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 March 31, 2012
[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934   For the transition period from _______to_______

 

 

Commission File No. 000-33053

 

 

FASTFUNDS FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

Nevada	87-0425514
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

319 Clematis Street, Suite 400

West Palm Beach, Florida 33401

(Address of principal executive offices) (Zip code)

 

(561) 514-9042

(Registrant's telephone number including area code)

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

[X]Yes [ ]No

 

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

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [X]

 

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b.2 of the Exchange Act).

[ ] Yes [X] No

 

Number of shares of common stock outstanding at May 15, 2012: 10,212,456

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

 

 

PART I	FINANCIAL INFORMATION		Page
	Item 1.	Financial statements:
		Condensed consolidated balance sheets - March 31, 2012 (unaudited) and December 31, 2011	2
		Condensed consolidated statements of operations three months ended March 31, 2012 and 2011 (unaudited)	3
		Condensed consolidated statement of changes in stockholders' equity deficiency - three months ended March 31, 2012 (unaudited)	4
		Condensed consolidated statements of cash flows – three months ended March 31, 2012 and 2011 (unaudited)	5
		Notes to condensed consolidated financial statements (unaudited)	6-13
	Item 2.	Management's discussion and analysis of financial condition and results of operations	14-17
	Item 3.	Quantitative and qualitative disclosures of market risk	18
	Item 4T	Disclosure controls and procedures	19-20
PART II	OTHER INFORMATION
	Item 1.	Legal proceedings	21
	Item 2.	Unregistered sales of equity securities and use of proceeds	21
	Item 3.	Defaults upon senior securities	21
	Item 4.	Mine Safety Disclosures	21
	Item 5.	Other information	21
	Item 6.	Exhibits	21
	Signatures

 

 

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
					March 31,			December 31,
					2012			2011
						(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents				$	226		$	253
	Accounts receivable, net of allowance of $30 (2012) and $75 (2011)					74,785			71,992
	Current portion of notes and advances receivable (Note 3)					50,000			50,000
	Other current assets					213			770
			Total current assets			125,224			123,015
Accounts receivable						105,000			105,000
Intangible and other assets						200			200
Long term investments (Note 4)						89,575			89,575
						194,775			194,775
					$	319,999		$	317,790
LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIENCY
Current liabilities:
	Cash overdraft				$	-		$	-
	Accounts payable					777,112			774,800
	Due to HPI (Note 7)					75,000			75,000
	Accrued expenses, including related parties $759,440 (2012) and $674,609 (2011) (Note 5)					3,610,456			3,441,199
	Promissory notes and current portion of long-term debt (Note 5), including related parties
		of $423,403 (2012) and $423,208 (2011)				2,756,847			2,756,652
	Litigation contingency (Note 7)					2,484,922			2,484,922
	Debenture payable, net					25,000			18,703
	Derivative liabilities (Notes 6 and 8)					693,000			694,667
			Total current liabilities			10,422,337			10,245,943
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					-			-
	Common treasury stock at cost; 8,917,344 shares					(4,547,845)			(4,547,845)
	Accumulated deficit					(22,790,338)			(22,616,153)
			Total stockholders' equity deficiency			(10,102,338)			(9,928,153)
					$	319,999		$	317,790

 

 See notes to condensed consolidated financial statements. 

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THRE THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (UNAUDITED)
				2012				2011
Fee revenue, net				$	9,392		$	11,538
Operating expenses:
	Processing fees				7,586			9,879
	Returned checks (collected)				(100)			(864)
	Other				1,336			1,630
			Total operating expenses		8,822			10,645
			Gross profit		570			893
Selling, general and administrative					58,401			68,428
Depreciation and amortization					-			25,200
Loss from operations					(57,831)			(92,735)
Other income (expense):
	Interest expense including related party interest of $9,739
		(2012) and $10,235 (2011)			(125,521)			(118,378)
	Dividend and fee income				7,500
	Derivative liability expense				1,667
			Total other expense		(116,354)			(118,378)
Net loss				$	(174,185)		$	(211,113)
Net loss per share				$	(0.02)		$	(0.02)
Weighted average number of common shares outstanding
		Basic and diluted			10,212,456			10,212,456

 

  See notes to condensed consolidated financial statements. 

 

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY DEFICIENCY
FOR THE THREE MOINTHS ENDED MARCH 31, 2012 (UNAUDITED)
									Additional									Total
				Common stock					paid-in			Common stock			Accumulated			stockholders'
				Shares		Amount			capital			treasury			deficit			equity deficiency
Balances, January 1,2012				19,129,800		$	19,130		$	17,216,715		$	(4,547,845)		$	(22,616,153)		$	(9,928,153)
	Net loss															(174,185)			(174,185)
Balances, March 31, 2012				19,129,800		$	19,130		$	17,216,715		$	(4,547,845)		$	(22,790,338)		$	(10,102,338)

 

 See notes to condensed consolidated financial statements.  

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (UNAUDITED)
							2012			2011
Cash flows from operating activities:
	Net loss						$	(174,185)		$	(211,113)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Amortization of non compete agreement						-			25,200
		Amortization of discount on convertible note						6,297			-
		Fair market value change in derivative liability						(1,667)			-
		Amortization of deferred financing costs						557			-
		Decrease (increase) in assets:
			Accounts receivable					(2,793)			(828)
		Increase (decrease) in liabilities
			Accounts payable					2,312			1,545
			Accrued expenses					169,257			179,214
Net cash used in operating activities								(222)			(5,982)
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							-			811
	Borrowings on notes and loans payable, other							1,500			-
	Borrowings on notes and loans payable, related							3,875			4,400
	Repayments on notes and loans payable, related							(3,680)			(1,100)
	Repayments on notes and loans payable, other							(1,500)			-
Net cash provided by financing activities								195			4,111
Net increase in cash and cash equivalents								(27)			(1,871)
Cash and cash equivalents, beginning								253			2,045
Cash and cash equivalents, ending							$	226		$	174
Supplemental disclosure of cash flow information:
	Cash paid for interest						$	-		$	-
	Cash paid for income taxes						$	-		$	-

 

 See notes to condensed consolidated financial statements.  

FastFunds Financial Corporation And Subsidiaries

Notes To Condensed Consolidated Financial Statements

Three Months Ended March 31, 2012

  

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, 2011 Form 10-K, FFFC also has several other non-operating wholly-owned subsidiaries. FFFC and its subsidiaries are referred to as (the “Company”).

 

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 13, 2012. Interim results of operations for the three months ended March 31, 2012 and 2011 are not necessarily indicative of future results for the full year. Certain amounts from the 2011 periods have been reclassified to conform to the presentation used in the current period.

 

 

Going concern and management’s plans:

 

In the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, 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 months ended March 31, 2012 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 $174,185 for the three months ended March 31, 2012 and has a working capital deficit of approximately $10,103,000 and accumulated deficit of approximately $22,790,300 as of March 31, 2012. 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.

 

 

 2. Summary of significant accounting policies:

 

A summary of our significant accounting policies is included in our 2011 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 March 31, 2012 and 2011 was 4,277,618 and 1,777,618 respectively and are not considered in the calculation for the three months ended March 31, 2012 and 2011, as the impact of the potential common shares would be to decrease loss per share. Therefore, diluted loss per share for the three months ended March 31, 2012 and 2011 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 March 31, 2012 and December 31, 2011, consist of the following:

 

	March 31,			December 31,
	2012			2011
Note receivable, ISI; interest at 6%; matured April 2007; currently in default	$	50,000		$	50,000
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 March 31, 2012 and December 31, 2011; is in default and non-performing [A]		50,000			50,000
		100,000			100,000
Less current maturities		50,000			(50,000)
Notes and advances receivable, net of current portion, before valuation allowance		50,000			50,000
Less valuation allowance		(50,000)			(50,000)
Notes receivable, long-term	$	-		$	-

 

 

[A]

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

 

 

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.

 

 

5. Accrued liabilities:

 

Accrued liabilities at March 31, 2012 and December 31, 2011 were $3,610,456 and $3,411,199 respectively, and were comprised of:

 

	2012			2011
Legal fees	$	489,576		$	474,576
Interest		2,149,047			2,030,380
Consultants and advisors		533,150			506,950
Director’s fees		210,409			204,199
Registration rights		98,013			98,013
Other		130,261			127,121
	$	3,610,456		$	3,441,199

 

 

 

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 March 31, 2012 and December 31, 2011, consist of the following:

 

	March 31,			December 31,
	2012			2011
Promissory notes payable:
Various related parties, interest rate 8% to 10 % [A]	$	423,403		$	423,208
Various other, interest rate ranging from 8% to 10%		242,725			242,725
Notes payable; interest rates ranging from 9% to 15%; interest payable quarterly; the notes are unsecured, matured on February 28, 2008; currently in default and past due [B]		2,090,719			2,090,719
	$	2,756,847		$	2,756,652

 

 

[A]

Pursuant to a November 4, 2011 Board of director resolution, these notes are convertible.

 

[B]

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

 

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 were amortized over the one-year term of the Restructured Notes. The warrants expired in March 2010.

 

In January 2008, the Company and the three guarantors received a complaint filed by the financial advisor (acting as agent for the holders of the Restructured Notes) and the holders of the Restructured Notes. The claim is seeking $1,946,250 plus per diem interest beginning January 22, 2008 at the rate of twenty percent (20%) per annum plus $37,000 due the financial advisor for unpaid fees. The court has ruled in favor of a motion for summary judgment filed by certain of the plaintiffs have had a judgment was entered on August 18, 2009 in the total amount of $2,487,250 in principal and interest on the notes, $40,920 in related claims and $124,972 in attorney’s fees and expenses. The Company is not aware of any payments being made by any of the guarantors and accordingly, the Company includes these liabilities on the March 31, 2012 balance sheet.

 

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 $557 has been expensed as debt issuance costs (included in interest expense) during the three months ended March 31, 2012.

 

 

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%

 

As of December 31, 2011, the Company revalued $25,000, the balance of the 2010 Convertible Note. For the period from their issuance to December 31, 2011, the Company increased the derivative liability of $44,286 by $2,381 resulting in a derivative liability balance of $46,667 at December 31, 2011.

 

As of March 31, 2012, the Company revalued $25,000, the balance of the 2010 Convertible Note. For the period from January 1, 2012 to March 31, 2012, the Company decreased the derivative liability of $46,667 by $1,667 resulting in a derivative liability balance of $45,000 at March 31, 2012.

 

The fair value of the Note was calculated at March 31, 2012 utilizing the following assumptions:

 

Fair Value	Term	Assumed Conversion Price	Volatility Percentage	Interest Rate
$45,000	9 months	$0.01	502%	0.07%

 

 

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.

 

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:

 

 

Effective February 1, 2011 through December 31, 2011 the Company rented office space in West Palm Beach, FL., for $900 per month. Effective January 1, 2012 the Company is utilizing space in an office rented by a Company controlled by our Acting President.

 

 

 

Consulting agreement:

 

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 months ended March 31, 2011, the Company recorded consulting expenses of $25,200. As of December 31, 2011 the loan balance was zero and accordingly, there will be no further expenses.

 

 

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 included a derivative liability due to the debt holders on its’ balance sheet as of March 31, 2012 and December 31, 2011 of $648,000.

 

 

8. Stockholders’ equity deficiency:

 

 

Warrants and options:

 

The Company did not issue any warrants or options for the three months ended March 31, 2012. A summary of outstanding warrant balances at January 1, and March 31, 2012 is as follows:

 

	Warrants	Weighted-Average exercise price	Weighted- Average grant date fair value
Outstanding at January 1 and March 31,2012	1,447,618	$        .03	$       .28

 

 

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 March 31, 2012 are fully-vested and exercisable. A summary of outstanding balances at January 1, and March 31, 2012 is as follows:

 

 

	Options		Weighted-Average exercise price		Weighted-Average remaining contractual life		Aggregate intrinsic Value
Outstanding at January 1, 2011	330,000		$    1.03		3.98		$          -
Outstanding at March 31, 2012	330,000		$    1.03		3.73		$          -

 

 

9. Prior events:

 

Asset sale:

 

On December 22, 2005, FFFC and Chex entered into an Asset Purchase Agreement (the “APA”) with Game Financial Corporation (“Game”), pursuant to which FFFC and Chex agreed to sell all of its cash access contracts and certain related assets, which represented substantially all the assets of Chex. Such assets also represented substantially all of the operating assets of the Company on a consolidated basis. On January 31, 2006, FFFC and Chex completed the sale (the “Asset Sale”) for $14 million pursuant to the APA and received net cash proceeds of $12,642,784, after certain transaction related costs and realized a pre-tax book gain of $4,145,835. As a result of the Asset Sale, the Company has no substantial continuing operations. Therefore, the Company is not reporting and accounting for the sale of Chex’s assets as discussed in discontinued operations.

 

Additionally, FFFC and Chex entered into a Transition Services Agreement (the “TSA”) with Game pursuant to which FFFC and Chex agreed to provide certain services to Game to ensure a smooth transition of the sale of the cash-access financial services business.

 

Pursuant to the APA and the TSA, FFFC and Chex owed Game approximately $300,000. Game, FFFC and Chex agreed to settle the balance due for $275,000 (included in accounts payable on the balance sheet presented herein) with payment terms. FFFC and Chex have not made any of the payments stipulated in the settlement and subsequently Game filed a complaint against Chex, FFFC and HPI seeking approximately $318,000. The Company has agreed to a judgment of $329,146, comprised of the $275,000, attorney fees of $15,277 (included in accounts payable on the balance sheet presented herein, and attorney fees of $38,869 (included in accrued liabilities on the balance sheet presented herein). FFFC and Chex have agreed to indemnify HPI.

 

 

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.

 

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, 2011. 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 was the secretary of FFFC through September 30, 2011, the date of his resignation.

 

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 HPI and to manage and operate HPI 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.

 

10. Subsequent events:

 

Management performed an evaluation of the Company’s activity through the date these financials were issued to determine if they must be reported. The Management of the Company determined that there were no reportable subsequent events to be disclosed. 

 

 

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, 2011 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, 2011 and 2010. The financial statements presented for the three months ended March 31, 2012 and 2011 include FFFC and its wholly-owned subsidiaries.

 

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

 

The Company’s financial statements for the three months ended March 31, 2012 and 2011 have been prepared on a going concern basis, which contemplates the realization of its remaining assets and the settlement of liabilities and commitments in the normal course of business. The Company has incurred significant losses since its inception and has a working capital deficit of approximately $10,103,000 and an accumulated deficit of approximately $22,790,300 as of March 31, 2012. 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 three months ended March 31, 2012, net cash used in operating activities was $222 compared to $5,982 for the three months ended March 31, 2011. Net loss was $174,185 and $211,113 for the three months ended March 31, 2012 and 2011, respectively. The net loss for the three months ended March 31, 2012 includes $6,854 related to amortization, and was partially offset by the change in the fair value of a derivative liability of $1,667 for the three months ended March 31, 2012. Included in the net loss for the three months ended March 31, 2012 was $25,200 for amortization.

 

There was no cash provided by or used in investing activities for the three months ended March 31, 2012, and 2011.

 

Net cash provided by financing activities for the three months ended March 31, 2012 was $195 compared to $4,111 for the three months ended March 31, 2011. The activity for the three months ended March 31, 2012 is the Company received net proceeds of $5,375 on the issuance of notes payable, and repaid $5,180 of notes payable. For the three months ended March 31, 2011, the Company received proceeds of $4,400 on the issuance of notes payable and repaid $1,100 of notes payable.

 

For the three months ended March 31, 2012, cash and cash equivalents decreased by $27 compared to a decrease of $1,871 for the three months ended March 31, 2011. Ending cash and cash equivalents at March 31, 2012 was $226 compared to $174 at March 31, 2011.

 

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 months ended March 31, 2012 were $9,392 compared to $11,538 for the three months ended March 31, 2011. Revenues in all periods consist of credit card income on Nova’s remaining portfolio.

 

 

OPERATING EXPENSES

 

Operating expenses for the three months ended March 31, 2012, were $8,822 compared to $10,645 for the three months ended March 31, 2011. 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 months ended March 31, 2012 were $58,401 compared to $93,628 for the three months ended March 31, 2011. The expenses were comprised of the following:

 

	Three months ended March 31,
	2012		2011
Accounting, legal and consulting	$ 54,000		$  85,450
Other	4,401		8.178
	$ 58,401		$  93,628

 

For the three months ended March 31, 2012 and 2010 corporate operating expenses are primarily related to FFFC.

 

Accounting, legal and consulting expenses decreased for the three months ended March 31, 2012 compared to the three months ended March 31, 2011. The decrease in the current period was primarily a result of decreases in consulting fees related to a non-compete agreement that has expired. FFFC has consulting agreements with two officers who provide various consulting services to the Company. These continuing agreements require the Company to pay approximately $9,000 per month.

 

 

OTHER INCOME (EXPENSE)

 

Other expenses, net for the three months ended March 31, 2012 were $116,354 compared to $118,378 for the three months ended March 31, 2011. Included in the current period was interest expense of $125,521, which was partially offset by $7,500 of dividend income on the Paymaster investment and $1,667 related to the change in the fair market value on the $25,000 convertible note.

 

 

INCOME TAX EXPENSE

 

There was no income tax expense for the three months ended March 31, 2012 and 2011.

 

 

CONTRACTUAL OBLIGATIONS

 

No material changes outside the ordinary course of business during the quarter ended March 31, 2012.

 

 

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 2011 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 March 31, 2012 and December 31, 2011.

 

		March 31,		December 31,
		2012		2011
Derivative liabilities (1)		$    693,000		$    694,667
		$    693,000		$    694,667

 

(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, 2011 and March 31, 2012, the common stock had a market value of $0. Accordingly, as of March 31, 2012 the Company has recorded a liability of $648,000. Additionally as of March 31, 2012 the Company is including in derivative liabilities $45,000 resulting from the fair value of $25,000 subordinated debenture (see footnote 6 to the financial statements).

 

 

 

 

ITEM 4T. 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") 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 report. Based on that review and evaluation, the CEO has concluded that as of March 31, 2012 disclosure controls and procedures, were not effective to ensure that information relating to us required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. The Company first intends to focus its’ efforts on stabilizing the business as a going concern, and secondly, designing and installing effective controls as soon as cash flow, and funding to do so become available.

 

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.

 

Our management, including our CEO does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. 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.

 

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may still occur.

 

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.

 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Refer to Note 7 of the Condensed Consolidated Financial Statements

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None

 

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

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)

 

 

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: May 21, 2012	By: /s/ Barry Hollander
	Barry Hollander
	Acting Chief Executive Officer
	Principal Executive Officer and
	Principal Accounting Officer