Hydrogen Future Corp - FORM 10-Q

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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: December 31, 2014

o 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 incorporation or organization)	(I.R.S. Employer 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 o

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 o

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	o		Accelerated Filer	o
Non-Accelerated Filer	o		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 o No þ

As of February 10, 2015, there were 12,397,239 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

	September 30,			September 30,
	2014			2014
	(unaudited)
Assets

Current assets
Cash	$	2,825		$	31,033
Inventory		2,031			712
Total current assets		4,856			31,745

Non-current assets
Property and equipment - net		174,119			181,259
Note Receivable		47,005			47,005
Debt issue costs - net		4,550			20,288
Goodwill		3,353,156			3,353,156
Total Non-Current Assets		3,578,830			3,601,708

Total assets	$	3,583,686		$	3,633,453

Liabilities and Stockholders' (Deficit)

Current Liabilities
Accounts payable and accrued liabilities	$	156,985		$	165,991
Accounts payable - related party		415,719			415,719
Accrued interest payable		401,919			379,092
Notes/Advances payable - related party		27,173			27,173
Derivative liability		620,097			243,809
Convertible debt - net		667,751			442,609
Non-convertible debt from Hydra Acquistion		981,508			981,508
Total current liabilities		3,271,152			2,655,901

Stockholders' Equity
Preferred stock, Series A, $0.001 par value, 200,000,000 shares authorized; 100,000,000 issued and outstanding at December 31, 2014 and September 30, 2014		100,000			100,000
Preferred stock,Series B, $0.001 par value, 1 share authorized; 1 share and 0 shares issued and outstanding at December 31, 2014 and September 30, 2014, respectively		-			-
Common stock, $0.001 par value, 40,000,000 shares authorized; 9,941,728 and 8,911,263 issued and outstanding at December 31, 2014 and September 30, 2014, respectively		9,942			8,912
Additional paid-in capital		13,863,758			13,832,548
Deficit accumulated during the development stage		(13,661,672	)		(12,964,414	)
Accumulated other comprehensive income		505			505
Total S+C15tockholders' Equity		312,534			977,551

Total liabilities and stockholders' (deficit)	$	3,583,686		$	3,633,452

Hydrogen Future Corp.

(A Development Stage Company)

Statements of Operations

(Unaudited)

	Three Months Ended December 31						June 21, 2006 (inception) through December 30,
	2014			2013			2014

Expenses
General and Administrative Expenses	$	117,231		$	229,986		$	8,769,057
Issuance of Common Stock to settle a prior liability		-			-			117,000
Impairment of software		-			-			1,035,027
Total		117,231			229,986			9,921,084

Other Income/(Expense)
Interest expense		(185,844	)		(103,510	)		(1,029,881	)
Derivative expense		(81,651	)		(1,052,177	)		(4,334,976	)
Change in fair value of derivative liability		(295,968	)		2,340,552			3,956,869
Loss on Retirement of Debt		(16,564	)		(174,263	)		(2,368,671	)
Tax refunds		-			-			36,071
Total Other (Expense) - net		(580,027	)		1,010,602			(3,740,588	)

Net Income (Loss)	$	(697,258	)	$	780,617		$	(13,661,672	)

Net loss per common share - basic	$	(0.08	)	$	385.98

Net loss per common share - diluted	$	(0.07	)	$	276.58

Weighted average number of common shares outstanding during the period/year - basic		8,943,450			2,022

Weighted average number of common shares outstanding during the period/year - diluted		9,343,450			2,822

Hydrogen Future Corp.

Statement of Stockholder's Equity

From the Period of Inception to December 31, 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- ($62.50/share)		80		$	0			-	$	-		-	$	-		5,000		$	-		$	-		$	5,000

Proceeds from the Issuance of founders stock- ($62.50/share)		120			0			-		-		-		-		15,000			-						15,000

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

Balance- September 30, 2006		200			0			-		-		-		-		20,000			(2,631	)		-			17,369

Proceeds from the Issuance of common stock- ($500/share)		164			0			-		-		-		-		82,000			-			-			82,000

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

Balance- September 30, 2007		364			0			-		-		-		-		102,000			(19,591	)		-			82,409

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

Balance- September 30, 2008		364			0			-		-		-		-		102,000			(37,790	)		-			64,210

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

Balance- September 30, 2009		364			0			-		-		-		-		102,000			(56,866	)		-			45,134

Proceeds from the Issuance of common stock- ($81,250/share)		2			0			-		-		-		-		162,500			-			-			162,500

Common stock issued to acquire software ($110,000/share)		13			0			-		-		-		-		1,380,876			-			-			1,380,876

Proceeds from the Issuance of common stock- ($100,000/share)		2			0			-		-		-		-		200,000			-			-			200,000

Common stock issued for consulting services ($100,000/share)		0			0			-		-		-		-		16,000			-			-			16,000

Common stock issued for consulting services ($112,500/share)		1			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		382			0			-		-		-		-		1,996,376			(408,656	)		(3,079	)		1,584,641

Proceeds from the Issuance of common stock- ($40,000/share)		3			0			-		-		-		-		99,999			-			-			100,000

Proceeds from the Issuance of common stock- ($25,000/share)		1			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 ($2,789/share)		9			0			-		-		-		-		24,990			-			-			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		394			0			-		-		-		-		2,190,388			(3,433,273	)		6,155			(1,236,729	)

Share Rescission		(22	)		(0	)										(89,936	)								(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		372			0			-		-		-		-		2,100,452			(2,738,994	)		505			(638,037	)

Share Issuance upon default of debt- ($488/share)		120			0			-		-		-		-		58,500			-			-			58,500

Issuance of Shares to Officers for Compensation- ($400/share)		256			0			-		-		-		-		102,596			-						102,596

Shares issuance upon conversion of debt- ($4,988/share)		48			0			-		-		-		-		237,575			-			-			237,575

Common stock issued upon conversion of insider debt		3			0			-		-		-		-		(0	)		-			-			0

Shares issued for consulting services- ($388/share)		1			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		800			1			100,000,000		100,000		-		0		2,709,575			(5,160,139	)		505			(2,350,058	)

Shares issuance upon conversion of debt, accrued interest and related share issuance expenses		7,867,943			7,868			-		-		-		-		3,616,231			-			-			3,624,098

Shares issued to Management for Compensation on December 26, 2013 at $.065		2,880			3			-		-		-		-		44,997			-			-			45,000

Shares issued to Management for Compensation on January 27, 2014 at $.0521		400,000			400			-		-		-		-		5,209,600			-			-			5,210,000

Shares issued in settlement for prior unrecorded obligation for equipment purchase		120,000			120			-		-		-		-		116,880									117,000

Shares issued for consulting services		200,000			200											39,800									40,000

Debt Issue Costs																37,875									37,875

Sale of common shares		320,000			320											7,670									7,990

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

Net loss for the year ended September 30, 2014		-			-			-		-		-		-		-			(7,804,274	)		-			(7,804,274	)

Balance- September 30, 2014		8,911,623			8,912			100,000,000	$	100,000		1		-		13,832,548			(12,964,414	)		505			977,551

Shares issuance upon conversion of debt, accrued interest and related share issuance expenses		1,030,061			1,030			-		-		-		-		31,211									32,241

Fractional shares issued in accordance with reverse split		44			-			-		-		-		-		-			-			-			-

Net loss for the period ended December 31, 2014								-		-		-		-					(697,258	)					(697,258	)

		9,941,728		$	9,942			100,000,000	$	100,000		1	$	-	$	13,863,758		$	(13,661,672	)	$	505		$	312,533

Hydrogen Future Corp.

(A Development Stage Company)

Statements of Cash Flows

(Unaudited)

	Three Months Ended December 31,						June 21, 2006 (Inception) to December 31,
	2014			2013			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(697,258	)	$	780,617		$	(13,661,672	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Share based payments		-			-			5,907,549
Impairment of Software					-			1,035,027
Derivative expense		81,651			1,052,177			4,334,976
Depreciation		9,945			8,533			479,159
Amortization of debt issue cost		15,738			3,578			84,226
Amortization of debt discount		152,780			81,462			735,685
Amortization of Original Issue Discount		2,107			899			38,250
Change in fair value of derivative liabilities		295,968			(2,340,582	)		(3,956,869	)
Accrued interest on Retired debt		8,131			2,875			44,206
Fees on debt conversions		1,470			174,263			21,614
Common Stock tobe Issued		-			45,000
Loss on Retirement of Debt		16,564			-			2,368,670
Loss on Issuance of Common Stock to settle a prior liability		-			-			117,000
Issuance of Common stock for consulting agreements		-			-			48,000
Changes in operating assets and liabilities:
(Increase) decrease in other receivables		-			-			-
(Increase) decrease in Inventory		(1,319	)					(2,031	)
Increase (decrease) in accounts payable and accrued expense		(9,006	)		-			156,985
Increase in accounts payable - related party					-			415,719
Increase in working capital from acquisition					-			(319,630	)
Increase in accrued interest		22,826			21,149			401,919
Net cash provided by (used in) operating activities		(100,403	)		(170,000	)		(1,751,217	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Note receivable Acquired in Acquistion								(47,005	)
Cash acquired in Acquisition								402
Purchase of property and equipment		(2,805	)					(307,428	)
Net cash used in investing activities		(2,805	)		-			(354,031	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party notes/advances		-			-			31,586
Proceeds from convertible notes payable		-			95,000			873,178
Notes Issued for Professional services		75,000			75,000			643,727
Repayment of related party notes/advances		-			-			(968	)
Cash paid as debt offering costs		-			-			(24,000	)
Proceeds from issuance of common stock					-			587,490
Net cash provided by financing activities		75,000			170,000			2,111,013

Net (Decrease) in Cash		(28,208	)		0			5,766
Effect of Exchange Rates on Cash								(2,941	)

Cash - Beginning of Period/Year		31,033			(0	)		-

Cash - End of Period/Year	$	2,825		$	0		$	2,825

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	$	4,745		$	-			855,322
Common stock issued to acquire software	$	-		$	-			1,380,876
Notes payable acquired in acquisition								984,008
Preferred stock issued to officers								310,000
Debt discount recorded on convertible debt accounted for as a derivative liability	$	75,000		$	170,000			1,122,875
Debt discount recorded on convertible debt accounted for as a derivative liability - original issue discount				$	-			27,122
Debt issue costs - warrants	$	-		$	-			26,901

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

December 31, 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, 2014 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the years ended September 30, 2014 and 2013. 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, 2014 and 2013.

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 three months ended December 31, 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

Company History

We were incorporated in the State of Nevada on June 21, 2006, as El Palenque Nercery, Inc. On June 30, 2006, we changed our name to El Palenque Vivero, Inc., and on March 23, 2010, we changed our name to A5 Laboratories Inc. On April 8, 2010, we effectuated a forward split of our issued shares of common stock on the basis of 10-for-1. 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, and on January 27, 2015, we effectuated a reverse split of our common stock on a 1:500 basis . On April 21, 2014, the Company completed the acquisition of Hydra Fuel Cell Corporation (“Hydra”) from American Security Resources Corporation (Pink Sheets: ARSC). On January 12. 2015, we effectuated a reverse split of our common stock on a 1:250 basis. Hydra has developed advanced hydrogen fuel cell technology which it initially intends to deploy as residential and small commercial grid replacement for electric generation. 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. This part of the Company is currently inactive, and we are concentrating on our fuel cell operation. We strongly suggest you read our 8-K filed April 28, 2014 about the Hydra acquisition and our form 10-K for the year ended September 30, 2013 filed on January 21, 2015 in addition to this filing to better understand the Company’s new direction. Both filings were with the Securities and Exchange Commission and can be found at www.SEC.gov.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

December 31, 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.

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 December 31, 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 December 31, 2014 and September 30, 2014, the Company had no cash equivalents.

At December 31, 2014, the Company had $2,825 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 December 31, 2014 and September 30, 2014, 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

December 31, 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. Debt issue costs are included in general and administrative expense and debt discount amortization is included in 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 back value of 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. During the three months ended December 31, 2014, there were no payments of this kind.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

December 31, 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 December 31, 2014 and September 30, 2014:

	December 31, 2014		September 30, 2014

Warrants		63		63
Convertible debt (1)		9,931,803		9,931,803
Total common stock equivalents		9,931,864		9,931,864

(1)	The Company has identified ten debt holders who cannot exceed ownership in the Company by 9.99%. The investor is limited to 993,180 shares on a fully diluted basis, which is the Company’s maximum exposure at the balance sheet date.

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

December 31, 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 $697,258 for the three months ended December 31, 2014, and utilized $100,403 in cash for operations. The Company also has a working capital deficit of $3,266,296 and a deficit accumulated during the development stage of $13,661,672 at December 31, 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

December 31, 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 December 31, 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 December 31, 2014.

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

	December 31, 2014		September 30, 2014
Level 1	$	-	$	-
Level 2 – Derivative Liability		620,097		243,809
Level 3		-		-
Total	$	620,097	$	243,809

Note 5 Receivables

(A) Note Receivables- Non-current

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

December 31, 2014

(Unaudited)

Note 6 Property and Equipment

Property and equipment consists of the following:

As of December 31,	2014			2013			Estimated Useful Lives

Software	$	1,380,876			1,380,876			3
Leasehold improvements (1)		144,802			144,802			10
Lab equipment (2)		106,705			106,705			10
Technical equipment (3)		15,824			15,824			5
Office equipment		40,141			37,336			5
		1,688,348			1,685,543

Less: Accumulated depreciation		(478,640	)		(468,695	)
Less: Impairment		(1,035,027	)		(1,035,027	)
Property and equipment – net	$	174,119			181,259

(1) See Note 8(B) – related party

(2) See below related to related party purchases

(3) Technical equipment- This represents equipment used to test fuel cell viability

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

December 31, 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 December 31, 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.

(B) Convertible debt-net

The following is a summary of the Company's outstandning convertible debt as of December 31, 2014:

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

December 31, 2014

(Unaudited)

Summary of Notes Issued

(as of December 31, 2014)

Date of Issuance	Original Amount		Conversions through December 31, 2014		Accrued Original Issue Discount, if any		Gross Amount outstanding at December 31, 2014		Remaining Discount		Net Amount		Shares to be issued upon full conversion at September 30, 2014		Type of Note

2-Apr-13		5,000						5,000		0		5,000		400,000	a
31-May-13		5,500						5,500		1,138		4,362		440,000	a
31-May-13		5,500						5,500		0		5,500		440,000	a
23-Feb-11		300,000		300,000				0		0		0		0	a
1-Oct-12		165,000		165,000				0		0		0		0	b
1-Aug-13		25,000		14,400				10,600		0		10,600		848,000	b
1-Sep-13		25,000		25,000				0		0		0		0	b
1-Oct-13		25,000		25,000				0		0		0		0	b
1-Nov-13		25,000						25,000		0		25,000		2,000,000	b
1-Dec-13		25,000						25,000		0		25,000		2,000,000	b
1-Jan-14		25,000						25,000		0		25,000		2,000,000	b
1-Feb-14		25,000		25,000				0		0		0		0	b
1-Mar-14		25,000						25,000		0		25,000		2,000,000	b
1-Aug-13		12,500		40,000		27,500		0		0		0		0	a
27-Aug-13		12,500				1,250		13,750		0		13,750		916,667	a
10-Oct-13		15,000				1,500		16,500		0		16,500		1,000,000	a
19-Nov-13		10,000				1,000		11,000		0		11,000		733,333	a
27-Sep-13		25,000						25,000		0		25,000		2,000,000	a
13-Dec-13		20,000		8,725				8,530		0		8,530		682,410	a
27-Feb-14		20,000		20,000				0		0		0		0	a
17-Mar-14		25,000		7,613		990		23,122		15,103		8,019		1,849,738	a
2-Apr-14		32,500		25,660		5,000		11,840		273		11,567		741,715	a
21-Mar-14		30,000						21,275		0		21,275		1,702,000	a
14-Apr-14		35,000						35,000		3,716		31,284		2,800,000	a
5-May-14		50,000						50,000		16,667		33,333		2,904,444	a
21-May-14		35,000						35,000		2,059		32,941		2,033,111	a
2-Jun-14		27,500						27,500		1,704		25,796		1,722,734	a
23-Jun-14		27,500						27,500		1,878		25,622		1,833,333	a
1-Apr-14		25,000						25,000		0		25,000		2,000,000	b
1-May-14		25,000						25,000		0		25,000		2,000,000	b
1-Jun-14		25,000						25,000		0		25,000		2,000,000	b
1-Jul-14		25,000						25,000		0		25,000		2,000,000	b
1-Aug-14		25,000						25,000		163		24,837		2,000,000	b
1-Sep-14		25,000						25,000		5,229		19,771		2,000,000	b
7-Jul-14		37,500						37,500		1,622		35,878		1,996,805	a
14-Jul-14		25,000						25,000		1,902		23,098		1,566,122	a
22-Aug-14		27,500						27,500		7,147		20,353		2,200,000	a
26-Aug-14		10,000						10,000		7,419		2,581		800,000	a
26-Aug-14		10,000						10,000		7,419		2,581		800,000	a
8-Sep-14		10,000						10,000		1,094		8,906		800,000	a
15-Sep-14		20,000						20,000		9,712		10,288		1,161,778	a
15-Sep-14		10,000						10,000		7,733		2,267		800,000	a
19-Sep-14		10,000						10,000		7,799		2,201		800,000	a
1-Oct-14		25,000						25,000		12,500		12,500		2,000,000	b
1-Nov-14		25,000						25,000		16,713		8,287		2,000,000	b
1-Dec-14		25,000						25,000		20,879		4,121		2,000,000	b

Totals		1,443,500		656,398		37,240		817,617		149,866		667,751		59,972,190

Legend:

a- Note for cash

b- Note for consulting services

The following is a summary of the notes issued for cash and issued for consulting services:

	Original Amount	Conversions through December 31, 2014	Accrued Original Issue Discount, if any	Gross Amount outstanding at December 31, 2014	Remaining Discount		Net Amount		Shares to be issued upon full conversion at September 30, 2014

Notes for Cash	853,500	401,998	37,240	482,017		94,382		387,635	33,124,190
Notes for Consulting Services	590,000	254,400	0	335,600		55,484		280,116	26,848,000

Totals	1,443,500	656,398	37,240	817,617		149,866		667,751	59,972,190

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-

During the Fiscal fourth quarter, $2,500 of the Bullivant Houser Bailer LLP Note was retired. Therefore, the remaining balance at September 30, 2014 is $981,508

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

(D) Debt Issue Costs

Deferred Issue costs relate to additional expenses associated with a financing that are amortized into expense over the length of the instrument. As of December 31, 2014, the value of these debt issue costs is $4,550 as follows:

	Original Balance		Issue Date	Maturity Date	Total Days		Days Remaining as of December 31, 2014		Percentage of Days as of December 31, 2014		Unamortized Balance

	$	2,500	2-Apr-14	7-Jan-15		280		7		3%	$	63
	$	7,375	5-May-14	30-Apr-15		360		120		33%	$	2,458
	$	5,500	21-May-14	14-Jan-15		238		14		6%	$	324
	$	2,500	2-Jun-14	14-Jan-15		226		14		6%	$	155
	$	2,500	23-Jun-14	14-Jan-15		205		14		7%	$	171
	$	12,500	7-Jul-14	8-Jan-15		185		8		4%	$	541
	$	2,500	14-Jul-14	14-Jan-15		184		14		8%	$	190
	$	2,500	22-Aug-14	15-Feb-15		177		46		26%	$	650
Total	$	37,875									$	4,550

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

December 31, 2014

(Unaudited)

(E) Debt Discount

During the three months ended December 31, 2014 and 2013 , the company recorded debt discounts of $75,000 and $170,000 respectively

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

During the three months ended December 31, 2014, the Company amortized $152,780 in debt discount.

Note 9 Stockholders’ Equity

(A) Common Stock

Stock Issued in Three months ended December 31, 2014

During the three months ended December 31, 2014, the Company issued 1,030,061 shares of common stock for the conversion of $4,745 of debt and $8,131 of accrued interest.

Stock Issued in Fiscal year ended September 30, 2014

The Company issued 8,910,823 (on a split-adjusted basis) shares of common stock during the year as follows:

Shares issued for conversion of debt accrued interest and related expenses associated with conversions			7,867,943

Shares issued to Management for compensation			402,880

Shares issued for settlement of a previously unrecorded liability for equipment purchase			120,000

Shares issued for consulting services			200,000

Sales of common shares			320,000

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

December 31, 2014

(Unaudited)

(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 63 warrants which are convertible at $25,000 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

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.

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

December 31, 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, 2014
Derivative liability Fair value at the commitment date for convertible notes issued	$	243,809
Fair value mark to market adjustment – December 31, 2014		295,968
Derivative liability associated with new issuances through June 30, 2012		81,651
Elimination of derivative liability upon conversion of debt		(1,331)

Derivative liability balance at December 31, 2014	$	620,097

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 $81,651 for the three months ended December 31, 2014.

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, 2014 and December 31, 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.

Hydrogen Future Corp.

(A Development Stage Company)

Notes to Financial Statements

December 31, 2014

(Unaudited)

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 December 31, 2014
	Alternative Energy			Contracted Research and Laboratory Services			Corporate Overhead			Total

Revenues	$	-		$	-		$	-		$	-

Cost of Revenues		-			-			-			-

Gross Profits		-			-			-			-
Operating Expenses											-
Selling General and Administrative Expenses		8,268		$	8,533		$	100,430			117,231

Total Operating Expenses		8,268			8,533			100,430			117,231

Operating Income (Loss)		(8,268	)		(8,533	)		(148,027	)		(164,828	)

Other Income (Expense)
Interest expense		-			-			(185,844	)		(163,263	)

Net loss		(8,268	)		(8,533	)		(680,457	)		(697,258	)

Total Assets		3,402,192			171,314			10,180			3,583,686

	Three Months Ended December 31, 2013
	Alternative Energy		Contracted Research and Laboratory Services			Corporate Overhead			Total
Revenues	$	-	$	-		$	-		$	-

Cost of Revenues		-		-			-			-

Gross Profits		-		-			-			-
Operating Expenses										-
Selling General and Administrative Expenses			$	8,533		$	221,453			229,986

Total Operating Expenses		-		8,533			221,453			229,986

Operating Income (Loss)		-		(8,533	)		(221,453	)		(229,986	)

Other Income (Expense)
Interest expense		-		-			(103,510	)		(103,510	)

Net income (loss)		-		(8,533	)		789,150			780,617

Total Assets		-		191,034			15,600			206,634

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;

Reverse stock split and change in Ticker Symbol

Effective January 12, 2015, there was a reverse stock split of our outstanding common stock on the basis of one for one two hundred fifty (1:250).

Our authorized shares were also reverse split and there are now 40,000,000 common shares authorized.

The new symbol is HFCOD. The "D" will be removed in 20 business days and the symbol will revert to HFCO.

Issuance of Convertible Debt

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

On January 1, 2015 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 July 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.

On February 1, 2015 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 August 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

Issuance of Common stock

Subsequent to the Balance Sheet, the Company issued the following shares:

16 shares for fractional issuances pursuant to the reverse split

2,455,495 shares for the conversion of $7,341 of convertible debt, $685 of accrued interest and $-0- of associated fees.

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, 2014 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

Management's Discussion and Analysis of Results of Operations

Three Months Ended December 31, 2014 Compared to the Three Months Ended December 31, 2013

Our results of operations are summarized below:

	Quarter Ended December 31, 2014 ($)			Quarter Ended December 31, 2013 ($)
Revenue		-0-			-0-
Expenses		(117,231	)		(229,986	)
Other Income (Expenses)		(580,027	)		1,010,603
Net Income (Loss)		(697,258	)		780,617
Income (Loss) Per Share-Basic		(.08	)		385.98
Income (Loss) Per Share- Fully diluted		(.07	)		276.58

During the three months ended December 31, 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 December 31, 2014 and 2013 can be summarized as follows:

	For the Three Months Ended December 31,
	2014 ($)		2013 ($)		Difference ($)
Consulting Fees		75,000		75,000		-0-
Other General and administrative expenses		42,231		154,986		(110,455)

Our net loss for the three month period ended December 31, 2014 was ($580,027), compared to a net income of $1,010,603 for the three month period ended December 31, 2014, an increased loss of $1,590,630.

During the three month period ended December 31, 2014, we incurred operating expenses (and respective net operating losses) of $117,231, compared to operating expenses of $229,986 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 December 31, 2014 and 2013 consisted of (i) $75,000 and $75,000 in fees paid to consultants; and (ii) $42,231 and $154,986 in other general and administrative expenses

Consulting fees were flat due to the quarterly accrual for consulting services, which existed in the same quarter as last year. Other General and administrative expenses decreased by $110,455. $45,000 of the decrease was due to the issuance of $45,000 in common stock to our management team in December 2013. The remaining increase was due to greater operating expenses at the parent company level of $73,723 (mostly for professional fees) partially offset by the operating expenses of the Hydra Fuel Cell subsidiary of $8,268 which did not exist in the same quarter of the prior fiscal year.

Other income/(expense) incurred during the three month periods ended December 31, 2014 and June 30, 2013 was as follows:

	2014 ($)			2013 ($)			Difference ($)
Interest Expense		(185,844	)		(103,510)			(82,334	)
Derivative Expense		(81,651	)		(1,052,177	)		970,526
Change in the Fair Value of Derivative liabilities		(295,968	)		2,340,552			(2,636,520	)
Loss on Retirement of Debt		(16,564	)		(174,263)			157,699

During the three month period ended December 31, 2014, we incurred other income/(expense) of $(580,027), compared to other income of $1,010,603 incurred during the three month period ended December 31, 2013, an increased expense of $1,590,630. Other income/(expense)incurred during the three month period ended December 31, 2014 and 2013 consisted of (i) $(185,844) and $(103,510), respectively of Interest expense; (ii) $(81,651) and $(1,052,177) in derivative expense; (iii) $(259,968) and $2,340,552 ,respectively in Change in the Fair Value of Derivative liabilities, and (iv) $(16,564) and $(174,263) in Loss on Retirement of Debt .

Interest expense increased $82,334 due principally to increased amortization of debt discounts of $71,318. Derivative expense decreased $970,526 due to the reduced issuance of debt during the quarter ended December 31, 2014 then the same quarter in the prior year. Change in the Fair Value of Derivative liabilities decreased $2,636,520 due to decreased stock price volatility partially offset greater outstanding debt levels. Loss on Retirement of Debt decreased $157,699 due to fewer debt conversions than in the same quarter of the prior year.

Therefore, our basic net loss and net loss per share during the three month period ended December 31, 2014, was ($697,258) or ($0.08) per share, compared to net income of $780,617 or $385.98 per basic share during the three month period ended December 31, 2013. The weighted average number of basic shares outstanding was 8,943,450 for the three month period ended December 31, 2014, compared to 2,022 for the three month period ended December 31, 2013. Our fully diluted net income (loss) per share was ($.07) and $276.58 for the three months ended December 31, 2014 and 2013, respectively. The weighted average number of fully-diluted shares outstanding was 9,343,450 for the three month period ended December 31, 2014, compared to 2,822 for the three month period ended December 31, 2013.

Liquidity and Capital Resources

As of December 31, 2014, our current assets were $4,856 and our current liabilities were $3,271,152, which resulted in a working capital deficiency of $3,266,296. As of December 31, 2014, current assets were comprised of: (i) $2,825 in cash; and (ii) $2,031 in receivables. As of December 31, 2014, current liabilities were comprised of: (i) $156,985 in accounts payable and accrued liabilities; (ii) $415,719 in accounts payable due to a related party; (iii) $401,919 in accrued interest payable; (iv) $27,173 in notes payable due to a related party; (v) a derivative liability of $620,097 resulting from convertible notes payable and (vii) $667,751 in convertible debt (net of $149,866 of discount), and (vii) non-convertible debt of $981,508.

As of December 31, 2014, our total assets of $3,583,686 were comprised of: (i) $4,856 in current assets; (ii) $174,119 in property and equipment (net of $478,640 of depreciation); (iii) $47,005 in Notes Receivable; (iv) $4,550 in debt issue costs and (v) Goodwill of $3,353,156. As of December 31, 2014, our total liabilities of $3,271,152 were comprised of current liabilities of the same amount.

Stockholders’ Equity decreased $665,017 from $977,551 as of September 30, 2014 to $312,534 as of December 31, 2014. The change in Stockholder’s deficit was comprised of (i) issuances of shares for conversion of debt totaling $32,241 and (ii) net loss of $7,968,659.

Cash Flows from Operating Activities

We did not generate positive cash flows from operating activities. For the three months ended December 31, 2014, net cash flows provided by operations was $(100,403). Net cash flows used in operating activities for the three months ended December 31, 2014 consisted of (i) net loss of $(697,258), (ii) the change in the fair value of the derivative liability of $295,968 (iii) derivative expense of $81,651; (iv) loss on retirement of debt of $16,564; (v) $152,780 in amortization of debt discount; (vi) depreciation expense of $9,945 and (vii) amortization expense of deferred financing costs of $15,738. Net cash flows used by operating activities were further changed by changes in working capital accounts related, of $12,501.

Cash Flows from Investing Activities

For the three months ended December 31, 2014, net cash flows provided by investing activities was $(2,805) due to purchases of property, plant and equipment at our Hydra subsidiary.

Cash Flows from Financing Activities

We have financed our operations primarily from debt or the issuance of equity instruments. For thethree months ended December 31, 2014, net cash flows provided from financing activities was $75,000 from the issuance of notes.

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 $800,000 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

Please see Note 8 above for a discussion of our outstanding indebtedness.

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 December 31, 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

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 book value of 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 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. During the three months ended December 31, 2014, there were no payments of this kind.

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.

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, 2014, as filed with the SEC on January 21, 2015.

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.

None.

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: February 10, 2015	By:	/s/ Frank Neukomm
		Name: Frank Neukomm
		Title: Chief Executive Officer (Principal Executive Officer)

Hydrogen Future Corp - FORM 10-Q - February 10, 2015

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Hydrogen Future Corp Reports