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EX-31 - EX 31.1 SECTION 302 CERTIFICATIONS - FASTFUNDS FINANCIAL CORPfastfunds10q063011ex311.htm
EX-32 - EX 32.1 SECTION 906 CERTIFICATIONS - FASTFUNDS FINANCIAL CORPfastfunds10q063011ex321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.


FORM 10-Q


 X .   

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarter ended June 30, 2011


     .   

TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from _______to_______


Commission File No. 000-33053


FASTFUNDS FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Nevada

87-0425514

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)


319 Clematis Street, Suite 703

West Palm Beach, Florida 33401

 (Address of principal executive offices) (Zip code)


(561) 514-9042

(Registrant's telephone number including area code)


Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes  X . No      .


Indicate by a check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.


Large accelerated filer

      .

Accelerated filer

      .

Non-accelerated filer

      . (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 .


Number of shares of common stock outstanding at August 14, 2011: 10,212,456







FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES


PART I

FINANCIAL INFORMATION

Page

 

 

 

 

 

Item 1.

Financial statements:

 

 

 

 

 

 

 

Condensed consolidated balance sheets - June 30, 2011 (unaudited) and December 31, 2010

3

 

 

 

 

 

 

Condensed consolidated statements of operations three and six months ended June 30, 2011 and 2010 (unaudited)  

4

 

 

 

 

 

 

Condensed consolidated statement of changes in stockholders' equity deficiency - six months ended June 30, 2011 (unaudited)

5

 

 

 

 

 

 

Condensed consolidated statements of cash flows – six months ended June 30, 2011 and 2010 (unaudited)

6

 

 

 

 

 

 

Notes to condensed consolidated financial statements (unaudited)

7

 

 

 

 

 

Item 2.

Management's discussion and analysis of financial condition and results of operations

15

 

 

 

 

 

Item 3.

Quantitative and qualitative disclosures of market risk

17

 

 

 

 

 

Item 4.

Disclosure controls and procedures

18

 

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal proceedings

18

 

 

 

 

 

Item 2.

Unregistered sales of equity securities and use of proceeds

19

 

 

 

 

 

Item 3.

Defaults upon senior securities

19

 

 

 

 

 

Item 4.

Submission of matters to a vote of security holders

19

 

 

 

 

 

Item 5.

Other information

19

 

 

 

 

 

Item 6.

Exhibits

19

 

 

 

 

 

Signatures

 




2




FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

 

 

2011

 

2010

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

$

1,036

 

$

2,045

 

Accounts receivable, net of allowance of $45 (2011) and $165 (2010)

 

72,271

 

 

68,974

 

Current portion of notes and advances receivable (Note 3)

 

50,000

 

 

139,575

 

Other current assets

 

2,436

 

 

213

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

125,743

 

 

210,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

105,000

 

 

105,000

Intangible and other assets

 

200

 

 

200

Long term investments (Note 4)

 

89,575

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

194,775

 

 

105,200

 

 

 

 

 

 

 

 

 

 

 

 

 

$

320,518

 

$

316,007

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIENCY

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

$

779,887

 

$

777,141

 

Due to HPI (Note 7)

 

75,000

 

 

75,000

 

Accrued expenses, including related parties $615,609 (2011) and $569,459 (2010) (Note 5)

 

3,110,139

 

 

2,765,062

 

Promissory notes and current portion of long-term debt (Note 5), including related parties of $490,983 (2011) and $498,963 (2010)

 

2,757,527

 

 

2,764,507

 

Litigation contingency (Note 7)

 

2,484,922

 

 

2,484,922

 

Debenture payable, net

 

2,037

 

 

-

 

Derivative liabilities (Notes 6 and 8)

 

691,334

 

 

648,000

 

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

9,900,846

 

 

9,514,632

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Notes 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

 

(1,366)

 

 

(51,766)

 

Common treasury stock at cost; 8,917,344 shares

 

(4,547,845)

 

 

(4,547,845)

 

Accumulated deficit

 

(22,266,962)

 

 

(21,834,858)

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity deficiency

 

(9,580,328)

 

 

(9,198,625)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

320,518

 

$

316,007


See notes to condensed consolidated financial statements.



3





FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

 

2011

 

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue, net

$

10,939

 

$

11,569

 

$

22,477

 

$

27,523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Processing fees

 

8,813

 

 

11,069

 

 

18,692

 

 

22,294

 

Returned checks (collected)

 

(290)

 

 

(633)

 

 

(1,154)

 

 

(2,390)

 

Other

 

787

 

 

3,203

 

 

2,417

 

 

6,144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

9,310

 

 

13,639

 

 

19,955

 

 

26,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

1,629

 

 

(2,070)

 

 

2,522

 

 

1,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

(93,342)

 

 

(98,099)

 

 

(186,970)

 

 

(206,657)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(91,713)

 

 

(100,169)

 

 

(184,448)

 

 

(205,182)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense including related party interest of $10,330 (2011) and $10,006 (2010) for the three months and $20,561 (2011) and $18,963 (2010) for the six months

 

(120,943)

 

 

(118,139)

 

 

(239,322)

 

 

(235,199)

 

Dividend and fee income

 

10,000

 

 

-

 

 

10,000

 

 

-

 

Derivative liability expense

 

-

 

 

-

 

 

(18,334)

 

 

-

 

 

 

Total other expense

 

(110,943)

 

 

(118,139)

 

 

(247,656)

 

 

(235,199)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(202,656)

 

$

(218,308)

 

$

(432,104)

 

$

(440,381)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share

$

(0.02)

 

$

(0.02)

 

$

(0.04)

 

$

(0.04)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding Basic and diluted

 

10,212,456

 

 

10,212,456

 

 

10,212,456

 

 

10,212,456


See notes to condensed consolidated financial statements.



4




FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY DEFICIENCY

SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)


 

 

 

 

 

 

Notes,

 

 

 

 

 

 

 

 

 

 

 

 

advances and

 

 

 

 

 

 

 

 

 

Additional

and interest

 

 

 

Total

 

Common stock

paid-in

receivable,

Common stock

Accumulated

stockholders'

 

Shares

Amount

capital

related parties

treasury

deficit

equity deficiency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, January 1, 2011

19,129,800

$

19,130

$

17,216,715

$

(51,766)

$

(4,547,845)

$

(21,834,858)

$

(9,198,625)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Decrease in notes and advances receivable due from related parties, net (Note 7)

-

 

-

 

-

 

50,400

 

-

 

-

 

50,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

-

 

-

 

-

 

-

 

-

 

(432,104)

 

(432,104)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, June 30, 2011

19,129,800

$

19,130

$

17,216,715

$

(1,366)

$

(4,547,845)

$

(22,266,962)

$

(9,580,328)


See notes to condensed consolidated financial statements.



5




FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

SIX MONTHS JUNE 30, 2011 AND 2010 (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Net cash used in operating activities

$

(16,529)

 

$

(34,904)

 

 

 

 

 

 

 

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)

 

Borrowings on notes and loans payable

 

41,120

 

 

71,003

 

Repayments on notes and loans payable

 

(23,100)

 

 

(35,000)

 

Payment of deferred financing costs

 

(2,500)

 

 

-

Net cash provided by financing activities

 

15,520

 

 

34,746

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

(1,009)

 

 

(158)

Cash and cash equivalents, beginning

 

2,045

 

 

421

 

 

 

 

 

 

 

Cash and cash equivalents, ending

$

1,036

 

$

263

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

$

-

 

$

-

 

 

 

 

 

 

 

 

Cash paid for income taxes

$

-

 

$

-

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible debentures and accounts payable to common stock

$

-

 

$

-

 

 

 

 

 

 

 

Conversion of derivative liability to common stock

$

-

 

$

-


See notes to condensed consolidated financial statements.




6



FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)


1.

Business and organization, basis of presentation, asset sale and management’s plans:


Business and organization:


FastFunds Financial Corporation (“FFFC” or the “Company”) is a holding company, and through January 31, 2006, operated primarily through its wholly-owned subsidiary Chex Services, Inc. (“Chex”).  As disclosed in the December 31, 2009 Form 10-K, FFFC also has several other non-operating wholly-owned subsidiaries.  FFFC and its subsidiaries are referred to as (the “Company”). The Company is an equity investee of Hydrogen Power, Inc. (“HPI”), a public company formerly known as Equitex, Inc.  


Chex, a Minnesota corporation, provided financial services prior to the sale of substantially all of Chex’s assets, 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 (the “Asset Sale”).


Basis of presentation:


Unaudited financial statements:


The accompanying condensed consolidated financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for all stated periods have been made.  Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with a reading of the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report filed with the Securities and Exchange Commission (SEC) on April 15, 2011.  Interim results of operations for the three and six months ended June 30, 2011 and 2010 are not necessarily indicative of future results for the full year.  Certain amounts from the 2010 periods have been reclassified to conform to the presentation used in the current period.


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 Asset Sale for $14 million pursuant to the APA and received net cash proceeds of $12,642,784 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.


On March 14, 2006, FFFC loaned HPI $5 million of the total proceeds from the Asset Sale for one year at 10% per annum interest.  This note was settled as part of the Redemption Agreement described below.


Going concern and management’s plans:


Pursuant to the APA, FFFC and Chex owed Game approximately $300,000.  Game, FFFC and Chex agreed to settle the balance due for $275,000 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 (included in accounts payable and accrued expenses in the balance sheet presented herein).  FFFC and Chex have agreed to indemnify HPI.



7



FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)


1.

Business and organization, basis of presentation, asset sale and management’s plans (continued)


Going concern and management’s plans:


In the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, the Report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going concern.  The Company’s interim financial statements for the three and six months ended June 30, 2011 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.  The Company reported a net loss of $432,104 for the six months ended June 30, 2011 and has a working capital deficit of approximately $9,686,000 and accumulated deficit of approximately $22,267,000 as of June 30, 2011.  Moreover, the Company presently has no significant ongoing business operations or sources of revenue and has little resources with which to obtain or develop new operations.


These factors raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not contain any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.


Currently, the Company does not have a revolving loan agreement with any financial institution, nor can the Company provide any assurance it will be able to enter into any such agreement in the future, or be able to raise funds through further issuance of debt or equity in the Company.


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, Key Financial and Nova Financial do not have significant 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.    


After the closing of the Redemption Agreement, HPI held 3,500,000 shares of FFFC common stock, constituting approximately 34% of FFFC’s outstanding common stock at June 30, 2011.  These shares have been pledged as collateral on certain notes of HPI.  During 2008 as a result of the payment 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 of FFFC common stock. 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 June 30, 2011, 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”).



8



FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)


1.

Business and organization, basis of presentation, asset sale and management’s plans (continued)


Return of Company Common Stock from HPI:


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:


A summary of our significant accounting policies is included in our 2010 Annual Report on Form 10-K.


Net loss per share:


Net 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 at June 30, 2011 and 2010 were 1,777,618 and are not considered in the calculation for the three and six months ended June 30, 2011 and 2010, as the impact of the potential common shares would be to decrease loss per share.  Therefore, diluted loss per share for the three and six months ended June 30, 2011 and 2010 is equivalent to basic loss per share.


Recent Accounting Pronouncements Not Yet Adopted:


As of the date of this report, there are no recent accounting pronouncements that have not yet been adopted that we believe would have a material impact on our financial statements.


3.

Notes and interest receivable:


Notes and interest receivable at June 30, 2011 and December 31, 2010, consist of the following:



9



FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)



3.

Notes and interest receivable (continued):


 

 

 

June 30,

 

December 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Note receivable, ISI; interest at 6%; matured April 2007; currently in default

$

50,000

$

50,000

 

 

 

 

 

 

 

Note receivable 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 August 15, 2008; payments of interest only due semi-annually beginning August 15, 2003 through maturity; a valuation allowance of $250,000 has been recorded against this receivable December 31, 2010, reclassified to long term investments as of June 30, 2011[A,C]

 

-

 

339,575

 

 

 

 

 

 

 

Note receivable from Coast ATM, LLC; interest at 10%; matured November 2005; currently in default; a valuation allowance of $50,000 has been recorded against this receivable at June 30, 2011 and December 31, 2010; is in default and non-performing [B]

 

50,000

 

50,000

 

 

 

 

 

 

 

 

 

100,000

 

439,575

 

Less current maturities

 

50,000

 

(139,575)

 

 

 

 

 

 

 

Notes and advances receivable, net of current portion, before valuation allowance

 

50,000

 

300,000

 

Less valuation allowance

 

(50,000)

 

(300,000)

 

 

 

 

 

 

 

Notes receivable, long-term

$

-

$

-


[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 upon redemption rights.  The Term Sheet is binding on the parties.


[B]

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


[C]    The Company and Paymaster restructured this note, see footnote 4, Long Term Investments, below.


4.   

Long term investments:


On March 30, 2011, the Company and Paymaster agreed to restructure the Note receivable.  Pursuant to the agreement, the parties agreed to convert the remaining balance of the Note receivable into Cumulative Convertible Redeemable Preference Shares (the Preference Shares”) with a value of $400,000, and an annual dividend of 7.5% over thirty-six (36) months. Paymaster, at any time prior to maturity, may elect to redeem some or all of the Preference Shares at an effective dividend rate of 10% per annum. The Company, upon maturity and with not less than ninety (90) days prior notice, may elect to convert some or all of Preference Shares into the pro rata equivalent of 11,100 ordinary shares of Paymaster (equal to 10% of the issued and outstanding capital of the Company based on the conversion of all Preference Shares on a fully diluted basis). The Company has recorded the investment at $89,575, net of a valuation allowance of $250,000, the same historical carrying value on the Company’s balance sheet as the note.



10



FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)



5.

Accrued liabilities:


Accrued liabilities at June 30, 2011 and December 31, 2010 were $3,110,139 and $2,765,062 respectively, and were comprised of:


 

2011

 

2010

 

 

 

 

 

 

Legal fees

$

444,576

 

$

415,607

Interest

 

1,793,128

 

 

1,579,101

Consultants and advisors

 

460,450

 

 

388,050

Director’s fees

 

191,659

 

 

179,159

Registration rights

 

98,013

 

 

98,013

Other

 

122,313

 

 

105,132

 

 

 

 

 

 

 

$

3,110,139

 

$

2,765,062


6.

Promissory notes, including related and current portions of long-term debt, and debenture payable


Promissory notes, including related parties and current portions of long-term debt at June 30, 2011 and December 31, 2010, consist of the following:


 

 

 

June 30,

 

December 31,

 

 

 

2011

 

2010

 

Promissory notes payable:

 

 

 

 

 

 

 

 

 

 

 

Various, including related parties of $490,983 (2011) and $498,463 (2010), interest rate ranging from 8% to 10%

$

666,808

$

673,788

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

$

2,757,527

$

2,764,507


[A]

These notes payable (the “Promissory Notes”) originally became due on February 28, 2007.  The Company renewed $283,000 of the Promissory Notes on the same terms and conditions as previously existed.  In April 2007 the Company, through a financial advisor, restructured $1,825,000 of the Promissory Notes (the “Restructured Notes”).  The Company has accrued an expense of $36,500 to compensate the financial advisor 2% of the Restructured Notes as well as having issued 150,000 shares of common stock to the financial advisor.  The Restructured Notes carry a stated interest rate of 15% (a default rate of 20%) and matured on February 28, 2008.  The Company has not paid the interest due since June 2007, and no principal payments on the Promissory Notes have been made since 2008 and accordingly, they are in default.

 

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, expiring in March 2010.  The warrants were valued at $715,200 using the Black-Scholes option pricing model and are being amortized over the one-year term of the Restructured 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 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.



11



FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)


6.

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


Debenture payable:


In June 2011, the Company entered into a note agreement with an institutional investor for the issuance of a convertible promissory note in the amounts of $25,000 (the “Note”).  Among other terms the Note is due nine months from its issuance date, bears interest at 8% per annum, payable in cash or shares at the Conversion Price as defined herewith, and are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 50% of the average of the lowest three trading prices (as defined in the note agreements) per share of the Company’s common stock for the ten trading days immediately preceding the date of conversion.  Upon the occurrence of an event of default, as defined in the Note, the Company is required to pay interest at 22% per annum and the holders may at their option declare the Note, together with accrued and unpaid interest, to be immediately due and payable.  In addition, the Note provides for adjustments for dividends payable other than is shares of common stock, for reclassification, exchange or substitution of the common stock for another security or securities of the Company or pursuant to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Company.  The Company may at its own option prepay the Note and must maintain sufficient authorized shares reserved for issuance under the Note.


We received net proceeds of $22,500 after debt issuance costs of $2,500 paid for lender legal fees. These debt issuance costs will be amortized over the terms of the Note, and accordingly $277 has been expensed as debt issuance costs (included in interest expense) during the three and six months ended June 30, 2011.


We have determined that the conversion feature of the Note represents an embedded derivative since the Note is convertible into a variable number of shares upon conversion.  Accordingly, the Note is not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability.  Accordingly, the fair value of this derivative instrument has been recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to the Note.  Such discount will be accreted from the date of issuance to the maturity dates of the Note.  The change in the fair value of the liability for derivative contracts will be recorded to other income or expenses in the consolidated statement of operations at the end of each quarter, with the offset to the derivative liability on the balance sheet. The beneficial conversion feature included in the Note resulted in an initial debt discount of $25,000 and an initial loss on the valuation of derivative liabilities of $19,286 for a derivative liability initial balance of $44,286. The fair value of the Note was calculated at issue date utilizing the following assumptions:


Issuance Date

Fair Value

Term

Assumed Conversion Price

Market Price on Grant Date

Volatility Percentage

Interest

Rate

6/8/11

$44,286

9 months

$0.0175

$0.035

380%

4.72%


At June 30, 2011, the Company revalued $25,000, the balance of the 2010 Convertible Note.  For the period from their issuance to June 30, 2011, the Company increased the derivative liability of $44,286 by $952 resulting in a derivative liability balance of $43,334 at June 30, 2011.


The fair value of the Note was calculated at June 30, 2011 utilizing the following assumptions:


Fair Value

Term

Assumed

Conversion

Price

Volatilty

Percentage

Interest

Rate

$43,334

  9 months

$0.0075

370%

4.72%


7.

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, included in the balance sheet presented herein.



12



FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)


7.

Commitments and contingencies (continued):


The Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse impact either individually or in the aggregate on 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.  The Company is currently leasing the space on a month to month basis for $900 per month.


Consulting agreements:


In conjunction with the Asset Sale, a former FFFC director and Chex 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 due from the officer (Note 7).  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.  During the three and six months ended June 30, 2011 and 2010, the Company recorded consulting expenses of $25,200 and $50,400 respectively, and the note receivable from an officer has been reduced by $50,400, for the six months ended June 30, 2011.


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 recorded a derivative liability due to the debt holders at June 30, 2011 and December 31, 2009 of $648,000.



13



FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)



8.   

Stockholders’ equity deficiency:


Notes, advances and interest receivable from related parties:


Chex has notes receivable due from related parties under various loan agreements.  In addition, the Company has made advances to HPI to fund its operations. In accordance with the Securities Exchange Commission’s Staff Accounting Bulletin No. 79, 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 for the year ended December 31, 2010 and for the six months ended June 30, 2011:


 

June 30,

 

December 31,

 

2011

 

2010

 

 

 

 

 

 

Beginning principal balances

$

51,766

 

$

152,556

Consulting fees applied to officer receivable

 

(50,400)

 

 

(100,800)

 

 

 

 

 

 

Ending principal balances [A]

$

1,366

 

$

51,766


[A]

The principal balance at June 30, 2011 and December 31, 2010 are all due from a former Chex officer.


Warrants and options:


The Company did not issue any warrants or options for the six months ended June 30, 2011.  A summary of outstanding warrant balances at January 1, and June 30, 2011 is as follows:


 


Warrants

 

Weighted-Average

exercise price

 

Weighted- Average

grant date

fair value

 

 

 

 

 

 

Outstanding at January 1, 2011

1,883,824

$

0.14

$

0.48

Expired

(436,206)

 

1.00

 

0.81

 

 

 

 

 

 

Outstanding at June 30, 2011

1,447,618

$

0.03

$

0.03


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.  All options outstanding at June 30, 2011 are fully-vested and exercisable.  A summary of outstanding balances at January 1, and June 30, 2011 is as follows:



 

Options

 

Weighted-Average exercise price

 

Weighted-Average remaining contractual life

 

Aggregate intrinsic

value

 

 

 

 

 

 

 

 

Outstanding at January 1 and June 30, 2011

330,000

$

1.03

 

4.48

$

-



14






ITEM TWO

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS


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


GENERAL


FastFunds Financial Corporation (“FFFC”) is a holding company and through January 31, 2006 operated primarily through its wholly-owned subsidiary Chex Services, Inc. (“Chex”).  As disclosed in the December 31, 2010 10-K, FFFC also has several other non-operating wholly-owned subsidiaries.  FFFC and its subsidiaries are referred to as (the “Company”).  


RETURN OF COMPANY COMMON STOCK FROM PARENT:


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, Key Financial and Nova Financial do not have significant 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 and HPI released the Company from all payment obligations of the Company to HPI, which totaled $2,151,572.  Due to the related party nature of the transaction, the Company accounted for the difference between the consideration received and the consideration given up as a capital transaction, which increased additional paid-in capital by $1,227,019.    


OVERVIEW


The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto for the years ended December 31, 2010 and 2009.  The financial statements presented for the three and six months ended June 30, 2011 and 2010 include FFFC and its wholly-owned subsidiaries, which primarily reflect the operations of Chex through the date of the Asset Sale.


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



15






The Company’s financial statements for the three and six months ended June 30, 2011 and 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 approximately $9,685,000 and an accumulated deficit of approximately $22,267,000 as of June 30, 2011.  Moreover, it presently has minimal ongoing business operations or sources of revenue, and little available resources with which to obtain or develop new operations.


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


LIQUIDITY AND CAPITAL RESOURCES


For the six months ended June 30, 2010, net cash used in operating activities was $16,529 compared to $34,904 for the six months ended June 30, 2010.  Net loss was $202,656 and $432,104 for the three and six months ended June 30, 2011 compared to $218,308 and $440,381 for the three and six months ended June 30, 2010. The net loss in each of the three and six month periods includes non-cash expenses of approximately $50,400 related to amortization.  Additionally, the Company recorded a a change in the fair value of a derivative liability of $18,334 for the three and six months ended June 30, 2011.  


There was no cash provided by or used in investing activities for the six months ended June 30, 2011, and 2010.  


Net cash provided by financing activities for the three months ended June 30, 2011 was $15,520 compared to $34,746 for the six months ended June 30, 2010.  The activity for the six months ended March 30, 2011 is the Company received net proceeds of $17,120 on the issuance of notes payable, and repaid $23,100 of notes payable. Additionally the Company received net proceeds of $22,500 after payment of deferred financing costs of $2,500, pursuant to the issuance of a subordinated debenture of $25,000. For the six months ended June 30, 2010, the Company received proceeds of $71,003 on the issuance of notes payable and repaid $35,000 of notes payable.


For the six months ended June 30, 2011, cash and cash equivalents decreased by $1,009 compared to a decrease of $158 for the six months ended June 30, 2010.  Ending cash and cash equivalents at June 30, 2011 was $1,036 compared to $263 at June 30, 2010.


We have limited cash and cash equivalents on hand and need to raise funds to continue to be able to support our operating expenses and to meet our other obligations as they become due.  Sources available to us that we may utilize include the sale of our or HPI’s equity securities, as well as the exercise of outstanding options and warrants, which may cause dilution to our stockholders.


REVENUES


Total revenues for the three and six months ended June 30, 2011 were $10,939 and $22,477 compared to $11,569 and $27,523 for the three and six months ended June 30, 2010.  Revenues in all periods consist of credit card income on Nova’s remaining portfolio.  


OPERATING EXPENSES


Operating expenses for the three and six months ended June 30, 2011, were $9,310 and $19,955 compared to $13,369 and $3,639 and $26,048 for the three and six months ended June 30, 2010. Expenses were primarily comprised of costs related to third party servicing fees of Nova’s remaining credit card portfolio.


CORPORATE OPERATING EXPENSES


Corporate operating expenses for the three and six months ended June 30, 2011 were $93,342 and $186,970 compared to $98,099 and $206,657 for the three and six months ended June 30, 2010. The expenses were comprised of the following:


 

 

Three months ended

June 30,

 

Six months ended

June 30,

 

 

2011

 

2010

 

2011

 

2010

Accounting, legal and consulting

$

85,450

$

92,650

$

170,900

$

193,452

Other

 

7,892

 

5,449

 

16,070

 

13,205

 

$

93,342

$

98,099

$

186,970

$

206,657



16






For the three and six months ended June 30, 2011 and 2010 corporate operating expenses are primarily related to FFFC.


Accounting, legal and consulting expenses decreased for the three and six months ended June 30, 2011 compared to the three and six months ended June 30, 2010. The decrease in the current period was primarily a result of decreases in accounting and legal fees. FFFC has consulting agreements with two officers who provide various consulting services to the Company. These continuing agreements require the Company to pay approximately $13,000 per month.


OTHER INCOME (EXPENSE)


Other expenses, net for the three months and six ended June 30, 2011 were $110,943 and $247,656 compared to $118,139 and $235,199 for the three and six months ended June 30, 2010.  


INCOME TAX EXPENSE


There was no income tax expense for the three and six months ended June 30, 2011 and 2010.


CONTRACTUAL OBLIGATIONS


No material changes outside the ordinary course of business during the quarter ended June 30, 2011.


CRITICAL ACCOUNTING POLICIES


Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.


Our significant accounting policies are described in more detail in our 2010 Annual Report on Form 10-K.



RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS


As of the date of this report, there are no recent accounting pronouncements that have not yet been adopted that we believe would have a material impact on our financial statements.


ITEM THREE

QUANTITATIVE AND QUALITATIVE DISCLOSURES OF 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 risk 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 subsidiary are exposed relate to the market prices of common stock of HPI and the Company. The Company has only fixed rate debt at June 30, 2011 and December 31, 2010.


 

 

June 30,

 

December 31,

 

 

2011

 

2010

 

 

 

 

 

Derivative liabilities (1)

$

691,334

$

648,000

 

 

 

 

 

 

$

691,334

$

648,000




17






(1)

The Company has given a price guaranty under certain circumstances to former noteholders on the value of 180,000 shares of HPI common stock they received in a settlement of $4.00 per share.  At December 31, 2010 and June 30, 2011, the common stock had a market value of $0.  Accordingly, as of June 30, 2011 the Company has recorded a liability of $648,000. Additionally as of June 30, 2011 the Company is including in derivative liabilities $43,334 resulting from the fair value of $25,000 subordinated debenture(see footnote 6 to the financial statements).


ITEM FOUR

DISCLOSURE CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


Disclosure controls and procedures (as such term is defined in Rules 13a-15(f)) are designed to ensure that information relating to us required to be disclosed with the Securities and Exchange Commission (“SEC”) reports is (i) recorded, processed, summarized and reported within the time period specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our acting chief executive officer, as appropriate to allow timely decisions requiring timely disclosure.  Under the supervision and with the participation of our Acting Chief Executive Officer, we conducted an evaluation and effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report (the “Evaluation Date”).  Based on this evaluation, our acting chief executive officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

 

Management of the Company is responsible for establishing and maintaining an adequate system of internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.  Because of its inherit limitations, internal control over financial reporting may not prevent or detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.  In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth in “Internal Control-Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  Based on this evaluation, our management concluded, as of December 31, 2009, our internal control over financial reporting was not effective based on those criteria.  The following material weaknesses were identified from our evaluation:


Due to the small size and limited financial resources, the Company’s Secretary and the acting chief executive officer are the only individuals involved in 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 Financial Officer and physical control of cash in the hands of the same individual as well as our 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.


Although this material weakness over preparation of the financial statements and related disclosures existed at the end of the quarter described in this report, the consolidated financial statements in this quarterly report on Form 10-Q fairly present in all material respects, our financial condition as of March 31, 2011 in conformity with GAAP.


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


Changes in Internal Control over Financial Reporting


There has not been any change in the Company’s internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended June 30, 2011 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.  The material weakness in our internal control over financial reporting described above for the year ended December 31, 2010 (absence of adequate segregation of duties) continues unremediated, due to our limited resources and employees.


PART II. OTHER INFORMATION


Item 1.

Legal Proceedings


Refer to Note 7 of the Condensed Consolidated Financial Statements



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Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds


None


Item 3.

Defaults upon Senior Securities


None.


Item 4.

Submission of Matters to a Vote of Security Holders


None.


Item 5.

Other Information


None.


Item 6.

Exhibits


Exhibit

Number

 


Description

 

 

 

31.1

 

CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

 

 

 

32.1

 

CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith)




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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 

FastFunds Financial Corporation

 

(Registrant)

 

 

Date: August 14, 2011

By: /s/ Barry Hollander             

 

Barry Hollander

 

Acting Chief Executive Officer

 

Principal Executive Officer and

 

Principal Accounting Officer




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