NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
1. Business and
organization, asset sale, and going concern and management’s plans:
Business and organization:
FastFunds
Financial Corporation (the “Company” or “FFFC”) is a holding company, and through January 31, 2006, operated
primarily through its wholly-owned subsidiary Chex Services, Inc. (“Chex”). FFFC was previously organized as Seven
Ventures, Inc. (“SVI”). Effective June 7, 2004, Chex merged with SVI (the “Merger”), a Nevada corporation
formed in 1985. At the date of the Merger, SVI was a public shell with no significant operations.
The
acquisition of Chex by SVI was recorded as a reverse acquisition based on factors demonstrating that Chex represents the accounting
acquirer. The historical stockholders’ equity of Chex prior to the exchange was retroactively restated (a recapitalization)
for the equivalent number of shares received in the exchange after giving effect to any differences in the par value of the SVI
and Chex common stock, with an offset to additional paid-in capital. The restated consolidated accumulated deficit of the accounting
acquirer (Chex) has been carried forward after the exchange.
On June 29, 2004, SVI changed its name
to FFFC.
Effective January
21, 2014, the Board of Directors of the Company approved the issuance of 1,000 shares of Class C Preferred Stock (as defined and
described below) (the “Class C Preferred Stock Shares”) to Mr. Henry Fong, the Company’s sole officer and Director,
or his assigns in consideration for services rendered to the Company and continuing to work for the Company without receiving
significant payment for services and without the Company having the ability to issue shares of common stock as the Company does
not have sufficient authorized but unissued shares of common stock to allow for any such issuances.
As
a result of the issuance of the Class C Preferred Stock Shares to Mr. Fong, or his assigns and the Super Majority Voting Rights
(described below), Mr. Fong obtained voting rights over the Company’s outstanding voting stock which provides him the right
to vote up to 51% of the total voting shares able to vote on any and all shareholder matters. As a result, Mr. Fong
will exercise majority control in determining the outcome of all corporate transactions or other matters, including the election
of Directors, mergers, consolidations, the sale of all or substantially all of the Company’s assets, and also the power
to prevent or cause a change in control. The interests of Mr. Fong may differ from the interests of the other stockholders and
thus result in corporate decisions that are adverse to other shareholders. Additionally, it may be impossible for shareholders
to remove Mr. Fong as an officer or Director of the Company due to the Super Majority Voting Rights
.
On
May 25, 2012, the Company entered into an Agreement Concerning the Exchange of Securities (the “Agreement”) by and
among Advanced Technology Development, Inc., a Colorado corporation ("ATD"), and Carbon Capture USA, Inc., a Colorado
corporation ("Carbon") and Carbon Capture Corporation, a Colorado corporation ("CCC"). ATD is a 100% wholly
owned subsidiary of the Company. Carbon is a 100% wholly owned subsidiary of CCC, which is privately held. Mr. Henry Fong, the
sole officer and director of the Company is the control person of CCC. Pursuant to the Agreement, ATD acquired from CCC all of
the issued and outstanding common stock of Carbon in exchange for ninety million (90,000,000) newly issued unregistered shares
of the Company’s common stock. ATD has also assumed an unpaid license fee of $250,000 due from Carbon to CCC.
Carbon has an
exclusive US license related to provisional patent Serial number 61/077,376 and a US Patent to be issued. The patent titled, “METHOD
OF SEPARATING CARBON DIOXIDE”, related to methods of decomposing a gaseous medium, more specifically, relating to methods
of utilizing radio frequency energy to separate the elemental components of gases such as carbon dioxide. ATD plans to commence
research and development with a goal of potential commercialization; subject to financing.
On October 7,
2013, the Company formed Financiera Moderna (“FM”), as a wholly-owned subsidiary to develop and market financial products
and services target for the Hispanic community. The spectrum of financial products to be offered includes insurance, secured credit
cards, debit cards, mortgage products and financial literacy tools.
On November
7, 2013, FM signed a marketing and funding agreement (“the Marketing Agreement”) with Compra Vida (“CV”)
and Compra Casa (“CS”); development stage companies that formulate, develop and implement marketing programs to the
Spanish speaking U.S. market. On November 20, 2013, the Company remitted $15,000 to the principals of CV and CS pursuant to the
Marketing Agreement. Subsequently, the parties have agreed to terminate the Marketing Agreement, to allow CV and CS to revise
their marketing concept to implement a more direct to consumer approach. Accordingly, the parties are still negotiating the final
transaction. There is no assurance that these negotiations will be successful.
As part of the
initial transaction, FFFC issued 30,000,000 shares of common stock to the principals of CV and CS. Due to the termination of that
agreement and the ongoing negotiations the common stock has not been delivered and has been recorded as Treasury Stock, pending
the outcome of the final transaction.
On
March 5, 2013, the Company and its’ wholly owned subsidiary NET LIFE Processing Inc., (“NET LIFE”) entered into
an Agreement Concerning the Exchange of Securities (the “Agreement”) with Net Life Financial Processing Trust (“Net
Life Trust”) and the Trustee of Net Life Trust pursuant to which NET LIFE was to acquire the exclusive mortgage servicing
rights (the “Rights”) from Net Life Trust. Net Life Trust holds the exclusive mortgage servicing rights from Net Life
Financial Holdings Trust.
The
closing of the transaction contemplated by the Agreement (the “Closing”) was subject to the satisfaction or waiver
of customary closing conditions, including that the representations and warranties given by the Parties are materially true and
correct as of the Closing, and the exchanging and approval by each party of the other party’s schedules and exhibits. The
Company has concluded its’ due diligence, the closing conditions have not been met and at this time, the Company is no longer
considering closing.
On January 21,
2014, the Company formed Cannabis Angel, Inc. (“CA”) as a wholly-owned subsidiary. CA was formed to assist and provide
angel funding, business development and consulting services to Cannabis related projects and ancillary ventures. CA has entered
into the following agreements:
-
On January 28, 2014, CA
entered into a one year Consulting Agreement with Singlepoint, Inc. (“Singlepoint”) (the “Singlepoint Agreement”).
The Singlepoint Agreement automatically renews for succeeding one year periods, provided, that the CA can terminate the Singlepoint
Agreement at any time during the initial one year term or thereafter by giving Singlepoint not less than five (5) days notice
to terminate. CA is to provide consulting services including strategy and business planning, marketing and sales support, define
and support for product offerings, acquisition strategy and funding strategy.
-
On
February 7, 2014, CA entered into a one year consulting agreement with Colorado Cannabis
Business Solutions, Inc (“CCBS”). CA is to provide consulting services to
CCBS relating to business opportunities, corporate finance activities and general business
development, in exchange for 9.9% ownership in CCBS.
-
On February 18, 2014,
CA entered into a month to month consulting agreement with Halfar Consulting GmbH (“Halfar”). Halfar will consult
with CA regarding corporate services including identifying and assisting CA with due diligence on potential European business
partners engaged in cannabis related businesses. CA has agreed to compensate Halfar $12,000 for these services.
-
On March 5, 2014, CA entered
into a five (5) year Strategic Alliance Agreement (“SAA”) with Worldwide Marijuana Investments, Inc. (“Worldwide”).
Pursuant to the SAA, Worldwide and CA have agreed to market and perform certain complementary business consulting services. The
SAA automatically renews for successive one year terms, unless either party gives written notice of termination at least thirty
(30) days prior to any expiration. The SAA can also be terminated by mutual agreement, or at any time by sixty (60) day written
notice from either party.
On February
17, 2014, the Company and CA entered into a consulting agreement with Merchant Business Solutions, Inc. (“MBS”). CA
will provide consulting services to MBS regarding seeking potential business opportunities, financial opportunities, and general
business development in exchange for 49% of Cannabis Merchant Financial Solutions, Inc. a new subsidiary of MBS.
On
February 25, 2014, the Company and CA entered into an Asset Purchase Agreement (the “APA”) with Green Information
Systems, Inc. (“GIS”). Pursuant to the APA the Company and CA will acquire from GIS certain domain names and trade
names, including
www.greenenergytv.com. The closing of the APA
has
not yet occurred.
To
date, none of the business activities have generated any revenue.
Going concern
and management’s plans:
In
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, 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, 2014 and 2013
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 $706,576 for the three months ended March 31,
2014, and has a working capital deficit of $9,951,751 and accumulated deficit of $25,317,955 as of March 31, 2014. Moreover, the
Company presently has no significant ongoing business operations or sources of revenue and has little resources with which to
obtain or develop new operations.
These
factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do
not contain any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going concern.
The
Company was to receive approximately $30,000 annually pursuant to the Preferred Stock it holds of an unaffiliated party (see note
4), as well as minimal cash from the Nova remaining credit card portfolio. However, the Company has not received the quarterly
dividend from its investment since the quarter ended June 30, 2012, and has not received any cash from the Nova portfolio since
2012. These factors raise substantial doubt about the Company’s ability to continue as a going concern. There can be no
assurance that the Company will have adequate resources to fund future operations, if any, or that funds will be available to
the Company when needed, or if available, will be available on favorable terms or in amounts required by the Company. Currently,
the Company does not have a revolving loan agreement with any financial institutions, nor can the Company provide any assurance
it will be able to enter into any such agreement in the future. The condensed consolidated financial statements do not include
any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
The
Company evaluates, on an ongoing basis, potential business acquisition/restructuring opportunities that become available from
time to time, which management considers in relation to its corporate plans and strategies.
2. Summary of significant
accounting policies:
Basis
of presentation and principles of consolidation:
The
accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management,
all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have
been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information
and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been condensed or omitted. These condensed financial statements
should be read in conjunction with a reading of the Company’s consolidated financial statements and notes thereto included
in the Company’s Form 10-K annual report filed with the Securities and Exchange Commission (SEC) on April 15, 2014. Interim
results of operations for the three months ended March 31, 2014 are not necessarily indicative of future results for the full
year. Certain amounts from the 2013 period have been reclassified to conform to the presentation used in the current period.
The condensed
consolidated financial statements include the accounts of the Company and its’ subsidiaries. All material intercompany balances
and transactions have been eliminated.
Cash
and cash equivalents:
For the
purpose of the financial statements, the Company considers all highly-liquid investments with an original maturity three-months
or less to be cash equivalents.
Accounts
receivables and revenue recognition:
Accounts
receivables are stated at cost plus refundable and earned fees (the balance reported to customers), reduced by allowances for
refundable fees and losses. Fees (revenues) are accrued monthly on active credit card accounts and included in accounts receivables,
net of estimated uncollectible amounts. Accrual of income is discontinued on credit card accounts that have been closed or charged
off. Accrued fees on credit card loans are charged off with the card balance, generally when the account becomes 90 days past
due. The allowance for losses is established through a provision for losses charged to expenses. Credit card receivables are charged
against the allowance for losses when management believes that collectability of the principal is unlikely. The allowance is an
amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the
collectability of the accounts and prior loss experience. This evaluation also takes into consideration such factors as changes
in the volume of the loan portfolio, overall portfolio quality and current economic conditions that may affect the borrowers’
ability to pay. While management uses the best information available to make its evaluations, this estimate is susceptible to
significant change in the near term.
Long-lived assets:
Long-lived
assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
Noncontrolling
interest:
On January
1, 2012, the Company adopted authoritative accounting guidance that requires the ownership interests in subsidiaries held by parties
other than the parent, and income attributable to those parties, be clearly identified and distinguished in the parent’s
consolidated financial statements. The Company’s noncontrolling interest is now disclosed as a separate component of the
Company’s consolidated deficiency on the balance sheets. Earnings and other comprehensive income are separately attributed
to both the controlling and noncontrolling interests. Earnings per share are calculated based on net income attributable
to the Company’s controlling interest.
Loss
per share:
Loss per share
of common stock is computed based on the weighted average number of common shares outstanding during the period. Stock options,
warrants, and common stock underlying convertible promissory notes are not considered in the calculations for the three month
periods ended March 31, 2014 and 2013, as the impact of the potential common shares, which total 940,929,733 (2014) and 139,402,442
(2013), would be antidilutive.
Use of estimates:
Preparation
of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the dates of the balance sheets and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Fair
value of financial instruments:
The estimated
fair value of financial instruments has been determined by the Company using available market information and appropriate methodologies;
however, considerable judgment is required in interpreting information necessary to develop these estimates. Accordingly, the
Company’s estimates of fair values are not necessarily indicative of the amounts that the Company could realize in a current
market exchange.
The fair values
of cash and cash equivalents, current non-related party accounts receivable, and accounts payable approximate their carrying amounts
because of the short maturities of these instruments.
The fair values
of notes and advances receivable from non-related parties approximate their net carrying values because of the allowances recorded
as well as the short maturities of these instruments.
The fair values
of notes and loans payable to non-related parties approximate their carrying values because of the short maturities of these instruments.
The fair value of long-term debt to non-related parties approximates carrying values, net of discounts applied, based on market
rates currently available to the Company.
Fair
value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation
techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained
from sources independent of the reporting entity (“observable inputs”) and the reporting entity’s own assumptions
about market participant assumptions developed based on the best information available in the circumstances (“unobservable
inputs”).
Fair
value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”)
in an orderly transaction between market participants at the measurement date. In determining fair value, the Company primarily
uses prices and other relevant information generated by market transactions involving identical or comparable assets (“market
approach”). The Company also considers the impact of a significant decrease in volume and level of activity for an asset
or liability when compared with normal activity to identify transactions that are not orderly.
The
highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest
priority to unobservable inputs (Level 3 measurements). Securities are classified in their entirety based on the lowest level
of input that is significant to the fair value measurement.
The three
hierarchy levels are defined as follows:
Level 1 – Quoted
prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted
prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in
active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
Level 3 – Prices
or valuations that require inputs that are both significant to the fair value measurement and unobservable.
Credit
risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value.
The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s
own credit risk as observed in the credit default swap market.
Accounting for obligations and
instruments potentially settled in the Company’s common stock:
The Company
accounts for obligations and instruments potentially to be settled in the Company's stock in accordance with ASC Topic 815,
Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock.
This issue addresses
the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company's
stock.
Under ASC Topic
815, contracts are initially classified as equity or as either assets or liabilities, depending on the situation. All contracts
are initially measured at fair value and subsequently accounted for based on the then current classification. Contracts initially
classified as equity do not recognize subsequent changes in fair value as long as the contracts continue to be classified as equity.
For contracts classified as assets or liabilities, the Company reports changes in fair value in earnings and discloses these changes
in the financial statements as long as the contracts remain classified as assets or liabilities. If contracts classified as assets
or liabilities are ultimately settled in shares, any previously reported gains or losses on those contracts continue to be included
in earnings. The classification of a contract is reassessed at each balance sheet date.
Stock-based
compensation:
The
Company has one stock option plan approved by FFFC’s Board of Directors in 2004, and also grants options and warrants to
consultants outside of its stock option plan pursuant to individual agreements. The Company accounts for its stock based compensation
under ASC 718 “Compensation- Stock Compensation” using the fair value based method. Under this method, compensation
cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually
the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity
instruments for goods and services. It also addresses transactions in which an entity incurs liabilities in exchange for goods
and services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance
of those equity instruments. We use the Black Scholes model for measuring the fair value of options. The stock based fair value
compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement
date) and is recognized over the vesting periods.
There
were no options granted during the three months ended March 31, 2014 and 2013.
The
Company’s stock option plan is more fully described in Note 8.
Income
Taxes
Deferred tax
assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities
using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation
allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.
The Company
accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 740, “Accounting for Income Taxes. It prescribes a recognition threshold and measurement
attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As
a result, the Company has applied a more-likely-than-not recognition threshold for all tax uncertainties. The guidance
only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination
by the various taxing authorities.
The Company
classifies penalties and interest related to unrecognized tax benefits as income tax expense in the Statements of Operations
Reclassifications:
Certain prior
period balances have been reclassified to conform to the current period's financial statement presentation. These reclassifications
had no impact on previously reported results of operations or stockholders' deficiency.
Recent Accounting Pronouncements
Not Yet Adopted
:
As of the date
of this report, there are no recent accounting pronouncements that have not yet been adopted that we believe would have a material
impact on our financial statements.
3. Notes receivable:
On February
20, 2014, LG Capital Funding, LLC (“LG”) issued a $40,000 collateralized secured promissory note to the Company. The
note bears interest at the rate of 8% and is due no later than November 20, 2014, unless the Company does not meet the current
information requirements required under Rule 144 of the Securities Act of 1933, as amended.
On March 19,
2014, the Company advanced $25,000 to Worldwide Marijuana Investments, Inc. (“WMI”) in exchange for a $25,000 promissory
note. Interest of 12% per annum is payable in monthly installments, along with a monthly principal amount of $500 beginning April
1, 2014 for twelve months, at which time the remaining principal amount and interest will be due in full.
4.
Long term investments:
On
March 30, 2011, the Company and Paymaster Limited (“Paymaster”) agreed to restructure a note receivable (the “Note”).
Pursuant to the agreement, the parties agreed to convert the remaining balance of $339,575 of the Note receivable into Cumulative
Convertible Redeemable Preference Shares (the Preference Shares”) with a value of $400,000, and an annual dividend of 7.5%
over thirty-six (36) months. Paymaster, at any time prior to maturity, may elect to redeem some or all of the Preference Shares
at an effective dividend rate of 10% per annum. The Company, upon maturity and with not less than ninety (90) days prior notice,
may elect to convert some or all of Preference Shares into the pro rata equivalent of 11,100 ordinary shares of Paymaster (equal
to 10% of the issued and outstanding capital of the Company based on the conversion of all Preference Shares on a fully diluted
basis). The Company has recorded the investment at $89,575, net of a valuation allowance of $250,000, the same historical carrying
value on the Company’s balance sheet as the note. The last dividend the Company has received was the quarterly dividend
for the quarter ended June 30, 2012.
5. Accrued
liabilities:
|
|
Accrued
liabilities at March 31, 2014 and December 31, 2013 were $3,351,998 and
$3,481,723, respectively, and were comprised of:
|
|
2014
|
|
2013
|
|
|
|
|
|
|
Legal
fees
|
$
|
23,594
|
|
$
|
215,218
|
Interest
|
|
2,986,142
|
|
|
2,896,763
|
Consultants
and advisors
|
|
139,524
|
|
|
166,600
|
Registration
rights
|
|
98,013
|
|
|
98,013
|
Other
|
|
104,725
|
|
|
105,119
|
|
|
|
|
|
|
|
$
|
3,351,998
|
|
$
|
3,481,723
|
6.
Promissory notes, including related parties and debenture payable:
Promissory
notes, including related parties at March 31, 2014 and December 31, 2013, consist of the following:
|
2014
|
|
2013
|
|
|
|
|
|
|
Promissory
notes payable:
|
|
|
|
|
|
|
|
|
|
|
|
Various,
including related parties of $157,322 (2014) and $173,113 (2013); interest rate ranging from 8% to 10%
[A]
|
$
|
171,422
|
|
$
|
192,213
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
$
|
2,262,141
|
|
$
|
2,282,932
|
.
[A]
Pursuant to a November 4, 2011 Board of director resolution, these notes
are convertible at conversion rates, determined at the discretion of the board of directors. During the three months ended March
31, 2014 the Company issued notes of $5,000 (all to related parties) and made payments of $25,791 (including $20,791 to related
parties).
|
[B]
|
These
notes payable (the “Promissory Notes”) originally
became due on February 28, 2007. The Company renewed $283,000
of the Promissory Notes on the same terms and conditions as
previously existed. In April 2007 the Company, through a financial
advisor, restructured $1,825,000 of the Promissory Notes (the
“Restructured Notes”). The Company has accrued
an expense of $36,500 to compensate the financial advisor
2% of the Restructured Notes as well as having issued 150,000
shares of common stock to the financial advisor. The Restructured
Notes carry a stated interest rate of 15% (a default rate
of 20%) and matured on February 28, 2008. The Company has
not paid the interest due since June 2007, and no principal
payments on the Promissory Notes have been made since 2008
and accordingly, they are in default. Accrued interest on
these notes total $2,909,686 and is included in accrued expenses
on the consolidated balance sheets.
|
The chairman
of the board of the Company has personally guaranteed up to $1 million of the Restructured Notes and two other non-related individuals
each guaranteed $500,000 of the Restructured Notes. In consideration of their guarantees the Company granted warrants to purchase
a total of 1,600,000 shares of common stock of the Company at an exercise price of $0.50 per share. The warrants were valued at
$715,200 using the Black-Scholes option pricing model and were amortized over the one-year term of the Restructured Notes. The
warrants expired in March 2010.
In January
2008, the Company and the three guarantors received a complaint filed by the financial advisor (acting as agent for the holders
of the Restructured Notes) and the holders of the Restructured Notes. The claim is seeking $1,946,250 plus per diem interest beginning
January 22, 2008 at the rate of twenty percent (20%) per annum plus $37,000 due the financial advisor for unpaid fees. The court
has ruled in favor of a motion for summary judgment filed by certain of the plaintiffs and a judgment was entered on August 18,
2009 in the total amount of $2,484,922 in principal and interest on the notes, $40,920 in related claims and $124,972 in attorney’s
fees and expenses. The Company is not aware of any payments being made by any of the guarantors and accordingly, the Company includes
these liabilities on the March 31, 2014 and December 31, 2013 balance sheets promissory notes payable and accrued expenses.
Debenture
payable:
2012
Notes
On October 9,
2012, the Company issued a $5,000 convertible promissory note to Carebourn Capital LP (“Carebourn”). The Carebourn
note was due on demand, bears interest at 8% per annum and had a conversion feature similar to the 2013 Asher Notes (defined below).
During the three months ended March 31, 2014, the Company issued 4,849,217 shares of common stock upon conversion of the note
and $696 of accrued and unpaid interest. No amounts remain open as of March 31, 2014.
On October 17,
2012, the Company issued a $25,000 convertible promissory note to Continental Equities, LLC (“Continental”). On March
26, 2013, Carebourn acquired the Continental note from Continental. During the year ended December 31, 2013, the Company issued
18,737,288 shares of common stock to Carebourn Partners, LLC. (“Carebourn Partners”) and Carebourn Partners’
assignee upon the conversion of the acquired Continental note. During the three months ended March 31, 2014, the Company issued
5,414,365 shares of common stock for $3,411 of accrued and unpaid interest. No amounts remain open as of March 31, 2014.
On October 24
and 29, 2012, the Company issued convertible promissory notes of $9,000 and $16,000 (“the 2012 Gel Notes”) respectively,
to GEL Properties, LLC (“Gel”)
The conversion price for the 2012 Gel Notes was equal
to 50% of the lowest closing bid price of the Common Stock as reported on the exchange which the Company’s shares are traded
or any exchange upon which the Common Stock may be traded in the future with a floor of $0.0001 per share, for any of the five
trading days including the day upon which a Notice of Conversion is received by the Company. If the shares had not been delivered
within 3 business days, the Notice of Conversion may be rescinded. Accrued but unpaid interest were also subject to conversion.
No fractional shares or scrip representing fractions of shares were to be issued on conversion, but the number of shares issuable
were to be rounded to the nearest whole share. Also in October 2012, the Company issued four (4) additional notes to Gel in the
aggregate, as amended, $85,000, and Gel issued the Company four secured promissory notes, one for $25,000 and three each in the
amount of $20,000, initially due June 21, 2013. Gel funded $65,000 of the notes to the Company during the year ended December
31, 2013, and the remaining $20,000 was funded on January 28, 2014. During the year ended December 31, 2013, the Company issued
288,467,551 shares of common stock in satisfaction of $63,145 of the Gel 2012 Notes. As of December 31, 2013, the Company had
$26,855 of principal amounts outstanding to Gel. During the three months ended March 31, 2014, the Company issued 314,508,480
shares of common stock in satisfaction of $46,855 of the 2012 Gel Notes. No amounts remain open of the 2012 Gel Notes as of March
31, 2014.
On November
1, 2012, the Company issued a convertible promissory note to David Schaper (“Schaper”) in the amount of $269,858 in
exchange for previously accrued legal fees. The note bears interest at 8% per annum and is convertible at a conversion price for
each share of common stock equal to 50% of the average of the lowest three trading prices (as defined in the note agreements)
per share of the Company’s common stock for the ten trading days immediately preceding the date of conversion. During the
year ended December 31, 2013, the Company issued 419,203,501 shares of common stock upon the conversion of $103,188 of the Note.
As of December 31, 2013, the balance of the note was $166,670. During the three months ended March 31, 2014, the Company issued
1,195,075,049 shares of common stock upon the conversion of $125,842 of the Note. As of March 31, 2014, the balance of the note
is $40,828.
2013
Notes
On March 14,
2013 the Company issued a convertible promissory note for $46,000 to an accredited investor (the “March 2013 Note”).
The March 2013 Note, was due eight months from issuance and bears an interest rate of 8% per annum, and in the case of an event
of default increases to 12% per annum (“the Default Rate”). The conversion feature of the 2013 Note is a 50% discount
to the average of the three lowest day closing bid prices for the ten trading days prior to conversion. The March 2013 Note matured
November 14, 2013, is in default, and the Default Rate was effective at that date. During the three months ended March 31, 2014,
the Company issued 78,000,000 shares of common stock upon conversion of $3,900 of the note. The balance of the March 2013 Note
is $42,100 as of March 31, 2014.
The
following notes issued in 2013, bear interest at 8% per annum and other than as described below are convertible at a conversion
price for each share of common stock equal to 50% of the average of the lowest three trading prices (as defined in the note agreements)
per share of the Company’s common stock for the ten trading days immediately preceding the date of conversion. The notes
issued in 2013 are referred to as the 2013 Notes.
On
April 8, 2013, the Company issued a convertible promissory note to Schaper for $5,000. During the three months ended March 31,
2014, the Company issued 100,000,000 shares of common stock upon the conversion of the note. No amounts remain open as March 31,
2014.
On April 26,
2013, the Company issued a convertible promissory note for $50,000 to an unaffiliated accredited investor. During the three months
ended March 31, 2014, the Company issued 167,359,375 shares of common stock upon the conversion of the note and $3,555 of accrued
and unpaid interest. No amounts remain open as of March 31, 2014.
On
June 6, 2013 ($12,000), July 12, 2013 ($12,500) and August 9, 2013 ($6,250) the Company issued convertible promissory notes to
Carebourn Partners. During the three months ended March 31, 2014, the Company issued 86,757,922 shares of common stock upon the
conversion of these notes and $1,024 of accrued and unpaid interest. No amounts remain open as of March 31, 2014.
On
August 9, 2013, the Company issued a $6,250 note to Linrick Industries, LLC. During the three months ended March 31, 2014, the
Company issued 10,268,561 shares of common stock upon the conversion of the note and $250 of accrued and unpaid interest in full
satisfaction of this note.
On
August 22, 2013, the Company issued a $6,000 convertible promissory note to Schaper. During the three months ended March 31, 2014,
the Company issued 40,000,000 shares of common stock upon conversion of $4,000 of this note. The outstanding principal balance
on this note is $2,000 as of March 31, 2014.
On
September 3, 2013 ($32,500) and October 17, 2013 ($37,500), the Company issued convertible promissory notes to Asher
Enterprises, Inc. (“Asher” and “2013 Asher Notes”). Among other terms the 2013 Asher Notes are due
nine months from their issuance date, bear interest at 8% per annum, are payable in cash or shares at the Conversion Price as
defined herewith, and are convertible at a conversion price (the “Conversion Price”) for each share of common
stock equal to 50% of the average of the lowest three trading prices (as defined in the note agreements) per share of the
Company’s common stock for the ten trading days immediately preceding the date of conversion. Upon the occurrence of an
event of default, as defined in the Note, the Company is required to pay interest at 22% per annum and the holders may at
their option declare the 2013 Notes, together with accrued and unpaid interest, to be immediately due and payable. In
addition, the 2013 Notes provide for adjustments for dividends payable other than in shares of common stock, for
reclassification, exchange or substitution of the common stock for another security or securities of the Company or pursuant
to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Company. During the
three months ended March 31, 2014, the Company issued 49,682,540 shares of common stock upon conversion of the $32,500 note
and $1,300 of accrued and unpaid interest. The outstanding principal balance on the October note is $37,500 as of March 31,
2014.
On
October 7, 2013, the Company issued a $3,500 convertible note to AU Funding, LLC in exchange for the cancellation of accounts
payable of $3,500. During the three months ended March 31, 2014, the Company issued 75,676,800 shares of common stock upon the
conversion of the note and $284 of accrued and unpaid interest in full satisfaction of this note.
On
October 7, 2013, the Company issued a $5,000 convertible note to Corizona Mining Partners, LLC in exchange for the cancellation
of $5,000 of accounts payable. During the three months ended March 31, 2014, the Company issued 100,000,000 upon conversion of
the note. There are no amounts open on this note as of March 31, 2014.
On
October 18, 2013, the Company issued four (4) convertible notes each in the amount of $25,000 to Gel (the 2013 Gel Notes). The
conversion price for the 2013 Gel Notes is equal to 50% of the lowest closing bid price of the Common Stock as reported on the
exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future with
a floor of $0.0001 per share, for any of the five trading days including the day upon which a Notice of Conversion is received
by the Company. If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Accrued
but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be rounded to the nearest whole share.
Also on October 18, 2014,
Gel issued the Company four secured promissory notes, each in the amount of $25,000, due April 21, 2014. The Company received
the $100,000 on March 6, 2014. As of March 31, 2014, the four convertible promissory notes in the aggregate of $100,000 of principal
amount owed Gel was outstanding.
On
November 19, 2013, the Company issued a $16,500 convertible note to Carebourn Capital L.P. The outstanding principal balance on
this note is $16,500 as of March 31, 2014.
On November
22, 2013, the Company issued a $35,000 (the Fong Note) and $30,000 (the Hollander Note) convertible note to Mr. Fong and Mr. Hollander,
respectively, for the cancellation of accrued and unpaid fees. During the three months ended March 31, 2014, the Company issued
230,000,000 shares of common stock in satisfaction of $22,000 of the Hollander note. The outstanding principal balances of the
Fong and Hollander notes as of March 31, 2014 are $35,000 and $8,000 respectively.
2014 Notes
On January 28,
2014, the Company issued a convertible promissory note to Mr. Fong for $25,500 in satisfaction of accrued and unpaid fees due
Mr. Fong. Also on January 28, 2014, the Company entered into a Debt Settlement and Release Agreement (the “DSR”) with
Mr. Fong, Mary Virginia Knight (“Knight”) or Knight assigns. Pursuant to the DSR, the Company has issued 300,000,000
shares of common stock to the Knight assign, in cancellation and satisfaction of $15,000 of the convertible note due Mr. Fong.
On February
10, 2014, the Company issued two (2) convertible promissory notes in the amounts of $95,814 and $95,813 in exchange for previously
accrued legal fees. The notes bear interest at 8% per annum and are convertible at a conversion price for each share of common
stock equal to 50% of the average of the lowest three trading prices (as defined in the note agreements) per share of the Company’s
common stock for the ten trading days immediately preceding the date of conversion. As of March 31, 2014, the balances of the
notes are outstanding.
On February
20, 2014, the Company issued two (2) convertible promissory notes, each in the amount of $40,000 to LG Capital (“LG”).
The Company received $38,000 after debt issuance costs of $2,000 and a $40,000 secured promissory note. The debt issuance costs
will be amortized over the earlier of the twelve month term of the Note or any redemptions and accordingly $389 has been expensed
as debt issuance costs (included in interest expense) for the three months ended March 31, 2014. The balance of this note is $40,000
as of March 31, 2014.
On March 3,
2014, the Company issued a $52,500 convertible promissory note to Carebourn Capital. The note is due on demand, bears interest
at 8% and is convertible at a 50% discount of the average of the three lowest days closing prices for the ten (10) days preceding
conversion. The conversion price cannot exceed 250% of the market price as of the date of the executed term sheet by the parties.
The Company received $50,000 after debt issuance costs of $2,500 which will be amortized over the six month term of the Note or
any redemptions and accordingly $375 has been expensed as debt issuance costs (included in interest expense) for the three months
ended March 31, 2014. The balance of this note is $52,500 as of March 31, 2014.
On March 6,
2014 the Company issued a $50,000 convertible promissory note to Gel, under the same terms and conditions as the 2012 Gel Notes.
The note is outstanding as of March 31, 2014.
The
Company has determined that the conversion features of the 2012, 2013 and 2014 Notes represent embedded derivatives since the
Notes are convertible into a variable number of shares upon conversion. Accordingly, the Notes are not considered to be conventional
debt under EITF 00-19 and the embedded conversion features must be bifurcated from the debt hosts and accounted for as derivative
liabilities. Accordingly, the fair value of these derivative instruments have been recorded as liabilities on the consolidated
balance sheet with the corresponding amounts recorded as a discounts to the Notes. Such discounts will be accreted from the date
of issuance to the maturity dates of the Notes. The change in the fair value of the liabilities for derivative contracts will
be recorded to other income or expenses in the consolidated statement of operations at the end of each quarter, with the offset
to the derivative liability on the balance sheet.
The fair value
of the conversion features embedded in the 2014 Notes as of their dates of issuance and in their entirety as of March 31, 2014
was determined to approximate their fair intrinsic value due to the terms of conversion.
The inputs used
to estimate the fair value of the derivative liabilities are considered to be level 1 inputs within the fair value hierarchy.
A summary of
the derivative liabilities related to convertible notes as of December 31, 2013 and March 31, 2014 is as follows:
Fair Value
|
Derivative
Liability Balance
1/1/14
|
Initial Derivative
Liability
|
Redeemed convertible
notes
|
Fair
value change- three months ended 3/31/14
|
Derivative Liability
Balance 3/31/14
|
2012
Notes
|
$172,602
|
-
|
$(120,982)
|
-
|
$51,620
|
2013
Notes
|
$363,260
|
-
|
(195,800)
|
-
|
167,460
|
2014
Notes
|
-
|
$559,512
|
(35,600)
|
-
|
523,912
|
Total
|
$535,862
|
$559,512*
|
$(352,382)
|
|
$742,992
|
|
|
|
|
|
|
|
* $19,885 of
the initial derivative liability, equal to the excess of the liabilities over the face value of the related notes is included
in derivative liability expense of $46,036 for the three months ended March 31, 2014.
A summary of debentures
payable as of December 31, 2013 and March 31, 2014 is as follows:
Face Value
|
Balances
1/1/14
|
Issuance
of new convertible notes
|
Amortization
of discount on convertible
Notes
|
Debenture
conversions three months ended 3/31/14
|
Balances
3/31/14
|
2012
Notes
|
$171,670
|
-
|
-
|
$(130,842)
|
$40,828
|
2013
Notes
|
$349,255
|
|
-
|
(204,755)
|
144,500
|
2014
Notes
|
-
|
$579,627
|
|
(20,000)
|
559,627
|
Note
discount
|
$(187,843)
|
(539,627)
|
$359,357
|
-
|
(368,113)
|
Total
|
$333,082
|
$ 40,000
|
$359,357
|
$(355,597)
|
$376,842
|
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. The Company has included $2,484,922 in litigation contingency on the consolidated balance sheets as of March 31,
2014 and December 31, 2013.
The Company
is involved in various claims and legal actions arising in the ordinary course of business. The ultimate disposition of these
matters may have a material adverse impact either individually or in the aggregate on future consolidated results of operations,
financial position or cash flows of the Company.
Operating
lease:
Effective
January 1, 2012 the Company utilized space in an office leased through February 2014, by a Company controlled by its former Acting
President. Effective January 1, 2013 the monthly rent became $1,066. The lease, as amended, expired in April 2014, when the Company
began leasing the same directly from the landlord.
Marketing
Agreement
On February
25, 2014, the Company entered into a six (6) month agreement with Aeson Ventures, LLC. Pursuant to the agreement Aeson will develop
an online marketing service and redevelop and thereafter maintain Company websites. The Company compensated Aeson $4,500 upon
signing the agreement and has agreed to a monthly fee of $2,250 thereafter. Additionally, Aeson will receive 20,000,000 shares
of Company common stock, upon the completion of the six month agreement. After the initial six month term, the agreement becomes
a month to month employment agreement, which either party can terminate with written notice to the other.
8. Income taxes:
The
operations of the Company for periods subsequent to its acquisition by HPI and through August 2004, at which time HPI’s
ownership interest fell below 80% are included in consolidated federal income tax returns filed by HPI. Subsequent to August 2004
and through January 29, 2006 the Company will file a separate income tax return. As of January 30, 2006, HPI’s ownership
interest again exceeded 80% and the operations of the Company will be included in a consolidated federal income tax from that
date through October 29, 2006 when the ownership fell below 80%. As of October 30, 2006, the Company will be filing separate income
tax returns. For financial reporting purposes, the Company’s provision for income taxes has been computed, and current and
deferred taxes have been allocated on a basis as if the Company has filed a separate income tax return for each year presented.
M
anagement assesses the
realization of its deferred
tax assets to determine if it is more likely than not that the Company's deferred tax assets will be realizable. The Company adjusts
the valuation allowance based on this assessment.
As
of March 31, 2014, the Company had a tax net operating loss carry forward of approximately $
5,229,000.
Any unused portion of this carry forward expires in 2029. Utilization of this loss may be limited in
the event of an ownership change pursuant to IRS Section 382.
9. Stockholders’
deficiency:
Common
stock:
During
the three months ended March 31, 2014, the Company issued 2,768,821,309 shares of common stock upon the conversion of $355,597
of debentures payable and $22,934 of accrued and unpaid interest.
Preferred
stock
There
were no shares of Class A or B preferred stock issued during the three months ended March 31, 2014.
Effective January
21, 2014, the Board of Directors of the Company approved the issuance of 1,000 shares of Class C Preferred Stock (as defined and
described below) (the “Class C Preferred Stock Shares”) to Mr. Fong or his assigns in consideration for services rendered
to the Company and continuing to work for the Company without receiving significant payment for services and without the Company
having the ability to issue shares of common stock as the Company does not have sufficient authorized but unissued shares of common
stock to allow for any such issuances.
As a result of
the issuance of the Class C Preferred Stock Shares to Mr. Fong, or his assigns and the Super Majority Voting Rights (described
below), Mr. Fong obtained voting rights over the Company’s outstanding voting stock which provides him the right to vote
up to 51% of the total voting shares able to vote on any and all shareholder matters. As a result, Mr. Fong will exercise
majority control in determining the outcome of all corporate transactions or other matters, including the election of Directors,
mergers, consolidations, the sale of all or substantially all of the Company’s assets, and also the power to prevent or
cause a change in control. The interests of Mr. Fong may differ from the interests of the other stockholders and thus result in
corporate decisions that are adverse to other shareholders. Additionally, it may be impossible for shareholders to
remove Mr. Fong as an officer or Director of the Company due to the Super Majority Voting Rights
.
The Class C preferred stock provides no other rights to their holder(s) other than voting rights.
The Company
valued the 1,000 shares of Class B preferred stock at $106,673, based on an estimated control premium that may be realized upon
the sale of common stock, primarily similar to voting control as of the grant date.
Stock options:
The
Company has a stock option plan (the “Plan”) which was approved by the Board of Directors in July 2004 and which permits
the grant of shares to attract, retain and motivate employees, directors and consultants of up to 1.8 million shares of common
stock. Options are generally granted with an exercise price equal to the Company’s market price of its common stock on the
date of the grant and vest immediately upon issuance.
There
were no options granted during the three months ended March 31, 2014 and 2013.
All options
outstanding at March 31, 2014 are fully vested and exercisable. A summary of outstanding balances at March 31, 2014 and December
31, 2013 is as follows:
|
|
|
Weighted-
|
|
Weighted-
|
|
Aggregate
|
|
|
|
Average
|
|
Average
|
|
Intrinsic
|
|
Options
|
|
exercise
price
|
|
Remaining
contractual life
|
|
Value
|
|
|
|
|
|
|
|
|
Outstanding at
January 1, 2014
|
990,000
|
|
$0.34
|
|
1.98
|
|
$0
|
|
|
|
|
|
|
|
|
Outstanding at
March 31, 2014
|
990,000
|
|
$0.34
|
|
1.73
|
|
$0
|
10.
Prior
events:
Asset sale:
On December
22, 2005, FFFC and Chex entered into an Asset Purchase Agreement (the “APA”) with Game Financial Corporation (“Game”),
pursuant to which FFFC and Chex agreed to sell all of its cash access contracts and certain related assets, which represented
substantially all the assets of Chex. Such assets also represented substantially all of the operating assets of the Company on
a consolidated basis. On January 31, 2006, FFFC and Chex completed the sale (the “Asset Sale”) for $14 million pursuant
to the APA and received net cash proceeds of $12,642,784, after certain transaction related costs and realized a pre-tax book
gain of $4,145,835. As a result of the Asset Sale, the Company has no substantial continuing operations. Therefore, the Company
is not reporting and accounting for the sale of Chex’s assets as discussed in discontinued operations.
Additionally,
FFFC and Chex entered into a Transition Services Agreement
(the “TSA”) with
Game pursuant to which FFFC and Chex agreed to provide certain services to Game to ensure a smooth transition of the sale of the
cash-access financial services business.
Pursuant to
the APA and the TSA, FFFC and Chex owed Game approximately $300,000. Game, FFFC and Chex agreed to settle the balance due for
$275,000 (included in accounts payable on the balance sheet presented herein) with payment terms. FFFC and Chex have not made
any of the payments stipulated in the settlement and subsequently Game filed a complaint against Chex, FFFC and Hydrogen Power
Inc. (“HPI”) seeking approximately $318,000. The Company has agreed to a judgment of $329,146, comprised of the $275,000,
attorney fees of $15,277 (included in accounts payable on the balance sheet presented herein, and attorney fees of $38,869 (included
in accrued liabilities on the balance sheet presented herein). FFFC and Chex have agreed to indemnify HPI.
11. Related party transactions:
Management
and director fees:
During the three
months ended March 31, 2014 and 2013 the Company accrued expenses of $0 and $15,000, respectively, for the services of Mr. Barry
Hollander as its Acting President (resigned January 22, 2014).
For the three
months ended March 31, 2014 and 2013, the Company accrued expenses of $15,000 and $5,000, respectively, for its Chairman, Mr.
Fong’s services. Mr. Fong received $12,576 in cash payments for the three months ended March 31, 2014. In January 2014,
the Company issued a convertible note to Mr. Fong in payment of $25,500 of accrued and unpaid fees. As of March 31, 2014, Mr.
Fong is owed $2,424 for these services, included in accrued expenses on the balance sheet.
Preferred
Stock:
On January 21,
2014, the Company issued 1,000 shares of Class C preferred stock to Mr. Fong.
Mr. Fong obtained voting
rights over the Company’s outstanding voting stock which provides him the right to vote up to 51% of the total voting shares
able to vote on any and all shareholder matters. As a result, Mr. Fong will exercise majority control in determining
the outcome of all corporate transactions or other matters, including the election of Directors, mergers, consolidations, the
sale of all or substantially all of the Company’s assets, and also the power to prevent or cause a change in control.
Acquisition
of Carbon Capture:
On May 25, 2012,
the Company’s newly formed subsidiary ATD acquired Carbon Capture USA (“Carbon”) from Carbon Capture Corporation,
a Colorado corporation ("CCC"). CCC is privately held by Mr. Henry Fong, a director of the Company and is the control
person of CCC. Pursuant to the Agreement, ATD acquired from CCC all of the issued and outstanding common stock of Carbon in exchange
for ninety million (90,000,000) newly issued unregistered shares of the Company’s common stock. During the year ended December
31, 2013, Carbon exchanged the 90,000,000 shares of common stock for 1,500,000 shares of Class B preferred stock. The Class B
preferred stock automatically converts to 90,000,000 shares of common stock whenever there are sufficient shares of common stock
to allow for the conversion. Pursuant to the terms and conditions of the preferred stock, the Company determined there were not
any additional costs to be recognized.
Notes
payable:
As disclosed
in Note 6, the Company has issued notes payable to various related parties. The balances of December 31, 2013 and March 31, 2014,
and the activity for the three months ended March 31, 2014 follows:
Noteholder
|
|
Balance
1/1/14
|
|
Additions
|
|
Payments
|
|
|
Balance
3/31/14
|
Gulfstream
Financial Partners (1)
|
$
|
1,750
|
$
|
-
|
$
|
1,750
|
|
$
|
-
|
HPI
Partners (1)
|
|
144,725
|
|
-
|
|
5,000
|
|
|
139,725
|
AFPW
(1)
|
|
6,953
|
|
-
|
|
6,953
|
|
|
-
|
Henry
Fong (2)
|
|
2,088
|
|
5,000
|
|
7,088
|
|
|
-
|
HF
Services (1)
|
|
4,150
|
|
-
|
|
-
|
|
|
4,150
|
Barry
Hollander (2)
|
|
2,775
|
|
-
|
|
-
|
|
|
2,775
|
SurgLine
Int’l (1)
|
|
10,672
|
|
-
|
|
-
|
|
|
10,672
|
Total
|
$
|
173,113
|
$
|
5,000
|
$
|
20,791
|
|
$
|
157,322
|
All of the notes
are due on demand and have interest rates of 8% to 10% per annum.
|
(1)
|
Mr.
Henry Fong, an
officer and director
of the Company,
is also an officer,
director or control
person of these
entities.
|
|
(2)
|
An
officer or director
of the Company,
Mr. Hollander resigned
January 22, 2014.
|
12.
Subsequent
events:
On March 27,
2014, the Company issued an $831,000 secured convertible promissory note (the “Note”) to Typenex Co-Investments, LLC
(“Typenex” or the “Lender”).
The Typenex Note carries an original issuer
discount of $75,000. In addition, the Company agreed to pay $6,000 to Typenex to cover the Lender’s legal and other fees.
At the option of the Lender, the note converts at $0.0025 per share, the conversion by Lender of any portion of the Outstanding
Balance shall only be exercisable in ten (10) tranches (each, a “
Tranche
”), consisting of an initial Tranche
in an amount equal to $88,500 and nine (9) additional Tranches, each in the amount of $82,500, plus any interest, costs, fees
or charges accrued thereon or added thereto under the terms of this Note. The Note carries a ten % interest rate and matures on
the seventeenth month after funding. Typenex funded $75,000 on April 1, 2014 and also delivered nine (9) secured promissory notes
to the Company, each in the amount of $75,000. Each payment received will constitute an “Issue Date”. The Company
also granted Typenex the right to purchase at any time on or after each Issue Date until the date which is the last calendar day
of the month in which the fifth anniversary of the Issue Date occurs (the “
Expiration Date
”), a number of fully
paid and non-assessable shares (the “
Warrant Shares
”) of the Company’s common stock, par value $0.001
per share equal to $41,250 divided by the Market Price (as defined in the Note).
On April 3,
2014, the Company and its wholly-owned subsidiary CA announced the launch of
GreenEnergyMedia.TV.
GreenEnergyMedia.TV caters to broadcasting real-time news and social media feeds relating exclusively to the medical and recreational
marijuana communities.
GreenEnergyMedia.TV
broadcasts stock quotations and intraday charts on over 40 leading companies competing within the medical marijuana industry. The
recently launched Cannabis Finance area of the website features this information, and will be updated with additional interactive
features in the weeks to come.
The
Company's goal in developing GreenEnergyMedia.TV is to provide the investing public, which has an interest in the medical and
recreational marijuana industry, an exclusive online venue that offers real-time news, commentary, video feeds and investor data.
On
April 29, 2014, Cannabis Live was launched, which
will focus exclusively on hosting and
broadcasting video of on-demand events. As this area of GreenEnergyMedia.TV’s website progresses, the Company plans to include
the development of an exclusive interactive online channel. This future development will allow for several sources of revenue
to be derived for the Company; including premium access membership fees, sponsorship and endorsement fees, and advertising revenue.
On
April 17, 2014, the Company and its wholly-owned subsidiary CA announced
a Merchant Payment Processing
Agreement to offer a debit card payment solution for retail cannabis dispensaries. This program will be offered through the
Company's 49% owned subsidiary, Cannabis Merchant Financial Solutions, Inc. ("CMFS"). This payment solution allows
dispensaries to accept debit and credit cards by using the PIN number associated with the card being used.
CMFS
will arrange within four business days after registration by a dispensary to install a pre-programmed terminal for payment acceptance. This
plug and process solution is ready to be installed immediately and can be utilized with only a power source and internet access. The
consumer swipes their card, follows the on-screen prompts, and enters their PIN information to complete the sale. The approved
transaction will print a receipt/voucher at which point it can be exchanged for goods and/or services with the merchant. The
approved funds clear the payers account listed on the ACH authorization form within 48 hours.
From
April 1, 2014, through May 15, 2014, the Company has issued 129,031,243 shares of common stock in satisfaction of $70,400 of convertible
promissory notes and $3,259 of accrued and unpaid interest.
Management has
determined that there are no further events subsequent to the balance sheet date that should be disclosed in these financial statements.