Hydrogen Future Corp - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - Hydrogen Future Corp	Financial_Report.xls
EX-32.1 - CERTIFICATION - Hydrogen Future Corp	hfco_ex321.htm
EX-32.2 - CERTIFICATION - Hydrogen Future Corp	hfco_ex322.htm
EX-31.2 - CERTIFICATION - Hydrogen Future Corp	hfco_ex312.htm
EX-31.1 - CERTIFICATION - Hydrogen Future Corp	hfco_ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2014

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

Commission File Number: 333-138927

HYDROGEN FUTURE CORP.

(Exact Name of registrant as specified in its charter)

Nevada	20-5277531
(State or other Jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

2525 Robinhood Street, Suite 1100

Houston, TX 77005

(Address of principal executive offices)

(713) 465-1001

(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 Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer	¨	Accelerated Filer	¨

Non-Accelerated Filer	¨	Smaller Reporting Company	þ

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

As of August 11, 2014, there were 382,282,430 shares outstanding of the registrant’s common stock.

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		27

Item 3. Quantitative and Qualitative disclosures about Market Risk.		38

Item 4. Controls and Procedures.		38

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.		39

Item 1A. Risk Factors.		39

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		39

Item 3. Defaults Upon Senior Securities.		39

Item 4. Mine Safety Disclosures.		39

Item 5. Other Information.		39

Item 6. Exhibits.		39

Signatures		40

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Hydrogen Future Corp.

(A Development Stage Company)

Balance Sheets

	June 30,			September 30,
	2014			2013
	(Unaudited)
Assets

Current assets
Cash	$	70,049		$	(0	)
Other receivables		3,529			3,194
Total current assets		73,578			3,194

Non-current assets
Property and equipment - net		173,968			199,567
Note Receivable		47,005
Debt issue costs - net		20,277			15,983
Goodwill		3,353,156
Total Non-Current Assets		3,594,406			215,550

Total assets	$	3,667,984		$	218,744

Liabilities and Stockholders' (Deficit)

Current Liabilities
Accounts payable and accrued liabilities	$	209,797		$	122,610
Accounts payable - related party		415,719			415,719
Accrued interest payable		369,105			74,247
Notes/Advances payable - related party		27,173			27,173
Derivative liability		494,410			1,337,315
Convertible debt - net		1,089,067			591,738
Non-convertible debt from Hydra Acquistion		984,008			-
Total current liabilities		3,589,280			2,568,801

Stockholders' (Deficit)
Preferred stock, Series A, $0.001 par value, 200,000,000 shares authorized; 100,000,000 issued and outstanding		100,000			100,000
Preferred stock,Series B, $0.001 par value, 1 share authorized; 1 share and 0 shares issued and outstanding at June 30, 2014 and September 30, 2013, respectively		-			-
Common stock, $0.001 par value, 10,000,000,000 shares authorized; 392,282,430 and 200,000 issued and outstanding at June 30, 2014 and September 30, 2013, respectively		392,282			200
Additional paid-in capital		12,714,715			2,709,377
Deficit accumulated during the development stage		(13,128,798	)		(5,160,139	)
Accumulated other comprehensive income		505			505
Total stockholders' (deficit)		78,704			(2,350,057	)

Total liabilities and stockholders' (deficit)	$	3,667,984		$	218,744

Hydrogen Future Corp.

(A Development Stage Company)

Statements of Operations

(Unaudited)

	Three Months Ended June 30						June 21, 2006 (inception) through June 30,
	2014			2013			2014
Expenses
General and Administrative Expenses	$	196,707		$	439,334		$	8,380,089
Issuance of Common Stock to settle a prior liability		117,000						117,000
Impairment of software		-			-			1,035,027
Total		313,707			439,334			9,532,116

Other Income/(Expense)
Interest expense		(243,721	)		41,230			(1,054,902	)
Derivative expense		(449,501	)		(23,021	)		(4,136,992	)
Change in fair value of derivative liability		(116,720	)		1,071,404			3,885,903
Loss on Retirement of Debt		(125,034	)		0			(2,326,761	)
Tax refunds		-			-			36,071
Total Other (Expense) - net		(934,976	)		1,089,614		$	(3,596,682	)

Net Income (Loss)	$	(1,248,683	)	$	650,280		$	(13,128,798	)

Net loss per common share - basic	$	(0.00	)	$	0.01

Net loss per common share - diluted	$	(0.00	)	$	0.01

Weighted average number of common shares outstanding
during the period/year - basic		341,140,290			67,883,275

Weighted average number of common shares outstanding
during the period/year - diluted		553,670,206			77,773,385

Hydrogen Future Corp.

(A Development Stage Company)

Statements of Operations

(Unaudited)

	Nine Months Ended June 30						June 21, 2006 (inception) through June 30,
Expenses	2014			2013			2014
General and Administrative Expenses	$	5,776,147		$	686,441		$	8,380,089
Issuance of Common Stock to settle a prior liability		117,000						117,000
Impairment of software		-			-			1,035,027
Total		5,893,147			686,441			9,532,116

Other Income/(Expense)
Interest expense		(523,738	)	$	(175,621	)		(1,054,902	)
Derivative expense		(2,569,102	)	$	(160,652	)		(4,136,992	)
Change in fair value of derivative liability		3,141,729		$	111,774			3,885,903
Loss on Retirement of Debt		(2,124,401	)	$	(202,360	)		(2,326,761	)
Tax refunds		-			-			36,071
Total Other (Expense) - net		(2,075,512	)		(426,858	)		(3,596,682	)

Net Income (Loss)	$	(7,968,659	)	$	(1,113,299	)	$	(13,128,798	)

Net loss per common share - basic	$	(0.05	)	$	(0.02	)

Net loss per common share - diluted	$	(0.03	)	$	(0.02	)

Weighted average number of common shares outstanding
during the period/year - basic		171,910,610			63,366,972

Weighted average number of common shares outstanding
during the period/year - diluted		309,420,582			66,663,675

Hydrogen Future Corp.

Statement of Stockholder's Equity

From the Period of Inception to June 30, 2014

(Unaudited)

	Common Stock, $0.001 Par Value				Series A Preferred Stock, $0.001 Par Value				Series B Preferred Stock, $0.001 Par Value				Additional Paid-In		Deficit Acquired During Development			Accumulated Other Comprehensive Income		Total Stockholders' Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Stage			(Loss)		(Deficit)

Proceeds from the Issuance of founders stock- ($0.25/share)		20,000	$	20		-	$	-		-	$	-		4,980	$	-		$	-	$	5,000

Proceeds from the Issuance of founders stock- ($0.25/share)		30,000		30		-		-		-		-		14,970		-					15,000

Net loss- Inception (June 21, 2006) to September 30, 2006		-		-		-		-		-		-		-		(2,631	)		-		(2,631	)

Balance- September 30, 2006		50,000		50		-		-		-		-		19,950		(2,631	)		-		17,369

Proceeds from the Issuance of common stock- ($2/share)		41,000		41		-		-		-		-		81,959		-			-		82,000

Net loss for the year ended September 30, 2007		-		-		-		-		-		-		-		(16,960	)		-		(16,960	)

Balance- September 30, 2007		91,000		91		-		-		-		-		101,909		(19,591	)		-		82,409

Net loss for the year ended September 30, 2008		-		-		-		-		-		-		-		(18,199	)		-		(18,199	)

Balance- September 30, 2008		91,000		91		-		-		-		-		101,909		(37,790	)		-		64,210

Net loss for the year ended September 30, 2009		-		-		-		-		-		-		-		(19,076	)		-		(19,076	)

Balance- September 30, 2009		91,000		91		-		-		-		-		101,909		(56,866	)		-		45,134

Proceeds from the Issuance of common stock- ($335/share)		500		1		-		-		-		-		162,500		-			-		162,500

Common stock issued to acquire software ($.88/share)		3,138		3		-		-		-		-		1,380,873		-			-		1,380,876

Proceeds from the Issuance of common stock- ($335/share)		500		1		-		-		-		-		200,000		-			-		200,000

Common stock issued for consulting services ($400/share)		40		0		-		-		-		-		16,000		-			-		16,000

Common Stock, $0.001 Par Value

Series A Preferred Stock, $0.001 Par Value

Series B Preferred Stock, $0.001 Par Value

Additional Paid-In

Deficit Acquired During Development

Accumulated Other Comprehensive Income

Total Stockholders' Equity

Amount

Capital

Stage

(Loss)

(Deficit)

Common stock issued for consulting services ($450/share)	300	0		-	-	-	-	135,000	-		-		135,000

Net loss for the year ended September 30, 2010	-	-		-	-	-	-	-	(351,790	)	-		(351,790	)

Foreign Currency translation adjustment	-	-		-	-	-	-	-	-		(3,079	)	(3,079	)

Balance- September 30, 2010	95,478	95		-	-	-	-	1,996,281	(408,656	)	(3,079	)	1,584,641

Proceeds from the Issuance of common stock- ($160/share)	625	(0	)	-	-	-	-	100,000	-		-		100,000

Proceeds from the Issuance of common stock- ($100/share)	150	0		-	-	-	-	15,000	-		-		15,000

Debt discount on convertible notes- Original Issue Discount	-	-		-	-	-	-	27,122	-		-		27,122

Debt issue costs- warrants	-	-		-	-	-	-	26,901	-		-		26,901

Common stock issued for conversion of Note ($60/share)	2,240	2		-	-	-	-	24,988	-		-		24,990

Net loss for the year ended September 30, 2011	-		-		-	-	-	-	-		(3,024,617	)	-		(3,024,617	)

Foreign Currency translation adjustment	-		-		-	-	-	-	-		-		9,234		9,234

Balance- September 30, 2011	98,493		98		-	-	-	-	2,190,291		(3,433,273	)	6,155		(1,236,728	)

Share Rescission	(5,616	)	(6	)					(89,931	)					(89,936	)

Net income for the year ended September 30, 2012	-		-		-	-	-	-	-		694,279		-		694,279

Foreign Currency translation adjustment	-		-		-	-	-	-	-		-		(5,650	)	(5,650	)

Balance- September 30, 2012	92,877		93		-	-	-	-	2,100,361		(2,738,994	)	505		(638,036	)

Share Issuance upon default of debt- ($1.95/share)	30,000		30		-	-	-	-	58,470		-		-		58,500

Common Stock, $0.001 Par Value

Series A Preferred Stock, $0.001 Par Value

Series B Preferred Stock, $0.001 Par Value

Additional Paid-In

Deficit Acquired During Development

Accumulated Other Comprehensive Income

Total Stockholders' Equity

Amount

Capital

Stage

(Loss)

(Deficit)

Issuance of Shares to Officers for Compensation- ($.0032/share)	64,123		64	-		-	-		-		102,532			-					102,596

Shares issuance upon conversion of debt- ($19.95/share)	11,909		12	-		-	-		-		237,563			-			-		237,575

Common stock issued upon conversion of insider debt	800		1	-		-	-		-		(1	)		-			-		0

Shares issued for consulting services- ($1.55/share)	292		0	-		-	-		-		452			-			-		452

Issuance of 100,000,000 shares of Preferred Stock to Officers- ($.0031/share)	-		-	100,000,000		100,000	-		-		210,000			-			-		310,000

Net loss for the year ended September 30, 2013	-		-	-		-	-		-		-			(2,421,145	)		-		(2,421,145	)

Balance- September 30, 2013	200,000		200	100,000,000		100,000	-		0		2,709,377			(5,160,139	)		505		(2,350,057	)

Shares issuance upon conversion of debt, accrued interest and related legal expense	261,362,403		261,362	-		-	-		-		2,714,138			-			-		2,975,501

Shares issued to Management for Compensation on December 26, 2013 at $.065	720,000		720	-		-	-		-		44,280			-			-		45,000

Shares issued to Management for Compensation on January 27, 2014 at $.0521	100,000,000		100,000	-		-	-		-		5,110,000			-			-		5,210,000

Shares issued in settlement for prior unrecorded obligation for equipment purchase	30,000,000		30,000	-		-	-		-		87,000								117,000

Fractional shares issued for reverse split	27		0	-		-	-		-		-			-			-		0

Issuance of 1 shares of Preferred Stock, Series B to American Security Research Company				-		-	1		-		2,049,920								2,049,920

Net Income for the nine months ended June 30, 2014	-		-	-		-	-		-		-		$	(7,968,659	)		-		(7,968,659	)

Balance- June 30, 2014	392,282,430	$	392,282	100,000,000	$	100,000	1	$	-	$	12,714,715		$	(13,128,798	)	$	505	$	78,704

Hydrogen Future Corp.

(A Development Stage Company)

Statements of Cash Flows

(Unaudited)

	Nine Months Ended June 30,						June 21, 2006 (Inception) to June 30,
	2014			2013			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(7,968,659	)	$	(1,113,299	)	$	(13,128,798	)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Share based payments		5,255,000			471,549			5,907,549
Impairment of Software					-			1,035,027
Derivative expense		2,569,102			160,652			4,136,993
Depreciation		25,599			25,599			460,681
Amortization of debt issue cost		16,081			9,621			50,999
Amortization of debt discount		427,679			151,591			861,982
Amortization of Original Issue Discount		28,394						28,511
Change in fair value of derivative liabilities		(3,141,729	)		(111,774	)		(3,885,903	)
Accrued interest on Retired debt		8,778			779			9,557
Legal fees on debt conversions		10,800						10,800
Loss on Retirement of Debt		2,124,401			202,360			2,326,761
Loss on issuance of Common Stock to settle a prior liability		117,000						117,000
Changes in operating assets and liabilities:
(Increase) decrease in other receivables		(335	)					(3,529	)
Increase (decrease) in accounts payable and accrued expense		87,187			-			209,797
Increase in accounts payable - related party					-			415,719
Increase in working capital from acquisition		(319,630	)		-			(319,630	)
Increase in accrued interest		294,858			23,251			369,105
Net cash provided by (used in) operating activities		(465,473	)		(181,788	)		(1,397,381	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Note receivable from Affiliate		(47,005	)					(47,005	)
Cash acquired in Acquisition		402						402
Purchase of property and equipment		-						(288,799	)
Net cash used in investing activities		(46,603	)		-			(335,402	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party notes/advances		-						31,586
Proceeds from convertible notes payable		357,125			16,000			725,928
Notes Issued for Professional services		225,000			165,000			493,727
Repayment of related party notes/advances		-						(968	)
Cash paid as debt offering costs		-						(24,000	)
Proceeds from issuance of common stock		-						579,500
Net cash provided by financing activities		582,125			181,000			1,805,773

Net (Decrease) in Cash		70,049			(788	)		72,990
Effect of Exchange Rates on Cash								(2,941	)

Cash - Beginning of Period/Year		(0	)		788			-

Cash - End of Period/Year	$	70,049		$	0		$	70,049

SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid during the period/year for:
Interest	$	-		$	-		$	-
Income Taxes	$	-		$	-		$	-

SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Debt converted to common shares	$	552,746		$	-		$	664,230
Common stock issued to acquire software	$	-		$	-		$	1,380,876
Notes payable acquired in acquisition	$	984,008					$	984,008
Preferred stock issued to officers	$	310,000					$	310,000
Debt discount recorded on convertible debt accounted for as a derivative liability	582,125			$	300,000		$	882,125
Debt discount recorded on convertible debt accounted for as a derivative liability - original issue discount				$	27,122		$	27,122
Debt issue costs - warrants	$	-		$	26,901		$	26,901

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Note 1 Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information.

The financial information as of September 30, 2013 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the years ended September 30, 2013 and 2012. The unaudited interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the years ended September 30, 2013 and 2012.

Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The interim results for the nine months ended June 30, 2014 are not necessarily indicative of results for the full fiscal year.

Note 2 Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

HYDROGEN FUTURE CORP., (the “Company” or “HFCO”) was incorporated in the State of Nevada on June 21, 2006. The Company was originally incorporated as El Palenque Nercery, Inc. and changed its name to El Palenque Vivero, Inc. on June 30, 2006. On March 23, 2010, it further changed its name to A5 Laboratories Inc. On October 10, 2013, we changed our name to Hydrogen Future Corporation. On December 27, 2013, our stock trading symbol was changed from AFLB.OB to HFCO.OB. Our business offices are located at 2525 Robinhood Street, Suite 1100, Houston TX and our telephone number is (713) 465-1001.

The Company intended to provide contract research and laboratory services to the pharmaceutical industry. To date, the activities of the Company have been limited to raising capital.

On April 28, 2014, the Company filed a form 8-K with the Securities and Exchange Commission. The 8-K referenced above, among other recent developments disclosed the following:

	●	On April 21, 2014, Hydrogen Future Corporation completed the acquisition of Hydra Fuel Cell Corporation (“Hydra”) from American Security Resources Corporation (Pink Sheets: ARSC). Hydra has developed advanced hydrogen fuel cell technology which it initially intends to deploy as residential and small commercial grid replacement for electric generation.

	●	Under the agreement to acquire Hydra, the Company acquired 100% of the common stock of Hydra in exchange for a convertible preferred share issued to ARSC. The preferred share is convertible into an amount equal to 100.2% of the then outstanding common stock of the Company at the time of conversion, which is at the sole discretion of ARSC. This gives ARSC an effective 50.1% equity interest in the Company.

	●	Although an all stock transaction, HFCO was required to have secured sufficient funding commitments to fund Hydra’s production startup before it could close the acquisition. Such commitments were completed just recently.

	●	Frank Neukomm, HFCO’s Chief Executive Officer and Chairman of the Board, and Robert Farr, HFCO’s President, Chief Operations Officer and Director of HFCO are also officers and directors of ARSC.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

At the end of this quarter, the company therefore had two segments, 1) Contract research and laboratory services and 2) Alternative Energy. See Note 13 for Segment reporting. See Note 7 for the accounting for Goodwill.

We strongly recommend that you read these financial statements in conjunction with the April 28 8-K for a fuller understanding of the Company’s new direction.

The Company’s fiscal year end is September 30.

Development Stage

The Company's financial statements are presented as those of a development stage enterprise. Activities during the development stage primarily include equity based financing and further implementation of the business plan.

Risks and Uncertainties

The Company intends to operate in an industry that is subject to rapid change. The Company’s operations will be subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks, including the potential risk of business failure.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Such estimates for the periods ended June 30, 2014 and 2013, and assumptions affect, among others, the following:

	●	estimated carrying value, useful lives and impairment of property and equipment;

	●	estimated fair value of derivative liabilities;

	●	estimated valuation allowance for deferred tax assets; and

	●	estimated fair value of share based payments

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.

Cash and Cash Equivalents

The Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. At June 30, 2014 and September 30, 2013, the Company had no cash equivalents.

At June 30, 2014, the Company had $70,049 in cash.

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At June 30, 2014 and September 30, 2013, there were no balances that exceeded the federally insured limit.

Property and Equipment

Property and equipment (including related party purchases) is stated at cost, less accumulated depreciation computed on a straight-line basis over the estimated useful lives. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized when deemed material. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company recognized an impairment of $1,035,027 during the year ended September 30, 2011. See Note 6.

Beneficial Conversion Feature

For conventional convertible debt where the rate of conversion is below market value, the Company records a “beneficial conversion feature” (“BCF”) and related debt discount.

When the Company records a BCF, the relative fair value of the BCF would be recorded as a debt discount against the face amount of the respective debt instrument. The discount would be amortized to interest expense over the life of the debt.

Derivative Liabilities

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as a Change in fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.

Debt Issue Costs and Debt Discount

The Company paid debt issue costs, and recorded debt discounts in connection with raising funds through the issuance of convertible debt. These costs are amortized over the life of the debt to interest expense.

Original Issue Discount

For certain convertible debt issued, the Company provides the debt holder with an original issue discount (“OID”). An OID is the difference between the original cash proceeds and the amount of the note upon maturity. The Note is originally recorded for the proceeds received. The OID is expensed into interest expense pro-rata over the term of the Note, and upon maturity, the Note shall equal the proceeds due.

Share-Based Payments

Generally, all forms of share-based payments, including stock option grants, warrants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest. Share-based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments are recorded as a component of general and administrative expense.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Earnings per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

Prior to the issuance of the Company’s Preferred Stock during the calendar year ending September 30, 2013, the Company did not have any dilutive securities. As such, a separate computation of diluted earnings (loss) per share was not presented. Commencing with the issuance of the Preferred Stock, the Company now has dilutive securities, and a separate computation of diluted earnings (loss) per share is now presented.

The Company had the following potential common stock equivalents at June 30, 2014 and September 30, 2013:

	June 30, 2014		September 30, 2013

Warrants (1)		14,989		14,989
Convertible debt (1)		464,738,618		212,611
Total common stock equivalents (2)		464,753,607		227,600

(1)	The Company has identified a debt and warrant holder who cannot exceed ownership in the Company by 9.99%. The investor is limited to 39,228,243 shares on a fully diluted basis, which is the Company’s maximum exposure at the balance sheet date.

(2)	There are other warrant holders included in total warrants besides those described in note (1) above.

Fair Value of Financial Instruments

The carrying amounts of the Company’s short-term financial instruments, other receivables, accounts payable and accrued liabilities, approximate fair value due to the relatively short period to maturity for these instruments.

Foreign Currency Transactions

The Company’s functional currency had been the Canadian dollar and its reporting currency was the U.S. Dollar. All transactions which had been initiated in Canadian Dollars were translated to U.S. Dollars in accordance with ASC 830-10-20 “Foreign Currency Translation” as follows:

(i)	Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date;

(ii)	Equity at historical rates; and

(iii)

Revenue and expense items at the average exchange rate prevailing during the period.

Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ equity (deficit) as a component of comprehensive income (loss). Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income (loss).

Currently, the Company’s functional and reporting currency is the U.S. dollar, and there are no more financial currency transactions, which require separate accounting.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Comprehensive Income (Loss)

Comprehensive income or loss is comprised of net earnings or loss and other comprehensive income or loss, which includes certain changes in equity, excluded from net earnings, primarily foreign currency translation adjustments.

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The guidance in ASU 2011-04 changes the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements, including clarification of the FASB's intent about the application of existing fair value and disclosure requirements and changing a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this ASU should be applied prospectively and are effective for interim and annual periods beginning after December 15, 2011. Early adoption by public entities is not permitted. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The guidance in ASU 2011-05 applies to both annual and interim financial statements and eliminates the option for reporting entities to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. This ASU also requires consecutive presentation of the statement of net income and other comprehensive income. Finally, this ASU requires an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income. The amendments in this ASU should be applied retrospectively and are effective for fiscal year, and interim periods within those years, beginning after December 15, 2011. The Company has adopted this guidance in these financial statements.

Note 3 Going Concern

As reflected in the accompanying financial statements, the Company had a net loss of $7,968,659 for the nine months ended June 30, 2014, and utilized $465,473 in cash for operations. The Company also has a working capital deficit of $3,515,702 and a deficit accumulated during the development stage of $13,128,798 at June 30, 2014. In addition, the Company is in the development stage and has not yet generated any revenues. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue its operations is dependent on Management's plans, which include potential asset acquisitions, mergers or business combinations with other entities, further implementation of its business plan and continuing to raise funds through debt or equity raises. The Company will likely rely upon equity financing in order to ensure the continuing existence of the business.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Note 4 Fair Value of Financial Assets and Liabilities

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The following are the hierarchical levels of inputs to measure fair value:

	●	Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

	●	Level 2: Inputs reflect: quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

	●	Level 3: Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

At June 30, 2014, the fair value of financial instruments measured on a recurring basis includes derivative liabilities, determined based on level two inputs consisting of quoted prices in active markets for identical assets. The carrying amount reported for accounts payable, accrued liabilities, and notes payable approximates fair value because of the short-term maturity of these financial instruments.

The Company has a derivative liability measured at fair market value on a recurring basis. Consequently, the Company had changes in fair value reported in the statements of operations, which were attributable to the change in market value relating to the liability for the three months ended June 30, 2012.

The following is the Company’s derivative liability measured at fair value on a recurring basis at:

	June 30, 2013		September 30, 2013
Level 1	$	-	$	-
Level 2 – Derivative Liability		494,410		1,337,315
Level 3		-		-
Total	$	494,410	$	1,337,315

Note 5 Receivables

(A) Other Receivables- Current

As of September 30, 2013, the Company had receivables of $3,194 from Hydra. The receivable was eliminated in consolidation upon the consummation of the Hydra merger. See Note 2 about the merger.

(B) Other Receivables- Long Term

On the closing of the purchase of Hydra, the Company paid on behalf of the seller ,American Security Research Company, to the State of Nevada $47,005 to execute the transfer. This expense will ultimate be borne by the seller and the Company has recorded a receivable to reflect this.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Note 6 Property and Equipment

Property and equipment consists of the following:

	June 30, 2014			September 30, 2013			Estimated Useful Lives

Software	$	-		$	1,380,876			3
Leasehold improvements		144,802			144,802			10
Lab equipment		106,062			106,705			10
Office equipment		37,336			37,336			5
		288,843			1,669,719

Less: Accumulated depreciation		(114,875	)		(435,125	)
Less: Impairment		-			(1,035,027	)
Property and equipment – net	$	173,968		$	199,567

During the year ended September 30, 2011, management evaluated the recoverability of long lived assets by determining whether the carrying value can be recovered through future cash flows. Management determined that it is more likely than not that no future cash flows are to be expected from the use of its software. Due to these circumstances, the remaining book value of the asset in the amount of $1,035,027 was fully impaired and is included in the statements of operations for the year ended September 30, 2011.

The leasehold improvements were completed and placed into service in July 2011.

Note 7 Goodwill

The Company recorded goodwill as a result of its business acquisition of Hydra(“Hydra Acquisition”) . Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible assets acquired. In the Hydra Acquisition , the objective was to expand the Company’s product offerings and customer base by entering into a new line of business. The Company determined the value of the goodwill by analyzing comparable companies with similar product lines. Based upon that analysis, the Company determined that the value of the Goodwill was $3,353,156 as follows:

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Assets acquired:
Cash	$	402
Other receivables		3,529
Total	$	3,931
Liabilities acquired:
Promissory note payable	$	984,008
Accrued interest payable		235,972
Other current liabilities		87,187
Additional paid-in capital		2,049,920
Total	$	3,357,087
Goodwill	$	3,353,156

The Company tests goodwill for impairment on a quarterly basis. At June 30, 2014, the company determined that there was no impairment.

Note 8 Notes Payable

(A) Related Party

The following is a summary of the Company’s related party liabilities:

	June 30, 2013			September 30, 2013
Notes payable (1)	$	20,915		$	20,915
Advances (2)		7,226			7,226
Less: payments		(968	)		(968	)
Total related party liabilities	$	27,173		$	27,173

(1) The note is non-interest bearing, unsecured, and due on demand.

(2) The advances are non-interest bearing, unsecured, and due on demand.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

(B) Convertible Debt – Secured – Derivative Liabilities

Fife Note

On February 15, 2011, the Company issued convertible notes, totaling $300,000, to John Fife with the following provisions:

	●	Interest rate 6%;

	●	Default interest rate of 12%;

	●	Notes are due 48 months from the issuance date of February 23, 2011;

	●	Conversion rates equal to 70% or 80% of the market price on date of conversion by applying a specified formula that utilizes the average of the 3 lowest quoted closing prices 20 days immediately preceding the conversion date, and then takes the higher of the average 3 lowest closing prices or $0.12 floor price; and

	●	Secured by the Chief Executive Officer’s 15,000,000 shares of the Company common stock.

The investor is entitled at its option to convert all or part of the principal and accrued interest into shares of the Company’s common stock at a conversion price as discussed above. The Company classified the embedded conversion feature as a derivative liability due to management’s assessment that the Company may not have sufficient authorized number of shares of common stock required to net-share settle.

On February 23, 2011, the Company entered into a secured convertible promissory note between the Company and a third party (the “Lender”). The note balance totaled $300,000. The Lender expects to contribute funds in tranches, the first tranche being equal to $300,000, and an additional ten tranches equal to $200,000 each commencing on October 23, 2011, and continuing each subsequent month for ten months. No additional draw downs occurred during the year ended September 30, 2011. In January 2012, the Company received $22,000 from a lender for an additional investment, under the same terms above, which is convertible to shares pursuant to the terms described below. See Note 9(A) related to conversions of this $300,000 note.

The number of shares of common stock to be issued upon conversion of each tranche shall be determined by dividing (a) the conversion amount by (b) the higher of (i) the Market Price or (ii) the Floor Price. Where “Market Price” is defined as 80% of the average of the closing bid price for the three (3) days with the lowest closing bids during the twenty trading days immediately preceding the conversion date, provided, however, that if the market prices fall below $0.05 per share of common stock the conversion factor shall be reduced by 10 percentage points. The “Floor Price” is defined as $.012. The trading data used to compute the closing bid shall be as reported by Bloomberg, LP or if such information is not then being reported by Bloomberg, then as reported by such other data information sources as may be selected by the Lender.

The note also contains language that removes the $0.12 floor if certain “triggering events” occur during the life of the note. Since the floor price can be removed upon any one of these events occurring, the conversion feature of this note has two elements: normal conversion and conversion upon a triggering event.

Upon each occurrence of any of the following triggering events , (a) the conversion factor shall be reduced by 10 percent points (i.e., if the conversion factor were 80% immediately prior to the occurrence of the triggering event, it shall be reduced to 70% upon the occurrence of a triggering event), (b) the conversion price shall be computed without regard to the Floor Price, and (c) this note shall accrue interest at the rate of 1% per month, whether before or after judgment; provided, however, that (1) in no event shall the triggering effects be applied more than two times, and (2) notwithstanding any provisions to the contrary herein, in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law:

On October 4, 2012, Mr. Fife foreclosed on his note to us because we were in default. According to the terms of the indenture, Mr. Fife was issued 15 million shares to forestall on his claim against the firm. At the time, the common stock of the Company was trading at $.0039. Therefore, a corresponding expense of $58,500 was recorded at that time and included in General and Administrative Expense.

As of June 30, 2014, as a result of the triggering events (a) and (b), the Company computes the exercise price related to convertible debt, without regard to the floor price.

The normal conversion resulted in a debt discount under ASC 470-25-8 since the calculated market price as of the date of the note was higher ($0.145) than the conversion floor of $0.12.

At the balance sheet date, $207,428 of the debt has been converted leaving a principal balance of $92,572.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Lucosky Brookman LLP Note

Effective on January 10, 2012, the Company issued to Lucosky Brookman LLP (“Lucosky”) a convertible promissory note ( the “Lucosky Note”) for legal services provided since February 1, 2011 of $53,727. The Lucosky Note bears interest at twelve percent (12%) per annum and has a term of six months. Should the Lucosky Note not be paid by the Maturity Date, an event of Default occurs and the interest rate becomes eighteen percent (18%) per annum. Shares of Common Stock to be issued upon conversion of each tranche shall be determined by dividing (a) the conversion amount by (b) the Market Price. The “Market Price” is defined as 50% of the average of the closing price for the five (5) days immediately preceding the conversion date.

During the quarter ended March 31, 2014, the remaining balance of the Lucosky note was converted, and no principal balance remains

Consulting Notes

Starting in Fiscal 2013, the Company incurred a liability to a consultant for $165,000. $165,000 of the Notes bear interest at twelve percent (12%) per annum and matures on June 30, 2014. Shares of Common Stock to be issued upon conversion of each tranche shall be determined by dividing (a) the conversion amount by (b) the Market Price. The “Market Price” is defined as 50% of the low closing bid price for the five (5) days immediately preceding the conversion date.

As of the Balance sheet date, $162,703 of principal on this note has been converted into common shares, leaving a remaining balance of $2,297.

The Company signed a new consulting agreement in August 2013 at a rate of $25,000 per month. Since that time, the Company issued notes totaling $275,000 to the consultant. Shares of Common Stock to be issued upon conversion of each tranche shall be determined by dividing (a) the conversion amount by (b) the Market Price. The “Market Price” is defined as 50% of the low closing bid price for the thirty (30) days immediately preceding the conversion date. As of the Balance sheet date, $64,400 of principal has been converted leaving a balance of $210,600

St. George Notes

On August 27, 2013, St. George Investments LLC (“St. George”) advanced the Company $12,500 (“St. George Note”). The St. George Note has a one year term, an interest rate of ten percent and a ten percent original issue discount (“OID”). An OID represents the difference between the amount received and the face value of the note. The St. George Note has a face value of $13,750, and the OID will be amortized into expense pro-rata over the term of the Note. Shares of Common Stock to be issued upon conversion of each tranche shall be determined by dividing (a) the conversion amount by (b) the Market Price. The “Market Price” is defined as 60% of the average of the two (2) low closing bid prices for the ten (10) days immediately preceding the conversion date. The full principal balance is outstanding.

On October 10, 2013, St. George Investments LLC (“St. George”) advanced the Company $15,000 (“St. George Note”). The St. George Note has a one year term, an interest rate of ten percent and a ten percent original issue discount (“OID”). An OID represents the difference between the amount received and the face value of the note. The St. George Note has a face value of $13,750, and the OID will be amortized into expense pro-rata over the term of the Note. Shares of Common Stock to be issued upon conversion of each tranche shall be determined by dividing (a) the conversion amount by (b) the Market Price. The “Market Price” is defined as 60% of the average of the two (2) low closing bid prices for the ten (10) days immediately preceding the conversion date. The full principal balance is outstanding.

On November 19, 2013, St. George Investments LLC (“St. George”) advanced the Company $10,000 (“St. George Note”). The St. George Note has a one year term, an interest rate of ten percent and a ten percent original issue discount (“OID”). An OID represents the difference between the amount received and the face value of the note. The St. George Note has a face value of $13,750, and the OID will be amortized into expense pro-rata over the term of the Note. Shares of Common Stock to be issued upon conversion of each tranche shall be determined by dividing (a) the conversion amount by (b) the Market Price. The “Market Price” is defined as 60% of the average of the two (2) low closing bid prices for the ten (10) days immediately preceding the conversion date. The full principal balance is outstanding.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Other Notes

The Company has received another $385,125 in proceeds from multiple investors. Interest on the notes varies from 0% to ten percent. Shares of Common Stock to be issued upon conversion of each tranche shall be determined by dividing (a) the conversion amount by (b) the Market Price. As of the balance sheet date, none of these balances have been converted.

Market price is defined as follows:

Debt Amount	Discount	Conversion Mechanism
$80,000	49%	average of low three trade prices over prior 30 days

$52,500	40%	low trade price over prior 25 days

77,625	45%	low trade price over ten days

$175,000	50%	low bid price over prior 30 days

As a result of the Hydra Acquisition, the Company acquired an additional $984,008 in debt as follows:

Investor	Amount		Interest rate
Golden State Equity Investors	$	350,000		7.5	%
St. George Investments, LLC	$	415,000		7.75	%
Bullivant Houser Bailey LLP	$	219,008		-0-

All of the notes are currently past due and are payable on demand

(D) Debt Issue Costs

In connection with the issuance of the $300,000 note discussed above, the Company incurred debt issue costs as follows:

	●	8% cash – which is equivalent to $24,000, and

	●	8% warrants – having a fair value of $26,901, which was computed as follows;

	Commitment Date
Expected dividends	0%
Expected volatility	180%
Expected term: conversion feature	2 years
Risk free interest rate	1.73%

In January 2012, we raised an additional $22,000 as discussed above, and the Company incurred debt issue costs as follows:

	●	8% cash – which is equivalent to $1,760, and

	●	8% warrants – having a fair value of $154, which was computed as follows;

	Commitment Date
Expected dividends	0%
Expected volatility	364%
Expected term: conversion feature	2 years
Risk free interest rate	0.65%

The debt issue costs have been capitalized and are being amortized over the life of the note.

Debt issue costs paid, September 30, 2011	$	50,901
Amortization of debt issue costs, September 30, 2011		(11,833	)
Amortization of debt issue costs, September 30, 2012		(9,833	)
Amortization of debt issue costs, September 30, 2013		(13,199	)
Amortization of debt issue costs, June 30, 2014		(10,733	)
Net Deferred financing costs associated with Fife Not		5,250
Deferred Financing costs associated with New debt during quarter		20,375
Amortization of New debt issued during quarter		( 5,348)
Net debt issue costs at June 30, 2014		20,277

(E) Debt Discount

During the nine months ended June 30, 2014 and 2013 , the company recorded debt discounts of $582,125 and $300,000 respectively

The debt discount pertains to convertible debt containing embedded conversion options that are required to bifurcated and reported at fair value.

During the nine months ended June 30, 2014, the Company amortized $427,679 in debt discount.

Note 9 Stockholders’ Equity (Deficit)

(A) Common Stock

Stock Issued in 2014

During the nine months ended June 30, 2014, the Company issued 261,362,403 shares for the conversion of shares of common stock.

On May 23, 2014, the Company issued 30,000,000 shares to Jean Faguy to settle a previously unaccrued liability relating to the prior business model of the Company

On January 27, 2014 the Company issued 100,000,000 shares of common stock to its management team for compensation in lieu of cash.

Stock Issued in 2013

On February 19, 2013, the Company issued 5,954, 252 shares for the conversion of $15,000 of debt plus accrued interest.

On June 30, 2012, the Company issued 15,000,000 shares of common stock to John Fife for the default on his Note. See Footnote 6

The Company issued 32,061,360 shares for compensation to Directors and Officers

Stock issued in 2012

On October 2, 2011, a lender converted $50,000 pertaining to a note it held with an original principal of $300,000, for 3,000,000 shares of common stock ($0.0166667/share). The quantity of shares issued is based upon the formula described above pertaining to the effect of the triggering event (see Note 7(B)).

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

On January 3, 2012, the Company issued 2,307,692 shares of common stock for $30,000 ($0.013/share) for services rendered.

On March 4, 2012, a lender converted $21,494 pertaining to a note it held with an original principal of $300,000, for 3,800,000 shares of common stock ($0.00566/share). The quantity of shares issued is based upon the formula described above pertaining to the effect of the triggering event (see Note 7(B)).

Stock issued 2011

During November and December 2010, the Company issued 312,500 shares of common stock for $100,000 ($0.32/share).

On June 14, 2011, the Company issued 75,000 shares of common stock for $15,000 ($0.20/share).

On September 2, 2011, a lender converted $24,990 pertaining to a note it held with an original principal of $300,000, for 1,120,000 shares of common stock ($0.022313/share). The quantity of shares issued is based upon the formula described above pertaining to the effect of the triggering event (see Note 7(B)).

Stock issued in 2010

On March 9, 2010, the Company’s board of directors authorized a 10-for-1 forward split of its common stock effective April 8, 2010. Each stockholder of record on April 7, 2010 received ten new shares of the Company’s $0.001 par value common stock for every one old share outstanding. The effects of the split have been retroactively applied to all periods presented in the accompanying financial statements.

On June 3, 2010, the Company issued 250,000 shares of common stock for $162,500 ($0.65/share).

On July 20, 2010, the Company issued 1,569,177 shares of common stock, having a fair value of $1,380,876 ($0.88/share), based upon the closing trading price, to acquire software from an affiliate of the Company’s Chief Executive Officer.

On July 30, 2010, the Company issued 125,000 shares of common stock for $100,000 ($0.80/share). In addition, the stockholder received a 2-year warrant for 125,000 shares with an exercise price of $1.20.

On August 18, 2010, the Company issued 125,000 shares of common stock for $100,000 ($0.80/share). In addition, the stockholder received a 2-year warrant for 125,000 shares with an exercise price of $1.20.

On August 23, 2010, the Company issued 20,000 shares of common stock to a consultant, having a fair value of $16,000 ($0.80/share), based upon the closing trading price. At September 30, 2010, the Company expensed this stock issuance as a component of general and administrative expense.

On September 17, 2010, the Company issued 150,000 shares of common stock to a consultant, having a fair value of $135,000 ($0.90/share), based upon the closing trading price. At September 30, 2010, the Company expensed this stock issuance as a component of general and administrative expense.

Stock issued in 2007

During 2007, the Company issued 20,500,000 shares of common stock for $82,000 ($0.004/share).

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Stock Issued in 2006

On June 21, 2006 (Inception), the Company issued 10,000,000 shares of common stock for $5,000 ($0.0005/share) to directors and officers of the Company.

On August 1, 2006, the Company issued 15,000,000 shares of common stock for $15,000 ($0.0001/share) to directors and officers of the Company.

(B) Stock Warrants

All warrants issued by the Company have expired or were cancelled except for those issued to John Fife, which are discussed in Note 7 (B). After adjustment for the split, Mr. Fife owned 14,989 warrants which are convertible at $100 per share. These warrants expire on February 15, 2015.

On September 5, 2013, the Company held a special meeting of shareholders (the “Meeting.”). At the Meeting, shareholders approved that the aggregate number of shares that the Corporation will have the authority to issue is Ten Billion Two hundrerd million (10,200,000,000), of which Ten Billion (10,000,00,000) shall be common stock, with a $.001 par value, and Two hundred million (200,000,000) shares will be preferred stock, with a par value of $.001. Prior to the Meeting, the Company was authorized to issue up to Two hundred million (200,000,000) shares, of which One hundred million (100,00,000) shall be common stock, with a $.001 par value, and One hundred million (100,000,000) shares will be preferred stock with a par value of $.001

(D) Preferred Stock

On June 21, 2013 (“Grant Date”), the Company granted One hundred million (100,000,000) shares of Series A Preferred stock (the “Series A”), with a par value of $.001. Fifty million (50,000,000) of the Series A were issued to Frank Neukomm, its Chief Executive Officer, and Robert Farr, its Chief Operating Officer. The shares are convertible into common stock on a 1:1 basis and do not carry any dividend. On the Grant Date, the price of the company’s common stock was $.0031. As such, the Company recorded $310,000 of compensation expense under General and Administrative Expenses.

On April 26, 2014, the Company issued one share of Series B Preferred Stock for the Hydra Fuel Cell Acquisition, with a par value of $.001 to American Security Research Corporation. The share is convertible into common stock equivalent to 50.1% ownership of the common stock of the Company.

Note 10 Commitments and Contingencies

(A) Contingencies

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse affect on its business, financial condition or operating results.

(B) Facility Lease – Related Party

The Company had subleased office space from a company controlled by the Company’s former Chief Executive. This lease has expired and the company no longer leases this space.

Rent expense for the nine months ended June 30, 2014 and 2013 was $-0-.

The Company had agreed to rent equipment from its former Chief Executive.

Rental equipment expense for the nine months ended June 30, 2014 and 2013 was $-0- and $-0-, respectively.

Note 11 Derivative Liabilities

The Company identified conversion features embedded within convertible debt securities as defined in Note 8. The Company has determined that the features associated with the embedded conversion option should be accounted for at fair value as a derivative liability.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

As a result of the application of ASC No. 815, the fair value of the conversion feature is summarized as follows:

Derivative liability balance at September 30, 2013
Derivative liability Fair value at the commitment date for convertible notes issued	$	1,337,315
Fair value mark to market adjustment – June 30, 2014		2,569,102
Derivative liability associated with new issuances through June 30, 2012		(3,141,729	)
Elimination of derivative liability upon conversion of debt		( 270,277	)

Derivative liability balance at June 30, 2014	$	494,410

The Company recorded the derivative liability to debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining value of the derivative as it exceeded the gross proceeds of the note. The Company recorded a derivative expense of $449,501 and $2,569,102 for the three months and nine months ended June 30, 2014, respectively.

Note 12 Other Related Party Transactions

The Company accrues consulting and rental fees to its former Chief Executive Officer as follows:

Balance at September 30, 2013 and June 30, 2014

415,719

The consulting and rental fees are components of general and administrative expenses.

Note 13 Segment Reporting

The Company operates in two operating segments which are consistent with its internal organization. The major segments are Contract Research and Laboratory services and Alternative Energy. The government contracting segment became inactive during the three months ended September 30, 2013. Where applicable, “Unallocated” represents items necessary to reconcile to the consolidated financial statements, which generally include corporate activity at the parent level and eliminations.

The Company evaluates performance of individual operating segments based on operating income (loss). On a consolidated basis, this amount represents total net loss as shown in the consolidated statement of operations. Reconciling items represent executive compensation costs that are not allocated to the operating segments. Such costs have not been allocated from the parent to the subsidiaries.

	Three Months Ended June 30, 2014
	Contract Research and Laboratory Services			Alternative Energy			Unallocated			Total

Revenues	$	-		$	-		$	-		$	-

Total Operating Expenses		125,533			19,875			168,299			313,707

Operating Income (Loss)		(125,533	)		(19,875	)		(168,299	)		(313,707	)

Other Income (Expense)		-			(14,345	)		(920,631	)		(934,976	)

Expenditure for long-lived assets, including intangible assets		-			-			-			-

Total Assets at June 30, 2014	$	173,968		$	67,256		$	3,426,760			3,667,984

	Three Months Ended June 30, 2013
	Contract Research and Laboratory Services			Alternative Energy		Unallocated			Total

Revenues	$	-		$	-	$	-		$	-

Total Operating Expenses		8,533			-		430,801			439,334

Operating Income (Loss)		(8,533	)		-		(430,801	)		(439,334	)

Other Income (Expense)					-		1,089,614			1,089,614
Expenditure for long-lived assets, including intangible assets		-			-		-			-

Total Assets at June 30, 2013	$	208,100			-		22,755			230,855

	Nine Months Ended June 30, 2014
	Contract Research and Laboratory Services			Alternative Energy			Unallocated			Total

Revenues	$	-		$	-		$	-		$	-

Total Operating Expenses		217,688			19,875			5,655,584			5,893,147

Operating Income (Loss)		(217,688	)		(19,875	)		(5,655,584	)		(5,893,147	)

Other Income (Expense)					(14,345	)		(2,061,167	)		(2,075,512	)

Expenditure for long-lived assets, including intangible assets		-			-			-			-

Total Assets at June 30, 2014	$	173,968		$	67,256		$	3,426,760		$	3,667,984

	Nine Months Ended June 30, 2013
	Contract Research and Laboratory Services			Alternative Energy		Unallocated			Total

Revenues	$	-		$	-	$	-		$	-

Total Operating Expenses		25,599			-		343,584			369,183

Operating Income (Loss)		(25,599	)		-		(343,584	)		(369,183	)

Other Income (Expense)		-			-		(426,858	)		(426,858	)

Expenditure for long-lived assets, including intangible assets		-			-		-			-

Total Assets at June 30, 2014	$	208,100		$	-	$	22,755		$	230,855

Note 14 Subsequent Events

The Company has evaluated events subsequent to the balance sheet date through the issuance date of these financial statements in accordance with FASB ASC 855 and has determined the following would require disclosure in, the financial statements;

Issuance of Convertible Debt

From the Balance Sheet date until the date of this report, the Company issued the following convertible debt securities

On July 1, 2014 the Company issued a Convertible Promissory Note in the principal amount of Twenty Five Thousand Dollars ($25,000), with ten percent, 10%, interest and a maturity date of November 1, 2014. The Principal plus any interest shall be convertible into common stock of the Company at fifty percent (50%) of the lowest closing bid prices for the thirty (30) trading days prior to conversion of the Note.

On August 1, 2014 the Company issued a Convertible Promissory Note in the principal amount of Twenty Five Thousand Dollars ($25,000), with ten percent, 10%, interest and a maturity date of January 1, 2015. The Principal plus any interest shall be convertible into common stock of the Company at fifty percent (50%) of the lowest closing bid prices for the thirty (30) trading days prior to conversion of the Note

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

This quarterly report on Form 10-Q and other reports filed by the Company from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements (collectively the “Filings”) and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013, filed with the SEC, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Plan of Operation

At the balance sheet date, Hydrogen Future Corporation was a development stage company concentrating on contract research and laboratory services.

New Business Opportunity

Based upon a review by the Board of Directors and Management, the Company has decided to enter a new line of business, fuel cell technology. In this regard, and subsequent to the Balance sheet, on April 21, 2014, Hydrogen Future Corporation completed the acquisition of Hydra Fuel Cell Corporation (“Hydra”) from American Security Resources Corporation (Pink Sheets: ARSC). Hydra has developed advanced hydrogen fuel cell technology which it initially intends to deploy as residential and small commercial grid replacement for electric generation.

Under the agreement to acquire Hydra, HFCO acquired 100% of the common stock of Hydra in exchange for a convertible preferred share issued to ARSC. The preferred share is convertible into an amount equal to 100.2% of the then outstanding common stock of HFCO at the time of conversion, which is at the sole discretion of ARSC. This gives ARSC an effective 50.1% equity interest in HFCO.

Although an all stock transaction, HFCO was required to have secured sufficient funding commitments to fund Hydra’s production startup before it could close the acquisition. Such commitments were completed just recently.

Frank Neukomm, HFCO’s Chief Executive Officer and Chairman of the Board, and Robert Farr, HFCO’s President, Chief Operations Officer and Director of HFCO are also officers and directors of ARSC.

Please see our Form 8-K issued on April 28, 2014, as filed with the Securities and Exchange Commission, for a fuller description of our new business model.

Management's Discussion and Analysis of Results of Operations

Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013

Our results of operations are summarized below:

	Quarter Ended June 30, 2014 ($)		Quarter Ended June 30, 2013 ($)
Revenue		-0-		-0-
Expenses		(313,707)		(439,334)
Other Income (Expenses)		(934,976)		1,089,614
Net Income (Loss)		(1,248,683)		650,280
Income (Loss) Per Share-Basic		(.00)		0.01
Income (Loss) Per Share- Fully diluted		(.00)		0.01

During the three months ended June 30, 2014, we did not earn any revenues. We have not earned any revenues since our inception and there is no assurance that we will be able to earn any revenues in the future.

Our expenses for the three months ended June 30, 2014 and 2013 can be summarized as follows:

	For the Three Months Ended June 30,
	2014 ($)		2013 ($)		Difference ($)
Consulting Fees		75,000		-0-		75,000
Other General and administrative expenses		121,707		26,738		94,969
Compensation Expense to Officers		-0-		412,596		(412,596)
Loss on Issuance of Shares		117,000		-0-		117,000

Our net loss for the three month period ended June 30, 2014 was $1,248,683, compared to a net income of $650,280 for the three month period ended June 30, 2013, an increased loss of $1,898,963.

During the three month period ended June 30, 2014, we incurred operating expenses (and respective net operating losses) of $313,007, compared to operating expenses of $439,334 incurred during the three month period ended June 30, 2013, an increase of $125,627. The operating expenses incurred during the three month period ended June 30, 2014 and 2013 consisted of (i) $75,000 and $-0- in fees paid to consultants; and (ii) $121,707 and $26,738 in other general and administrative expenses (iii) $-0- and $412,596, of Management compensation, and (iv) $117,000 and $-0- for expenses associated with the issuance of common stock to settle a prior liability, respectively. See Footnote 9A for a fuller discussion of this expense

Consulting fees increased by $75,000 due to the quarterly accrual for consulting services, which did not exist in the same quarter as last year. Other General and administrative expenses increased by $94,969 principally due to greater operating expenses at the parent company level of $53,516 (mostly for professional fees) and the operating expenses of the Hydra Fuel Cell subsidiary of $19,875 which did not exist in the same quarter of last year greater Management compensation decreased $412,596 due to the issuance of common stock and Preferred stock to our Management team in the quarter ended June 30, 2013. The Issuance of Common stock to settle a prior liability increased $117,000 due to an one-time issuance of shares to settle a liability from the prior business model.

Other income/(expense) incurred during the three month periods ended June 30, 2014 and June 30, 2013 was as follows:

	2014 ($)			2013 ($)			Difference ($)
Interest Expense		(243,721	)		41,230			(284,951	)
Derivative Expense		(449,501	)		(23,021	)		(426,480	)
Change in the Fair Value of Derivative liabilities		(116,720	)		1,071,404			(1,188,124	)
Loss on Retirement of Debt		(125,034	)		-0-			(125,034	)

During the three month period ended June 30, 2014, we incurred other income/(expense) of $(934,976), compared to other income of $1,089,614 incurred during the three month period ended June 30, 2013, an increased expense of $2,024,590. Other income/(expense)incurred during the three month period ended June 30, 2014 and 2013 consisted of (i) $(243,721) and $41,230, respectively of Interest expense; (ii) $(449,501) and $(23,021) in derivative expense; (iii) $(116,720) and $1,071,404,respecitvely in Change in the Fair Value of Derivative liabilities, and (iv) $(125,034) and $-0- in Loss on Retirement of Debt .

Interest expense increased $284,951 due to i) greater debt levels and increased amortization of debt discounts of $183,697, and ii) due to the reversal of prior overamortization of debt discounts of $101,254 in the quarter ended June 30, 2013. Derivative expense increased $426,280 due to the issuance of greater levels of debt during the quarter ended June 30, 2014 than the same quarter in the prior year. Change in the Fair Value of Derivative liabilities increased $1,188,124 due to increased stock price volatility and greater outstanding debt levels. Loss on Retirement of Debt increased $125,034 due to a lack of debt conversions in the prior year

Therefore, our basic net loss and net loss per share during the three month period ended June 30, 2014, was $1,248,683 or $0.00 per share, compared to net income of $650,280 or $.001 per basic share during the three month period ended June 30, 2013. The weighted average number of basic shares outstanding was 341,140,290 for the three month period ended June 30, 2014, compared to 67,883,275 for the three month period ended June 30, 2013. Our fully diluted net income (loss) per share was ($.00) and $.01 for the three months ended June 30, 2014 and 2013, respectively. The weighted average number of fully-diluted shares outstanding was 553,670,026 for the three month period ended June 30, 2014, compared to 77,773,385 for the three month period ended June 30, 2013.

Nine Months Ended June 30, 2014 Compared to the Nine Months Ended June 30, 2013

Our results of operations are summarized below:

	Nine months Ended June 30, 2014 ($)		Nine months Ended June 30, 2013 ($)
Revenue		-0-		-0-
Expenses		(5,893,147)		(686,441)
Other Income (Expenses)		(2,075,512)		(426,858)
Net Loss		(7,968,,659)		(1,113,299)
Loss Per Share-Basic		(.05)		(0.02)
Loss Per Share- Fully diluted		(.03)		(0.02)

During the nine months ended June 30, 2014, we did not earn any revenues. We have not earned any revenues since our inception and there is no assurance that we will be able to earn any revenues in the future.

Our expenses for the nine months ended June 30, 2014 and 2013 can be summarized as follows:

	For the Nine Months Ended June 30,
	2014 ($)		2013 ($)		Difference ($)
Compensation Expense to Officers		5,255,000		412,596		4,842,404
Consulting Fees		225,000		165,000		60,000
Other General and administrative expenses		341,107		108,885		167,162
Loss on Issuance of Shares		117,000		-0-		117,000

Our net loss for the nine month period ended June 30, 2014 was $7,968,659, compared to a net loss of $1,113,299 for the nine month period ended June 30, 2013, an increased loss of $6,855,360.

During the nine month period ended June 30, 2014, we incurred operating expenses (and respective net operating losses) of $5,893,147, compared to operating expenses of $686,441 incurred during the three month period ended June 30, 2013, an increase of $5,206,706. The operating expenses incurred during the three month period ended June 30, 2014 and 2013 consisted of (i) $5,255,000 and $412,596 of Management compensation; $225,000 and $165,000 in fees paid to consultants;(iii) $341,107 and $108,885 in other general and administrative expenses (iii), and (iv) $117,000 and $-0- for expenses associated with the issuance of common stock to settle a prior liability, respectively. See Footnote 9A for a fuller discussion of this expense

Management compensation increased $4,842,404 due to the issuance of 100 million shares of common stock to our Management team on January 27, 2014 and another 720,000 shares which were issued in December 2013 with a value of $45,000. See Footnote 9 for more detail. This was partially offset by Management consulting expense incurred in the most recently ended quarter as detailed in the three month discussion . Consulting fees increased by $60,000 due to the nine monthly accruals for consulting services, which did not exist in the same period as last year. This increase was offset by a $165,000 accrual for consulting expenses in the prior nine month period. Other General and administrative expenses increased by $167,162 principally due to greater operating expenses at the parent company level of $147,287 mostly for professional fees and the operating expenses of the Hydra Fuel Cell subsidiary of $19,875 which did not exist in the same period of last year greater The Issuance of Common stock to settle a prior liability increased $117,000 due to an one-time issuance of shares to settle a liability from the prior business model.

Other income/(expense) incurred during the three month periods ended June 30, 2014 and June 30, 2013 was as follows:

	2014 ($)			2013 ($)		Difference ($)
Interest Expense		(523,738	)		(175,621)		(348,117	)
Derivative Expense		(2,569,102)			(160,652)		(2,408,451	)
Change in the Fair Value of Derivative liabilities		3,141,729			111,774		3,029,955
Loss on Retirement of Debt		(2,124,401)			(202,360)		(1,922,042	)

During the nine month period ended June 30, 2014, we incurred other (expense) of $(2,075,512), compared to other (expense) of $(426,858) incurred during the nine month period ended June 30, 2013, an increased expense of $1,648,654. Other income/(expense)incurred during the nine month period ended June 30, 2014 and 2013 consisted of (i) $(523,738) and $(175,621), respectively of Interest expense; (ii) $(2,569,102) and $(160,652) in derivative expense; (iii) 3,141,729 and $111,774,respecitvely in Change in the Fair Value of Derivative liabilities, and (iv) $(2,124,401) and $202,360 in Loss on Retirement of Debt .

Interest expense increased $348,117 due to i) greater debt levels and increased amortization of debt discounts of $246,863, and ii) due to the reversal of prior overamortization of debt discounts of $101,254 in the quarter ended June 30, 2013. Derivative expense increased $2,408,451 due to the issuance of greater levels of debt during the quarter ended June 30, 2014 than the same period in the prior year. Change in the Fair Value of Derivative liabilities increased $3,029,955 due to increased stock price volatility and greater outstanding debt levels. Loss on Retirement of Debt increased $1,922,042 due to a substantially greater level of debt conversions in the current period versus the prior periods.

Therefore, our basic net loss and net loss per share during the nine month period ended June 30, 2014, was $7,968,659 or $(0.05) per share, compared to a net loss of $1,113,299 or $(.02) per basic share during the nine month period ended June 30, 2013. The weighted average number of basic shares outstanding was 171,910,610 for the nine month period ended June 30, 2014, compared to 63,366,972 for the nine month period ended June 30, 2013. Our fully diluted net (loss) per share was ($.03) and ($.02) for the nine months ended June 30, 2014 and 2013, respectively. The weighted average number of fully-diluted shares outstanding was 309,420,582 for the nine month period ended June 30, 2014, compared to 66.663.675 for the nine month period ended June 30, 2013.

Liquidity and Capital Resources

As of June 30, 2014, our current assets were $73,578 and our current liabilities were $3,589,280, which resulted in a working capital deficiency of $3,515,702. As of June 30, 2014, current assets were comprised of: (i) $70,049 in cash; and (ii) $3,529 in receivables. As of June 30, 2014, current liabilities were comprised of: (i) $209,797 in accounts payable and accrued liabilities; (ii) $415,719 in accounts payable due to a related party; (iii) $369,105 in accrued interest payable; (iv) $27,173 in notes payable due to a related party; (v) a derivative liability of $494,410 resulting from convertible notes payable and (vii) $1,089,067 in convertible debt (net of $266,773 of discount), and (vii) non-convertible debt of $984,008.

As of June 30, 2014, our total assets of $3,667,984 were comprised of: (i) $32,351 in current assets; (ii) $173,968 in property and equipment (net of $114,875 of depreciation); (iii) $47,005 in Notes Receivable; (iv) $20,277 in debt issue costs and (v) Goodwill of $3,353,156. As of June 30, 2014, our total liabilities of $3,589,280 were comprised of current liabilities of the same amount.

Stockholders’ deficit improved $2,428,762 from ($2,350,057) as of September 30, 2013 to $78,704 as of June 30, 2014. The change in Stockholder’s deficit was comprised of (i) issuance of shares for Management compensation of $5,255,000; (ii) issuances of shares for conversion of debt totaling $2,975,501; (iii) issuance of shares to settle old liabilities of $117,000; (iv) issuance of preferred stock of $2,049,920 for the purchase of Hydra partially offset by; (v) net loss of $7,968,659.

Cash Flows from Operating Activities

We did not generate positive cash flows from operating activities. For the nine months ended June 30, 2014, net cash flows provided by operations was $(465,473). Net cash flows used in operating activities for the nine months ended June 30, 2014 consisted of (i) net loss of $(7,968,659), and (ii) the change in the fair value of the derivative liability of $(3,141,729) adjusted by: (iii) share based payments of $5,255,000 (iv) derivative expense of $2,569,102; (v) loss on retirement of debt of $2,124,401; (vi) $427,629 in amortization of debt discount; (vi) loss on issuance of commons tock of $117,000 and (vii) depreciation expense of $25,599. Net cash flows used by operating activities were further changed by changes in working capital accounts related, principally related to the Hydra acquisition of $62,080.

Cash Flows from Investing Activities

For the nine months ended June 30, 2014, net cash flows provided by investing activities was $(46,603) principally due to payments to the State of Nevada to be reimbursed by ASRC of $47,005. See Note 5(B) for details.

Cash Flows from Financing Activities

We have financed our operations primarily from debt or the issuance of equity instruments. For the six months ended June 30, 2014, net cash flows provided from financing activities was $582,125. This was from the issuance of notes for cash of $357,125 and notes for professional services of $225,000.

We anticipate that we will meet our ongoing cash requirements by selling our equity securities or through shareholder loans. Our management has changed our business focus to the acquisition of operating assets and we estimate that our expenses over the next 12 months will be approximately $600,000 for our new venture in fuel cell technology.

Material Commitments

As of the date of this Quarterly Report, we do not have any material commitments other than as described below.

Convertible Debt

Fife Note

On February 15, 2011, the Company issued convertible notes, totaling $300,000, to John Fife with the following provisions:

	●	Interest rate 6%;

	●	Default interest rate of 12%;

	●	Notes are due 48 months from the issuance date of February 23, 2011;

	●	Conversion rates equal to 70% or 80% of the market price on date of conversion by applying a specified formula that utilizes the average of the 3 lowest quoted closing prices 20 days immediately preceding the conversion date, and then takes the higher of the average 3 lowest closing prices or $0.12 floor price; and

	●	Secured by the Chief Executive Officer’s 15,000,000 shares of the Company common stock.

As of June 30, 2014, as a result of the triggering events (a) and (b), the Company computes the exercise price related to convertible debt, without regard to the floor price.

The normal conversion resulted in a debt discount under ASC 470-25-8 since the calculated market price as of the date of the note was higher ($0.145) than the conversion floor of $0.12.

At the balance sheet date, $207,428 of the debt has been converted leaving a principal balance of $92,572.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Lucosky Brookman LLP Note

During the quarter ended March 31, 2014, the remaining balance of the Lucosky note was converted, and no principal balance remains

Consulting Notes

As of the Balance sheet date, $162,703 of principal on this note has been converted into common shares, leaving a remaining balance of $2,297.

St. George Notes

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

June 30, 2014

(Unaudited)

Other Notes

Market price is defined as follows:

Debt Amount	Discount	Conversion Mechanism
$80,000	49%	average of low three trade prices over prior 30 days

$52,500	40%	low trade price over prior 25 days

77,625	45%	low trade price over ten days

$175,000	50%	low bid price over prior 30 days

Non-convertible Debt

Notes Acquired in Hydra Acquisition

As a result of the Hydra Acquisition, the Company acquired an additional $984,008 in debt as follows

Investor	Amount		Interest Rate

Golden State Equity Investors	$	350,000		7.5	%

St. George Investments, LLC	$	415,000		7.75	%

Bullivant Houser Bailey LLP	$	219,008		-0-

All of the notes are currently past due and are payable on demand

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Inflation

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

Critical Accounting Policies

Use of Estimates

Such estimates for the quarter ended June 30, 2014 and 2013, and assumptions affect, among others, the following:

	●	estimated carrying value, useful lives and related impairment of property and equipment;

	●	estimated fair value of derivative liabilities;

	●	estimated valuation allowance for deferred tax assets, due to continuing losses; and

	●	estimated fair value of share based payments.

Derivative Liabilities

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.

Debt Issue Costs and Debt Discount

The Company may pay debt issue costs, and record debt discounts in connection with raising funds through the issuance of convertible debt. These costs are amortized over the life of the debt to interest expense.

Original Issue Discount

Share-based Payments

Generally, all forms of share-based payments, including stock option grants, warrants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.

Earnings per Share

In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

Since the Company reflected a net loss in 2011 and 2010, respectively, the effect of considering any common stock equivalents, if exercisable, would have been anti-dilutive. A separate computation of diluted earnings (loss) per share is not presented.

Fair Value of Financial Instruments

ASC 820 defines fair value, provides a consistent framework for measuring fair value under generally accepted accounting principles and expands fair value financial statement disclosure requirements. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:

	●	Level 1 inputs: Quoted prices for identical instruments in active markets.

	●	Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

	●	Level 3 inputs: Instruments with primarily unobservable value drivers.

Foreign Currency Transactions

The Company’s functional currency is the Canadian Dollar. The Company’s reporting currency is the U.S. Dollar. All transactions initiated in Canadian Dollars are translated to U.S. Dollars in accordance with ASC 830-10-20 “Foreign Currency Translation” as follows:

	(i)	Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date;

	(ii)	Equity at historical rates; and

	(iii)	Revenue and expense items at the average exchange rate prevailing during the period.

For foreign currency transactions, the Company translates these amounts to the Company’s functional currency at the exchange rate effective on the invoice date. If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income for the period.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We do not hold any derivative instruments and do not engage in any hedging activities.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s principal executive officer (“PEO”) and principal financial officer (“PFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the PEO and PFO concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective to ensure that information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the PEO and PFO, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013, as filed with the SEC on January 2, 2014.

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

Not applicable.

Item 3. Defaults upon Senior Securities.

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default not cured within 30 days, with respect to any indebtedness of the Company.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

See Form 8K filed on

Item 6. Exhibits.

(d) Exhibits.

Exhibit No.		Description

31.1		Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))*

31.2		Certification by the Principal Accounting Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))*

32.1		Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2		Certification by the Principal Accounting Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

* filed herewith

SIGNATURES

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

	HYDROGEN FUTURE CORP.


Dated: August 11, 2014	By:	/s/ Frank Neukomm
		Name: Frank Neukomm
		Title: Chief Executive Officer (Principal Executive Officer)

Hydrogen Future Corp - FORM 10-Q - August 11, 2014

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Hydrogen Future Corp Reports