Fastfunds Financial 10-Q 2006 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the quarter ended September 30, 2006
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________to_________

Commission File No. 333-1026-D

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 803

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. xYes  ¨No

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  

Large Accelerated Filer ¨, Accelerated Filer ¨, Non-Accelerated Filer x

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

Number of shares of common stock outstanding at November 13, 2006: 15,494,473

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

PART I	FINANCIAL INFORMATION		Page
	Item 1.	Financial statements:
		Condensed consolidated balance sheets - September 30, 2006 (unaudited) and December 31, 2005	2
		Condensed consolidated statements of operations- three and nine months ended September 30, 2006 and 2005 (unaudited)	3
		Condensed consolidated statement of changes in stockholders' deficiency - nine months ended September 30, 2006 (unaudited)	4
		Condensed consolidated statements of cash flows - nine months ended September 30, 2006 and 2005 (unaudited)	5-6
		Notes to condensed consolidated financial statements (unaudited)	7-19
	Item 2.	Management's discussion and analysis of financial condition and results of operations	20-25
	Item 3.	Quantitative and qualitative disclosures of market risk	26
	Item 4.	Disclosure controls and procedures	27
PART II	OTHER INFORMATION
	Item 1.	Legal proceedings	27
	Item 2.	Unregistered sales of equity securities and use of proceeds	27
	Item 3.	Defaults upon senior securities	27
	Item 4.	Submission of matters to a vote of security holders	27
	Item 5.	Other information	27
	Item 6.	Exhibits	28
	Signatures		29

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
	September 30,			December 31,
	2006			2005
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,933,908		$	8,273,253
Accounts receivable, net					163,044
Prepaid and other assets					387,994
Deferred tax assets					1,874,000
Current portion of notes, advances and interest receivable (Note 3)					75,461
Total current assets		1,933,908			10,773,752
Notes and interest receivable, related parties (Note 3)					268,390
Property and equipment, net		16,816			1,077,802
Intangible and other assets, net		200			2,183,902
Goodwill					5,636,000
		17,016			9,166,094
	$	1,950,924		$	19,939,846
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Checks issued in excess of cash in bank	$	89,556		$	1,105,379
Accounts payable		332,275			430,873
Accounts payable, parent company (Notes 4, 5 and 7)		1,981,573
Accrued expenses		458,871			2,353,060
Convertible and other promissory notes and current portion of long-term
debt (Note 4)		3,404,061			14,605,472
Total current liabilities		6,266,336			18,494,784
Long-term debt, net of current portion (Note 4)					1,639,331
Deferred tax liability					2,867,000
					4,506,331
		6,266,336			23,001,115
Commitments and contingencies (Notes 4 and 5)
Stockholders' deficiency (Note 6):
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;
15,494,473 (2006) and 10,513,672 (2005) shares isssued and outstanding		15,495			10,514
Additional paid-in capital		19,528,730			14,812,356
Stock subscription receivable					(135,000	)
Investment in parent company		(6,225,878	)		(14,905	)
Notes, advances and interest receivable, related parties		(6,165,787	)		(6,990,700	)
Accumulated deficit		(11,467,972	)		(10,743,534	)
Total stockholders' deficiency		(4,315,412	)		(3,061,269	)
	$	1,950,924		$	19,939,846

See notes to condensed consolidated financial statements.

2

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)
	Three months ended September 30,						Nine months ended September 30,
	2006			2005			2006			2005
Fee revenue				$	$4,980,376		$	1,714,882		$	13,966,925
Other income								477,500
Total revenue					4,980,376			2,192,382			13,966,925
Location expenses (income):
Fees to casinos					1,770,161			557,415			4,855,390
Salaries and benefits					780,873			303,489			2,361,750
Processing fees	$	16,528			634,590			230,889			1,542,162
Returned checks (collected)		(3,826	)		84,708			(11,362	)		417,880
Other		(406	)		372,885			132,643			1,131,405
Total location expenses		12,296			3,643,217			1,213,074			10,308,587
Location gross (loss) margin		(12,296	)		1,337,159			979,308			3,658,338
Selling, general and administrative		394,712			1,909,275			3,431,110			4,823,830
Loss from operations		(407,008	)		(572,116	)		(2,451,802	)		(1,165,492	)
Other income (expense):
Gain on sale of assets (Note 1)								4,145,835
Interest expense, including related party interest for the
three months of $0 (2006) and $68,462 (2005) and for
the nine months of $17,533 (2006) and $217,122 (2005)		(59,086	)		(869,007	)		(1,363,314	)		(2,973,611	)
Loss on debt extinguishment		(100,000	)					(1,121,000	)
Interest income, including related party interest for the
three months of $125,000 (2006) and $96,951 (2005)
and for the nine months of $274,657 (2006) and
$293,069 (2005)		151,758			97,067			431,516			293,382
Total other (expense) income		(7,328	)		(771,940	)		2,093,037			(2,680,229	)
Loss before income taxes		(414,336	)		(1,344,056	)		(358,765	)		(3,845,721	)
Income tax benefit (expense) (Note 7)		238,327			(8,000	)		(365,673	)		(24,000	)
Net loss	$	(176,009	)	$	(1,352,056	)	$	(724,438	)	$	(3,869,721	)
Basic and diluted net loss per share	$	(0.01	)	$	(0.13	)	$	(0.05	)	$	(0.37	)
Weighted average number of common shares outstanding:
Basic and diluted		15,494,473			10,513,672			14,879,683			10,479,718

See notes to condensed consolidated financial statements.

3

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
NINE MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED)
	Common stock				Additionalpaid-in			Stocksubscription			Investment in parent			Notes,advances andinterest receivable,  related			Accumulated			Totalstockholders'
	Shares		Amount		capital			receivable			company			parties			deficit			deficiency
Balances, January 1, 2006		10,513,672	$	10,514	$	14,812,356		$	(135,000	)	$	(14,905	)	$	(6,990,700	)	$	(10,743,534	)	$	(3,061,269	)
Issuance of common stock upon cashless
exercise of warrants (Note 6)		63,457		64		(64	)
Increase in notes and advances receivable due
from related parties, net (Note 6)															(193,761	)					(193,761	)
Warrants issued for services (Note 5)						355,000															355,000
Conversion of parent company note and interest
payable to common stock (Note 4)		4,717,344		4,717		4,335,238															4,339,955
Issuance of 200,000 shares of common stock
in settlement (Note 4)		200,000		200		(200	)
Receipt of parent company common stock in
satisfaction of notes, advances and interest
receivable (Note 6)												(6,144,000	)		6,144,000
Issuance of note to parent company
(Notes 1 and 6)															(5,000,000	)					(5,000,000	)
Amount due from parent company-stock
protection agreement (Note 6)												125,326			(125,326	)
Write off of stock subscription receivable
(Note 6)									135,000												135,000
Repricing of warrants and extension of
expiration (Note 4)						26,400															26,400
Purchase of parent company common stock
(Note 6)												(192,299	)								(192,299	)
Net loss																		(724,438	)		(724,438	)
Balances, September 30, 2006		15,494,473	$	15,495	$	19,528,730		$			$	(6,225,878	)	$	(6,165,787	)	$	(11,467,972	)	$	(4,315,412	)

See notes to condensed consolidated financial statements.

4

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)
	2006			2005
Net loss	$	(724,438	)	$	(3,869,721	)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Provision for (recovery of) losses on note receivable, including bad
debt expense		618,184			(89,159	)
Depreciation and amortization		506,730			1,429,857
Stock-based compensation for services		355,000			9,500
Loss on debt extinguishment		1,121,000
Non-cash interest expense		702,772			94,842
Amortization of discount on convertible promissory notes payable
related to beneficial conversion features					1,588,729
Deferred income tax expense		359,000
Gain on sale of assets (Note 1)		(4,145,835	)
Decrease (increase) in operating assets, net of asset sale (Note 1):
Accounts receivable		163,044			687,067
Interest and other receivables		(281,340	)		(512,313	)
Prepaid and other assets		40,954			186,198
Increase (decrease) in liabilities:
Accounts payable		(28,798	)		140,547
Accounts payable, parent company		(672,428	)
Accrued expenses		(1,746,163	)		580,510
Net cash (used in) provided by operating activities		(3,732,318	)		246,057
Cash flows from investing activities:
Purchases of property and equipment					(564,568	)
Repayments on notes receivable		160,461			813,064
Proceeds received from asset sale, net of costs (Note 1)		12,712,784
Advances on notes receivable					(11,073	)
Net cash provided by investing activities		12,873,245			237,423
Cash flows from financing activities:
Decrease in checks issued in excess of cash in bank		(1,015,823	)
Borrowings on notes and loans payable		400,000			1,751,000
Repayments on notes and loans payable		(9,309,936	)		(1,997,105	)
Repayments on long-term debt					(689,716	)
Purchase of parent company common stock		(192,299	)
Proceeds from sale of parent common stock					243,833
Repayment on notes and advances receivable, related parties		212,555
Payment of deferred loan costs					(4,000	)
Purchase of FFFC warrants from parent					(50,000	)
Notes and advances to related parties		(5,574,769	)		(108,277	)
Net cash used in financing activities		(15,480,272	)		(854,265	)

(Continued)

5

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)
	2006			2005
Decrease in cash and cash equivalents	$	(6,339,345	)	$	(370,785	)
Cash and cash equivalents, beginning of period		8,273,253			8,438,341
Cash and cash equivalents, end of period	$	1,933,908		$	8,067,556
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,218,720		$	954,809
Cash paid for income taxes	$	3,938		$	23,851
Supplemental disclosure of non-cash investing and financing activities:
Conversion of parent company note payable and accrued interest to
common stock	$	3,905,960
Receipt of parent company common stock in satisfaction of notes,
advances and interest receivable	$	6,144,000
Issuance of parent company common stock by parent company to
third parties in satisfaction of notes and interest payable	$	286,037		$	95,193
Return and retirement of common stock in exchange for stock
subscription receivable				$	81,000
Purchase of FFFC warrants from parent company in exchange for
reduction in related party note receivable				$	47,500
Accounts payable allocated to parent company related to legal fees
in the iGames litigation				$	96,427
Reclassification of iGames note receivable and accrued interest to
receivable due from parent company due to indemnification				$	1,815,352
Fixed assets sold to third party in exchange for extinguishment of debt				$	152,000

See notes to condensed consolidated financial statements.

6

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

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

Business and organization:

FastFunds Financial Corporation (“FFFC” or the “Company”) is a holding company, and through January 31, 2006, operated primarily through its wholly-owned subsidiary Chex Services, Inc. (“Chex”). As disclosed in the December 31, 2005 Form 10-K, FFFC also has several other non-operating wholly-owned subsidiaries. FFFC and its subsidiaries are referred to as (the “Company”). The Company is a majority-owned subsidiary of Hydrogen Power, Inc. (“HPII” or the “Parent”), a public company, formerly known as Equitex, Inc. and Hydrogen Power International, Inc. As of September 30, 2006, HPII owns and controls 80% of the Company’s outstanding common stock. On September 25, 2006, the Parent merged its wholly-owned subsidiary Hydrogen Power, Inc. (“HPI”) with and into HPII, with HPII remaining as the surviving corporation to the merger. In connection with the merger, HPII changed its name to Hydrogen Power, Inc.

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

Basis of presentation:

Unaudited financial statements:

The condensed consolidated balance sheet as of September 30, 2006, the condensed consolidated statements of operations for the three and nine months ended September 30, 2006 and 2005, the condensed consolidated statement of stockholders’ deficiency for the nine months ended September 30, 2006, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2006 and 2005, 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 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 6, 2006. Due to the sale of substantially all of the Company’s assets in January 2006, the historical results of operations for the three and nine months ended September 30, 2006 are not necessarily indicative of future operating results for the full year.

Asset Sale:

On December 22, 2005, FFFC and Chex entered into an Asset Purchase Agreement (the “APA”) with Game Financial Corporation (“Game”), pursuant to which FFFC and Chex agreed to sell all of its cash access contracts and certain related assets, which represented substantially all the assets of Chex. Such assets also represented substantially all of the operating assets of the Company on a consolidated basis. On January 31, 2006, FFFC and Chex completed the Asset Sale for $14 million pursuant to the APA and received cash proceeds of $13,710,630 ($12,712,784 after certain transaction related costs) and realized a pre-tax book gain of approximately $4 million.

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

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

Asset Sale (continued):

On March 14, 2006, FFFC loaned HPII $5 million of the total proceeds from the Asset Sale for one year at 10% per annum interest (Note 6). Based on management’s evaluation of repayment intentions, and in consideration of SEC Staff Accounting Bulletin (“SAB”) Topic 4-E regarding receivables from affiliates, the total face value amount is presented as a reduction of stockholders’ equity at September 30, 2006.

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 TSA, FFFC and Chex provided the necessary services for approximately three months and Game paid FFFC $150,000 per month. The TSA terminated May 19, 2006, and as a result FFFC recorded $477,500 of other income pursuant to the agreement for the nine months ended September 30, 2006.

Pro forma information:

The following pro forma information has been prepared assuming the Asset Sale had taken place at the beginning of each of the respective periods. The pro forma information includes adjustments to eliminate substantially all revenues and expenses related to the financial services that the Company provided prior to the Asset Sale. Revenues represent fees pursuant to the TSA.

The pro forma information is not necessarily indicative of the results of operations as they would have been had the transaction been consummated on the assumed date.

	Three months ended September 30,			Nine months ended September 30,
		2006	2005		2006	2005
Revenues					$ 477,500	$ 477,500
Net loss		$ (403,000)	$(2,682,000)		(5,007,000)	(7,027,000)
Basic and diluted loss per common share		(0.03)	(0.26)		(0.34)	(0.67)
Shares used in per share calculation		15,494,473	10,513,672		14,879,683	10,479,718

Management’s plans:

The Company incurred a net loss of $5,906,347 and $4,787,944 for the years ended December 31, 2005 and 2004, respectively. Based on these losses, it was becoming increasingly difficult for the Company to continue to fund its operations and any future growth. Additionally, due to intense competition in the market and the lack of assurance that the Company would be able to obtain

8

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

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

Management’s plans (continued):

renewals of its existing casino contracts, or to obtain contracts with new customers, and the difficulty encountered in attracting and retaining experienced employees, the Company decided to complete the Asset Sale.

HPII is currently negotiating the terms of an agreement and series of transactions with the management of HPI that may result in a change in control of HPII’s board of directors and effect a change in HPII’s management. In addition, the negotiations may require HPII to divest all or substantially all of its holdings of equity in FFFC and eliminate all obligations between HPII and FFFC. As of the date of this quarterly report, no agreements have been reached and no assurance can be given that one will be reached.

Management believes that the Asset Sale and its plans will provide sufficient resources to fund the Company’s 2006 debt payments and working capital needs, which will consist primarily of payment of salaries and expenses necessary to meet its reporting compliance obligations as a SEC issuer, through September 2007.

The Company also 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:

Notes receivable:

The Company has made advances to various third parties, as well as officers, affiliates and employees of the Company under various loan agreements (Notes 3 and 6). The advances made to officers were made prior to the acquisition of Chex by HPII in December 2001. Certain of these loans are collateralized by HPII common stock, including registered and unregistered shares. The Company’s allowance for doubtful notes receivable is adjusted based on the value of the underlying collateral, among other factors. Due to the level of risk associated with this common stock, it is reasonably possible that change in the value of the common stock will occur in the near term and that such changes could materially affect the value of the collateral underlying the notes. After all attempts to collect a note receivable have failed, the note receivable is written-off against the allowance. Based on management’s evaluation of repayment intentions, and in consideration of SAB Topic 4-E, $480,166 and $485,936 of the total face value amount is presented as a reduction of stockholders equity at September 30, 2006 and December 31, 2005, respectively.

Investment in Parent:

At September 30, 2006 and December 31, 2005, the Company has an investment in common stock of its Parent, HPII (Note 6). The Company presents its investment in HPII common stock as a component of stockholders’ equity at cost in a manner similar to treasury stock. This presentation is based upon the Company’s consideration of the provisions of Emerging Issues Task Force (“EITF”) Issue No. 98-2, Accounting by a Subsidiary or Joint Venture for an Investment in the Stock of its Parent Company or Joint Venture Partner. This EITF discusses that in the separate financial

9

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

2. Summary of significant accounting policies:

Investment in Parent (continued):

statements of a subsidiary; an investment in the common stock of a parent whose only significant asset is its investment in the subsidiary is essentially the same as stock of the subsidiary and should be classified as a reduction to stockholders’ equity.

Stock based compensation:

During the first quarter of fiscal 2006, the Company adopted the provisions of, and accounts for stock-based compensation in accordance with, the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards No. 123 - revised 2004 (“SFAS 123R”) “Share-Based Payment” which replaced Statement of Financial Standards No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees”. Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. The Company elected the modified-prospective method, under which prior periods are not revised for comparative purposes. The valuation provisions of SFAS 123R apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified. There were no options granted during the three and nine months ended September 30, 2006, and all options granted prior to the adoption of SFAS 123(R) were fully-vested. As a result, no stock option expense was required to be recorded in 2006.

During the nine months ended September 30, 2005, the Company granted to officers and directors 385,000 options to purchase shares of common stock at an exercise price of $1.10 per share (the market value of the common stock on the date of the grant).

Had compensation cost for stock based awards issued to employees, officers and directors been determined based on the fair values at the grant dates for awards under the plans consistent with the fair value recognition provision of SFAS No. 123, the Company’s results would have been changed to the pro forma amounts indicated below:

	Three months ended September 30, 2005	Nine months ended September 30, 2005
Net loss	$ (1,352,056)	$ (3,869,721)
ADD: Stock-based employee compensation expense included in reported net loss	9,500	9,500
DEDUCT: Total stock-based compensation expense determined under fair value based method for all awards	(191,500)	(191,500)
Pro forma net loss	$ (1,534,056)	$ (4,051,721)

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FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

2. Summary of significant accounting policies (continued):

Stock based compensation (continued):

	Three months ended September 30, 2005	Nine months ended September 30, 2005
Net loss per share:
Basic and diluted - as reported	$ (0.13)	$ (0.37)
Basic and diluted - pro forma	$ (0.15)	$ (0.39)

The fair value of options granted to purchase FFFC common stock were estimated on the date of the grant using Black-Scholes option pricing model with the following assumptions used for the grants during the three and nine months ended September 30, 2005.

Expected dividend yield	0
Expected stock price volatility	111%
Risk fee interest rate	2.0%
Expected life of options	1 year

The Company has a Stock Option Plan 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. All options outstanding at September 30, 2006 are fully-vested and exercisable. A summary of outstanding balances at January 1, and September 30, 2006 is as follows:

		Weighted-	Weighted-	Aggregate
		average	average	intrinsic
	Options	exercise price	remaining life	value
Outstanding at January 1, 2006 and September 30, 2006	385,000	$1.10	9 years	$0

Net income (loss) per share:

SFAS No. 128, Earnings Per Share, requires dual presentation of basic and diluted earnings or loss per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

Net income (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 September 30, 2006 and 2005 total 2,443,280 and6,651,148, respectively. Stock options, warrants, and common stock underlying convertible promissory notes are not considered in the calculation for the three and nine month periods ended

11

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

2. Summary of significant accounting policies (continued):

Net income (loss) per share (continued):

September 30, 2006 and 2005, as the impact of the potential common shares would be to decrease loss per share. Therefore, diluted loss per share for the three and nine months ended September 30, 2006 and 2005 is equivalent to basic loss per share.

Recently issued accounting pronouncements:

In July 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109”. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement principles for financial statement disclosure of tax positions taken or expected to be taken on a tax return. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company is currently assessing the impact the adoption of FIN 48 will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact the adoption of SFAS No. 157 will have on its consolidated financial statements.

In September 2006, the SEC issued SAB No. 108 in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. In SAB 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the company’s financial statements and the related financial statement disclosures. SAB 108 is effective for fiscal years ending after November 15, 2006. Management does not believe the adoption of SAB No. 108 will have an impact on its consolidated financial statements.

3. Notes and interest receivable:

Notes and interest receivable at September 30, 2006 and December 31, 2005, consist of the following:

	September 30,		December 31,
	2006		2005
Notes receivable; non-interest bearing; net of $256,316 discount; imputed interest rate of 12%; collateralized by mortgages on three parcels of real property in Florida; a valuation allowance of $201,500 and $336,500 has been recorded against this receivable at September 30, 2006 and December 31, 2005, respectively; $135,000 was received in July 2006	$	201,500	$	336,500

12

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

3. Notes and interest receivable (continued):

	September 30,		December 31,
	2006		2005
Notes receivable from Equitex 2000, Inc., an affiliate of HPII; a valuation allowance of $205,000 has been recorded against this receivable at September 30, 2006		205,000		205,000
Note receivable; interest at 10%; matured November 2005; currently in default; a valuation allowance of $50,000 has been recorded against this receivable at September 30, 2006		50,000		50,000
Notes receivable from various Chex employees				25,461
		456,500		616,961
Interest receivable, Equitex 2000, Inc.; a valuation allowance of $63,392 has been recorded against this receivable at September 30, 2006		63,392		63,390
Less valuation allowance		(519,892)		(336,500)
Less current maturities				(75,461)
Notes and interest receivable, long-term	$	-	$	268,390

4. Convertible and other promissory notes and long-term debt:

Convertible and other promissory notes and long-term debt at September 30, 2006 and December 31, 2005, consist of the following:

	September 30,		December 31,
	2006		2005
Notes payable to individual investors	$	3,404,061	$	11,301,497
Convertible promissory notes [A]				1,362,500
Note payable to HPII, net of discount of $242,377 [B]				3,496,559
Obligations under capital leases				84,247
Less current portion		(3,404,061)		(14,605,472)
Long-term debt, net of current portion	$	-	$	1,639,331

13

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

4. Convertible and other promissory notes and long-term debt (continued):

[A]In December 2004, the Company issued an aggregate of $1,774,064 of unsecured convertible promissory notes (the “Convertible Notes”) with various note holders (the “Holders”). The Convertible Notes carried a stated interest rate of 9.5% per annum, had a nine month original term and were convertible at the Holder’s option, including any unpaid interest into shares of FFFC common stock at $1.00 per share commencing on the due date. The Holders also received warrants to purchase 1,774,064 shares of FFFC common stock at an exercise price of $2.00 per share. During the year ended December 31, 2005, the Company repaid $611,564 of these Convertible Notes. Through September 30, 2006, the Company repaid an additional $1,012,500 of these Convertible Notes. In consideration of not meeting the original payment term on certain amounts, the Company agreed to issue 200,000 shares of its common stock to the Holders. The Holders also agreed to surrender 800,000 of the warrants originally received to purchase 800,000 shares of common stock. The value of the 200,000 shares of common stock issued did not exceed the value of the 800,000 warrants at the time of the exchange and accordingly, no additional expense was recorded.

In May 2006, FFFC and HPII negotiated a settlement regarding the remaining $150,000 of these Convertible Notes, whereby HPII issued 42,182 shares of its common stock to the Holders in exchange for payment of the Convertible Notes. The fair market value of the 42,182 shares of common stock issued by HPII was $212,155, and accordingly, $62,155 is included in interest expense for the nine months ended September 30, 2006. HPII also issued warrants to purchase 21,091 shares of its common stock at $5.10 per share, expiring three years after the date of issuance. The warrants were valued at $73,882 based on the Black-Scholes option-pricing model, which is included in interest expense for the nine months ended September 30, 2006. Additionally, the Company agreed to lower the exercise price of the warrants to purchase 300,000 shares of its common stock from $2.00 to $1.75 per share. As a result of this reduction in the exercise price, the Company recognized an additional $26,400 of interest expense for the nine months ended September 30, 2006.

As of December 31, 2005, the Company also had $200,000 of outstanding convertible promissory notes issued in June 2004. These notes carried interest at 5% per annum, and unless converted, were due in April 2007. The notes were convertible into shares of FFFC common stock at $0.10 per share based on certain criteria. In May 2006, HPII negotiated a settlement regarding these convertible notes, whereby HPII issued 180,000 shares of its common stock. The fair market value of the 180,000 shares of common stock issued by HPII as of the date of the settlement was $870,000 and accordingly, an additional $670,000 was recognized as a loss on extinguishment of debt (included in other expenses) for the nine months ended September 30, 2006. The settlement terms stipulate a price protection clause whereby HPII must reimburse the former debt holders if the market price of the HPII common stock issued to them in the settlement is below $4.00 per share at the time they sell the stock.  As a result, the Company has recorded a liability due to HPII at September 30, 2006 of $432,000 and expenses of $81,000 and $432,000 for the three and nine months ended September 30, 2006, respectively, representing the difference between the market value of the shares issued as of September 30, 2006 and the $4.00 stated in the settlement agreement. Pursuant to the terms of the settlement agreement, HPII is required to file a registration statement covering the resale of these shares of common stock and to use its best efforts to cause the same to be effective on or before June 26, 2006.  HPII is in the process of registering these shares,.  However, as the registration has not yet been declared effective, the Company has incurred certain liquidating damages per the terms of the settlement agreement. Accordingly, $19,000 has been recorded as a liability and is included in loss on debt extinquishment as of and for the three and nine months ended September 30, 2006.

14

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

4. Convertible and other promissory notes and long-term debt (continued):

[B]In March 2004, HPII issued an aggregate of $5,000,000 of convertible promissory notes (the “Whitebox Notes”) to Pandora Select Partners, L.P. and Whitebox Hedged High Yield Partners, L.P. (the “Lenders”). Concurrently with the Whitebox Note financing, HPII loaned the borrowed proceeds to Chex (the “HPII Note”) under terms identical to the Whitebox Notes. The Whitebox Notes are collateralized by all of the assets of Chex, HPII’s stock ownership in the Company and the HPII Note. In January 2006, the Company issued 4,717,344 shares of its common stock to HPII in exchange for the outstanding balance and accrued interest in the aggregate amount of $3,905,960. The shares were valued at $0.83 per share, which represented a 10% discount to the closing price on the conversion date. Accordingly, additional interest expense of $433,995 was recorded on the date of conversion resulting from this discount.

5. Commitments and contingencies:

Executive compensation:

In July 2005, the Company’s Board of Directors authorized a proposal for a stock-based compensation plan (the “Plan”) for the Company’s CEO. In August 2005, the Board of Directors retained an independent consultant to review the Plan for reasonableness. As a result of that review, in September 2005, the Board of Directors approved the Plan, which consists of the following: i) a fully-vested warrant to purchase up to 125,000 shares of the Company’s $.001 par value common stock for a period of three years at an exercise price of $1.81 per share (the 10 day average market price of the stock from the date of the proposal); ii) a number of shares of common stock of the Company based on 5% of the increase in the market value of the Company’s common stock on an annual basis, with the exception of the first payment, which shall be for the period from July 1, 2005 to December 31, 2005; and, iii) a grant of 125,000 fully-vested options under FFFC’s 2004 Stock Option Plan. Each option has an exercise price of $1.10 (the market value of the common stock on the date of grant) with an expiration of September 2015. No compensation expense has been recorded for the nine months ended September 30, 2006 under the Plan, as the market value of the Company’s common stock has not increased from January 1, 2006.

Board of directors’ compensation:

In September 2005, the Board of Directors authorized a new compensation plan for the Company’s directors, which includes the grant of 30,000 options to each director on an annual basis, as well as annual compensation of $25,000 to each director, to be paid monthly. Accordingly, in September 2005, 60,000 options were granted with an exercise price of $1.10 per share (the market value of the common stock on the date of the grant) for services provided during 2004 and 2005 and cash compensation of approximately $29,200 was paid to each director for the period of July 2004 through August 30, 2005. Additionally, the Company’s Secretary was granted 20,000 options at $1.10 per share (the market value of the common stock on the date of the grant). All options are fully-vested at the date of grant. Beginning with the monthly fee due September 1, 2006, the Board of Directors temporarily suspended the monthly payment. Accordingly, $25,000 and $75,000 has been recorded as expense for the three and nine months ended September 30, 2006 and $8,333 is included in accrued liabilities on the September 30, 2006 balance sheet.

15

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

5. Commitments and contingencies (continued):

Litigation:

The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters 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.

Consulting agreements:

In February 2006, the Company entered into a consulting agreement with a financial advisor (a former officer of the Company) to provide assistance to the Company in the placement of debt or equity financing with prospective investors. The term of the agreement is for three years, but can be terminated at any time by either party with 60 days notice. The advisor is to be compensated if the advisor is successful in completing a debt or equity financing for or on behalf of the Company. Through September 2006, the financial advisor assisted the Company in restructuring and or obtaining $3,404,061 of investor notes. Pursuant to the agreement, the advisor was paid $134,972 and received 75,000 shares of HPII common stock, valued at $224,215, of which $71,808 (included in due to parent company) and $224,215 are included in general and administrative expenses for the three and nine months ended September 30, 2006, respectively.

In addition, the advisor received warrants to purchase up to 436,206 shares of the Company’s common stock at an exercise price of $1.00 per share. The warrants were valued at $355,000 based upon the Black-Scholes option-pricing model which was included in selling, general and administrative expenses for the nine months ended September 30, 2006.

In conjunction with the Asset Sale, a FFFC officer signed a five-year non-compete agreement with the buyer and also signed a release, waiving his right to any future commissions that he was previously entitled to. The Company agreed to compensate the officer $100,800 annually, over the five-year term of the non-compete agreement. Such compensation is to be applied to reduce the loan and interest receivable from the officer. If the officer breaches his non-compete agreement, the officer is no longer entitled to compensation and will be liable for any amount remaining on the loan

Accordingly, during the three and nine months ended September 30, 2006, the Company recorded consulting expenses of $25,200 and $67,200, respectively and the interest and note receivable from an officer has been reduced by $67,000, for the nine months ended September 30, 2006.

6. Stockholders’ deficiency:

Investment in Parent:

At September 30, 2006 and December 31, 2005, the Company has an investment in HPII common stock. This investment is presented as a component of stockholders’ equity at cost in a manner similar to that of treasury stock. The following table summarizes the activity of this investment:

16

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

6. Stockholders’ equity (continued):

Investment in Parent (continued):

	Nine months ended					Year ended
	September 30, 2006					December 31, 2005
Beginning balances		4,178	$	14,905			86,486		$	308,488
Shares purchased		41,858		192,299
Shares received in satisfaction of
notes, advances and interest payable		1,200,000		6,144,000
Share price guaranty from HPII [A]				(125,326	)
Shares sold							(82,308	)		(293,583	)
Ending balances		1,246,036	$	6,225,878			4,178		$	14,905

Sales of HPII common stock are accounted for based on the weighted-average cost of the total shares outstanding, and the difference between the sales price and cost of the shares sold is classified as additional paid-in capital.

[A]HPII has agreed to reimburse the Company for any losses incurred in the purchase of any shares of parent company common stock acquired after April 1, 2006. As of September 30, 2006, the cost of the shares acquired was $125,326 below the market price. Therefore, the Company reduced the value of its investment in HPII and increased its receivable due from HPII (see below) by $125,326 as of September 30, 2006.

Notes, advances and interest receivable from related parties:

Chex has notes receivable due from HPII and Denaris under various loan agreements. In addition, Chex has made advances to HPII and Denaris to fund their operations. In accordance with SEC SAB No. 79, Allocation of Expenses and Related Disclosure in Financial Statements of Subsidiaries, Divisions or Lessor Business Components of Another Entity, certain expenses paid by Chex on behalf of HPII have been debited (charged) to the receivables. These transactions include the allocation of certain debt extinguishment costs through issuance of HPII common stock and warrants from HPII to Chex. The balances are presented as a reduction of stockholders’ equity on the accompanying condensed consolidated balance sheets.

The following table summarizes the activity for the year ended December 31, 2005 and for the nine months ended September 30, 2006:

	September 30,		December 31,
	2006		2005
Beginning principal balances	$	6,070,785	$	4,189,816
Loan to HPII		5,000,000
Cash advances		424,310
Issuance of HPII warrants to third party for settlement of Chex obligation		73,882
Share price guaranty from HPII		125,326
Amount due from HPII under indemnification				1,815,352
Chex cash disbursements and accounts payable allocated to HPII, Denaris and FFFC officer		459		208,270
Cash repayments		(400)

17

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

6. Stockholders’ equity (continued):

Notes, advances and interest receivable from related parties (continued):

	September 30,		December 31,
	2006		2005
Consulting fees applied to officer receivable		(6,134)
Purchase by Chex of FFFC warrants owned by HPII				(47,500)
Issuance of HPII common stock to third parties for settlement of Chex obligation		(212,155)		(95,153)
Receipt of HPII common stock in payment of receivables as of January 31, 2006, from HPII and Denaris		(5,584,944)
Ending principal balances [A]		5,891,129		6,070,785
Interest receivable, including interest from a director of FFFC of $61,066 at December 31, 2005, and from parent company (and its subsidiary) of $274,658 and $858,849 at September 30, 2006 and December 31, 2005, respectively [B]		274,658		919,915
Ending principal and interest balances	$	6,165,787	$	6,990,700

In March 2006, HPII issued 1,200,000 shares of its common stock in full settlement of amounts due from HPII and Denaris as of February 22, 2006. During the nine months ended September 30, 2006, the Company advanced $424,310 to HPII in consideration for HPII to issue shares of its common stock to satisfy a FastFunds debt and interest obligation to various third parties. In May 2006, HPII issued 42,182 shares of its common stock valued at $212,155 and the balance of $212,155 is included in the above HPII balance owed. In addition, HPII also agreed to issue warrants to purchase shares of its common stock valued at $147,764. HPI issued 21,091 warrants to the same third parties to purchase 21,091 shares of its common stock. The warrants were valued at $73,882 and the balance of $73,882 is included in the above. The notes receivable from an officer of FFFC are due on demand and the Company is no longer accruing interest on these notes due to non performance and related uncertainty as to collection. The notes are collateralized by unregistered shares of HPII common stock.

[A]The principal balance at September 30, 2006 and December 31, 2005 are as follows:

	September 30,		December 31,
	2006		2005
HPII	$	5,410,963	$	4,480,490
Denaris				1,104,359
FFFC officer		480,166		485,936
	$	5,891,129	$	6,070,785

18

FASTFUNDS FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)

6. Stockholders’ equity (continued):

Notes, advances and interest receivable from related parties (continued):

[B]The above interest receivable at September 30, 2006, is net of a payment of $559,056 in shares of HPII common stock, as well as a reduction of $299,794 (included in selling, general and administrative expense for the nine months ended September 30, 2006) as a result of the 1,200,000 shares of HPII common stock that the Company received having less market value than the carrying value of the notes and interest receivable. Additionally, the Company reduced the interest receivable by $61,066 during the nine months ended September 30, 2006 pursuant to a consulting agreement with a director of FFFC. Lastly, during the nine months ended September 30, 2006, the Company recorded interest receivable of $274,658 related to the $5,000,000 the Company loaned HPII in March 2006.

Stock subscription receivable:

At December 31, 2005, $135,000 is presented as a stock subscription receivable related to 25,000 shares of the Company's common stock that were issued to convertible noteholders.  The $135,000 was written off during the second quarter of 2006 in conjunction with the settlement agreement with the convertible noteholders discussed in Note 4.

Issuances of common stock:

In January 2006, the Company issued 63,457 shares of common stock upon the cashless exercise of warrants to purchase 70,000 shares of common stock.

7. Income taxes:

Income tax expense for the nine months ended September 30, 2006 was $365,673. This amount is primarily related to deferred income tax expense recorded as a result of the Asset Sale in January 2006. This expense represents the use of HPII’s net operating loss carryforwards, as the Company does not have sufficient net operating loss carryforwards available to offset the total taxable gain on the Asset Sale. Accordingly, the Company has recorded a liability to Parent company of $1,352,000 comprised of the 2006 deferred tax expense of $359,000, as well as the 2005 deferred tax expense of $993,000.

19

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, 2005 10-K, FFFC also has several other non-operating wholly-owned subsidiaries. FFFC and its subsidiaries are referred to as (the “Company”). The Company is a majority-owned subsidiary of Hydrogen Power, Inc. (“HPI” or “parent”), a public company, formerly known as Equitex, Inc. and Hydrogen Power International, Inc. As of September 30, 2006, HPII owns and controls 80% of the Company’s outstanding common stock.

On December 22, 2005, FastFunds and Chex entered into an Asset Purchase Agreement (the “APA”) with Game Financial Corporation (“Game”), pursuant to which FastFunds an Chex agreed to sell all of their cash access contracts and certain related assets, which represented substantially all the assets of Chex (the “Asset Sale”). Such assets also represented substantially all of the operating assets of FFFC on a consolidated basis. On January 31, 2006, FFFC and Chex completed the Asset Sale for $14 million pursuant to the APA and received net cash proceeds of $13,710,630 after adjustments for certain transaction related expenses and liabilities assumed by Game.

On March 14, 2006, FFFC loaned HPII $5 million of the total proceeds from the Asset Sale for one year at 10% per annum interest. Based on management’s evaluation of repayment intentions, and in consideration of SEC Staff Accounting Bulletin (“SAB”) Topic 4-E regarding receivables from affiliates, the total face value amount is presented as a reduction of stockholders’ equity at September 30, 2006.

Additionally, FFFC and Chex entered into a Transition Services Agreement (the “TSA”) with Game pursuant to which FFFC and Chex agreed to provide certain transitional services to Game for the cash-access financial services business. Pursuant to the TSA, FFFC and Chex provided the necessary services for approximately three months and Game paid FFFC $150,000 per month. The TSA expired May 19, 2006, and the Company received $477,500 pursuant to the terms of the TSA.

20

HPII is currently negotiating the terms of an agreement and series of transactions that may result in a change in control of HPII’s board of directors and effect a change in HPII’s management. In addition, the negotiations may require HPII to divest all or substantially all of its holdings of equity in FFFC and eliminate all intercompany obligations between HPII and FFFC. As of the date of this quarterly report no agreements have been reached and no assurance can be given that one will be reached.

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, 2005, 2004 and 2003. The financial statements presented for the three and nine months ended September 30, 2006 and 2005 include FFFC and its wholly-owned subsidiaries, which primarily reflect the operations of Chex through the date of the Asset Sale.

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

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended September 30, 2006, net cash used in operating activities was $3,732,318 compared to cash provided by operations of $246,057 for the nine months ended September 30, 2005. Net loss was $724,438 for the nine months ended September 30, 2006 compared to $3,869,721 for the nine months ended September 30, 2005. The significant decrease in net loss in the current period is a result of a gain on the Asset Sale of $4,145,835 offset by deferred income taxes of $359,000, other expenses of $2,052,798 and other operating losses of $2,458,475.

Net cash provided by investing activities for the nine months ended September 30, 2006 was $12,873,245 compared to $237,423 for the nine months ended September 30, 2005. Net cash provided by investing activities for the nine months ended September 30, 2006, was attributable to the net proceeds received on the Asset Sale of $12,712,784 and $160,461 received in payments on notes receivable. Net cash provided by investing activities for the nine months ended September 30, 2005 was primarily a result of payments received on notes receivable of $813,064 offset by purchases of property and equipment of $564,568 and advances made on notes receivable of $11,073.

Net cash used in financing activities for the nine months ended September 30, 2006 was $15,480,272 compared to $854,265 for the nine months ended September 30, 2005. The significant activity for the nine months ended September 30, 2006 included the Company receiving proceeds of $400,000 upon the issuance of notes payable. The Company utilized the proceeds from the Asset Sale, to repay notes payable and long-term debt of $9,309,936, advances of $5,574,769 to HPII and purchased 41,858 shares of HPII common stock for $192,299.

The significant financing activity for the nine months ended September 30, 2005 included the Company receiving proceeds of $1,751,000 upon the issuance of notes payable and long-term debt and proceeds from the sale of 82,308 shares of HPII common stock for $243,833. The Company also repaid $2,795,098 of notes payable and long-term debt.

For the nine months ended September 30, 2006, cash and cash equivalents decreased by $6,339,345 compared to a decrease in cash and cash equivalents of $370,875 for the nine months ended September 30, 2005. Ending cash and cash equivalents at September 30, 2006 was $1,933,908 compared to $8,067,556 at September 30, 2005.

21

Management believes that the Asset Sale and its plans will provide sufficient resources to fund its 2006 debt payments, and working capital needs, which will consist primarily of meeting its reporting compliance obligations as a SEC issuer, through at least through September 30, 2007.

Other sources available to us that we may utilize include the sale of our or our parent’s equity securities, as well as the exercise of outstanding warrants, all of which may cause dilution to our stockholders.

REVENUES

Total revenues for the nine months ended September 30, 2006 were $2,192,382 and for the three and nine months ended September 30, 2005 were $4,980,376 and $13,966,925, respectively. Effective January 31, 2006, the Company sold substantially all of its assets and accordingly, the current nine month results reflect fees from providing financial services of $1,714,882, as well as $477,500 of fees received under the TSA from the buyer of the assets.

OPERATING EXPENSES

LOCATION EXPENSES

Chex location expenses for the three and nine months ended September 30, 2006 were $12,296 and $1,213,074, respectively and for the three and nine months ended September 30, 2005 were $3,643,217 and 10,308,587, respectively. The decrease is a result of the sale of substantially all of the assets that were generating revenues and their associated costs at January 31, 2006.

CORPORATE OPERATING EXPENSES

Corporate operating expenses for the three and nine months ended September 30, 2006 were $394,712 and $3,431,110, respectively and for the three and nine months ended September 30, 2005 were $1,909,275 and $4,823,830, respectively. The expenses were comprised of the following:

	Three months ended					Nine months ended
	September 30,					September 30,
	2006			2005		2006		2005
Salaries and benefits	$	(8,764	)	$	403,517	$	468,891	$	1,478,318
Stock-based compensation					9,500				9,500
Accounting, legal and consulting		210,007			195,793		1,217,877		652,902
Travel and entertainment		17,520			74,384		65,607		276,664
Advertising					47,323		3,446		136,981
Depreciation and amortization		1,846			327,893		348,941		1,015,819
Provision for (recovery of) valuation allowances							183,392		(89,159	)
Other		174,103			850,865		1,142,956		1,342,805
	$	394,712		$	1,909,275	$	3,431,110	$	4,823,830

Corporate operating expenses include Chex’s Minneapolis administrative office which through January 31, 2006, supported the operating locations and was closed on May 31, 2006, and also includes for the three and nine months ended September 30, 2005, those expenses associated with FFI’s London and Chicago offices. As of June 2005, the London and Chicago offices have been closed.

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Salaries and related costs decreased significantly for the three and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005 period primarily as a result of the elimination of the corporate staffing of FFI’s London office, as well as the reduction of the Minneapolis administrative staff during the second quarter of 2006. As of May 31, 2006, the Company vacated that office and will not be incurring any future staffing costs related to the Chex operations.

Accounting, legal and consulting expenses increased significantly for the nine months ended September 30, 2006 compared to the nine months ended September 30, 2005. The increase for the nine months ended September 30, 2006 was primarily as a result of an increase in consulting fees of approximately $648,000, for costs associated with the refinancing of investor notes. The 2006 costs were comprised of $134,972 of cash, $224,215 of HPII common stock and the issuance of 436,206 FastFunds warrants to purchase common stock at $1.00 per share, valued at $355,000 under the Black-Scholes option pricing method. In addition, FFFC has entered into consulting agreements with a financial advisor and individuals who provide various consulting services to the Company. These continuing agreements require the Company to pay approximately $15,000 per month.

Travel and entertainment expense decreased for the three and nine months ended September 30, 2006 compared to September 30, 2005 primarily as a result of the elimination of travel associated with the closure of the Company’s London and Chicago offices during the second quarter of 2005 and the Minneapolis office in the second quarter of 2006.

In June 2006, the Company decreased the valuation allowance on a customer receivable that previously had been fully provided for as the Company negotiated a settlement with the customer and received $135,000 in July 2006. Additionally, $140,000 is due in January 2007; however, until that amount is received, the Company is still including the $140,000 in its valuation allowance. The valuation allowance on a related party receivable (including interest of $63,392) and a note receivable was increased by $268,392 and $50,000, respectively during the second quarter. The valuation allowance on the note receivable from the estate of a deceased officer was decreased by $90,000 for the nine months ended September 30, 2005. Shares of HPII common stock collateralized the note and the allowance was adjusted accordingly based on the value of the underlying collateral. This note was repaid during 2005.

Other costs included in corporate operating expenses decreased for the three and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005. The decrease for the three and nine months ended September 30, 2006 was a result of approximately $625,000 of expenses incurred in the fourth quarter 2005 that did not occur in 2006. These 2005 expenses included restructuring costs associated with closing our London office and the operations of FFI, as well as costs associated with terminating certain contracts. During the nine months ended September 30, 2005, these decreases were partially offset by increases in 2006, including the write-down of $146,553 of property and equipment, and approximately $300,000 of bad debt expense related to the settlement of receiving 1.2 million shares of HPII common stock for amounts owed. Additional increases for the nine months ended September 30, 2006 were the write-off of a stock subscription receivable of $135,000 as part of a settlement and costs of approximately $130,000 related to the closure of the Minneapolis office.

OTHER INCOME (EXPENSE)

Other expenses, net for the three months ended September 30, 2006 was $7,328 compared to $771,940 for the three months ended September 30, 2005. Other income, net, for the nine months ended September 30, 2006 was $2,093,037 compared to an expense of $2,680,229 for the nine months ended September 30, 2005. Included in other income for the nine months ended September 30, 2006 is the gain recognized on the Asset Sale of $4,145,835. Interest expense for the three and nine months ended September 30, 2006 and 2005 is summarized as:

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	Three months ended				Nine months ended
	September 30,				September 30,
	2006		2005		2006		2005
Beneficial conversion features		-	$	375,431	$	586,521	$	1,487,767
HPII $5 million note payable		-		62,918		17,533		205,272
Notes payable to individual investors	$	59,086		314,296		443,001		927,908
Amortization of note discounts		-		112,120		242,377		335,014
Warrants issued				-		73,882
Other				4,242				17,650
	$	59,086	$	869,007	$	1,363,314	$	2,973,611

Interest income increased to $431,516 for the nine months ended September 30, 2006 from $293,387 for the nine months ended September 30, 2005. The increase for the nine months ended September 30, 2006 was due primarily to the interest income of $274,658 recorded on the $5.0 million HPII Note issued in March 2006. Also included in other expenses for the three and nine months ended September 30, 2006, was $670,000 of costs related to the extinguishment of convertible notes payable due from third parties in exchange for the issuance of 180,000 shares of parent company common stock. In addition, the Company recorded $451,000 of expense related to the settlement of $200,000 of convertible debt.  The settlement terms stipulate a registration rights penalty clause and a price protection clause whereby HPII must reimburse the former debt holders if the market price of the HPII common stock issued to them in the settlement is below $4.00 per share at the time they sell the stock.  As a result, the Company has recorded a liability of $451,000 (of which $432,000 is due to HPII) at September 30, 2006 representing the difference between the market value of the shares issued as of September 30, 2006 and the $4.00 stated in the settlement agreement, and costs incurred due to late registration of the 180,000 shares of common stock.

INCOME TAX EXPENSE

Income tax expense for the nine months ended September 30, 2006 was $365,673 compared to $24,000 for the nine months ended September 30, 2005. There was an income tax benefit of $238,327 and an expense of $8,000 for the three months ended September 30, 2006 and 2005, respectively. The 2006 amount is primarily related to $359,000 the Company recorded as deferred income tax expense as a result of the Asset Sale in January 2006. This expense represents the use of HPII’s net operating losses, as the Company does not have sufficient loss carryforwards available to offset the total taxable gain on the Asset Sale.

CONTRACTUAL OBLIGATIONS

No material changes outside the ordinary course of business during the quarter ended September 30, 2006.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123(R), Share-Based Payment, which addresses the accounting for share-based compensation transactions. SFAS No. 123(R) eliminates the ability to account for share-based compensation transactions using APB 25, and generally requires instead that such transactions be accounted and recognized in the statement of operations based on their fair value. The Company adopted SFAS No. 123(R) on January 1, 2006. The adoption of this standard did not have an impact on the Company’s results of operations as no options were issued during the nine months ended September 30, 2006 and all options outstanding prior to the adoption of SFAS 123(R) by the Company very fully-vested. Depending on the number and terms of

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options that may be granted in future periods, the implementation of this standard could have a material impact on the Company’s financial position and results of operations.

In July 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109”. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement principles for financial statement disclosure of tax positions taken or expected to be taken on a tax return. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company is currently assessing the impact the adoption of FIN 48 will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact the adoption of SFAS No. 157 will have on its consolidated financial statements.

In September 2006, the SEC issued SAB No. 108 in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. In SAB 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the company’s financial statements and the related financial statement disclosures. SAB 108 is effective for fiscal years ending after November 15, 2006. Management does not believe the adoption of SAB No. 108 will have an impact on its consolidated financial statements.

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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. Other than its investment in HPII common stock, 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 interest rates on debt. The Company has only fixed rate debt at September 30, 2006 and December 31, 2005 as follows:

	September 30,	December 31,
Contractual obligation	2006	2005	Interest rate
Notes payable	$ 3,404,061	$11,301,497	Fixed 9% - 15%
Convertible promissory notes		3,738,936	Fixed 7%
Convertible promissory notes		1,362,500	Fixed 5% - 9.5%
Operating lease obligations		84,247	Fixed 6.5% - 7%
Debt outstanding, before
note discounts	$ 3,404,061	$16,487,180

As most of the Company's average outstanding indebtedness is renewed annually and carries a fixed rate of interest, a change in interest rates is not expected to have a material impact on the consolidated financial position, results of operations or cash flows of the Company during the year ending December 31, 2006.

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ITEM FOUR

DISCLOSURE CONTROLS AND PROCEDURES

A review and evaluation was performed by the Company's management, including the Company's Acting Chief Executive Financial Officer (the "CEFO"), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that review and evaluation, the CEFO has concluded that the Company's current disclosure controls and procedures, as designed and implemented, were effective. 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. There were no significant material weaknesses identified in the course of such review and evaluation and, therefore, the Company took no corrective measures.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

Refer to Note 5 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. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number	Description
31.1	CEO and CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)
32.1	CEO and CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith)

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SIGNATURES

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

	FastFunds Financial Corporation
	(Registrant)
Date: November 14, 2006	By: /s/ Michael S. Casazza
	Michael S. Casazza
	Chief Executive and Financial Officer

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