which is adequate for its current needs. The current minimum lease payment is approximately $1,800 per month through January 31, 2011, when it expired. Subsequent to January 31, 2011 the lease is on a monthly basis with either party having the right to terminate the lease with 60 days notice. Pursuant to the terms of the lease, FastFunds is also responsible for its pro-rata share of taxes, operating expenses and improvement costs.

ITEM 3. LEGAL PROCEEDINGS.

We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters may have a material adverse impact either individually or in the aggregate on our consolidated results of operations, financial position or cash flows.

In January 2008 the Company and three guarantors received a complaint filed by Grace Capital, LLC (as agent) and individual noteholders in the Fourth Judicial District in the County of Hennepin, in the State of Minnesota.  The complaint seeks payment of principal and interest of $1,946,250 as of January 22, 2008, plus default per diem interest at the rate of twenty percent (20%) per annum and $37,000 for unpaid fees to Grace Capital, LLC. The court has ruled in favor of a motion for summary judgment filed by certain of the plaintiffs and had a  judgment entered in the total amount of $2,487,250 in principal and interest on the notes, $40,920 in related claims and $124,972 in attorney’s fees and expenses.  The judgment was entered on August 18, 2009.

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Pursuant to the terms of the Asset Sale, the Company owed Game Financial Corporation (“Game”) approximately $300,000.  The parties agreed to settle the balance due for $275,000.  The Company didn’t make any payments as stipulated in the settlement, and subsequently, Game filed a complaint against the Company.  The Company has agreed to a judgment of $275,000 plus interest and attorney fees for a total of $329,146.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a)

Market Information.

Our common stock is not listed on any exchange; however, market quotes for the Company’s common stock (under the symbol FFFC) may be obtained from the Over-the-Counter Bulletin Board Service. The bulletin board service is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter securities. The table below states the quarterly high and low bid prices for the common stock as reported by the bulletin board service. However, such Over-the-Counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission and may not represent actual transactions.

Quarter Ended	High		Low
2010
March 31, 2010	$0.18		$0.06
June 30, 2010	$0.15		$0.06
September 30, 2010	$0.13		$0.04
December 31, 2010	$0.10		$0.04

Quarter Ended	High		Low
2009
March 31, 2009	$0.04		$0.015
June 30, 2009	$0.19		$0.02
September 30, 2009	$0.26		$0.04
December 31, 2009	$0.16		$0.04

(b)

Holders.

The number of record holders of our common stock as of March 28, 2011 was 145 according to our transfer agent. This figure excludes an indeterminate number of shareholders whose shares are held in “street” or “nominee” name.

(c)

Dividends.

FastFunds has not declared nor paid cash dividends on our common stock during the previous two fiscal years, nor do we anticipate paying any cash dividends in the foreseeable future. We currently intend to retain any future earnings to fund our limited operations.  

(d)

Securities Authorized for Issuance Under Equity Compensation Plans.

We have the following securities authorized for issuance under our equity compensation plans as of December 31, 2010, including options outstanding or available for future issuance under our 2004 Stock Option Plan.

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Equity Compensation Plan Information
Plan category		Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plan
		(a)		(b)		(c)
Equity compensation plans not approved by security holders		330,000	$	1.03		1,345,000
Total		330,000	$	1.03		1,345,000

Recent Sales of Unregistered Securities

None.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto for the years ended December 31, 2009 and 2008. The financial statements presented for the year ended December 31, 2010 and 2009 include FastFunds, Chex, Collection Solutions, FastFunds International Limited, Key, Nova and Denaris.

In light of the foregoing, and the Company’s sale of substantially all of its assets in January 2006, the historical data presented below is not indicative of, and therefore, not useful for purposes of predicting future results. You should read this information in conjunction with the audited consolidated financial statements of the Company, including the notes to those statements (Item 8), and the following “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”.

The Company’s financial statements for the year ended December 31, 2010 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 $9,303,825, and an accumulated deficit of $21,834,858 as of December 31, 2010.  Moreover, it presently has limited business operations or sources of revenue, and little available resources with which to obtain or develop new operations.

These factors raise substantial doubt about the Company’s ability to continue as a going concern.  There can be no assurance that the Company will have adequate resources to fund future operations or that funds will be available to the Company when needed, or if available, will be available on favorable terms or in amounts required by the Company.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

(a)

Liquidity and Capital Resources

For the year ended December 31, 2010, net cash used in operating activities was $32,310 compared to $141,322 for the year ended December 31, 2009.  Net loss for the year ended December 31, 2010 was $844,877 compared to a net loss of $3,562,393 for the year ended December 31, 2009. Included in the 2009 loss was a litigation contingency of $2,484,922. The net loss for 2009 included selling general and administrative expenses of $616,692 compared to $380,366 in 2010 and interest expense of $465,685 in 2009 compared to $472,750 in 2010. The 2009 non cash adjustments to the net loss included the litigation contingency of $2,484,922 as well as stock based compensation of $82,095 and depreciation and amortization for 2010 and 2009 was $100,800.

.   

Cash provided by financing activities for the year ended December 31, 2010 was $33,934 compared to $141,207 for the year ended December 31, 2009.  During the year ended December 31, 2010, the Company issued $102,603 of notes payable and repaid $67,412 of notes payable. In 2009, the Company issued $143,550 of notes payable and repaid $3,600 of notes payable.  

For the year ended December 31, 2010, net cash increased $1,624 compared to a net cash decrease of $115 for the year ended December 31, 2009.  Ending cash at December 31, 2010, was $2,045 compared to $421 at December 31, 2009.

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Other sources available to us that we may utilize include the sale of equity securities as well as the exercise of stock options and/or warrants, all of which may cause dilution to our stockholders. We may also be able to borrow funds from related and/or third parties.

(b)

Results of operations.

Critical Accounting Policies and Estimates

Preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States 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 date of the balance sheets and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.  Moreover, except as described below, we do not employ any critical accounting policies that are selected from among available alternatives or require the exercise of significant management judgment to apply.

We believe that the following are some of the more critical accounting policies that currently affect our financial condition and results of operations:

1)

stock based compensation; and,

2)

income taxes, deferred taxes

Stock Based Compensation

Share-based compensation expense is based on the estimated fair value at the grant date of the portion of share-based payment awards that are ultimately expected to vest during the period. The grant date fair value of stock-based awards to employees and directors is calculated using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes option pricing model, particularly the Company’s estimates of expected term and volatility, are based in some respects on management’s judgments and historical trends.  Compensation expense for the share-based payment awards granted subsequent to December 31, 2005, are based on the grant date fair value estimated under ASC 718 “Compensation- Stock Compensation.”

Income Taxes, Deferred Taxes

The operations of the Company for periods subsequent to the acquisition of the Company by HPI (then known as Equitex) 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 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 return 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.

In prior years the Company recorded a valuation allowance to reduce its deferred tax assets to the amount, if any, then deemed more likely than not to be realized.  The Company considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance.  During 2006, the Company removed its deferred tax valuation allowance and utilized the remainder of its deferred tax assets related to net operating losses to offset the taxable gain resulting from the Asset Sale.  In addition, during 2006 the Company utilized a portion of HPI’s net operating losses to offset the remainder of 2006 taxable income resulting in a payable due to HPI.  

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements.  This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers.  Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  We are currently evaluating the impact of this ASU, however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

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In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310):  Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.  The ASU amends FASB Accounting Standards Codification Topic 310, Receivables, to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses.  As a result of these amendments, an entity is required to disaggregate, by portfolio segment or class of financing receivables, certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses.  This ASU is effective for interim and annual reporting periods ending on or after December 15, 2010.  The adoption of this standard may require additional disclosures, but we do not expect the adoption to have a material effect on our consolidated financial statements.

 

On December 21, 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-29, which impacts any public entity that enters into business combinations that are material on an individual or aggregate basis. The guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenues and earnings of the combined entity as though the business combination(s) that occurred during the year had occurred at the beginning of the prior annual period when preparing the pro forma financial information for both the current and prior reporting periods. The guidance also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in reported pro forma revenues and earnings. This guidance is effective for business combinations consummated in periods beginning after December 15, 2010.  We do not believe the adoption of this guidance will have a material impact on our Consolidated Financial Statements.

Results of operations

Results of continuing operations for the year ended December 31, 2010 vs. December 31, 2009

REVENUES

Total revenues for 2010 were $53,104 compared to $54,930 for 2009.  Revenues for the year ended December 31, 2010 and 2009 consist of credit card income on Nova’s remaining credit card portfolio.  

OPERATING EXPENSES

Operating expenses were $44,865 for the year ended December 31, 2010 compared to $50,024 for 2009.  The operating expenses for the year ended December 31, 2010 and 2009 primarily consisted of expenses related to third party servicing fees of Nova’s remaining credit card portfolio.  

CORPORATE OPERATING (INCOME) EXPENSES

Corporate operating expenses for 2010 were $380,366 and $616,692 for 2009. The expenses were comprised of the following:

		2010		2009
Salaries and benefits	$	--	$	8,516
Stock-based compensation		--		82,095
Accounting, legal and consulting		349,096		486,226
Other		31,270		39,855
	$	380,366	$	616,692

Salaries and related costs decreased in 2010 compared to the year ended December 31, 2009 as the Company had no employees as of March 15, 2009.

Accounting, legal and consulting expenses decreased for the year ended December 31, 2010. The decrease was primarily as a result of decreases in legal fees associated with certain law suits the Company defended in 2009. Current expenses include consulting expenses of $10,000 and $3,000 per month being accrued for services provided by the Acting CEO and corporate secretary respectively, as well as $25,000 accrued annually for Director fees. Consulting costs for both periods, includes $100,800 of amortization expense related to a consulting agreement with a former officer of Chex.

Other costs included in corporate operating expenses decreased for the year ended December 31, 2010 compared to the year ended December 31, 2009. The expenses are mostly comprised of rent $23,058 (2010) and $33,863 (2009) and telephone $3,999 (2010) and $4,723 (2009).

9

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In April 2009, the Company issued 2,038,114 shares of common stock to previous holders of the Company’s convertible debentures.  The Company issued the shares in consideration of the delay in delivering registered shares of common stock upon notice from the debenture holders.  The shares were valued at $0.02 per share (the market value of the common stock), and accordingly the Company recorded $40,762 as stock compensation expense for the year ended December 31, 2009.  Also included in stock compensation expense for 2009 were warrants issued to purchase 1,447,618 shares of common stock.  The warrants have an exercise price of $0.03 per share, and 1,047,618 warrants expire in April 2010 and 400,000 warrants expire April 2011. The Company recorded $41,333 of stock compensation expense for the issuance of the warrants.

OTHER INCOME (EXPENSE)

Other expense, net for the year ended December 31, 2010 was $472,750 compared to expenses of $2,950,607 for the year ended December 31, 2009. The 2009 period included $2,484,922 of litigation contingency expense. Interest expense for the year ended December, 2010 and 2009 is summarized as:

		2010		2009
Notes payable, other	$	432,486	$	437,021
Notes payable, related parties		40,264		28,664
	$	472,750	$	465,685

INCOME TAX EXPENSE

There was no income tax expense recorded for the years ended December 31, 2010 and 2009.  

OFF BALANCE SHEET ARRANGEMENTS

None

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company has limited exposure to market risks related to changes in interest rates. The Company does not currently invest in equity instruments of public or private companies for business or strategic purposes.

The principal risks of loss arising from adverse changes in market rates and prices to which the Company and its subsidiaries are exposed relate to interest rates on debt. The Company has only fixed rate debt. The Company has $2,795,019 of debt outstanding as of December 31, 2010, of which $2,090,719 has been borrowed at fixed rates ranging from 10% to 15%. This fixed rate debt is subject to renewal quarterly or annually and was due February 28, 2008.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements are listed under Item 15.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

N/A

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

A review and evaluation was performed by the Company's management, including the Company's Acting Chief Executive Officer (the "CEO") who is also the Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that review and evaluation, the CEO /CFO has concluded that as of December 31, 2010 disclosure controls and procedures, were effective at ensuring that the material information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported as required in the application of SEC rules and forms.

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Management’s Report on Internal Controls over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

•

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;

•

Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statement.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our CEO/CFO has not evaluated the effectiveness of our internal control over financial reporting as described in Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report based upon criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) due to the fact that the we do not have the personnel resources or technological infrastructure in place to perform the evaluation.  Based upon our management’s discussions with our auditors and other advisors, our CEO/CFO believe that, during the period covered by this report, such internal controls and procedures were not effective as described below.  

Due to the small size and limited financial resources, the Company’s Corporate Secretary and the acting chief executive officer are the only individuals involved in the accounting and financial reporting.  As a result, there is no segregation of duties in the accounting function, leaving all aspects of financial reporting in the hands of our acting chief executive officer and physical control of cash in the hands of the Corporate Secretary. This lack of segregation of duties represents a material weakness.  We will continue periodically review our disclosure controls and procedures and internal control over financial reporting and make modifications from time to time considered necessary or desirable.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

(a)(b)(c)

Identification of directors, executive officers and certain significant persons

Name		Age		Offices Held		Length of service
Henry Fong		75		Chairman		Since June 2004
Thomas B. Olson		44		Secretary		Since June 2004
Barry Hollander		53		Acting Chief Executive Officer		Since January 2007

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Our directors hold office until the next annual meeting of the stockholders and until their respective successors have been elected and qualified. Officers are appointed by our Board of Directors and hold office until their successors are duly elected and qualified.

No arrangement exists between any of the above officers and directors pursuant to which any one of those persons was elected or appointed to such office or position.

(d)

Family relationships.

Not applicable.

(e)

Business experience.

HENRY FONG

Mr. Fong became the Company’s chairman upon the effectiveness of the Merger.  Mr. Fong has served in a variety of roles for other public corporations. Mr. Fong has been President and a Director of China Nuvo Solar Energy, Inc. (“China Nuvo”) since March 2002. China Nuvo is an alternative energy company that is publicly traded.  Mr. Fong has been president and a director of Alumifuel Power Corporation, (“Alumifuel”) formerly, Inhibiton Therapeutics, Inc. since its inception in May 2004.  Alumifuel is a publicly held company developing hydrogen generation products. Mr. Fong has been the president, CEO and director of Techs Loanstar, Inc., (“Techs”) since February 2010.  Techs’ is a publicly traded company in the social network industry and has been the president, treasurer and a director of Hydrogen Power, Inc., formerly Equitex, Inc. from its inception in January 1983 to January 2007. Mr. Fong has been president and a director of Equitex 2000, Inc. since its inception in 2001. From 1959 to 1982 Mr. Fong served in various accounting, finance and budgeting positions with the Department of the Air Force. During the period from 1972 to 1981 he was assigned to senior supervisory positions at the Department of the Air Force headquarters in the Pentagon. In 1978, he was selected to participate in the Federal Executive Development Program and in 1981, he was appointed to the Senior Executive Service. In 1970 and 1971, he attended the Woodrow Wilson School, Princeton University and was a Princeton Fellow in Public Affairs. Mr. Fong received the Air Force Meritorious Civilian Service Award in 1982. Mr. Fong has passed the uniform certified public accountant exam. In March 1994, Mr. Fong was one of twelve CEOs selected as Silver Award winners in FINANCIAL WORLD magazine’s corporate American “Dream Team.”

THOMAS B. OLSON

Mr. Olson became the Company’s secretary upon the effectiveness of the Merger.  Mr. Olson also served as secretary of Equitex from January 1988 to April 2007, and has been a director of Chex since May 2002. From March 2002 through his resignation on December 15, 2010 Mr. Olson had been the secretary of China Nuvo Solar Energy, Inc., a publicly traded alternative energy company. Mr. Olson has been Secretary of Equitex 2000, Inc. since its inception in 2001. Mr. Olson has been secretary of Alumifuel since its inception in May 2004.  Mr. Olson has attended Arizona State University and the University of Colorado at Denver.

BARRY HOLLANDER

Mr. Hollander has been our Acting Chief Executive Officer since January 2007.  Mr. Hollander has been the Chief Financial Officer of China Nuvo Solar Energy, Inc. since May 2002 and the Chief Financial Officer of Techs’ since February 2010. Mr. Hollander has a BS degree from Fairleigh Dickinson University and passed the uniform certified public accountant exam.

(f)

Involvement in certain legal proceedings.

Not applicable.

(g)

Promoters and control persons.

Not applicable.

(h)

Audit committee financial expert.

See (i) below.

(i)

Identification of the audit committee

The Company does not currently have an audit committee of the board of directors, as none is required, and the board believes it can effectively serve in that function and, therefore, currently does.  Management believes that certain individuals on the board of directors may have the necessary attributes to serve as a financial expert on an audit committee, if required.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires executive officers and directors and persons who beneficially own more than 10% of our common stock to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater-than-10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.  We believe that during 2010, based solely on a review of the copies of such forms furnished to us during 2010 and written representations from the executive officers, directors and greater-than-10% beneficial owners of our common stock, have complied with all Section 16 filing requirements.

CODE OF ETHICS

We have adopted a Code of Ethics for our senior financial management, which includes our chief executive officer and chief financial officer as principal executive and accounting officers, that has been filed as an exhibit to this report.

ITEM 11. EXECUTIVE COMPENSATION.

Compensation Discussion and Analysis

Equity Compensation

Mr. Barry Hollander became Acting Chief Executive Officer in January 2007, filling a vacancy.  Prior to that appointment, Mr. Hollander was providing functions related to accounting, finance and general operations of the Company as a consultant.  Pursuant to the Board of Directors resolution, The Company has been accruing a monthly management fee for Mr. Hollander of $10,000 per month and is paid when cash flow is available. During the year ended December 31, 2010 Mr. Hollander received $3,000. As of December 31, 2010, Mr. Hollander is owed $261,400 for these services.

Cash Incentive Bonuses

We had no cash incentive bonus program in effect for 2010.

Severance and Change-in-Control Benefits

We had no provisions for mandatory severance benefits in the event of a termination of change of control of the Company.

We have no plan or arrangement with respect to any officer’s of the Company that will result from a change in control of the Company or a change in the individual’s responsibilities following a change in control.  For descriptions of applicable employment agreements and arrangements, please refer to the above paragraph (a) of this Item.

Other Benefits

Through the Asset Sale on January 31, 2006, our executives were eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life and disability insurance on the same basis as our other employees.

We currently have no benefit plan.

Summary Compensation Table

The following table sets forth information regarding compensation paid to our officers during the years ended December 31, 2010 and 2009:  

Name and Principal Position	Year	Salary ($)	Bonus ($)	All Other Compensation ($)	Total ($)
(a)	(b)	(c)	(d)	(i)	(j)
Barry Hollander (1) Acting Chief Executive Officer	2010 2009	$0 $0	$0 $0	$120,000 $120,000	$120,000 $120,000

(1)

Mr. Hollander became the acting chief executive officer on January 2, 2007 to fill a vacancy and the Company accrued fees of $10,000 per month during 2010 and 2009. During the year ended December 31, 2010 Mr. Hollander received payments of $3,000. Included in accrued liabilities related parties at December 31, 2010 is $261,400.

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Grant of Plan-Based Awards

None.

Outstanding Equity Awards at Fiscal Year-End Table

None.

Option Exercises and Stock Vested Table

None.

Non-Qualified Deferred Compensation Plans

We have no non-qualified deferred compensation plans currently in effect.

Director Compensation

The following table shows the compensation earned by each of our non-officer directors for the year ended December 31, 2010.

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($) (2)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Non-Qualified Deferred Compensation Earnings	All Other Compensation	Total ($)
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)
Henry Fong	$25,000						$25,000

(1)

Amount reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2010 in accordance with SFAS 123(R) of stock option awards, and may include amounts from awards granted in and prior to fiscal year 2008.  Assumptions used in the calculation of this amount for employees are identified in Note 2 to our annual financial statements for the year ended December 31, 2010 included elsewhere in this Annual Report.

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The 2010 amounts were not paid and are included in accrued expenses on the 2010 balance sheet.  In September 2005 the Board of Directors of the Company authorized a new compensation plan to all Directors of the Company, which includes the grant of 30,000 options to each director on an annual basis, as well as annual compensation of $25,000 to each director, to be paid in monthly installments. Beginning with the monthly fee due September 1, 2006, the Board of Directors temporarily suspended the monthly payment and accordingly, at December 31, 2010, $179,159 is included in accrued liabilities representing the total amount that remains unpaid in the aggregate.  Additionally, members of the board of directors receive reimbursement for expenses incurred in attending board meetings or for other services related to their responsibilities as board members.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

(a) Security Ownership of Certain Beneficial Owners and Security Ownership of Management.

The following table contains information at March 31, 2011, as to the beneficial ownership of shares of our common stock by each person who, to our knowledge at that date, was the beneficial owner of five percent or more of the outstanding shares of the class, each person who is a director or a named executive officer of the Company under the summary compensation table and all persons as a group who are current executive officers and directors, and as to the percentage of outstanding shares so held by them at March 31, 2011. The number of shares beneficially held is determined under rules promulgated by the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose.  Including the number of shares below does not, however, constitute an admission that the named stockholder is a direct or indirect beneficial owner of the shares.

Name and Address of Beneficial Owner		Shares of Common Stock Owned (1)		Shares of Common Stock Underlying Options (1)		Total		Percentage of Common Stock Owned (2)
HPI Partners, LLC. 7315 E. Peakview Ave. Englewood, Co. 80111		3,500,000		0		3,500,000		34.3%
Henry Fong 7315 E Peakview Ave Englewood CO 80111		148,725		90,000		238,725		2.3%
Barry Hollander 319 Clematis St #703 West Palm Beach FL 33401		28,546		0		28,546		0.3%
All officers and directors as a group (three persons)		206,212		120,000		326,212		3.0%

(1)

The beneficial owners exercise sole voting and investment power.

(2)

As of March 28, 2011, 10,212,456 shares of our common stock were outstanding.

(c)

Changes in control. None

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

(a) Transactions with Related Persons.

None.

Transactions with Directors

DIRECTOR INDEPENDENCE

Our board of directors has one director and has no standing sub-committees at this time due to the associated expenses and the small size of our board.  We are not currently listed on a national securities exchange that has requirements that a majority of the board of directors be independent, however, the board has determined that Aaron A. Grunfeld, until his resignation on November 8, 2008, was an “independent” under the definition set forth in the listing standards of the NASDAQ Stock Market, Inc., which is the definition that our board has chosen to use for the purposes of the determining independence.  

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In performing the functions of the audit committee, our board oversees our accounting and financial reporting process.  In this function, our board performs several functions.  Our board, among other duties, evaluates and assesses the qualifications of the Company’s independent auditors; determines whether to retain or terminate the existing independent auditors; meets with the independent auditors and financial management of the Company to review the scope of the proposed audit and audit procedures on an annual basis; reviews and approves the retention of independent auditors for any non-audit services; reviews the independence of the independent auditors; reviews with the independent auditors and with the Company’s financial accounting personnel the adequacy and effectiveness of accounting and financial controls and considers recommendations for improvement of such controls; reviews the financial statements to be included in our annual and quarterly reports filed with the Securities and Exchange Commission; and discusses with the Company’s management and the independent auditors the results of the annual audit and the results of our quarterly financial statements. While we do not currently have a standing compensation committee, our non-employee director considers executive officer compensation, and our entire board participates in the consideration of director compensation.  Our non-employee board members oversee our compensation policies, plans and programs.  Our non-employee board members further review and approve corporate performance goals and objectives relevant to the compensation of our executive officers; review the compensation and other terms of employment of our Chief Executive Officer and our other executive officers; and administer our equity incentive and stock option plans.  Each of our directors participates in the consideration of director nominees.  In addition to nominees recommended by directors, our board will consider nominees recommended by shareholders if submitted in writing to our secretary.  Our board believes that any candidate for director, whether recommended by shareholders or by the board, should be considered on the basis of all factors relevant to our needs and the credentials of the candidate at the time the candidate is proposed.  Such factors include relevant business and industry experience and demonstrated character and judgment.

Indebtedness of management.

Mr. James Welbourn, one of the Company’s former directors (resigned January 2, 2007) has a note payable to the Company at December 31, 2010 in the amount of $51,766, which is presented as a reduction of stockholders’ equity in the Company’s balance sheet as of December 31, 2010.  In conjunction with the Asset Sale, the Company agreed to compensate the director $100,800 annually in consideration of a five year non-compete agreement and a release, whereby the director waived his right to future commissions that he was previously entitled to.  Such compensation is being applied to reduce the note payable.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

R.R. Hawkins & Associates International PC (“Hawkins”) served as our independent registered public accounting firm for December 31, 2010 and 2009.

Audit Fees

Fees billed and expected to be billed by Hawkins for audit services related to the year ended December 31, 2010 and 2009 were approximately $7,000, respectively, which includes out-of-pocket costs incurred in connection with these services.

Audit-Related Fees

Fees billed by Hawkins for audit-related services related to the years ended December 31, 2010 were approximately $0.

Tax Fees

Fees billed and expected to be billed by Hawkins for tax return preparation services related to the year ended December 31, 2010 were approximately $0.

All Other Fees

The Company incurred no other fees to Hawkins for 2010 and 2009.

Preapproval Policy

Pursuant to our Audit Committee Charter, before the accountant is engaged by us to render audit or non-audit services, our audit committee approves the engagement.  In absence of a standing audit committee, such approval is made by our entire board of directors.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)

The following documents are filed as a part of this report immediately following the signature page.

1.

Financial Statements and Supplementary Data

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated financial statements:
Consolidated balance sheets - December 31, 2010 and 2009	F-3
Consolidated statements of operations - years ended December 31, 2010 and 2009	F-4
Consolidated statements of stockholders’ equity (equity deficiency) Years ended December 31, 2010 and 2009	F-5
Consolidated statements of cash flows - years ended December 31, 2010 and 2009	F-6
Notes to consolidated financial statements	F-7

2.

Financial Statements Schedules.

Financial statements and exhibits – Schedule 11, Valuation and Qualifying Accounts, are omitted because the information is included in the consolidated financial statements and notes.

3.

Exhibits.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 15, 2011	FASTFUNDS FINANCIAL CORPORATION (Registrant)
	By   /S/ BARRY HOLLANDER
	Acting Chief Executive Officer Principal Executive Officer and Principal Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Date: April 15, 2011	/S/ BARRY HOLLANDER
	Barry Hollander, Acting Chief Executive Officer
Date: April 15, 2011	/S/ HENRY FONG
	Henry Fong, Director

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

YEARS ENDED DECEMBER 31, 2010 and 2009

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Reports of Independent Registered Public Accounting Firm	F-2
Consolidated financial statements:
Consolidated balance sheets	F-3
Consolidated statements of operations	F-4
Consolidated statements of stockholders’ equity (equity deficiency)	F-5
Consolidated statements of cash flows	F-6
Notes to consolidated financial statements	F-7

F-1

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Board of Directors

FastFunds Financial Corp.

West Palm Beach, FL

Report of Independent Registered Public Accounting Firm

We have audited the consolidated balance sheet of FastFunds Financial Corp. as of December 31, 2010 and the related statements of operations, stockholders’ equity and cash flows for the year ending December 31, 2010.  These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the schedule of accounts receivable is free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the schedule of accounts receivable.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FastFunds Financial Corp. as of December 31, 2010, the results of operations, stockholders’ equity and its cash flows for the year ended December 31, 2010 in conformity with generally accepted accounting principles in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company has incurred net losses since inception, which raise substantial doubt about its ability to continue as a going concern.  The financial statements do not include any adjustment that might result from the outcome of this uncertainty.

/s/ R.R. Hawkins & Associates International, a PC

April 14, 2011

Los Angeles, CA

Corporate Headquarters

5777 W. Century Blvd. , Suite No. 1500

Los Angeles, CA 90045

T: 310.553.5707  F: 310.553.5337

www.rrhawkins.com

F-1

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
				December 31,			December 31,
				2010			2009
ASSETS
Current assets:
	Cash and cash equivalents			$	2,045		$	421
	Accounts receivable, net of allowance of $165 (2010) and $8,916 (2009)				68,974			73,223
	Current portion of notes and advances receivable (Note 3)				139,575			139,575
	Other current assets				213			4,213
			Total current assets		210,807			217,432
Accounts receivable					105,000			105,000
Intangible and other assets					200			200
					105,200			105,200
				$	316,007		$	322,632
LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIENCY
Current liabilities:
	Cash overdraft			$	-		$	1,257
	Accounts payable				777,141			785,563
	Due to HPI				75,000			75,000
	Accrued expenses, including related parties $569,459 (2010) and $383,116 (2009) (Note 4)				2,765,062			2,053,121
	Promissory notes and current portion of long-term debt (Note 5), including related parties of $498,963 (2010) and $430,572 (2009)				2,764,507			2,729,316
	Litigation contingency (Note 6)				2,484,922			2,484,922
	Derivative liabilities (Notes 5 and 7)				648,000			648,000
			Total current liabilities		9,514,632			8,777,179
Commitments and contingencies (Notes 4, 5, 6 and 7)
Stockholders' equity deficiency (Note 8):
	Preferred stock, $.001 par value; 5,000,000 shares authorized; no shares issued and outstanding
	Common stock, $.001 par value; 250,000,000 shares authorized; 19,129,800  shares issued and 10,212,456 shares outstanding				19,130			19,130
	Additional paid-in capital				17,216,715			17,216,715
	Notes, advances and interest receivable, related parties				(51,766)			(152,566)
	Common treasury stock at cost; 8,917,344 shares				(4,547,845)			(4,547,845)
	Accumulated deficit				(21,834,858)			(20,989,981)
			Total stockholders' equity deficiency		(9,198,625)			(8,454,547)
				$	316,007		$	322,632

See notes to condensed consolidated financial statements.

F-2

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2010 and 2009
				2010			2009
Fee revenue, net				$	53,104		$	54,930
Operating expenses:
	Processing fees				42,107			45,840
	Returned checks (collected)				(6,951)			(10,565)
	Other				9,709			14,749
			Total operating expenses		44,865			50,024
			Gross profit		8,239			4,906
Selling, general and administrative					279,566			515,892
Depreciation and amortization					100,800			100,800
Loss from operations					(372,127)			(611,786)
Other income (expense):
	Litigation contingency				-			(2,484,922)
	Interest expense including related party interest of $28,864
		(2010) and $17,446 (2009)			(472,750)			(465,685)
			Total other expense		(472,750)			(2,950,607)
Net loss				$	(844,877)		$	(3,562,393)
Net loss per share				$	(0.08)		$	(0.37)
Weighted average number of common shares outstanding
		Basic and diluted			10,212,456			9,670,820

See notes to condensed consolidated financial statements.

F-3

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

See notes to condensed consolidated financial statements.

F-4

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS DECEMBER 31, 2010 and 2009
				2010			2009
Cash flows from operating activities:
	Net loss			$	(844,877)		$	(3,562,393)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization			100,800			100,800
		Non cash interest expense			-			-
		Stock based compensation			-			82,095
		Litigation contingency			-			2,484,922
		Decrease (increase) in assets
			Accounts receivable		4,249			19,711
			Other current assets		4,000
		Increase (decrease) in liabilities
			Accounts payable		(8,423)			52,064
			Accrued expenses		711,941			681,479
Net cash used in operating activities					(32,310)			(141,322)
Cash flows from investing activities:
	Repayments on notes and interest receivable				-			-
Net cash provided by investing activities					-			-
Cash flows from financing activities:
	Increase (decrease in) in checks issued in excess of cash in bank				(1,257)			1,257
	Borrowings on notes and loans payable				102,603			143,550
	Repayments on notes and loans payable				(67,412)			(3,600)
Net cash provided by financing activities					33,934			141,207
Net increase in cash and cash equivalents					1,624			(115)
Cash and cash equivalents, beginning					421			536
Cash and cash equivalents, ending				$	2,045		$	421
Supplemental disclosure of cash flow information:
	Cash paid for interest			$	-		$	14,122
	Cash paid for income taxes			$	-		$	-
Supplemental disclosure of non-cash investing and financing activities:
Conversion of accounts payable and accrued expenses to common stock				$	-		$	-
Cashless exercise of warrants				$	-		$	-
Reclassification from current portion of accounts receivable to non-current				$	-		$	-

See notes to condensed consolidated financial statements.

F-5

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

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.

FFFC’s wholly-owned subsidiaries (collectively referred to as the “Company”) include the following:

Chex, a Minnesota corporation, provided financial services prior to the sale of substantially all of Chex’s assets (the “Asset Sale”), see below, which primarily consisted of check cashing, automated teller machine (ATM) access, and credit card advances to customers primarily at Native American owned casinos and gaming establishments.

Collection Solutions, Inc. (“Collection Solutions”), a Minnesota corporation, formed for the purpose of providing collection services for the Company, customers of the Company, and other entities both within and outside the gaming industry. Collection Solutions is licensed as a collection agency in Minnesota.

FastFunds International, Inc. (“FFI”), a Delaware corporation based in London. FFI was formed to build a presence in Europe for the Company’s stored value card program.

FFC FastFunds (Cyprus) Limited (“FFC”), formed in September 2004, under the Laws of Cyprus. FFC was formed to have a presence in Cyprus to work with a financial institution regarding the issuance of stored value cards throughout Europe.

FastFunds International Limited (“FFIL”), formed in October 2004 with the Registrar of Companies for England and Wales. FFIL was formed in order to have a local presence in the European community.

Key Financial Services, Inc. (“Key”) and Nova Financial Services, Inc. (“Nova”) were formed to design, market and service credit card products aimed at the sub-prime market; both companies are wholly-owned by the Company. Nova processes payments on a remaining portfolio, which provides the Company with limited operations. Key ceased "run-off" operations in the fourth quarter of 2003.

Denaris Corporation ("Denaris"), was formed to develop and market a prepaid re-loadable stored value card program, which was designed to offer customers, particularly immigrants, a convenient alternative to traditional bank accounts; 77%-owned by the Company; Denaris generated no revenues through December 31, 2010.

Collection Solutions, FFI, FFC, FFIL, Denaris and Key generated no revenues and had no significant operations for the years ended December 31, 2010 and 2009. All significant intercompany accounts and transactions have been eliminated in consolidation.

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.

F-6

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

1.

Business and organization, asset sale, and going concern and management’s plans (continued):

Asset sale (continued):

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 HPI seeking approximately $318,000.  The Company has agreed to a judgment of $275,000, plus interest and attorney fees, for a total of $329,146.  FFFC and Chex have agreed to indemnify HPI.

Going concern and management’s plans:

The Company’s financial statements for the year ended December 31, 2010 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 has incurred significant losses since its inception and has a working capital deficit of approximately $9,304,000, and an accumulated deficit of approximately $21,835,000 as of December 31, 2010.  Moreover, it presently has no ongoing business operations or sources of revenue and 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.  There can be no assurance that the Company will have adequate resources to fund future operations, if any, or that funds will be available to the Company when needed, or if available, will be available on favorable terms or in amounts required by the Company.  Currently, the Company does not have a revolving loan agreement with any financial institutions, nor can the Company provide any assurance it will be able to enter into any such agreement in the future. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company evaluates, on an ongoing basis, potential business acquisition/restructuring opportunities that become available from time to time, which management considers in relation to its corporate plans and strategies.

Return of Company Common Stock from HPI:

On January 2, 2007, pursuant to the terms of a Redemption, Stock, Sale and Release Agreement (the “Redemption Agreement”) by and between HPI and the Company, the Company (i) redeemed 8,917,344 shares of FFFC’s common stock held by HPI, (ii) acquired from HPI an aggregate of 5,000 shares of common stock of Denaris Corporation, a Delaware corporation (“Denaris”), (iii) acquired from HPI an aggregate of 1,000 shares of common stock of Key Financial Systems, Inc., a Delaware corporation (“Key Financial”), and (iv) acquired from HPI an aggregate of 1,000 shares of common stock of Nova Financial Systems, Inc., a Delaware corporation (“Nova Financial”).  Denaris was a majority owned subsidiary of HPI, and Key Financial and Nova Financial were wholly owned subsidiaries of HPI.  Denaris and Key Financial do not have any operations and Nova Financial has limited operations  The shares of common stock of each entity transferred by HPI pursuant to the Redemption Agreement constituted all of HPI’s holdings in each entity.  In consideration of the redemption and acquisition of the shares of Denaris, Key Financial and Nova Financial, FFFC released HPI from all outstanding payment obligations of HPI to the Company which totaled $5,814,617, including obligations under a Secured Promissory Note dated March 14, 2006 in favor of the Company in the principal face amount of $5,000,000 (the “FastFunds Note”).  The outstanding balance on the FastFunds Note, including principal and interest accrued, as of the date of the Redemption Agreement was $5,402,398.  HPI released the Company from all payment obligations of the Company to HPI, which totaled $2,151,572.  The Company allocated the difference between the value of the assets received and the consideration exchanged as an increase to additional paid-in capital.    

F-7

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

1.

Business and organization, asset sale, and going concern and management’s plans (continued):

Return of Company Common Stock from HPI (continued):

After the closing of the Redemption Agreement, HPI held 3,500,000 shares of FFFC common stock, constituting approximately 34.3% of FFFC’s outstanding common stock at December 31, 2010.  These shares have been pledged as collateral on certain notes of HPI.  During 2008 as a result of the assumption of this debt by HPI Partners, LLC., (“HPIP”) and the subsequent foreclosure by the debt holders upon HPIP. HPIP owns the 3.5 million shares. The principal managers of HPIP are Messrs. Fong and Olson.  Mr. Fong is the Chairman and CEO of FFFC and Mr. Olson is the secretary of FFFC.  As of December 31, 2010, the Company holds 1,546,036 shares of common stock of HPI.  Pursuant to the Redemption Agreement, the Company and HPI each provided the other certain registration rights relating to the common stock of such party held by the other party.  

On January 18, 2008, the Company filed a complaint in the Superior Court of Washington in King County (the “Superior Court”). The complaint was filed by FastFunds Financial Corporation, Daniel Bishop, Barbara M. Schaper, HP Services LLC, VP Development Corporation, and Gulfstream Financial Partners, LLC (collectively, the “Plaintiffs”) against Dilbagh Singh Gujral, Ricky Gurdish Gujral, Virendra Chaudhary,

Gurinder Dilawari, Global Hydrofuels Technology, Inc. (“GHTI”) and Hydrogen Power, Inc. (collectively, the “Defendants”).

Messrs. Chaudhary and Dilawari are directors of HPI. GHTI is the majority shareholder of HPI. Ricky Gurdish Gujral is the former chief executive officer of HPI. The complaint alleges fraud, misappropriation of corporate opportunity and breach of fiduciary duty by the Defendants relating to the merger of Equitex, Inc. and Hydrogen Power, Inc., the Sublicense Agreement with GHTI, and payments to Ricky Gurdish Gujral. The complaint seeks the appointment of a receiver to take possession of the property and assets of the Company and to manage and operate the Company pending completion of the action. The complaint also seeks damages in the excess of $3,000,000, exemplary damages, attorney’s fees plus interest and costs and any other relief the court finds just and proper.  On January 25, 2008, the Superior Court appointed a receiver of HPI with respect to HPI’s assets. Some assets have been recovered by the Receiver. One of the defendants has filed a counterclaim asserting that the action is frivolous; the Plaintiffs have denied the counterclaim in its entirety.  GHTI has sought arbitration regarding ownership of certain patent applications and other intellectual property.  GHTI was granted a stay of this case until the arbitration is complete.

On March 25, 2010 the Defendants and Plaintiffs entered into a Settlement Agreement and Mutual Release

  (the “Settlement Agreement”).  Pursuant to the Settlement Agreement, which was approved by the receiver and the Court on September 23, 2010, the Defendants and Plaintiffs have agreed to release each other from the claims and to have no further suits against each other.  Additionally, the Defendants have agreed to assign to the Receiver for the benefits of the Plaintiffs any and all rights, including but not limited to insurance payments and settlements for any and all officers and directors liability insurance policies.

2.

Summary of significant accounting policies:

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.

F-8

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

2.

Summary of significant accounting policies:

Accounts (credit card) receivables and revenue recognition:

Accounts (credit card) receivables are stated at cost plus refundable and earned fees (the balance reported to customers), reduced by allowances for refundable fees and losses. Management believes that part of this receivable will not be collected in the next twelve months and accordingly has reclassified a portion of the receivable as non-current on the accompanying balance sheet. Fees (revenues) are accrued monthly on active credit card accounts and included in credit card receivables, net of estimated uncollectible amounts.  Accrual of income is discontinued on credit card accounts that have been closed or charged off.  Accrued fees on credit card loans are charged off with the card balance, generally when the account becomes 90 days past due. The allowance for losses is established through a provision for losses charged to expenses.  Credit card receivables are charged against the allowance for losses when management believes that collectability of the principal is unlikely.  The allowance is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience.  This evaluation also takes into consideration such factors as changes in the volume of the loan portfolio, overall portfolio quality and current economic conditions that may affect the borrowers’ ability to pay.  While management uses the best information available to make its evaluations, this estimate is susceptible to significant change in the near term.

Basis of presentation:

The accompanying consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“USGAAP”). The consolidated financial statements of the Company include the Company and its subsidiaries.  All material inter-company balances and transactions have been eliminated.

Notes and advances receivable:

The Company has made notes and advances to various officers, affiliates and employees of the Company under various loan agreements (Notes 3 and 9). The notes and advances made to officers were made prior to the acquisition of Chex by HPI in December 2001.  The Company’s allowance for doubtful notes receivable is adjusted based on the Company’s assessment of the collectability of each individual note and advance receivable, as well as the aging of the notes and advances receivable.  After all attempts to collect a note receivable have failed, the note receivable is written-off against the allowance.  Based on management’s evaluation of repayment intentions, and in consideration of SAB topic 4-E regarding receivables due from a former director, $51,766 and $152,566 of the total face value amount is presented as a reduction of stockholders’ equity at December 31, 2010 and 2009, respectively.

Property, equipment and leaseholds:

Property, equipment and leaseholds are stated at cost, and depreciation is provided by use of accelerated and straight-line methods over the estimated useful lives of the assets. The cost of leasehold improvements is depreciated over the estimated useful life of the assets or the length of the respective leases, whichever period is shorter. The estimated useful lives of property, equipment and leaseholds are as follows:

Office equipment, furniture and vehicles	3 to 7 years
Computer hardware and software	3 to 5 years
Leasehold improvements	7 years

F-9

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

2.

Summary of significant accounting policies (continued):

Property, equipment and leaseholds (continued):

Impairment of HPI common stock:

At December 31, 2010 and December 31, 2009, the Company owned 1,546,036 shares of common stock of HPI.  At December 31, 2006, the Company presented its investment in HPI common stock as a component of stockholders’ equity deficiency at cost in a manner similar to treasury stock.  This presentation was based upon the Company’s consideration of the provisions of Emerging Issues Task    Force (“EITF”) Issue No. 98-2, Accounting by a Subsidiary or Joint Venture for an Investment in the Stock of its Parent Company or Joint Venture Partner (“EITF 98-2”).  This EITF discusses that in the separate financial statements of a subsidiary; an investment in the common stock of a parent whose only significant asset is its investment in the subsidiary is essentially the same as stock of the subsidiary and should be classified as a reduction to stockholders’ equity.  In April 2007, the Company transferred all of its securities classified as a component of stockholders’ equity deficiency to an available-for-sale security.  The cost of the securities at the date of the transfer was $6,801,000.  The fair value of the securities at the date of transfer was $1,206,000.  The difference at the date of the transfer between cost and fair value of the securities was recorded as a reduction to additional paid-in capital.  The transfer of securities resulted from the Company no longer being a subsidiary of HPI in 2007; therefore, the provisions of EITF 98-2 are no longer applicable.

Unrealized gains and losses are computed on the basis of specific identification and are reported as a separate component on comprehensive income (loss), included as a separate item in shareholders’ equity deficiency.  The unrealized loss reported through September 30, 2007 was $588,000 resulting in a balance of $618,000, reported as available-for-sale securities at September 30, 2007.  Realized gains, realized losses, and declines in value, judged to be other-than-temporary, are included in other income (expense).  Due to the status of HPI and the then current market price of HPI common stock of $0.05 per share as of March 17, 2008, management believed that the decline in value is other than temporary and accordingly, reduced the available-for-sale security to zero as of December 31, 2007 and has included $1,206,000 in other expense for the year ended December 31, 2007.

Legal defense costs:

The Company does not accrue for estimated future legal and related defense costs, if any, to be incurred in connection with outstanding or threatened litigation and other disputed matters but rather, records such as period costs when the services are rendered.

Loss per share:

Loss per share of common stock is computed based on the weighted average number of common shares outstanding during the period. Stock options, warrants, and common stock underlying convertible promissory notes are not considered in the calculations for the periods ended December 31, 2010 and 2009, as the impact of the potential common shares, which total 2,213,824 (2010) and 4,363,824 (2009), would be antidilutive and decrease loss per share. Therefore, there is no diluted loss per share presented in 2010 and 2009.

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.

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.

F-10

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

2.

Summary of significant accounting policies (continued):

Fair value of financial instruments (continued):

The fair values of cash and cash equivalents, current non-related party accounts receivable, and accounts payable approximate their carrying amounts because of the short maturities of these instruments.

The fair values of notes and advances receivable from non-related parties approximate their net carrying values because of the allowances recorded as well as the short maturities of these instruments. The fair values of receivables from related parties are not practicable to estimate, based upon the related party nature of the underlying transactions.

The fair values of notes and loans payable to non-related parties approximate their carrying values because of the short maturities of these instruments. The fair value of long-term debt to non-related parties approximates carrying values, net of discounts applied, based on market rates currently available to the Company. The fair value of the notes payable to related parties (presented as a reduction in stockholders’ equity deficiency) are not practicable to estimate, based on the related party nature of the underlying transactions.

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.  

During the year ended December 31, 2009 the Company issued 1,447,618 options to purchase shares of common stock at $0.03 per share (the market value of the common stock on the date of the grant).  The options were valued at $41,333 based upon the black Scholes option pricing model (approximately a $0.0285 grant date fair value per option. These options were fully-vested at the date of the grant. There were no options granted during the year ended December 31, 2010.  During the year ended December 31, 2007, the Company granted to officers and directors 70,000 options to purchase shares of common stock at $0.75 per share (the market value of the common stock on the date of the grant).  The options were valued at $39,151 based upon the Black-Scholes option pricing model (approximately a $0.56 grant date fair value per option).  These options were fully-vested at the date of the grant.  

The fair value of options and warrants granted to purchase FFFC and HPI common stock were estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions for 2009.

F-11

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

2.

Summary of significant accounting policies (continued):

Stock-based compensation (continued):

	2009
Expected dividend yield	0
Expected stock price volatility	351%
Risk fee interest rate	4.5%
Expected life of options	1-2 years

The Company’s stock option plan is more fully described in Note 9.

Reclassifications:

Certain minor reclassifications to amounts reported in the 2009 consolidated financial statements have been made to conform to the 2010 presentation.

Recently issued accounting pronouncements:

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Codification Accounting Standards Update No. 2009-1 (“ASU No. 2009-1”), an amendment based on Statement of Financial Accounting Standard No. 168, The FASB Accounting Standards Codification (“Codification”) and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles, under Topic 105, Generally Accepted Accounting Principles. Under this update, the Codification has become the source of US GAAP recognized by the FASB to be applied by nongovernmental entities. The rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of ASU No. 2009-1, the Codification superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification has become non-authoritative.  The provisions of ASU No. 2009-1 are effective for financial statements issued for interim and annual periods ending after September 15, 2009. All accounting references have been updated and therefore all FAS references have been replaced with ASC references.

In May 2009, the FASB issued ASC 855-10, “Subsequent Events”, (formerly SFAS No. 165,   “Subsequent Events,” which establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The pronouncement requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, whether that date represents the date the financial statements were issued or were available to be issued.  In conjunction with the preparation of these financial statements, an evaluation of subsequent events was performed through March 31, 2010, which is the date the financial statements were issued.    No reportable subsequent events were noted.

In June 2009, the FASB issued ASC 860 ("Accounting for Transfers of Financial Assets") , which requires additional information regarding transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. ASC 860 eliminates the concept of a "qualifying special-purpose entity," changes the requirements for derecognizing financial assets, and requires additional disclosures. The pronouncement is effective for fiscal years beginning after November 15, 2009. The Company does not believe this pronouncement will impact its financial statements.

In June 2009, the FASB issued ASC 810 for determining whether to consolidate a variable interest entity. These amended standards eliminate a mandatory quantitative approach to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis, and require an ongoing reassessment of whether an entity is the primary beneficiary. These amended standards are effective for us beginning in the first quarter of fiscal year 2010 and the Company does not believe this pronouncement will impact its financial statements.

F-12

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

2.

Summary of significant accounting policies (continued):

Recently issued accounting pronouncements (continued):

In August 2009, the FASB issued Codification Accounting Standards Update No. 2009-5 (“ASU No. 2009-5”), Measuring Liabilities at Fair Value, under Topic 820, Fair Value Measurements and Disclosures, to provide guidance on the fair value measurement of liabilities. This update provides clarification in circumstances in which a quoted price in an active market for the identical liability is not available. It also clarifies the inputs relating to the existence of a restriction that prevents the transfer of the liability and clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. ASU

No. 2009-5 is effective for financial statements issued for interim and annual periods beginning after its issuance. The adoption of ASU No. 2009-5 did not have a material impact on our financial statements.

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements.  This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers.  Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  We are currently evaluating the impact of this ASU, however, we do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.

In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310):  Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.  The ASU amends FASB Accounting Standards Codification Topic 310, Receivables, to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses.  As a result of these amendments, an entity is required to disaggregate, by portfolio segment or class of financing receivables, certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses.  This ASU is effective for interim and annual reporting periods ending on or after December 15, 2010.  The adoption of this standard may require additional disclosures, but we do not expect the adoption to have a material effect on our consolidated financial statements.

 

On December 21, 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-29, which impacts any public entity that enters into business combinations that are material on an individual or aggregate basis. The guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenues and earnings of the combined entity as though the business combination(s) that occurred during the year had occurred at the beginning of the prior annual period when preparing the pro forma financial information for both the current and prior reporting periods. The guidance also requires that pro forma disclosures be accompanied by a narrative description regarding the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in reported pro forma revenues and earnings. This guidance is effective for business combinations consummated in periods beginning after December 15, 2010.  We do not believe the adoption of this guidance will have a material impact on our Consolidated Financial Statements.

F-13

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

3.

Notes and interest receivable:

Notes and interest receivable at December 31, 2010 and 2009, consist of the following:

	2010			2009
Note receivable, ISI; interest at 6%; matured April 2007; currently in default	$	50,000		$	50,000
Note receivable (Denaris) from Paymaster Jamaica (see Redemption Agreement) (Note 1); interest at 10%, collateralized by a pledge of Paymaster Jamaica common shares by Paymaster Jamaica's president; note matured in August 15, 2008; currently in default; payments of interest only due semi-annually beginning August 15, 2003 through maturity (received payments of $100,000 through December 31, 2010); a valuation allowance of $250,000 has been recorded against this receivable at December 31, 2010 and 2009 [A,B]		339,575			339,575
Note receivable from Coast ATM, LLC; interest at 10%; maturity November 2005; a valuation allowance of $50,000 has been recorded against this receivable at December 31, 2010 and 2009, respectively; in default and non-performing [B]		50,000			50,000
		439,575			439,575
Less current maturities		(139,575)			(139,575)
Notes and interest receivable, net of current portion, before valuation allowance		300,000			300,000
Less valuation allowance		(300,000)			(300,000)
Notes and interest receivable, long-term	$	0		$	0

[A]

On March 30, 2011, the Company and Paymaster agreed to restructure the Note receivable (“Term Sheet”).  Pursuant to the Term Sheet, the parties agreed to convert the remaining balance of the Note receivable into Cumulative Convertible Redeemable Preference Shares with a value of $400,000, with an annual dividend of 7.5% over thirty-six (36) months. Additionally, the company has certain conversion rights and redemption rights.  The Term Sheet is binding on the parties and provides for the terms(non-negotiable) for a definitive agreement that the Company anticipates to be signed by April 30, 2011.

[B]

The Company is no longer accruing interest on these non-performing loans due to uncertainty as to substantial collection.

Changes in the allowance for notes and interest receivable for the years ended December 31, 2010 and 2009 are as follows:

	2010			2009
Balances, beginning of year	$	300,000		$	300,000
Additions charged to costs and expenses
(deducted from notes receivable)		-			-
Deductions credited to costs and expenses
(added to notes receivable)		-			-
Deductions to the allowance for final
settlements		-			-
Balances, end of year	$	300,000		$	300,000

F-14

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

4.

Accrued liabilities:

Accrued liabilities at December 31, 2010 and 2009 were $2,765,062 and $2,053,121, respectively, and were comprised of:

	2010			2009
Legal fees	$	415,607		$	355,606
Interest		1,579,101			1,106,349
Accounting fees		7,458			14,258
Consultants and advisors		388,050			240,150
Director’s fees		179,159			154,159
Registration rights		98,013			98,013
Other		97,674			84,586
	$	2,765,062		$	2,053,121

5.

Promissory notes, including related parties and current portions of long-term debt:

Promissory notes, including related parties and current portions of long-term debt at December 31, 2010 and 2009, consist of the following:

	2010			2009
Promissory notes payable:
Various, including related parties of $498,463 (2010) and $430,572 (2009); interest rate ranging from 8% to 10%	$	673,788		$	638,597
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  [A]		2,090,719			2,090,719
	$	2,764,507		$	2,729,316

The weighted average interest rate on short-term borrowings was 17.1 %, 17.8% and 20.1% in 2010, 2009 and 2008, respectively.

[A]

These notes payable (the “Promissory Notes”) originally became due on February 28, 2007.  At that time, the Company renewed $283,000 of the Promissory Notes on the same terms and conditions as previously existed.  The Company has failed to pay interest and the principal amount of these notes. The Company received complaints filed from several of these note holders.  The Company has not responded to these complaints and accordingly the plaintiffs were awarded default judgments.  In April 2007 the Company, through a financial advisor, restructured $1,825,000 of the Promissory Notes (the “Restructured Notes”).  The Company has accrued an expense of $36,500 to compensate the financial advisor 2% of the Restructured Notes as well as having issued 150,000 shares of common stock to the financial advisor (Note 7).  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 September 30, 2007 and no principal payments on the Promissory Notes have been made in and accordingly, they are in default.

The chairman of the board of the Company has personally guaranteed up to $1 million of the Restructured Notes and two other non-related individuals each guaranteed $500,000 of the Restructured Notes.  In consideration of their guarantees the Company granted warrants to purchase a total of 1,600,000 shares of common stock of the Company at an exercise price of $0.50 per share. The warrants which expired in March 2010, were valued at $715,200 using the Black-Scholes option pricing model and were being amortized over the one-year term of the Restructured Notes.

F-15

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

5.

Promissory notes, including related parties and current portions of long-term debt (continued):

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 have had a  judgment entered in the total amount of $2,487,250 in principal and interest on the notes, $40,920 in related claims and $124,972 in attorney’s fees and expenses.  The judgment was entered on August 18, 2009.

 

6.

Commitments and contingencies:

Litigation:

The Forest County Potawatomi Community (“FCPC”) has initiated an action against Chex, an inactive subsidiary of the Company, in the FCPC tribal court asserting that Chex breached a contract with FCPC during the 2002 to 2006 time period.  Chex is inactive and did not defend this action. On October 1, 2009 a judgment was entered against Chex in the FCPC Tribal Court in the amount of $2,484,922. The Company has included $2,484,922 in other income (expenses) for the year ended December 31, 2009.

The Company is involved in various claims and legal actions (as described in footnotes 1 and 5) arising in the ordinary course of business.  The ultimate disposition of these matters may have a material adverse impact either individually or in the aggregate on future consolidated results of operations, financial position or cash flows of the Company.

Operating lease:

Beginning February 2007, the Company began leasing office space in West Palm Beach, Florida, its corporate headquarters for approximately $2,900 per month.  The lease increased by approximately 5% from February 1, 2008 and 2009 and expired in February 2010. Pursuant to this lease, the Company is also required to pay its pro-rata share of taxes, operating expenses and improvement costs.

Effective February 1, 2010 the company entered into a one year amendment to the lease with either party having the right to terminate the lease with a sixty (60) day notice to the other party. The base rent is $1,800 per month during the one year amendment. Future approximate minimum lease payments due under this lease (assuming monthly renewals) as of December 31, 2010, are as follows:

Operating lease (continued):

Year ending December 31,		Amount
2011	$	21,600
2011		21,600
	$	43,200

Rent expense for the years ending December 31, 2010 and 2009 was approximately $23,058 and$33,863.

F-16

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

6.

Commitments and contingencies (continued):

Consulting agreements:

In conjunction with the Asset Sale, an officer signed a five-year non-compete agreement with the buyer and also signed a release, waiving his right to any future commissions that he was previously entitled to.  The Company agreed to compensate the officer $100,800 annually, over the five-year term of the non-compete agreement.  Such compensation is to be applied to reduce the loan and interest receivable from the officer.  If the officer breaches his non-compete agreement, the officer is no longer entitled to compensation and will be liable for any amount remaining on the loan.  Accordingly, during 2010 and 2009, the Company recorded consulting expenses of $100,800 each year, and the interest and note receivable from the officer has been reduced by $100,800 for 2010 and 2009 (Note 9).

Guaranty:

In March 2004, HPI closed on $5 million of debt financing and issued convertible promissory notes to two financial institutions (the “Lenders”).  The proceeds from the promissory notes were immediately thereafter loaned to Chex.  The promissory notes are collateralized, among other things, by all of the assets of Chex and HPI, including the 3.5 million shares of FFFC common stock owned by HPI.  In conjunction with the Asset Sale, the Lenders consented to the sale of assets that secured their notes.  In contemplation of the Redemption Agreement described above, on December 29, 2006, HPI and the Company obtained the consent of the Lenders to complete the transactions contemplated by the Redemption Agreement. Contemporaneously with receipt of the consent, FFFC (as successor in interest to Chex) reconfirmed its obligations under the guaranty and security agreements previously provided by Chex.  The guaranty and security agreements do not expire until the notes are paid in full.    On August 6, 2007, HPI received a notice of default from the Lenders.  On August 16, 2007, the Lenders and HPI entered into a Forbearance Agreement in consideration of HPI paying $300,000 (paid on August 14, 2007) and making a final payment (the “Final Payment”) of $646,981 by October 15, 2007.  During the fourth quarter of 2007 $100,000 of the Final Payment was paid, and there remained an unpaid balance of principal and interest of approximately $561,000.  On March 11, 2008, the Lenders notified the court appointed receiver of HPI that that they were foreclosing on the assets of HPI that were collateralizing the loan.  During 2008 HPIP paid the balance and accordingly purchased FFFC’s guaranty and asset pledge.

HPI stock price guaranty:

In May 2006, HPI and the Company negotiated a settlement regarding convertible notes with a face value of $200,000 issued by the Company, whereby HPI issued 180,000 shares of its common stock. In connection with the Settlement Agreement, a Stock Sale and Lock-up Agreement, Registration Agreement and an Escrow Agreement were also entered into (the “Agreements”). Terms of the Agreements stipulate a price protection clause whereby the Company under certain circumstances must reimburse the former debt holders if the market price of the HPI common stock issued to them in the settlement is below $4.00 per share at the time they sell the stock.  As a result, the Company has a derivative liability due to the debt holders at December 31, 2010 and December 31, 2009 of $648,000, representing the difference between the market value of the common stock as of each date and the $4.00 stated in the settlement agreement. The amounts are included on the balance sheet in derivative liabilities and on the statement of operations in loss on extinguishment of debt.

F-17

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

7.

Income taxes:

The operations of the Company for periods subsequent to its acquisition by HPI and through August 2004, at which time HPI’s ownership interest fell below 80% are included in consolidated federal income tax returns filed by HPI. Subsequent to August 2004 and through January 29, 2006 the Company will file a separate income tax return.  As of January 30, 2006, HPI’s ownership interest again exceeded 80% and the operations of the Company will be included in a consolidated federal income tax from that date through October 29, 2006 when the ownership fell below 80%.  As of October 30, 2006, the Company will be filing separate income tax returns.  For financial reporting purposes, the Company’s provision for income taxes has been computed, and current and deferred taxes have been allocated on a basis as if the Company has filed a separate income tax return for each year presented.  Management assesses the realization of its deferred tax assets to determine if it is more likely than not that the Company's deferred tax assets will be realizable.  The Company adjusts the valuation allowance based on this assessment.

Income tax expense for 2010 and 2009, is as follows:

	2010			2009
Current:
Federal	$	-		$	-
State		-			-
		-			-
Deferred:
Federal		1,028,000			1,952,000
State		121,000			230,000
Valuation allowance		(1,149,000)			(2,182,000)
		-			-
	$	-		$	-

The following is a summary of the Company’s deferred tax assets and liabilities at December 31, 2010 and 2009:

	2010			2009
Deferred tax assets - current:
Stock-based compensation and other	$	874,000		$	874,000
Net operating loss carryforwards		275,000			1,308,000
		1,149,000			2,182,000
Less valuation allowance		(1,149,000)			(2,182,000)
Net deferred tax assets	$	-		$	-

A reconciliation between the expected tax expense (benefit) and the effective tax rate for the years ended December 31, 2010 and 2009 are as follows:

		2010		2009
Statutory federal income tax rate		(34%)		(34%)
State taxes, net of federal income tax		(4%)		(4%)
Effect of change in valuation allowance		-		-
Non deductible expenses and other		38%		38%
		0%		0%

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

7.

Income taxes (continued):

At December 31, 2006, the Company had utilized all of its net operating loss carryforwards available for federal and state income tax purposes.  For the year ended December 31, 2010, the Company had a tax net operating loss carry forward of approximately $2,940,000.  Any unused portion of this carry forward expires in 2029.  Utilization of this loss may be limited in the event of an ownership change pursuant to IRS Section 382.  The Company’s valuation allowance decreased $1,033,000 during the year ended December 31, 2010.

8.

Stockholders’ equity deficiency:

Common stock:

In April 2009, the Company issued 2,038,114 shares of common stock to previous holders of the Company’s convertible debentures.  The Company issued the shares in consideration of the delay in delivering registered shares of common stock upon notice from the debenture holders.  The shares were valued at $0.02 per share (the market value of the common stock), and accordingly the Company recorded $40,763 as stock compensation expense for the year ended December 31, 2009.

Stock options:

The Company has a stock option plan (the “Plan”) which was approved by the Board of Directors in July 2004 and which permits the grant of shares to attract, retain and motivate employees, directors and consultants of up to 1.8 million shares of common stock.  Options are generally granted with an exercise price equal to the Company’s market price of its common stock on the date of the grant and vest immediately upon issuance.  In 2005, the Company granted to officers and directors 385,000 options under the Plan to purchase shares of common stock at an exercise price of $1.10 per share (the market value of the common stock at the date of the grant).  

There were no options granted during the years ended December 31, 2010 and 2009.

All options outstanding at December 31, 2010 are fully vested and exercisable.  A summary of outstanding balances at December 31, 2009 is as follows:

					Weighted-
			Weighted-		Average		Aggregate
	Options		Average exercise price		Remaining contractual life		Intrinsic Value
Outstanding at January 1, 2010	330,000		$1.03		5.98		$0
Outstanding at December 31, 2010	330,000		$1.03		4.98		$0

The expected term of stock options issued to employees represents the period of time that the stock options granted are expected to be outstanding based on historical exercise trends.  The expected life of stock options and warrants issued to third parties is the contractual life.  The expected volatility is based on the historical price volatility of FFFC’s common stock.   The risk-free interest rate represents the U.S. Treasury bill rate for the expected life of the related stock options.  The dividend yield represents FFFC’s anticipated cash dividend over the expected life of the stock options.

Warrants:

During the year ended December 31, 2009 the company issued warrants to purchase 1,447,618 shares of common stock.  The warrants have an exercise price of $0.03 per share, and expire April 2011. The Company recorded $41,333 of stock compensation expense for the year ended December 31, 2009.

A summary of the activity of the Company’s outstanding warrants during 2010 and 2009 is as follows:

F-19

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

8.

Stockholders’ equity deficiency (continued):

Warrants (continued):

		Warrants		Weighted-average exercise price		Weighted-average grant date fair value		Aggregate intrinsic value
Outstanding and exercisable at January 1, 2009		3,749,280	$	0.91	$	0.42	$	0
Granted		1,447,618		0.03		0.028		0
Exercised
Forfeited		(1,163,074)		(1.63)		(0.20)		0
Outstanding and exercisable at December 31, 2009		4,033,824		0.39		0.34		0
Expired		(2,150,000)		(0.50)		(0.44)		0
Outstanding and exercisable At December 31, 2010		1,883,284	$	0.14	$	0.12	$	0

The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives of the warrants by groups as of December 31, 2010.

Exercise price range		Number of options outstanding		Weighted-average exercise price		Weighted-average remaining life
$0.03		1,447,618	$	0.03		.40
$1.00		436,206		1.00		.08
		1,883,824	$	0.14		0.48

The fair value of warrants granted to purchase the Company’s common stock were estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions used for the grants for the years ended December 31, 2009.

		2009
Expected dividend yield		0
Expected stock price volatility		351%
Risk fee interest rate		4.5%
Expected life of warrants		1-2 years

Investment in HPI:

In 2007 the cost value of the shares were reclassified to available-for-sale securities at the fair value of $1,206,000.  The difference at the date of the transfer ($5,595,204) was recorded as a reduction to additional paid-in capital.  At December 31, 2007, the Company believed that there was an other than temporary impairment to the value of the HPI and accordingly, the Company has reduced the available-for-sale securities to zero at December 31, 2007 and has included $1,206,000 in other expense for the year ended December 31, 2007.

F-20

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2010 and 2009

8.

Stockholders’ equity deficiency (continued):

Notes, advances and interest receivable from related parties:

The Company has notes receivable due from HPI under various loan agreements.  In addition, the Company has made advances to HPI to fund its operations. In accordance with the Securities and Exchange Commission’s Rule regarding, Allocation of Expenses and Related Disclosure in Financial Statements of Subsidiaries, Divisions or Lessor Business Components of Another Entity, certain expenses paid by the Company on behalf of HPI have been charged to the receivables.  

The following table summarizes the activity in these accounts for 2010 and 2009.

	2010			2009
Beginning principal balances	$	152,566		$	253,366
Consulting fees applied to officer’s receivable		(100,800)			(100,800)
Ending principal and interest balances	$	51,766		$	152,566

The above balances are presented as a reduction of stockholders’ equity on the accompanying consolidated balance sheets and all are related to former Chex officer.

9.

Selected quarterly financial data (unaudited):

Selected unaudited quarterly financial data for 2010 and 2009 is summarized as follows:

	2010
		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter
Revenues	$	15,954	$	11,569	$	14,301	$	11,280
Gross profit (loss)		3,545		(2,070)		2,240		4,524
Net loss		(222,073)		(218,308)		(224,642)		(179,854)
Basic loss per common share		(0.02)		(0.02)		(0.02)		(0.02)

	2009
		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter (a)
Revenues	$	14,427	$	14,337	$	12,924	$	13,442
Gross margin		(47)		2,029		6,814		(3,890)
Net loss		(255,413)		(2,736,453)		(282,166)		(288,361)
Basic loss per common share		(0.03)		(0.27)		(0.03)		(0.03)

F-21