U.S. SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


FORM 10-K




(Mark One)


x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For Fiscal Year Ended: December 31, 2009




OR




TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the transition period from _______________ to _______________




Commission file number:  000-52601




Flex Fuels Energy, Inc.(Exact name of registrant as specified in its charter)Nevada

20-5242826(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)3rd Floor, 14 South Molton Street, London, UK

W1K 5QP(Address of principal executive offices)

(Postal Code)




Issuer's telephone number:  +44 (0) 8445 861910




Securities registered under Section 12(b) of the Act:  None




Securities registered under Section 12(g) of the Act:  Common Stock, par value $0.001 par value




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o    No x




Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.


Yes o   No x




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 o    No o




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 past 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 x    No o




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. o




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of the “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.   (Check one):




Large Accelerated Filer o                                                     Accelerated Filer o




Non-Accelerated Filer o                                                     Smaller reporting company x


(Do not check if a smaller reporting company)




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




As of June 30, 2009, there were 52,391,305 shares of the registrant's common stock, par value $0.001, issued and outstanding.  Of these, 51,641,923 shares were held by non-affiliates of the registrant.  The market value of securities held by non-affiliates was approximately $1,549,258 based on the closing price of $0.03 for the registrant’s common stock on June 30, 2009.




DOCUMENTS INCORPORATED BY REFERENCE


If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated:  (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933, as amended (“Securities Act”).




Not Applicable.






1




Item Number and Caption
PageFORWARD-LOOKING STATEMENTS
3PART I

4ITEM 1.
BUSINESS
4
 ITEM 1A.
RISK FACTORS
13ITEM 1B.
UNRESOLVED STAFF COMMENTS
20ITEM 2.
PROPERTIES
20ITEM 3.
LEGAL PROCEEDINGS
20
 ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
22PART II

22ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
22ITEM 6.
SELECTED FINANCIAL DATA
24ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
24ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
34ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
34ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
34ITEM 9A.[T]
CONTROLS AND PROCEDURES
34ITEM 9B.
OTHER INFORMATION
35PART III
35ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
35ITEM 11.
EXECUTIVE COMPENSATION
40ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
41ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
42ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
42PART IV
43ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
43





2




FORWARD-LOOKING STATEMENTS




Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses.  Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language.  Our actual results may differ significantly from those projected in the forward-looking statements.  You should carefully review the risks described in this Annual Report and in other documents we file from time to time with the Securities and Exchange Commission.  You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report.  We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.




Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.




Factors that might cause or contribute to such differences include, but are not limited to, those discussed below and in the sections “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”




Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:




1.
Our ability to successfully attract and retain management and other key employees;


2.
Our ability to successfully engage in mineral exploration activities;


3.
Our ability to successfully complete development of and market our currency risk mitigation product;


4.
The intensity of competition;


5.
Our ability to raise additional capital if, as, and when needed on acceptable terms; and


6.
General economic conditions that affect our industry or the global environment in which we operate.




All references in this Form 10-K to the “Company,” “Flex Fuels,” “we,” “us” or “our” are to Flex Fuels Energy, Inc. and unless otherwise differentiated, its subsidiaries, Flex Fuels Energy Limited, WDX Organisation Limited and Bio AMD Holdings Limited.


3


PART I






ITEM 1.BUSINESS




Organizational History




We were incorporated in the State of Nevada on March 10, 2006, to engage in the business of exploration and discovery of gold, minerals, mineral deposits and reserves. Flex Fuels has staked two mineral claims containing 33 cell claim units totaling approximately 683 hectares. Throughout this Annual Report, we refer to these mining claims as the “Malibu Gold Mine Property” or the “Malibu Gold Property”. Flex Fuels purchased the Malibu Gold Property in March of 2006. The Malibu Gold Property is located approximately 110 km northwest of Vancouver, British Columbia, and 75 km north of Sechelt, BC. The property is situated on the south side of Queen’s Reach on upper Jervis Inlet, at the entrance to Princess Louisa Inlet. Access to the property is available via plane from Vancouver or Sechelt, or by boat from Egmont or Pender Harbor on the Sechelt Peninsula.




During the fourth quarter of 2006, we acquired a 15% interest in Flex Fuels Energy Limited (“FFE Ltd”). In May 2007 we completed the acquisition of the remaining 85% of FFE Ltd, making FFE Ltd a wholly owned subsidiary of ours.  FFE Ltd, a development stage company, was formed on November 26, 2006 under the laws of England and Wales to engage in the business of manufacturing and distributing oil seed rape (“OSR”) products.  In addition, it had been anticipated that FFE Ltd would also construct an associated biodiesel production facility with an associated Combined Heat and Power plant.  As more fully discussed in “Item 1. Business – Business Overview – FFE Ltd”, effective June 5, 2009, we determined to abandon FFE Ltd’s proposed oil seed business and related projects as we no longer considered the business to be economically viable on either a go alone or partnered basis.




On May 1, 2009 we acquired stock of WDX Organisation Limited, a corporation incorporated under the laws of England and Wales (“WDX”) representing a 51% interest in the company. Since such time, we have acquired additional stock of WDX and as of December 31, 2009 owned 75.66% of WDX making it a subsidiary of ours. WDX is the developer of a technology designed to mitigate currency risk. See “Item 1. Business – Business Overview – WDX Currency Risk Mitigating Business”.




In May of 2007, Flex Fuels authorized and affected a dividend in the form of common stock, whereby each stockholder of record of Flex Fuels as of the end of the business day on May 21, 2007, received five shares of common stock, in exchange for one share of existing common stock held.




In November of 2006, Flex Fuels filed a Form 211 application with the NASD in order to obtain its approval for the listing and quotation of Flex Fuels common stock on the Over-The-Counter Bulletin Board (the “OTCBB”). In May of 2007, the NASD assigned a symbol of “MLBU.OB” to Flex Fuels (formerly named Malibu Minerals, Inc) common stock. Following the renaming of the Company as Flex Fuels Energy, Inc. and since July 16, 2007, Flex Fuels shares have been quoted on the OTCBB under the symbol “FXFL.OB”.




Our fiscal year end is December 31.




4




Business Overview




During the financial year ended December 31, 2009, we were engaged in two planned sectors:




·
developing our currency risk mitigation business; and




·
the exploration and discovery of gold, minerals, mineral deposits and reserves through our Malibu Gold operation.




Although we maintained considerable cash balances throughout fiscal year ended December 31, 2009, we have incurred operating losses since our inception and have generated no revenues. As a result, we have generated negative cash flow and had an accumulated deficit of $36,023,459 as of December 31, 2009.




Our Strategy




Since July 2009 our business strategy has been to enter high growth potential projects with a low risk profile in the technology space. At the same time, we expect to continue to develop our existing assets, including WDX’s product, the WOCU, with a view to divesting or significantly reducing control as the opportunity arises in order to realize potential value build.  This may necessitate the injection of further limited funds from our available cash balances prior to realization.




Operations




Bio-Alternative Medical Devices




On February 25, 2010, we entered into a Subscription and Shareholders Agreement with Bio AMD Holdings Limited (“Bio-AMD”), a UK limited company, and the managers of Bio-AMD, under which we acquired 63% of the fully diluted equity in Bio-AMD for £865,000 GBP (approximately US$1,286,775). The purchase price is to be applied to the development of the Bio-AMD business.




In line with our diversification plan, Bio-AMD is intended to form the main focus of our operations going forward. The Bio-AMD core, which may be further expanded, is expected to enable us to optimally apply our capital in an established, high growth sector and significantly reduce our risk profile.




Bio-AMD is a medical technology company in the rapidly expanding Point Of Care (“POC”) diagnostic space. Bio-AMD owns several patents and patent applications on technologies expected to be developed by Bio-AMD into low cost hand-held electronic diagnostic devices able to read third party assays. Bio-AMD expects to license these technologies and devices to international manufacturers and distributors.




Initial technologies slated for development by Bio-AMD include:




·
A low manufacturing cost, qualitatively advanced, digital read-out home pregnancy test;




·
A POC prothrombin time monitor using low cost and user-friendly technology to enable patient based, anticoagulant drug therapy monitoring;




·
A Digital Strip Reader (“DSR”) able to perform POC rapid assay tests at a low cost in the cardiac treatment monitoring market; and




·
A highly accurate Magnetic Particle Reader (“MPR”), able to perform POC tests for multiple indications at a low cost.




POC devices offer rapid near patient diagnostic testing, reducing costs and improving clinical outcomes.  The POC market is growing rapidly.  There is clear demand for rapid, intuitive and easy to use, robust handheld technologies at an effective cost.  POC testing accounts for an estimated 33.33% of the US$30 billion global in-vitro diagnostic testing market.  Diagnostic testing accounts for a very low proportion of healthcare expenditure worldwide, yet influences around two thirds of healthcare decisions.




5


The POC market is presently estimated at $12 billion plus globally and is expanding. It is driven by patient need for improved clinical outcomes and convenience; and cost savings compared to laboratory analysis. The medical device and related biotechnology sector as a whole continues to experience strong activity despite the economic downturn, accounting for an estimated 34% of all venture capital dollars invested in 2009.  Sector merger and acquisition activity is vibrant; increasing by an estimated 154% in the third quarter of 2009 to approximately $5.6 billion. In the second quarter of 2009 and third quarter of 2009 average P/E ratios of acquired medical equipment companies were 22 and 16 respectively.  No assurance can be given at the time that Bi-AMD will successfully develop and market its proposed products.




Bio-AMD is managed by experienced personnel, expert in the development of technically advanced, low cost POC devices. Our CFO, Robert Galvin, is actively involved in the financial management of Bio-AMD and the development of the Bio-AMD business plan.




Malibu Gold Property




Property Acquisition Details




On March 27, 2006, we acquired a mineral license for the Malibu Gold Property from Mr. James Laird, a former director and stockholder, for $10,000.  Since non-Canadian individuals or companies cannot directly hold mineral licenses in British Columbia, Mr. Laird holds the license on behalf of the Company under a trust agreement entered into on November 28, 2007.  The Trust Agreement remains in force and can be transferred by Flex Fuels without any requirement to notify or obtain the further consent of Mr. Laird.




The claims are currently in good standing and are 100% beneficially owned by the Company, subject to a carried 3% Net Smelter Return Royalty if mineral production is commenced. Under BC Government Laws regarding Mineral Tenure, the property can be held in perpetuity provided that all fees are paid in a timely manner.  Annual work requirements can be fulfilled by performing approved work or by payment of cash-in-lieu. Development of the property is subject to obtaining a Work Permit for certain types of work beyond basic exploration sampling and geological studies.  More advanced programs may also require an environmental survey.




Local First Nations groups are brought into consultation at the work permit stage.  Additional government departments are also notified of the application for a Work Permit.  In general, the Work Permit process takes about 4 - 6 weeks, provided that it has been filed properly and fully.  There are no fees to obtain a Work Permit. The duration of a work program must be stated on the Permit application, and there are numerous Regulations under the Mines Act which state how the work must be carried out. Prior to major production (not bulk-sampling), the mineral deposit area proposed for production must be surveyed and a Mining Lease obtained.




Circumstances that may lead to relinquishing such rights include failure to determine profitable deposits, sale of the license and a lack of funding.




Land Status, Topography, Location, and Access




The Malibu Gold Property is located approximately 110 km northwest of Vancouver, BC, and 75 km north of Sechelt, BC. The property is situated on the south side of Queen’s Reach on upper Jervis Inlet, due south of Malibu at the entrance to Princess Louisa Inlet.




Access is by float plane from Vancouver or Sechelt, or by boat from Egmont or Pender Harbor on the Sechelt Peninsula. Several campsite locations with good water supplies can be found within a few kilometers of the property. Supplies and services are available in Egmont or Pender Harbor.




6


The topography along Jervis Inlet extents from sea level to mountain tops in excess of 2,000 meters elevation. In the vicinity of the old mining tunnels on the Malibu Gold Property, short, steep cliffs extend to tidewater, but elsewhere on the property slopes are more manageable.




The climate is typical of the west coast of British Columbia, mild and wet overall with some snowfall in the winter months. The summers are usually warm with less rainfall, and year-round work is possible on the property. Vegetation is a dense growth of coniferous forest, with cedar, fir, spruce, alder and maple trees. Ground vegetation is usually Salal and various berry bushes.









Mining Claims




The Malibu Gold Property comprises two MTO mineral claims containing 33 cell claim units totaling 683.445 hectares.




BC Tenure #

Work Due Date

Staking Date

Total Area (Ha.)525215

Jan. 12, 2014

Jan. 12, 2006

165.685592273

Sep. 30, 2011

Sept. 30, 2008

517.760




Both properties are without known reserves and the proposed program is exploratory in nature.




Geology of the Mineral Claims




The Malibu Gold Property hosts gold and base metal deposits within quartz veins and quartz-filled shear zones.  Two short tunnels (“adits”) have been driven on the mineralized areas; shear and vein-hosted gold, silver, copper, lead and zinc in the #1 adit; and a gold-quartz vein in the #2 adit.  A small amount of visible gold was seen in the #2 adit vein, which can be followed for at least 50 meters along the shoreline.  No reserves or resources have been delineated at this time.




The Upper Jervis Inlet area is underlain by a variety of Jurassic to Tertiary granitic intrusives of the Coast Plutonic Complex. The granitic rocks intrude and metamorphose Jurassic to Lower Cretaceous argillaceous sediments and andesitic to felsic volcanics of the Gambier Group. The Gambier Group hosts the 60 MT Britannia copper, zinc, lead, silver, gold deposit on Howe Sound about 80 km to the southeast.




7


The Malibu Gold Property is underlain by a relatively small stock of gabbro-diorite that has intruded dark grey, partly limey argillaceous shale and slate of the Gambier Group. Silicification and mineralization occurs on the contact and within the stock in a number of areas.




Exploration History and Previous Operations




The Malibu Gold Property has at least one adit dating prior to 1907, when the first and only mention of the working was made in a Geological Survey Report dated 1908.  GSC geologist O. E. LeRoy noted that pyrrhotite and chalcopyrite occurred along a diorite–slate contact and a 9 meter long adit had been driven on the zone.  A second 2 meter long adit nearby was not mentioned, so it may post-date LeRoy’s visit. The 9 meter adit (#1) has had significant unrecorded work since this time, and is now an estimated 25 meters in length.




There are physical work records of additional work being done on the property during the 1940’s, however  the prospector’s hand-drawn maps attached do not show exactly where the development is in relation to recognizable land features. This work apparently consisted of at least four shafts up to 6 meters deep and a 30 metre long trench.




Laird Exploration Ltd. first explored the property in 1983 as part of the BC Prospector’s Grant Program. Several assays were taken and the area was geologically mapped. Two assays from the #1 adit gave moderate values in gold, silver, copper, lead and zinc.




The #2 adit was driven 2 meters on a shallow-dipping 0.3 to 1.3 meter wide quartz vein with arsenopyrite, minor pyrite, chalcopyrite and rarely native gold.  The vein pinches and swells and can be followed for at least 50 meters along the shoreline cliffs.  The #2 adit gave a gold assay of 0.72 oz/t Au across 0.4 meters in a channel sample across the exposed quartz vein, with minor values in cobalt, copper and bismuth.




The claims were optioned by Laird Exploration Ltd. to Oriole Resources Ltd. in 1988.  A work program consisting of geological mapping, rock sampling, and a small soil geochemical survey were completed in 1988.  The #2 adit gold values were confirmed by assay and additional gold-bearing areas were located at the #1 adit.  The soil grid showed a 200 meter-long gold anomaly extending west from the #1 adit.  Additional work was recommended but no further work was been done on the property between 1988 and 2007.




In June, 2009 we conducted a further limited survey at a cost of around $15,000. In connection with the survey we took several diamond saw cut rock samples.  These samples were examined by an independent geologist, as per the National Instrument 43-101 regulations governing the Standards of Disclosure for Mineral Projects within Canada.  The independent geologist reported upon the samples and assays.  Thin-section interpretation of the mineralization was also conducted to assess the microscopic nature of the mineralization.




The survey report concluded that it has been demonstrated that gold values of interest are present on the property but little is known about the remainder of the property outside the two shoreline adits. It concluded that more evaluation and investigation is clearly justified to properly judge the overall economic attributes of the property and recommended a more extensive survey, including blasting work and, contingent on results, a diamond drilling program.




In connection with our turnaround plan and related entry into the Medical Point Of Care diagnostics sector, we are examining options for the Malibu Gold Property including a further survey, or divestment in order to realize value. No decision has been made at this time. For further information see Item 1, Business Overview




8


WDX – Currency Risk Mitigating Business




On May 1, 2009 we entered into an Investment Agreement (the “Investment Agreement”) with WDX Organisation Limited (“WDX”), and the founding shareholders of WDX (the “Founders”), the owners of all of the issued and outstanding shares of WDX.  On the same date, we entered into a related Loan Agreement (the “Loan Agreement”) and a related Option and Funding Agreement (the “Funding Agreement”) with WDX.  The Investment Agreement, Loan Agreement and Funding Agreement are hereinafter collectively referred to as the “Agreements”.




WDX is the developer of a technology designed to mitigate currency risk known as the Wocu.  The Wocu is effectively a “World Currency” quotation derived by a WDX proprietary algorithm from the currency pair market prices of the world’s twenty largest economies, weighted by International Monetary Fund Gross Domestic Product figures of individual countries and outputted in real time.




On September 10, 2009 a patent application was made to the United States Patent and Trademark Office designed to protect WDX’s computer implemented method for determining the value of a global currency unit using real time currency values and International Monetary Fund Gross Domestic Product data to weight those values.




The Wocu algorithm was completed in June 2009 and live prices are being outputted. WDX has not achieved any operating revenues to date and does not expect to achieve operating revenues until such time, if ever, that the Wocu is successfully marketed.




The Agreements provided for us to make loans to WDX in the minimum amount of approximately $225,510 and the maximum amount of approximately $902,040 and receive shares in WDX constituting a minimum of 51% and a maximum of 73% of WDX’s outstanding share capital on a fully diluted basis.  The Agreements also contained conditions which were required to be satisfied by WDX in connection with the loans.  WDX’s failure to satisfy such conditions (the “Performance Conditions”) had the potential to result in our receiving rights to acquire up to an additional 20% of WDX on a fully diluted basis, or 93% in total.




The initial loan under the Agreements in the amount of approximately $225,510 (the “Initial Loan” or the “Phase 1 Funding”) was made upon execution of the Agreements and resulted in our receipt of 5,100 WDX shares owned by the Founders.  These shares represented 51% of WDX’s fully diluted, outstanding share capital.  On August 11, 2009, we entered into a Call Option and Draw Down Agreement with WDX pursuant to which we made an additional loan in the approximate amount of $247,500 to WDX, exercised certain call options effective August 14, 2009 (the “Second Loan”) and received an additional 5,474 WDX Shares.  Following receipt of the 5,474 shares, we owned an aggregate of 10,574 WDX Shares representing approximately 68.33% of WDX’s fully diluted, outstanding share capital.  On November 20, 2009 we loaned an additional $249,840 to WDX (the “Third Loan”) and increased our equity position in WDX from 68.33% to 75.66%. On March 8, 2010, we entered into a Call Option and Draw Down Agreement with WDX pursuant to which we made an additional loan in the amount of approximately $224,055 to WDX (the “Fourth Loan”) and executed certain call options effective March 18, 2010. In connection therewith, we received an additional 49,862 WDX Shares. Following receipt of the 49,862 WDX Shares, we owned an aggregate of 65,100 WDX Shares representing 93% of WDX’s fully diluted outstanding share capital. At the time of each of the August 2009 and March 2010 loans, we gained, upon each occasion, at nominal value, an additional 10% in the equity of WDX as a result of a performance condition penalty. The Initial Loan, Second Loan, Third Loan, and Fourth Loan are evidenced by and secured by WDX debentures.  WDX applied the Initial Loan, Second Loan, Third Loan, and Fourth Loan proceeds to finance the development, marketing and sale of products and services related to the Wocu and subject to our approval, to reimburse the Founders for reasonably incurred costs related thereto.


9


The Investment Agreement contains customary confidentiality provisions and a non-compete provision.  The non-compete prohibits us and the Founders from engaging, directly or indirectly, in a trade or business which competes with WDX during the term of the Agreements and for a period of two years thereafter.




Further to our ongoing turnaround plan involved our entry into the Point of Care diagnostics sector, we expect to continue to develop the WDX opportunity, with a view to divesting or significantly reducing control as the opportunity arises in order to realize potential value build.  This may necessitate the injection of further limited funds from our available cash balances prior to realization. For further information see Item 1. 1. Business Overview – Operations.




FFE Ltd.




FFE Ltd proposed to engage in the business of manufacturing and distributing oil seed rape (“OSR”) products.  In addition, it had been anticipated that FFE Ltd would also construct an associated biodiesel production facility with an associated Combined Heat and Power plant (“CHP”). Following a change in our board of directors on December 12, 2008, we commenced a strategic review of the proposed FFE Ltd OSR processing facility (the “Project”).  The review identified potential enhancements to the Project, providing clearer definition to the OSR processing facility. A modified construction plan and scale was developed and submitted for study by FFE Ltd's preferred engineering contractor. The plan provided for reversion to the original preferred and permitted site and the construction of a co-located CHP to deliver lower energy costs and to attract potential partners.  Effective June 5, 2009, after having carefully evaluated all options, we determined to abandon our proposed OSR business as we no longer considered the business to be economically viable on either a go alone or partnered basis.  The proposed project initiated by prior management involving the establishment of an oil seed crushing plant at Cardiff by us was compromised by constant delays, sub-optimal design and substantial legal costs.  We were unable to raise the approximately $123,000,000 needed for maximum project efficiency, to locate a project partner, or to divest our interest in the project for value.  Accordingly, we determined that our best course of action was to preserve value by winding down the oil seed operations of FFE Ltd which we did on an orderly basis.  The historical operations and costs of FFE Ltd and its assets and liabilities at December 31, 2009 have been reclassified as discontinued operations.




As a consequence of the decision to wind down the operations of our main subsidiary FFE Ltd, we have reported the results of FFE Ltd as “discontinued operations” in the consolidated financial statements covered in this Annual Report for the year ended December 31, 2009.  In addition, we have reclassified the historical operations of FFE Ltd. and its assets and liabilities as discontinued operations.  As a result of the discontinuance of FFE Ltd’s operations, we have removed our accumulated other comprehensive loss-foreign currency translation adjustment related to FFE Ltd. and recognized as loss on disposal/abandonment of investment in FFE Ltd. or as a liquidation of the investment in FFE Ltd. for the year ended December 31, 2009 under the caption, loss from discontinued operations.  The effect of reporting FFE Ltd as a discontinued operation, is to effectively revert the consolidated financial statements back to those items associated with the parent company, reflecting mainly compliance related costs and movements in shareholder’s funds, and to the investment made into our new subsidiary, WDX, as described above.




Compliance with Government Regulation




We will be required to conduct all mineral exploration activities in accordance with the state and federal regulations. Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, mine safety and other matters. Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact and cause increases in capital expenditures which could result in a cessation of operations. We have had no material costs related to compliance and/or permits in recent years, and anticipate no material costs in the next year. We will not be required to obtain a permit in order to conduct Phase 2 of our proposed exploration program.




10


Employees




As of December 31, 2009 Flex Fuels Energy Inc. had no direct employees.




Our Chief Executive Officer, Thomas Barr, is engaged by way of a Supply of Services Agreement entered into on July 1, 2009. Our Chief Financial Officer, Robert Galvin, is engaged on a part-time basis by way of a Supply of Services Agreement entered into with The ARM Partnership (“ARM”), a partnership in which Robert Galvin is a partner, on July 1, 2009. Our President, David Miller, is engaged on a part-time basis by way of a Supply of Services Agreement entered into on July 1, 2009.




Further details of the Supply of Services Agreements are provided in Item 10. Directors, Executive Officers, and Corporate Governance. We anticipate that we will be conducting most of our business through agreements with consultants and third parties. To the extent that we are successful in developing our businesses we may need to hire additional employees/contractors during the fiscal year ending 2010 to handle anticipated growth.




As of December 31, 2009 WDX had four employees including a Managing Director, Operations/IT Manager, Sales Director and a Business Development Director. All WDX employees work on a full-time basis except for the Business Development Director who devotes approximately 90% of his work time to this employment. The employment agreements for the full-time employees are identical in nature and provide for the following:




·
Commencement date of May 1 2009;




·
Term of 3 months subject to automatic extensions;




·
Annual salaries of £60,000 GBP (approximately US$89,750);




·
Expense reimbursement;




·
Immediate termination by WDX for cause and similar events;




·
Termination by either party upon giving of at least 8 weeks written notice;




·
Confidentiality provisions; and




·
Covenant not to compete.




The employment agreement for the part-time employee is identical to the full-time employment agreements except that it has a commencement date of January 1st 2010 and provides for an annual salary of £54,000 (approximately US$80,773). Further, it can be terminated by either party upon at least 6 weeks prior notice.




11




2008 Management Dispute




On May 16, 2008 Mr. Laird, then a director of the Company, submitted his written resignation as a director to Mr. Brian Barrows and Mr. Tom Barr.  Therein, Mr. Laird indicated that his resignation was effective May 16, 2008.  Section 3.3 of the Company’s By-Laws provides that any director of the Company may resign by giving written notice of his resignation to the President or Secretary of the Company, that such resignation will take effect at the time specified therein, and that acceptance of such resignation is not necessary to make it effective.  On May 22, 2008, at the request of Mr. Barrows, Mr. Laird advised that he was rescinding his resignation.  Mr. Barrows unilaterally determined, over the objections of Mr. Barr, that he had the authority to effect such rescission and re-appoint Mr. Laird to the board.  From that time until the Company’s December 12, 2008 Annual Meeting of Stockholders in which the Barr Nominees were appointed to serve as the Company’s directors (see “Item 4. Submission of Matters to a Vote of Stockholders”), Messrs. Barrows and Laird took the position that the re-appointment of Mr. Laird was valid and that the board consisted of Messrs. Barrows, Laird and Barr.  On that basis, Mr. Barrows effectively took control of the management of the Company and excluded Mr. Barr from any decision making concerning the Company.  Mr. Barrows proceeded to take actions without the consent or approval of Mr. Barr including, but not limited to, (i) the October 10, 2008 removal of Robert Galvin as the Company’s Chief Financial Officer, (ii) the November 2008 execution of Indemnity Agreements with certain directors, consultants, and employees of the Company, (iii) the October 13, 2008 appointment of Mr. Paul Gothard as the Company’s Chief Financial Officer, (iv) the institution of an October 7, 2008 lawsuit in federal court in Nevada alleging claims against Mr. Barr not in the interest of the Company (v) incurring large legal costs on behalf of the Company and (vi) in December 2008, immediately prior to the Annual Meeting of Stockholders, causing the payment of  Mr. Barrows’ personal legal bill from a Company account.  Flex Fuels is presently looking into possible options for the prospective recovery of costs incurred including, but not limited to, payments made under (v) and (vi) above. To that end Flex Fuels has engaged UK litigation counsel in the expectation of taking legal action if settlement cannot be agreed between Flex Fuels and any party responsible for causing those costs.




Stock Purchase Agreements




On May 21, 2009 we entered into Stock Purchase Agreements (the “Stock Purchase Agreements”) with Iestyn Morgan, Gillian Penton and Mark Paulson (collectively the “Shareholders”) whereby we purchased an aggregate of 16,989,136 shares of our common stock (the “Shares”) from the Shareholders at a price of $0.008 per share or an aggregate of approximately $131,025.  Messrs. Morgan and Paulson are founding shareholders of Flex Fuels Energy Limited while Mrs. Penton is the wife of Jon Penton, a founding shareholder of Flex Fuels Energy Limited.  Following purchase, the Shares were retired and returned to the status of authorized but unissued.  The last closing sale price for our common stock prior to the execution of the Stock Purchase Agreements was $0.04 per share and as such the per share price to be paid by us to the Shareholders under the Stock Purchase Agreements represented a substantial discount to the market price.  We entered into the Stock Purchase Agreements to preserve share value and decrease the number of shares of our common stock issued and outstanding.  The Stock Purchase Agreements require us to indemnify the Shareholders against all claims, liabilities and assessments, if any, against the Shareholders for additional capital gains tax imposed by HM Revenue and Customs (“HMRC”) based upon a determination by HMRC that the shares shall be deemed for tax purposes to have been sold for a purchase price in excess of $0.008 per share. In such instance, the indemnification will not cover the capital gains tax due with respect to the first $0.008 of the deemed sales price. No call has been made in respect of these indemnities as at the financial year ended December 31, 2009.




On October 9, 2009 we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with JTC Trustees Limited As Trustee of the LOGO Investment Trust (the “Shareholder”) whereby we purchased 7,865,341 shares of our common stock (the “Shares”) from the Shareholder at a price of $0.008 per share or an aggregate of approximately $62,923.  The Shares were beneficially owned by Gordon Ewart, a founding shareholder of Flex Fuels Energy Limited.  The purchase of the Shares took take place on October 9, 2009.  Following purchase, the Shares were retired and returned to the status of authorized but unissued.  The last closing sale price for our common stock prior to the execution of the Stock Purchase Agreement was $0.05 per share and as such the per share price paid by us to the Shareholder under the Stock Purchase Agreement represented a substantial discount to the market price.  We entered into the Stock Purchase Agreement to preserve share value and decrease the number of shares of our common stock issued and outstanding.  The Stock Purchase Agreement requires us to indemnify the Shareholder against all claims, liabilities and assessments, if any, against the Shareholder for additional capital gains tax imposed by HM Revenue and Customs (“HMRC”) based upon a determination by HMRC that the shares shall be deemed for tax purposes to have been sold for a purchase price in excess of $0.008 per share.  In such instance, the indemnification will not cover the capital gains tax due with respect to the first $0.008 of the deemed sales price.  In connection with the execution of the Stock Purchase Agreement, we also executed mutual releases with the Shareholder. No call has been made in respect of this indemnity as at the financial year ended December 31, 2009.




12


Reports to Security Holders




We file annual, quarterly, current and special reports and other information with the Securities and Exchange Commission. You may read and obtain copy of any reports, statement or other information that we file with the Commission at the Commission's public reference room at 100 F Street, N.E., Washington, D.C. 20549.  Please call the Commission at (202) 551-8090 for further information on the public reference room. These Commission filings are also available to the public from commercial document retrieval services and at the Internet site maintained by the Commission at http://www.sec.gov.




In addition our filings can be viewed on the “investor” section of the Company’s Internet site at www.flexfuelsenergy.com.




ITEM 1A.RISK FACTORS




You should carefully consider the risks described below as well as other information provided to you in this Annual Report, including information in the section of this Annual Report entitled "Information Regarding Forward Looking Statements."  The risks and uncertainties described below are not the only ones we face.  Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business operations.  If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, and you may lose all or part of your investment.




RISKS RELATED TO OUR FINANCIAL RESULTS




We have incurred losses since our incorporation, have yet to achieve profitable operations and anticipate that we will continue to incur losses for the foreseeable future.




For our 2009 fiscal year, we incurred operating loss of $1,792,228.  We have generated no revenues to date.  We plan to increase our expenses associated with exploitation of mineral claims and with the development of our currency risk mitigation business.  There is no assurance we will be able to derive revenues from the exploitation of our mineral claims or currency risk mitigation business to successfully achieve positive cash flow or that our mineral exploitation business or currency risk mitigation business will be successful.  If we achieve profitability, we may be unable to sustain or increase profits on a quarterly or annual basis to generate revenues in the future.




We believe that long-term profitability and growth will depend on our ability to:




·
commercially exploit the mineral deposits or reserves located on the Malibu Gold Property;




·
identify and commercially exploit gold and other mineralized deposits through development, mining, production or sale; and




·
develop and integrate our currency risk mitigation business; or




·
engage in any alternative business.




13


Inability to successfully execute on any of the above, among other factors, could have a material adverse effect on our business, financial results or operations.




Because we have a limited operating history, have yet to attain profitable operations and will need additional financing to fund our businesses, there is doubt about our ability to continue as a going concern.




The consolidated financial statements for the year ended December 31, 2009 have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We have accumulated a loss to date and have relied on raising funds through private placements. From inception (March 10, 2006) to December 31, 2009 we raised approximately $18,977,000, net of placement costs and at December 31, 2009 held $6,771,218 in cash. Our consolidated financial statements do not include any adjustments that might result from this uncertainty.


As shown in the accompanying consolidated financial statements, we have incurred a net loss of approximately $36,023,459 for the period from March 10, 2006 (date of inception) to December 31, 2009 and have not generated any revenues. The future of our Company is dependent upon our ability to obtain financing, upon the future success of our planned businesses and upon profitable operations from the development of acquisitions. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.




If we engage in acquisition activities, we may require additional financing to fund our operations.  We will seek such additional funds through private placements of our equity or debt securities or through loans from financial institutions, our directors or our stockholders.  Currently, we do not have any arrangements in place for additional funding.  There can be no assurance that we will be able to raise additional funds, if needed, on terms acceptable to us. If we do not obtain additional financing, when required, our business may fail.




Obtaining additional financing is subject to a number of factors, including investor acceptance of the value of our mineral claims and our currency risk mitigation business.  These factors may adversely affect the timing, amount, terms, or conditions of any financing that we may obtain or make any additional financing unavailable to us.




To date, our sources of cash have been primarily limited to the sale of our equity securities.  We cannot be certain that additional funding via this means will be available on acceptable terms if at all.  To the extent that we are able to raise additional funds by issuing equity securities, our existing stockholders may experience significant dilution.  Any debt financing that we may secure, if available, may involve restrictive covenants that impact our ability to conduct our business.  If we are unable to raise additional capital, when required, or on acceptable terms, we may have to delay or scale back significantly or discontinue our planned exploration and development projects.  Inability to obtain these or other sources of capital could have a material adverse effect on our business, financial results or operations.




14


RISKS RELATED TO OUR MANAGEMENT AND CORPORATE GOVERNANCE




We have no independent directors, which poses a significant risk for us from a corporate governance perspective.




Our three executive officers, namely Mr. Thomas Barr, our chief executive officer; Mr. Robert Galvin, our chief financial officer, treasurer and secretary; and Mr. David Miller, our president, also serve as our three directors.  Our directors and executive officers are required to make interested party decisions, such as the approval of related party transactions, their level of compensation, and oversight of our accounting function.  Our directors and executive officers also exercise control over all matters requiring stockholder approval, including the nomination of directors and the approval of significant corporate transactions. We have chosen not to implement various corporate governance measures, the absence of which may cause stockholders to have more limited protections against transactions implemented by our board of directors, conflicts of interest and similar matters.  Stockholders should bear in mind our current lack of corporate governance measures in formulating their investment decisions.




We may find it difficult to attract senior management in the absence of Directors and Officers Insurance, which may not be economically obtainable.




As discussed in Item 3, hereof, we are involved in legal proceedings. The Nevada Legal proceedings are effectively over but these legal proceedings may make it difficult for us to obtain Directors and Officers Insurance at commercially reasonable rates, if at all. This may deter or preclude persons from joining our management, or cause them to demand additional compensation to join our management.




If we seek to recover costs incurred by previous management in the UK courts it may put a further strain on our limited human resources and may cause us to incur further costs.




We may seek to recover the considerable costs incurred by previous management in resisting stockholder calls for board elections prior to the Annual Meeting of Stockholders held on December 12, 2008 in the UK courts. This may involve distraction of management time and further legal expense prior to any prospective recovery.




We will need to increase our size, and may experience difficulties in managing growth.




Flex Fuels Energy, Inc. is a smaller reporting company with no direct employees as of December 31, 2009. WDX had four employees as at December 31, 2009. We hope to experience a period of expansion in headcount, facilities, infrastructure and overhead to develop our prospective currency risk mitigation and point of care diagnostic businesses and to address potential growth and market opportunities.  Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional independent contractors and managers. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future growth effectively.  Inability to manage future growth could have a material adverse effect on our business, financial results or operations.




Our business is headquartered in the United Kingdom and none of our directors are resident in the United States; accordingly, it may be difficult to enforce any liabilities against them.




If an event occurs that gives rise to any liability on the part of our officers and directors who are not resident in the United States, including liabilities arising under the US securities laws, stockholders would likely have difficulty in enforcing such liabilities.  Stockholders may not be able to obtain jurisdiction in the United States over such non-resident officers and directors, and any judgment obtained against such persons in the United States may not be recognized or enforceable in the foreign jurisdiction where such person's assets are located.




15


RISKS RELATING TO OUR MINING BUSINESS




If we do not conduct mineral exploration on our mineral claims and keep the claims in good standing, then our right to the see mineral claims will lapse and we may lose the entire value of our investment.




We must complete mineral exploration work on our mineral claims and keep the claims in good standing.  If we do not fulfill our work commitment requirements on our claims or keep the claims in good standing, then our right to the claims will lapse and we will lose all interest that we have in these mineral claims.  Loss of these interests could have a material adverse effect on our business, financial results or operations.




The imprecision of mineral deposit estimates may cause any resource calculations that we make to be unreliable.




Mineral deposit estimates and related databases are expressions of judgment based on knowledge, mining experience, and analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. By their nature, mineral deposit estimates are imprecise and depend upon statistical inferences, which may ultimately prove unreliable. Mineral deposit estimates included here, if any, have not been adjusted in consideration of these risks and, therefore, no assurances can be given that any mineral deposit estimate will ultimately be reclassified as reserves.




We are sensitive to fluctuations and volatility in the price of gold and other minerals, which are beyond our control.




The prices for gold and other metals fluctuate and are affected by numerous factors beyond our control. Factors that affect the price of gold and other metals include consumer demand, economic conditions, over supply from secondary sources and costs of production. Price volatility and downward price pressure, which can lead to lower prices, could have a material adverse effect on the costs and viability of our projects, which could in turn have a material adverse effect on our business, financial condition or results of operations.




Mineral exploration and prospecting is a highly competitive and speculative business and we may not be successful in seeking or executing on available opportunities.




The process of mineral exploration and prospecting is a highly competitive and speculative business. In seeking available opportunities, we will compete with a number of other companies, including established, multi-national companies that have more experience and financial and human resources than us. Because we may not have the financial and managerial resources to compete with other companies, we may not be successful in our efforts to acquire new projects.




Compliance with environmental considerations and permitting could have a material adverse effect on the viability costs of our projects.  The historical trend towards stricter environmental regulation may continue and, as such, represent an unknown factor in our planning processes.




All mining in Canada is regulated by government agencies at the federal and provincial levels in that country. Compliance with such regulation could have a material effect on the economics of our operations and the timing of project development. Our primary regulatory costs will be related to obtaining licenses and permits from government agencies before the commencement of mining activities. An environmental impact study that must be obtained on each property, in order to obtain governmental approval to mine on the properties, is also a part of the overall operating costs of a milling company.




The gold and mineral mining business is subject not only to worker health and safety, and environmental risks associated with all mining businesses, but is also subject to additional risks uniquely associated with gold and other minerals mining. Although we believe that our operations will be in compliance, in all material respects, with all relevant permits, licenses and regulations involving worker health and safety, as well as the environment, the historical trend toward stricter environmental regulation may continue. The possibility of more stringent regulations exists in the areas of worker health and safety, the dispositions of wastes, the decommissioning and reclamation of mining and milling sites and other environmental matters, each of which could have an adverse material effect on the viability costs of a particular project.




16


Mining and exploration activities are subject to extensive regulation by federal and provincial governments in Canada.  Future changes in governments, regulations and policies could adversely affect our results of operations for a particular period and our long-term business prospects.




Mining and exploration activities are subject to extensive regulation by federal and provincial governments in Canada. Such regulation relates to production, development, exploration, exports, taxes and royalties, labor standards, occupational health, waste disposal, protection and remediation of the environment, mine and mill reclamation, mine and mill safety, toxic substances and other matters. Compliance with such laws and regulations has increased the costs of exploring, drilling, developing, constructing, operating mines and other facilities. Furthermore, future changes in governments, regulations and policies, could adversely affect our results of operations in a particular period and our long-term business prospects.




The development of mines and related facilities is contingent upon governmental approvals, which are complex and time consuming to obtain and which, depending upon the location of the project, involve various governmental agencies. The duration and success of such approvals are subject to many variables outside of our control.




RISKS RELATED TO THE WDX BUSINESS




WDX is a start up business. No assurance can be given that WDX can successfully achieve demand for the Wocu and achieve profitability.




There is no certainty that the Wocu will achieve market acceptance or that WDX will achieve profitability.  Commercial relationships have to be developed with senior market participants to deliver WDX products to market which cannot be guaranteed to be consummated in a timely fashion, if at all.




WDX’s lack of product diversity subjects it to substantial risk.




Presently, the sole product of WDX is the Wocu. This lack of product diversity subjects WDX to substantial market risk.




No assurance can be given that WDX can adequately protect its proprietary product.




The algorithmic technology owned by WDX is subject to a U.S. patent application by WDX. There is no certainty that this patent application will be granted as a full patent or, if granted, will be sufficient to protect the Wocu, either in the U.S. or any other jurisdiction. If a patent infringement occurred, WDX would have to apply funds to assert its rights, if any, and there is no certainty that sufficient funding would be available to do so.




Our prospective business may suffer if we are unable to attract or retain talented personnel.




Our success will depend in large measure on the abilities, expertise, judgment, discretion, integrity and good faith of our management, as well as other personnel.  We have a small management team, and the loss of a key individual or our inability to attract suitably qualified replacements or additional staff could adversely affect our business.  Our success also depends on the ability of management to form and maintain key commercial relationships within the market place.  No assurance can be given that key personnel will continue their association or employment with us or that replacement personnel with comparable skills will be found.  If we are unable to attract and retain key personnel and additional employees, our business may be adversely affected.




17


Our business may be subject to political factors which are beyond our control.




While the Wocu product is itself apolitical, certain government bodies may not view its use positively. This may affect the support, development and acceptance of the product.




A competing product may be launched by a larger, more established competitor




A competitor may launch a similar product. Such a competitor would likely be financial institution with far greater financial support and backing, which may facilitate the sale of the product in a more timely fashion than WDX is able to achieve.




WDX relies on third parties to support product delivery




WDX is not able to support the end to end delivery of the product in-house. WDX relies on third parties for the delivery of data and pricing mechanisms and is therefore reliant on their ability to do so on an ongoing basis. Any failure on their part would disrupt product delivery and availability.




RISKS RELATING TO OUR COMMON STOCK




We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.




We have periodically offered and sold our common stock to investors pursuant to certain exemptions from the registration requirements of the Securities Act, as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is, the applicability of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making the offering. While we believe that such exemptions were applicable to offers and sales of our common stock, we have not received a legal opinion to the effect that any of our prior offerings were exempt from registration under any federal or state law. Instead, we have relied upon the operative facts as the basis for such exemptions, including information provided by investors themselves.




If any prior offering did not qualify for such exemption, an investor would have the right to rescind its purchase of the securities if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A similar situation prevails under state law in those states where the securities may be offered without registration in reliance on the partial pre-emption from the registration or qualification provisions of such state statutes under the National Securities Markets Improvement Act of 1996.  If investors were successful in seeking rescission, we would face severe financial demands that could adversely affect our business and operations.  Additionally, if we did not in fact qualify for the exemptions upon which we have relied, we may become subject to significant fines and penalties imposed by the SEC and state securities agencies.




18


We may need additional capital that will dilute the ownership interest of investors.




We may require additional capital to fund our future business operations. If we raise additional funds through the issuance of equity, equity-related or convertible debt securities, these securities may have rights, preferences or privileges senior to those of the rights of holders of our common stock, who may experience dilution of their ownership interest of our common stock. We cannot predict whether additional financing will be available to us on favorable terms when required, or at all. Since our inception, we have experienced negative cash flow from operations and expect to experience significant negative cash flow from operations in the future. The issuance of additional common Stock by our management may have the effect of further diluting the proportionate equity interest and voting power of holders of our common stock.




Our common stock is listed on the OTC-Bulletin Board (Ticker: FXFL.OB) and our shares may qualify as a penny stock and, as such, we are subject to the risks associated with "penny stocks".  Regulations relating to "penny stocks" limit the ability of our stockholders to sell their shares and, as a result, our stockholders may have to hold their shares indefinitely.




Our common stock may be deemed to be "penny stock" as that term is defined in Regulation Section 240.3a51-1 of the Securities and Exchange Commission. Penny stocks are stocks: (a) with a price of less than U.S. $5.00 per share; (b) that are not traded on a "recognized" national exchange; (c) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ - where listed stocks must still meet requirement (a) above); or (d) in issuers with net tangible assets of less than U.S. $2,000,000 (if the issuer has been in continuous operation for at least three years) or U.S. $5,000,000 (if in continuous operation for less than three years), or with average revenues of less than U.S. $6,000,000 for the last three years.




Section 15(g) of the United States Securities Exchange Act of 1934 and Regulation 240.15g(c)2 of the Securities and Exchange Commission require broker dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account. Potential investors in our Common Stock are urged to obtain and read such disclosure carefully before purchasing any common shares that are deemed to be "penny stock".




Moreover, Regulation 240.15g-9 of the Securities and Exchange Commission requires broker dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker dealer to: (a) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (b) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (c) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (d) receive a signed and dated copy of such statement from the investor confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in our common stock to resell their shares to third parties or to otherwise dispose of them. Stockholders should be aware that, according to Securities and Exchange Commission Release No. 34-29093, dated April 17, 1991, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:




(i)
control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;




(ii)
manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;




(iii)
boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons;




(iv)
excessive and undisclosed bid-ask differential and mark-ups by selling broker-dealers; and




(v)
the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.




Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.




19




ITEM 1B.UNRESOLVED STAFF COMMENTS




Not Applicable.




ITEM 2.PROPERTIES




Principal Executive Offices




Our principal executive offices are located at 14 South Molton Street, London, UK W1K 5QP. This office, which we utilize for certain administrative needs, is currently provided on an informal rent free basis by an executive officer. During fiscal year ending 2010, it is anticipated that a more formal agreement will be entered into for use of the office space. We do not own any real estate.




Malibu Gold Property




For a description of Malibu Gold Property and our mineral properties, see “Description of Business.”




ITEM 3.LEGAL PROCEEDINGS




Legal Proceedings




State Court Actions




On July 24, 2008, Mr. Thomas Barr commenced an action (Case no. A568118) in the District Court of Clark County, Nevada (the “Court”) against our then CEO and Chairman of the Board, Mr. Brian Barrows, and a former director, Mr. James Laird ("Laird"), seeking declaratory and injunctive relief preventing Messrs. Barrows and Laird from taking actions Mr. Barr believed would be detrimental to the Company, including their taking control of the management of the Company. Mr. Barr's court action sought to preclude Mr. Laird, who had resigned as a director on May 16, 2008 from participating in any future meetings of the Board and to prevent Mr. Barr from being disciplined or otherwise punished for his filing on July 15, 2008, with the SEC, a current report on Form 8-K on behalf of the Company.  On the same date, Mr. Barr filed a motion for a Temporary Restraining Order and Preliminary Injunction seeking such relief on a temporary and preliminary basis pending a trial on the merits of the case.




On July 28, 2008, the Court issued a temporary restraining order granting the relief sought by Mr. Barr and setting a non-evidentiary preliminary injunction hearing on the matter for August 11, 2008.  On August 1, 2008, Mr. Barr filed an amended complaint in this action to add the Company as a defendant.  On August 11, 2008, the Court held the non-evidentiary hearing, at which the Motion to Quash filed by Messrs. Barrows and Laird was denied and a Preliminary Injunction Hearing date was set for August 19, 2008.  On August 25, 2008, the parties executed a Stipulation and Order in which the parties stipulated to continue the Preliminary Injunction Hearing and to hold a shareholders’ meeting as soon as possible with respect to the election of directors.  A shareholders’ meeting was held on December 12, 2008 at which a slate of directors consisting of Mr. Barr, Mr. John Nangle and Mr. David Miller were elected. On January 25, 2010,Mr. Barr filed a Motion to Dismiss the Company from the case which was granted on March 1, 2010.




On July 21, 2009 we commenced an action (Case No. A-09-595448-C) in the Court against our former corporate counsel, Mayer Brown, LLP, claiming relief for general and special damages in excess of $10,000 on each count of Professional Negligence, Breach of Fiduciary Duty and Breach of Contract, costs of the suit incurred including reasonable attorneys fees and such other relief as the court deemed just and proper. The costs of the action were not expected to exceed $500,000. On October 20, 2009 the Court granted a Motion to Dismiss filed by Mayer Brown, LLP on the grounds that the forum selection clause in the Company’s contract with Mayer Brown, LLP (as entered into by prior management) determined that any dispute, including relief for Professional Negligence, Breach of Fiduciary Duty and Breach of Contract, should be conducted in the U.K. courts. Accordingly, we have instructed our U.K. solicitors and Queens Counsel to evaluate a similar action in the U.K. to claim damages and the costs of the action against Mayer Brown, LLP, the ultimate outcome of which cannot be determined at this time.




20


Federal Action




The Company, along with Mr. Barrows, filed a complaint against Mr. Barr in federal district court (“the Federal Case”) in Nevada on October 7, 2008 (Case No. 2:08-cv-01358-KLD-RJJ) seeking compensatory and punitive damages and injunctive relief for, among other things, alleged breaches of his fiduciary duties as a director to the Company and its shareholders.  On October 30, 2008 Mr. Barr filed an answer to the complaint denying all of the material allegations set forth in the complaint and asserting affirmative defenses.  Subsequent to the shareholders’ meeting held on December 12, 2008 the Company’s directors, excluding Mr. Barr who recused himself (hereinafter referred to as the “Unaffected Directors”), commenced a review of the Federal Case and the facts and circumstances giving rise to its filing.  Such review included meetings with the Company's legal advisers, compiling and reviewing correspondence between the Company and its consultants, legal advisers, accountants, proxy solicitors and other persons relating to the litigation and the matters alleged therein, and discussions with Mr. Barr and other officers and employees of the Company.  In the course of their review, the Unaffected Directors examined such other records and matters as they deemed appropriate.  The Unaffected Directors concluded, and advised the Board, that the instigation and the continuation of the Federal Case was not in the best interest of the Company or its stockholders and recommended that the Company withdraw from the Federal Case which it did on February 11, 2009. The Federal Case remained active however, as Mr. Barrows did not elect to withdraw his claims against Mr. Barr.  On May 29, 2009 Mr. Barr applied for summary judgment in the Federal Case to dismiss Mr. Barrows’ remaining claims. Mr. Barrows did not offer a defense. On June 6, 2009 Mr. Barrows’ counsel applied to be withdrawn from the Federal Action. On October 16, 2009 Summary Judgment was granted by the Court in favor of Mr. Barr against Mr. Barrows, the court having dismissed Mr. Barrows’ remaining claims on finding that Mr. Barrows had no standing to bring those claims and, in any event, Mr. Barr had not violated the Computer Fraud and Abuse Act and the Stored Communications Act, as alleged by Mr. Barrows.




Further, at the suggestion of the Unaffected Directors, on February 24, 2009, Mr. Barrows was terminated as an employee of the Company’s subsidiary, Flex Fuels Energy Ltd. and has been removed as a director of Flex Fuels Ltd. by UK company law statutory process. We believe it is unlikely that Mr. Barrows has any valid claims against Flex Fuels Energy Ltd.




From time to time we may be a defendant and plaintiff in various other legal proceedings arising in the normal course of our business. Except as disclosed above, we are currently not a party to any material legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings. In addition, we are not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Furthermore, as of the date of this Annual Report, our management is not aware of any proceedings to which any of our directors, officers, or affiliates, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has a material interest adverse to us.




21




ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




No matters were submitted to the vote of our security holders during the quarter ended December 31, 2009.




PART II






ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES




Market Information




“Bid” and ”ask” prices for our common stock have been quoted on the Over-The-Counter Bulletin Board (the “OTCBB”) under the symbol “FXFL.OB” since June 2007. Prior to June 2007 our common stock was not quoted.




The following table sets forth, for the fiscal quarters indicated, the high and low closing bid prices per share of our common stock on the OTCBB, reported by the National Association of Securities Dealers Composite Feed or other qualified interdealer quotation medium.  Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.




Quarter Ended

High Bid (1)


Low Bid (1)December 31, 2009

$
0.06


$
0.02September 30, 2009

$
0.05


$
0.02June 30, 2009

$
0.09


$
0.02March 31, 2009

$
0.16


$
0.02December 31, 2008

$
0.25


$
0.11September 30, 2008

$
0.36


$
0.15June 30, 2008

$
0.65


$
0.18March 31, 2008

$
1.05


$
0.51December 31, 2007

$
1.85


$
0.71September 30, 2007

$
2.40


$
1.76June 30, 2007

$
2.23


$
1.90





(1)
On May 21, 2007 our Board of Directors declared a stock split, distribution to be May 22, 2007, in the form of a dividend of five additional shares of our common stock for each share owned by stockholders of record at the close of business on May 21, 2007.  All high and low closing bid prices reflect the split.




As of December 31, 2009, we had 380 shareholders on record of our common stock.




Dividends




We have never declared any cash dividends with respect to our common stock.  Future payment of dividends is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, financial condition and other relevant factors.  Although there are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock, we presently intend to retain future earnings, if any, for use in our business and have no present intention to pay cash dividends on our common stock.




22


Recent Sales of Unregistered Securities




Effective October 22, 2009 we issued an aggregate of 10,100,000 warrants to members of our management and a key consultant, each exercisable, upon vesting, for the purchase of one share of our common stock for a period of seven years at an exercise price of $0.07 per share.  The warrants contain cashless exercise and piggyback registration provisions and are subject to adjustment in the event of stock splits, recapitalizations or reclassifications of our common stock.  5,800,000 of the warrants were issued to Thomas Barr; 2,000,000 to Robert Galvin; and 2,000,000 to David Miller.  Messrs. Barr, Galvin and Miller serve as our executive officers and directors.  300,000 of the warrants were issued to our outsourced financial controller.  5,200,000 of the warrants (the “Time Warrants”), including 2,900,000 issued to Thomas Barr; 1,000,000 issued to Robert Galvin; 1,000,000 issued to David Miller and 300,000 issued to our outsourced financial controller vest as follows:


(i)
25% upon issuance;




(ii)
25% on December 31, 2009;




(iii)
25% on December 31, 2010; and




(iv)
25% on December 31, 2011.




The vesting of 2,450,000 of the remaining 4,900,000 warrants is subject to our achieving an average closing price for our common stock of at least $0.45 per share over a period of twenty consecutive trading days on or prior to October 21, 2012 and the vesting of 2,450,000 of the remaining 4,900,000 warrants is subject to our achieving an average closing price for our common stock of at least $1.00 per share over a period of twenty consecutive trading days on or prior to October 21, 2012.  The 4,900,000 warrants subject to our achieving average minimum closing prices for our common stock are hereinafter referred to as the “Price Warrants”.




In the event a warrantholder ceases to be an officer, director or employee of ours during the term of the warrants for any reason, including the death of such warrantholder (a “Triggering Event”) (i) such warrantholder, or the warrantholder’s legal assigns, as the case may be, shall retain all warrants held by them, which have vested as of the date of the Triggering Event, for the remainder of the warrant term and may exercise such warrants in accordance with the terms thereof; (ii) all non-vested Time Warrants, except those vesting in the year of the Triggering Event, shall expire as of the Triggering Event; and (iii) all-non-vested Price Warrants shall expire as of the Triggering Event.  Time Warrants which are subject to vesting at the end of the year in which the Triggering Event takes place shall be retained on a proportionate basis which takes into account the number of Time Warrants vesting at year end and the number of days which have passed in the year of the Triggering Event at the time of the Triggering Event.  By way of example, a warrantholder holding 1,000,000 Time Warrants which are subject to vesting on December 31 of the year in which a Triggering Event occurs would have 250,000 of such Time Warrants be deemed vested as at the date of the Triggering Event when the Triggering Event takes place three months into such year (i.e. on April 1) and 750,000 of such Time Warrants would be deemed to have expired as of the Triggering Event.




Notwithstanding the foregoing, all of the Time Warrants and Price Warrants shall vest immediately upon a change in control of the Company.




The Time Warrants and Price Warrants were issued to incentivize the recipients thereof to remain with us and to work towards creating shareholder value.




23


Purchases of Equity Securities by the Issuer and Affiliated Purchasers




None.




Equity Compensation Plan Information




We have not adopted any stock option or other equity compensation plans since our inception other than our March 28, 2007 Employment Agreement with Paul Gothard under which we issued 65,000 shares of our common stock to Mr. Gothard in May 2008.  We have no further obligations to Mr. Gothard thereunder.




On October 22, 2009 we issued 10,100,000 warrants to members of our management and a key consultant. See Item 5. “Recent Sales of Unregistered Securities.”




ITEM 6.SELECTED FINANCIAL DATA




Not applicable.




ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The following discussion should be read in conjunction with our audited consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.




The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of various factors, including those discussed in “Risk Factors” and elsewhere in this annual report.




Results of Operations




Loss from Continuing Operations




We incurred a loss from continuing operations of $1,723,843 for the year ended December 31, 2009.  For the year ended December 31, 2008, we incurred a loss from continuing operations of $2,262,742.  The reduction in comparable loss is mainly due to the reduction in ongoing legal costs associated with the 2008 Proxy and the State and Federal Court actions as described in item 3 above. We have incurred a loss from continuing operations of $5,144,525 for the period from March 10, 2006 (date of inception) through December 31, 2009 and have not yet generated any revenues since inception that can support our operating expenses.  We anticipate that we will not generate any revenues until the fiscal year ending 2011.


Loss from Discontinued Operations




We incurred losses from discontinued operations of $5,052,602 and $1,900,695 for the years ended December 31, 2009 and 2008, respectively.  The increase in loss from discontinued operations was primarily due to translation adjustment.
  We incurred losses from discontinued operations of $31,087,938 for the period from March 10, 2006 (date of inception) through December 31, 2009 primarily due to the loss on disposal/abandonment of FFE Ltd as discontinued operations, which amounted to $27,919,531 (consisted of loss on disposal/abandonment of a) assets of $565,714, b) transaction costs incurred in connection with acquisition of FFE Ltd of $22,897,587, c) an impairment loss on capitalized plant under construction of $458,730 and d) removal of the accumulated foreign currency translation adjustments of $3,997,500 related to FFE Ltd as a result of the discontinuance of FFE Ltd’s operations and realized a loss from disposal/abandonment or liquidation of the investment in FFE Ltd).
 Net Loss
  We incurred net losses in the amounts of $6,776,445 and $4,163,437 for the years ended December 2009 and 2008 respectively.  We incurred a net loss in the amount of $36,232,463 for the period from March 10, 2006 (date of inception) through December 31, 2009.
 Revenues




We generated no revenues during the period from March 10, 2006 (date of inception) through December 31, 2009.




24


Operating loss




On June 5, 2009, the Company decided to wind down the operations of its subsidiary FFE Ltd, we have reported the historical operations and costs, and the assets and liabilities of FFE Ltd as “discontinued operations” in the consolidated financial statements covered in this Annual Report for the year ended December 31, 2009.  During fiscal year ended December 31, 2008 the majority of operating costs were recorded with FFE Ltd as this was the main focus of the Company during this period.  During the year ended December 31, 2009 the majority of operating costs were incurred by the Company following the Proxy vote to change Board composition as of December 12, 2008.  On May 1, 2009, the Company acquired a majority stake in WDX, and consolidated the full costs and expenses into its operating results.









The main components of the recorded operating loss during the fiscal years ended December 31, 2009 and 2008, and for the period from March 10, 2006 (date of inception) through December 31, 2009 were as follows:




Years ended

December 31,


For the Period from March 10, 2006

(date of inception) through

December 31,2009


2008


2009Consulting expenses (note 1)

$
392,035


$
187,512


$
630,829Payroll and administrative expenses (note 2)

$
254,098


$
58,611


$
1,098,203Legal Fees (note 3)

$
400,350


$
1,803,898


$
2,317,672Professional Fees (note 4)

$
334,650


$
231,034


$
720,659Rent, Office related, Telecoms and Travel expense (note 5)

$
106,773


$
6,488


$
115,614Warrant issuance (note 6)

$
163,550


$
0


$
163,550




(1)
Consulting expenses increased by $204,523 to $392,035 for the year ended December 31, 2009, compared to $187,512 for the year ended December 31, 2008. Consulting expenses includes consultants engaged with the management and administration of the Company.  The increase was primarily due to 1) WDX incurring consulting expense of $73,973 to assist in the set up of the subsidiary, 2) a Director replacing an existing employment agreement with a consulting services agreement on December 13, 2008, and 3) with a certain employee of FFE Ltd, who entered into a consulting service agreement with the Company on June 8, 2009.




(2)
Payroll and administrative expenses increased by $195,487 from $58,611 for the year ended December 31, 2008 to $254,098 for the year ended December 31, 2009.  The increase was primarily due to the payroll of WDX which amounted to $190,194 for the period from May 1, 2009 to December 31, 2009.




(3)
Legal fees reduced by $1,403,548 from $1,803,898 for the year ended December 31, 2008 to $400,350 for the year ended December 31, 2009.  This significant decrease was due primarily to the absence of expenses incurred related to the Proxy and State Court Actions which occurred in December 2008.




25




(4)
Professional fees increased by $103,616 from $231,034 for the year ended December 31, 2008 to $334,650 for the year ended December 31, 2009.  In January 2009, the Company decided to change its auditor, and determined that the new auditor should audit the Company’s historical results from inception, March 10, 2006 to the year ended December 31, 2008.  The additional audit work amounted to $125,158 which was incurred in the period ended December 31, 2009.




(5)
Rent, Office related, Telecoms and Travel expense was $106,773 for the year ended December 31, 2008 compared to $6,488 for the year ended December 31, 2008.  The majority of the increase of $100,285 can be attributed to costs associated with WDX  amounting to $79,223.




(6)
On October 22, 2009,  the Company issued warrants to its Directors and a key consultant to the Company.  The fair value of the warrants vested in the period ended December 31, 2009 amounted to a non-cash accounting charge of $163,550.




Net loss Attributable to the non-controlling interest
 
 Net loss attributable to the non-controlling interest amounted to $209,004 for the year ended December 31, 2009 and for the period from March 10, 2006 (date of inception) through December 31, 2009 as compared to $0 for the year ended December 31, 2008.  The net loss attributable to the non-controlling interest represented the 24.4% third party ownership of WDX's share of its net loss for the year ended December 31, 2009.




Liquidity and Capital Resources




We expect that we will need additional capital to implement our strategies.  Given the currently unsettled state of the capital markets and credit markets, there is no assurance that we will be able to raise the amount of capital that we seek for acquisitions.  Even if financing is available, it may not be on terms that are acceptable to us.  In addition, we do not have any determined sources for any future funding.  If we are unable to raise the necessary capital at the times we require such funding, we may have to materially change our business plan, including delaying implementation of aspects of our business plan or curtailing or abandoning our business plan.  The Company is a speculative investment and investors may lose all of their investment.




Since inception, we have been financed primarily by private placements. The Company raised $10,000 for shares issued for founders in 2006, $1,635,000 on December 29, 2006 net of legal fees of $20,000, $13,391,879 on May 29, 2007 net of legal fees of $1,492,000, and $3,940,189 on July 31, 2007 net of legal fees of $444,654, by way of three separate private placements of shares of common stock. The total funds raised of $18,977,068 have been used principally as follows: (a) $3,859,370 Salaries; (b) $2,533,823 Legal Fees; (c) $1,160,212 Consultancy; (d) $ 758,730 Professional Fees and (e) to fund the cost of operations.




At December 31, 2009, cash was $6,771,218 and we had other current assets of $44,334 which consisted of value added tax and other receivables, prepaid expenses and current assets of discontinued operations; at the same time we had current liabilities of $379,456, which consisted of accounts payable, accrued expenses, taxation and social security, and liabilities of discontinued operations,. We attribute our net loss to having no revenues to sustain our operating costs as we are a development stage company.   At December 31, 2008, cash was $7,382,778 and we had other current assets of $1,410,488, which consisted of prepaid expenses and current assets of discontinued operations and current liabilities of $699,412, which consisted of accounts payable, accrued expenses and liabilities of discontinued operations.


Continuing Operations:




Net Cash Used in Operating Activities




Net cash used in operating activities of continuing operations was $1,619,678 for the year ended December 31, 2009, as compared to net cash used of $1,863,140 for the year ended December 31, 2008. The decrease was primarily due to significantly reduced legal, consulting fees, professional fees and payroll and administrative expense as discussed and quantified above.  During the period from March 10, 2006 (date of inception) through December 31, 2009, we used net cash in operating activities of continuing operations of $3,761,406, which mainly was used for legal, consulting fees, professional fees and payroll and administrative expense.




Net Cash Used in Investing Activities




We have not utilized any cash in investing activities of continuing operations during the years ended December 31 2009 and 2008.  During the period from March 10 2006 (date of inception) through December 31, 2009, we used net cash in investing activities of continuing operations of $10,000, which is comprised of the purchase of mineral claim.





26




Net Cash Used by Financing Activities




During the year ended December 31, 2009, we used $193,948 in financing activities, representing the repurchase and buy back of common stock from the original Founder shareholders. No additional finance was raised during the year ended December 31, 2008.  During the period from March 10, 2006 (date of inception) through December 31, 2009, we received net cash provided by financing activities of $18,783,120 primarily from private placements of our common stock.




Discontinued Operations:




We have reclassified FFE Ltd. as discontinued operations for all periods presented in the accompanying consolidated financial statements and throughout this annual report to provide readers the information necessary to an understanding of our consolidated financial condition, changes in financial condition and results of operations.  Accordingly, we have reclassified the cash flows from discontinued operations for cash provided by (used in) operating, investing and financing activities of discontinued operations.  We used net cash from discontinued operations of $8,861,007 during the period from March 10, 2006 (date of inception) through December 31, 2009.




General


We will only commit to capital expenditures for any future projects requiring us to raise additional capital as and when adequate capital or new lines of finance are made available to us. There is no assurance that we will be able to obtain any financing or enter into any form of credit arrangement.  Although we may be offered such financing, the terms may not be acceptable to us.  If we are not able to secure financing or it is offered on unacceptable terms, then our business plan may have to be modified or curtailed or certain aspects terminated.  There is no assurance that even with financing we will be able to achieve our goals.




The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  However, our ability to continue as a going concern will be dependent upon our ability to generate sufficient cash flow from our planned operations to meet our obligations on a timely basis, to obtain additional financing, and ultimately attain profitability. The report of our independent accountants on our December 31, 2009 consolidated financial statements included an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to recurring losses. Our ability to continue as a going concern will be determined by our ability to obtain additional funding or generate sufficient revenue to cover our operating expenses. We currently have no sources of financing available and we do not expect to earn any revenues in the near term. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


27







Critical Accounting Policies and Estimates




Significant Accounting Policies




Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our consolidated financial condition and results of operations, we view certain of these policies as critical.  Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.




We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.




General




The Company’s Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles, which require management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue, if any, and expenses, and the disclosure of contingent assets and liabilities.  Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Senior management has discussed the development, selection and disclosure of these estimates with the Board of Directors.  Management believes that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates under different assumptions or conditions.




An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the consolidated financial statements. Management believes the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.




Development Stage Company




The Company is considered to be a development stage entity, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915.




28


Going Concern




The consolidated financial statements have been prepared on the going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of operations. If we were not to continue as a going concern, we would likely not be able to realize on our assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial statements. There can be no assurances that we will be successful in generating additional cash from equity or other sources to be used for operations. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.




Principles of Consolidation




The consolidated financial statements include the accounts of Flex Fuels Energy, Inc. and Flex Fuels Energy Limited (“FFE Ltd”), a wholly owned subsidiary including the FFE Ltd. Subsidiaries (consisting of four inactive companies) and WDX Organisation Ltd. (a 75.66% owned subsidiary as of December 31, 2009). All significant intercompany transactions and balances have been eliminated in consolidation. The 24.34% third party ownership of WDX at December 31, 2009 is recorded as a non-controlling interest in the consolidated financial statements.




Revenue recognition




The Company has generated no revenues to date. It is the Company’s policy that revenue from product sales or services will be recognized in accordance with ASC 605 “Revenue Recognition”. Four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product was not delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.





Stock-Based Compensation




The Company accounts for its stock based compensation under ASC 718 “Compensation – Stock Compensation” which was adopted in 2006, using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.  This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.





Impairment of Long-Lived Assets




The Company follows ASC 360, "Property, Plant and Equipment" which requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of the long-lived assets and certain identifiable intangibles will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset.  ASC 360 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less disposal costs.




29





Income Taxes




The Company utilizes ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.




Foreign Currency Translation




The Company’s reporting currency is US Dollars. Flex Fuels functional currency is US Dollars. The accounts of the Company’s wholly-owned subsidiary, FFE Ltd and of its 75.66% owned subsidiary, WDX, are maintained using the local currency (Great British Pound) as the functional currency. Monetary assets and liabilities are translated into U.S. Dollars at balance sheet date and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are deferred as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain.  Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations.




Recent accounting pronouncements




New Accounting Pronouncements Effective January 1, 2009





Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.





In March 2008, the FASB issued new accounting guidance which requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This guidance is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We adopted this guidance on January 1, 2009 and the adoption had no material effect on our consolidated financial position, results of operations or cash flows.




30


In December 2007 the FASB issued new accounting guidance which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This guidance changes the way the consolidated income statement is presented. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. This guidance establishes disclosure requirements in the consolidated financial statements, which will enable users to clearly distinguish between the interests of the parent’s owners and the interests of the non-controlling owners of a subsidiary. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008; earlier adoption is prohibited. We adopted this guidance effective on January 1, 2009 which had no material effect on our consolidated financial position, results of operations or cash flows other than changing the description and moving the presentation of net loss attributable to the non-controlling interest below the net loss of our consolidated statements of operations for the period from inception as the non-controlling interest or formerly known as minority interest ceased on May 27, 2007.





In December 2007, the FASB issued new guidance which prescribes the accounting for parties of a collaborative arrangement to present the results of activities for the party acting as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied accounting policy election. Further, the new guidance clarified the determination of whether transactions within a collaborative arrangement are part of a vendor-customer (or analogous) relationship. The new guidance is effective for collaborative arrangements that exist on January 1, 2009 and application is retrospective. We adopted the new guidance effective on January 1, 2009 and the adoption had no material effect on our consolidated financial position, results of operations or cash flows.





In June 2008, the FASB issued new accounting guidance which requires entities to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock by assessing the instrument’s contingent exercise provisions and settlement provisions. Instruments not indexed to their own stock fail to meet the scope exception of ASC 815 and should be classified as a liability and marked-to-market. The statement is effective for fiscal years beginning after December 15, 2008 and is to be applied to outstanding instruments upon adoption with the cumulative effect of the change in accounting principle recognized as an adjustment to the opening balance of retained earnings. We adopted the new guidance effective on January 1, 2009 and the adoption had no material effect on our consolidated financial position, results of operations or cash flows.





Recently Issued Accounting Standards





In January 2009, the FASB issued new accounting guidance to achieve a more consistent determination of whether an other-than-temporary impairment has occurred. The Company adopted this new guidance and it did not have a material impact on the consolidated financial statements.





In April 2009, the FASB issued new accounting guidance to be utilized in determining whether impairments in debt securities are other than temporary, and which modifies the presentation and disclosures surrounding such instruments. This guidance is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this guidance during the second quarter of 2009 had no impact on the Company’s consolidated financial position, results of operations, or cash flows.





31


In April 2009, the FASB issued new accounting which provides additional guidance in determining whether the market for a financial asset is not active and a transaction is not distressed for fair value measurement purposes. The guidance is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this guidance during the second quarter of 2009 had no impact on the Company’s consolidated financial position, results of operations, or cash flows.




In April 2009, the FASB issued new accounting guidance which requires disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. This guidance is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this guidance during the second quarter of 2009 had no impact on the Company’s consolidated financial position, results of operations, or cash flows.





In May 2009, the FASB issued new accounting guidance which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The guidance will be effective for interim and annual financial periods ending after June 15, 2009. The Company adopted the guidance during the three months ended June 30, 2009 and has evaluated subsequent events through the issuance date of these financial statements. The adoption of this guidance had no impact on the Company’s consolidated financial position, results of operations, or cash flows.





In June 2009, the FASB issued new accounting guidance which will require more information about the transfer of financial assets where companies have continuing exposure to the risks related to transferred financial assets. This guidance is effective at the start of a company’s first fiscal year beginning after November 15, 2009, or January 1, 2010 for companies reporting earnings on a calendar-year basis.





In June 2009, the FASB issued new accounting guidance which will change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. Under this guidance, determining whether a company is required to consolidate an entity will be based on, among other things, an entity's purpose and design and a company's ability to direct the activities of the entity that most significantly impact the entity's economic performance. This guidance is effective at the start of a company’s first fiscal year beginning after November 15, 2009, or January 1, 2010 for companies reporting earnings on a calendar-year basis.





In August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair Value , which provides additional guidance on how companies should measure liabilities at fair value under ASC 820. The ASU clarifies that the quoted price for an identical liability should be used. However, if such information is not available, an entity may use, the quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities traded as assets, or another valuation technique (such as the market or income approach). The ASU also indicates that the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer and indicates circumstances in which quoted prices for an identical liability or quoted price for an identical liability traded as an asset may be considered level 1 fair value measurements. This ASU is effective October 1, 2009. The adoption of this guidance during the fourth quarter of 2009 had no material impact on the Company’s consolidated results of operations or financial condition.







32


In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force , that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. ASU No. 2009-13 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.





In October 2009, the FASB issued ASU No. 2009-14, Certain Revenue Arrangements That Include Software Elements—a consensus of the FASB Emerging Issues Task Force , that reduces the types of transactions that fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be applied to an entire arrangement when the sale of any products or services containing or utilizing software when the software is considered more than incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance:  the tangible element of the product, software products bundled with tangible products where the software components and non-software components function together to deliver the product’s essential functionality, and undelivered components that relate to software that is essential to the tangible product’s functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). ASU No. 2009-14 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.





Other recent accounting pronouncements issued by the FASB and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future consolidated financial statements.





Off Balance Sheet Arrangements




None.




Contractual Obligations





Not applicable.




33


ITEM 7AQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Not applicable




ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




Our consolidated financial statements are included beginning immediately following the signature page to this report.  See Item 15 for a list of the consolidated financial statements included herein.




ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE




We have previously reported on Changes in and Disagreements with Accountants on Accounting and Financial Disclosure in our Current Report on Form 8-K dated January 13, 2009.




ITEM 9A.[T]CONTROLS AND PROCEDURES




Evaluation of Disclosure Controls and Procedures




We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure. During the quarter ended December 31, 2009 we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act. Based on this evaluation, management concluded that, as of December 31, 2009, our disclosure controls and procedures were effective.




Management's Report on Internal Control over Financial Reporting




Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.




Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (ii) provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.




34


Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009 based on the framework established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, management concluded that, as of December 31, 2009, our internal control over financial reporting was effective based on the criteria established in Internal Control—Integrated Framework.




This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management's report in this Annual Report on Form 10-K.




Limitations on Effectiveness of Controls and Procedures




Our management, including our Chief Executive Officer and Chief Financial Officer (principal financial officer), does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our control systems are designed to provide such reasonable assurance of achieving their objectives.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.




Changes in Internal Controls




During the fiscal quarter ended December 31, 2009, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.




ITEM 9B.OTHER INFORMATION




Not applicable.




PART III






ITEM 10.DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE




Executive Officers, Directors and Key Employees




Directors serve until the next annual meeting of the stockholders; until their successors are elected or appointed and qualified, or until their prior resignation or removal.  Officers serve for such terms as determined by our board of directors.  Each officer holds office until such officer’s successor is elected or appointed and qualified or until such officer’s earlier resignation or removal.  No family relationships exist between any of our present directors and officers.




35


The following table sets forth certain information, as of March 1, 2010, with respect to our directors and executive officers.




Name
Positions Held
Age
Date of Election or Appointment as DirectorThomas Barr
Chief Executive Officer and Director
50
December 2006Robert Galvin
Chief Financial Officer, Treasurer, Secretary and Director
41
June 2009David Miller
President and Director
50
December 2008




Certain biographical information of our directors and officers is set forth below.




Thomas Barr:  Mr. Barr has served as our chief executive officer since December 2008 and as a director of ours since December 2006.  He has served as a director of WDX since May 2009.  He has expertise in corporate management, corporate governance and SEC reporting matters. He has been actively involved in the development of our new corporate strategy including our WDX and Bio-AMD acquisitions. He served as our Vice President of Alternative Fuels Operations from December 2006 until December 2008.  From January 2005 to April 2007, Mr. Barr acted as a consultant to small and medium sized private and public enterprises regarding prospective funding, investor and public relations strategy, collateral creation, website development and public market quotation, including Index Oil and Gas, Inc. and Four Rivers BioEnergy Inc.  From December 2001 to December 2004, Mr. Barr served as a consultant to EasyScreen PLC, a fully listed London Stock Exchange company, at which Mr. Barr’s main duties were to draft and implement corporate statements.  While serving as a consultant to EasyScreen PLC, Mr. Barr was an integral part of the team involved in several private placement funding rounds prior to the company’s acquisition.  From January 1996 to November 2001 Mr. Barr was a private analyst and investor in publicly quoted stocks. From 1981 to 1996, Mr. Barr worked in the North Sea as a professional saturation diver involved in oil and gas field sub-sea construction. Mr. Barr obtained a BSc from Stirling University, Scotland, in 1981. Mr. Barr is a citizen of the United Kingdom.




Robert Galvin: Mr. Galvin has served as our chief financial officer, secretary and treasurer since December 2008 and as a director of ours since June 2009. He has expertise in corporate finance and accounting, mergers and acquisitions, divestitures, and capital raising. He is a founding partner in the ARM Partnership, a corporate and financial advisory firm that specializes in small cap, venture backed fast growth businesses. He is also a co-founder, shareholder and manager of Bio-AMD. From February 1996 to March 2002, he was a Director within the Arthur Andersen Corporate Finance Division, responsible for operations and supporting the development of business units globally; previously, Mr. Galvin began his career in the commercial banking division of Barclays Plc, advising and arranging advances for small and medium sized companies in the UK .  He sits on the Boards of a number of U.K. private companies and is currently Chief Accountant to Four Rivers Bioenergy Inc., a US publicly traded company on the OTC BB, employed as a consultant on a part-time basis. He has a first class honors degree BA (hons), and is an Associate of the Chartered Institute of Bankers.  Mr. Galvin is a citizen of the United Kingdom.




David S. Miller: Mr. Miller has served as our president since June 2009 and as a director of ours since December 2008. He has served as a director of WDX since May 2009.  He has expertise in corporate management, development of business plans and strategies, sales and human resources matters. He has had an active role in the development of our WDX business.  He has been providing consultancy services to a venture capital provider since January 2009. From January 2006 through December 2008 he was the Sales Development Director for DX Group Ltd., which is a provider of specialised business mail and delivery services. From September 1999 through September 2005, Mr. Miller was the Sales and Marketing Director for MailSource UK Ltd. From 1978 through 1999, Mr. Miller was employed by Barclays Bank PLC, where his positions included Head of Regional Sales, South East Region, and Regional Sales Manager, Thames Valley Region. Mr. Miller is a citizen of the United Kingdom.




36


Employment Agreements




Flex Fuels Energy Inc. has no direct employees.  All of Flex Fuel Energy Inc.’s executive officers are engaged through consulting or supply of services agreements as set forth herein.




Pursuant to a December 12, 2008 Supply of Services Agreement (the “December 2008 Agreement”) between us and Mr. Barr and a July 1, 2009 Supply of Services Agreement with Mr. Barr (the “July 2009 Agreement”) which replaced the December 2008 Agreement (collectively, the “Services Agreements”), we paid Mr. Barr an aggregate of $154,267 in salary and fees during 2009 for services provided in all capacities.  Under the July 2009 Agreement, which has a term of 12 months, Mr. Barr serves as our Chief Executive Officer and a Director.  Under the July 2009 Agreement, Mr. Barr devotes a maximum average of up to five days per week to the performance of the services reasonably required by his positions.  In the event we require the services of Mr. Barr for more than five days per week, we may, at our discretion, pay Mr. Barr for the additional days worked (the “Additional Time Payments”). The July 2009 Agreement is subject to automatic extensions for additional 12 month periods unless either party gives written notice of termination to the other at least 6 months prior to the proposed expiration date.  We pay Mr. Barr a base monthly fee under the July 2009 Agreement of £7,916 (approximately $11,500) and reimburse Mr. Barr for his reasonable business expenses incurred in the performance of his duties.  The base monthly fee includes an amount of £975 (approximately $1,600) for Board related duties.  The July 2009 Agreement also provides for the potential payment of additional compensation to Mr. Barr in the form of warrants, bonuses and incentive fees as determined by us.  Notwithstanding the termination provisions above, we may terminate the Agreement for “Cause” effective upon the giving of written notice.  If we terminate the Agreement without “Cause” we must pay Mr. Barr, in addition to all fees, unreimbursed expenses and Additional Time Payments due him at the termination date, the base monthly fees due to him through the expiration date in effect immediately prior to such termination.  The July 2009 Agreement contains standard confidentiality provisions.  The Agreement also contains a non-compete provision which prohibits Mr. Barr, without our written consent, during the term of the Agreement and for a period of one year thereafter, from owning a material interest in, managing, operating, joining, controlling, lending money or rendering financial or other assistance to or participating in or being connected with, as an employee, contractor, stockholder, consultant or otherwise, any person or entity that competes with us in owning, operating or managing an oilseed crush or biodiesel plant located in England or Wales, or any other business actively being pursued by us or developed by us during the term of the Agreement.




Effective December 12, 2008 we entered into a Consulting Agreement (the “December 2008 Consulting Agreement”) with The ARM Partnership (“ARM”), a partnership in which Robert Galvin, our Chief Financial Officer, Treasurer and Secretary is a partner.  Effective July 1, 2009 we terminated the December 2008 Consulting Agreement and entered into a 12 month Supply of Services Agreement (the “ARM Services Agreement”) with ARM.  Thereunder, we receive the services of Mr. Galvin for an average of not more than 1.5 days per week.  Mr. Galvin’s responsibilities under the ARM Services Agreement include oversight of our finance and internal control functions, review of our SEC filings, advising us on SEC regulatory matters, support with capital raisings and mergers and acquisitions and equivalent services.  The ARM Services Agreement may be terminated by us for “Cause” or by us or ARM without “Cause”.  Termination without “Cause” requires a minimum of 90 days prior written notice.  Under the ARM Services Agreement, we pay the ARM a base monthly fee of £4,200 (approximately $6,820).  The base monthly fee includes an amount of £975 (approximately $1,600) for Board related duties.  In the event we require the services of Mr. Galvin for an average of more than 1.5 days per week, we may, at our discretion, pay ARM for the additional days worked (the “Additional Time Payments”).  The ARM Services Agreement renews automatically for additional 12 month periods unless either party gives written notice to the other at least 6 months prior to the existing expiration date. The ARM Services Agreement provides for expense reimbursement and the potential payment of additional compensation in the form of warrants, bonuses, and incentive fees as determined by us. If we terminate the ARM Services Agreement without “Cause” we must pay ARM, in addition to all fees and unreimbursed expenses and Additional Time Payments due to ARM on the termination date, the base monthly fees due to ARM through the expiration date in effect immediately prior to such termination. The ARM Services Agreement contains standard confidentiality provisions. The ARM Services Agreement also contains a non-compete provision which prohibits ARM, without our written consent, during the term of the ARM Services Agreement and for a period of one year thereafter, from owning a material interest in, managing, operating, joining, controlling, lending money or rendering financial or other assistance to or participating in or being connected with, as an employee, contractor, stockholder, consultant or otherwise, any person or entity that competes with us in owning, operating or managing an oilseed crush or biodiesel plant located in England or Wales, or any other business actively being pursued by us or developed by us during the term of the ARM Services Agreement.




37


Effective July 1, 2009 we entered into a 12 month Supply of Services Agreement (the "Services Agreement") with David Miller under which Mr. Miller serves as our President and provides us with his services, in all capacities, for an average of up to 3 days per week. We pay Mr. Miller a base monthly fee under the Services Agreement of £5,141 (approximately $8,348) per month.  The base monthly fee includes an amount of £975 (approximately $1,600) for Board related duties.  In the event that the performance of his duties under the Services Agreement require Mr. Miller to devote more than an average of 3 days per week to such performance, our board of directors may, in its sole discretion, pay Mr. Miller additional fees (the “Additional Time Payments”). The Services Agreement renews automatically for additional 12 month periods unless either party gives written notice to the other at least six months prior to the existing expiration date. Prior to the expiration date then in effect, we may terminate the Services Agreement upon 90 days prior written notice and Mr. Miller may terminate the Services Agreement upon 30 days prior written notice. The Services Agreement provides for expense reimbursement and the potential payment of additional compensation in the form of warrants, bonuses, and incentive fees as determined by us. Notwithstanding the termination provisions above, we may terminate the Services Agreement for "Cause" effective upon the giving of written notice. If we terminate the Services Agreement without "Cause" we must pay Mr. Miller, in addition to all fees and unreimbursed expenses and Additional Time Payments due to him on the termination date, the base monthly fees due to him through the expiration date in effect immediately prior to such termination. The Agreement contains standard confidentiality provisions. The Agreement also contains a non-compete provision which prohibits Mr. Miller, without our written consent, during the term of the Agreement and for a period of one year thereafter, from owning a material interest in, managing, operating, joining, controlling, lending money or rendering financial or other assistance to or participating in or being connected with, as an employee, contractor, stockholder, consultant or otherwise, any person or entity that competes with us in owning, operating or managing an oilseed crush or biodiesel plant located in England or Wales, or any other business actively being pursued by us or developed by us during the term of the Services Agreement.




Term of Office




Our directors are appointed for a period of one year or until such time as their replacements have been elected by our shareholders.  The officers of the Company are appointed by our board of directors and hold office until their resignation or removal.




38


Board Committees




We do not have a standing audit committee, an audit committee financial expert, or any committee or person performing a similar function. We do not have any board committees including a nominating, compensation, or executive committee.  We currently have no operating revenues.  Presently, we have no independent directors.  Management does not believe that it would be in our best interests at this time to retain independent directors to sit on an audit committee or any other committee. If we are able to grow our business and increase our operations in the future, then we will likely seek out and retain independent directors and form audit, compensation, and other applicable committees.  Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. Our three directors perform all functions that would otherwise be performed by committees.




Board of Directors and Board Compensation




All of our directors also serve as executive officers. We pay our directors a set monthly fee for attending board meetings of approximately $1,600.Our directors also receive compensation in their executive officer capacities.




Corporate Governance




Leadership Structure




Our Board has 3 members as follows: Mr. Thomas Barr, Mr. Robert Galvin and Mr. David Miller. We have not designated a Chairman and each of our directors assume equal leadership roles.




Mr. Barr has served as chief executive officer since December 2008 and as a director of ours since December 2006. Mr. Barr serves on a full time basis.




Mr. Galvin has served as chief financial officer, secretary and treasurer since December 2008 and as a director since June 2009. Mr. Galvin serves on a part time basis




Mr. Miller has served as president since June 2009 and as a director since December 2008. Mr. Miller serves on a part time basis.




We are a small, development stage Company currently implementing a turnaround strategy following the decision in June 2009 to abandon our proposed oil seed business and related projects. Our three directors also serve as our executive officers.  Our board members have complementary skills, enabling us to operate in a cost and time effective manner, closely managing our assets. Our Board regularly reviews this structure for optimum fit as our plans progress. We believe that our present management structure is appropriate for a company of our size and state of development.




Our board is actively involved in our risk oversight function and collectively undertakes risk oversight as part of our monthly management meetings. This review of our risk tolerances includes, but is not limited to, financial, legal and operational risks and other risks concerning our reputation and ethical standards.




Given our size, we do not have a Nominating Committee or a diversity policy. Our entire board monitors and assesses the need for and qualifications of additional directors.  We may adopt a diversity policy in the future in connection with our anticipated growth.




39


Compliance with Section 16(a) of the Exchange Act




Section 16(a) of the Exchange Act requires our directors, officers and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Directors, officers and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely upon our review of the copies of such forms that we received during the fiscal year ended December 31, 2009, we believe that each person who at any time during the fiscal year was a director, officer or beneficial owner of more than 10% of our Common Stock complied with all Section 16(a) filing requirements during such fiscal year.




Code of Ethics




On December 13, 2007 we adopted a Code of Ethics that applies to our executive officers.  A copy of our Code of Ethics will be provided to any person requesting same without charge.  To request a copy of our Code of Ethics, please make written request to our President c/o Flex Fuels Energy, Inc. at 3rd Floor, 14 South Molton Street, London, W1K 5QP, United Kingdom.




ITEM 11.EXECUTIVE COMPENSATION




The following table sets forth information concerning the total compensation paid or accrued by us during the two fiscal years ended December 31, 2009 and 2008 to (i) all individuals that served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended December 31, 2009; (ii) all individuals that served as our principal financial officer or acted in a similar capacity for us at any time during the fiscal year ended December 31, 2009; and (iii) all individuals that served as executive officers of ours at any time during the fiscal year ended December 31, 2009 that received annual compensation during the fiscal year ended December 31, 2009 in excess of $100,000.


Summary Compensation Table




Name and Principal Position

Year

Salary

($)

Bonus

($)

Stock Awards

($)

Option / Warrant Awards

($)

Grant Date Fair Value of Stock and Stock Option / Warrant Awards

($)

Non-

Equity Incentive

Plan Compen-sation

($)

Change in Pension Value

and

Non-

qualified

Deferred

Compen-sation

Earnings

($)

All

Other

Compen-sation

($)

Total

($)Thomas Barr – Chief Executive Officer (2)

2009

2008

143,954

232,815

0

0

0

0

91,211

0

0

0

0

0

0

0

0

0

235,165

232,815Robert Galvin – Chief Financial Officer (2)

2009

2008

72,568

32,112

0

0

0

0

31,452

0

0

0

0

0

0

0

0

0

104,020

32,112David Miller – President (2)

2009

2008

71,961

0

0

0

0

0

31,452

0

0

0

0

0

0

0

0

0

103,413

0John Nangle –  President (1)

2009

2008

28,942

13,200

0

0

0

0

0

0

0

0

0

0

0

0

0

0

28,942

13,200




(1)      John Nangle served as our president from December 12, 2008 until May 27, 2009.




Except for our October 22, 2009 issuance of an aggregate of 10,100,000 warrants to members of our management and a key consultant (See Item 5. Market for Registrant’s Common Equity Related Shareholder Matters and Issuer Purchases of Equity Securities – Recent Sales of Unregistered Securities), we have not issued any stock options or warrants or maintained any stock option or other equity incentive plans since our inception. We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans. Similarly, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers or any other persons following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control of us or a change in a named executive officer’s responsibilities following a change in control.


(2)
Commencing May 2009, the Directors compensation for the year includes a monthly fee of $1,600 in respect of Board of Directors’ services.


40




The following table sets forth information with respect to the warrants issued by us on October 22, 2009 to members of our management:






OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END




Warrants

Stock AwardsName

Number of Securities Underlying Unexercised Warrants

(#) Exercisable

Number of Securities Underlying Unexercised Warrants

(#) Unexercisable

Number of Securities Underlying Unexercised Unearned Warrants

(#)

Warrant Exercise Price (#)

Warrant Expiration Date

Number of Shares or Units of Stock That Have Not Vested

(#)

Market Value of Shares or Units of Stock That Have Not

Vested

($)

Number of Unearned Shares Units or Other Rights That Have Not Vested (#)

Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

($)(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)Thomas Barr – CEO

1,450,000

1,450,000(1)

2,900,000(2)

$0.07

October 21, 2016

N/A

N/A

N/A

N/ARobert Galvin – CFO

500,000

500,000(3)

1,000,000(4)

$0.07

October 21, 2016

N/A

N/A

N/A

N/ADavid Miller – President

500,000

500,000(5)

1,000,000(6)

$0.07

October 21, 2016

N/A

N/A

N/A

N/A




(1)
Includes 725,000 warrants that vest on December 31, 2010 and 725,000 warrants that vest on December 31, 2011.




(2)
Includes 1,450,000 warrants that vest upon our achieving an average closing price for our common stock of at least $0.45 per share over a period of twenty consecutive trading days on or prior to October 21, 2012 and 1,450,000 warrants that vest upon our achieving an average closing price for our common stock of at least $1.00 per share over a period of twenty consecutive trading days on or prior to October 21, 2012.




(3)
Includes 250,000 warrants that vest on December 31, 2010 and 250,000 warrants that vest on December 31, 2011.




(4)
Includes 500,000 warrants that vest upon our achieving an average closing price for our common stock of at least $0.45 per share over a period of twenty consecutive trading days on or prior to October 21, 2012 and 500,000 warrants that vest upon our achieving an average closing price for our common stock of at least $1.00 per share over a period of twenty consecutive trading days on or prior to October 21, 2012.




(5)
Includes 250,000 warrants that vest on December 31, 2010 and 250,000 warrants that vest on December 31, 2011.




(6)
Includes 500,000 warrants that vest upon our achieving an average closing price for our common stock of at least $0.45 per share over a period of twenty consecutive trading days on or prior to October 21, 2012 and 500,000 warrants that vest upon our achieving an average closing price for our common stock of at least $1.00 per share over a period of twenty consecutive trading days on or prior to October 21, 2012.




ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS




The following table sets forth information with respect to the beneficial ownership of our common stock known by us as of February 28, 2010 by:




·
each person or entity known by us to be the beneficial owner of more than 5% of our common stock;




·
each of our directors;




·
each of our executive officers; and




·
all of our directors and executive officers as a group.




The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on such date and all shares of our common stock issuable to such holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by such person at said date which are exercisable within 60 days of February 28, 2010.  Each person’s address is c/o Flex Fuels Energy, Inc., 3rd Floor, 14 South Molton Street, London, UK W1K 5QP.  Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent such power may be shared with a spouse.




Name and Address of Beneficial Owner
Title of Class

Amount and Nature

of Beneficial

Ownership(1)


Percentage of

Class(2)Executer Capital Inc

60, Market Square

PO Box 364

Belize City
Common Stock, $0.001 par value


2,467,500



5.54
%Medford Financial Limited

35, Barrack Road

Belize City
Common Stock, $0.001 par value


2,384,239



5.35
%Tresca International Inc

East 53rd Street

Swiss bank building 2nd Floor

Marbella

Panama
Common Stock, $0.001 par value


2,929,998



6.58
%Thomas Barr
Common Stock, $0.001 par value


2,299,382
(3)


5.00
%Robert Galvin
Common Stock, $0.001 par value


500,000
(4)


1.11
%David Miller
Common Stock, $0.001 par value


703,000
(5)


1.56
%All officers and directors as a group (3 persons)
Common Stock, $0.001 par value


3,502,382
(3)(4)(5)


7.46
%




41


(1)
As used herein, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the power to dispose or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship or otherwise, including a right to acquire such power(s) within 60 days of February 28, 2010.  Unless otherwise noted, beneficial ownership consists of sole ownership, voting and investment rights.
 
 (2)
There were 44,525,966 shares of common stock issued and outstanding on February 28, 2010.
 
 (3)
Includes 1,450,000 presently exercisable warrants. Excludes 4,350,000 warrants not exercisable within 60 days of February 28, 2010.
 
 (4)
Includes 500,000 presently exercisable warrants. Excludes 1,500,000 warrants not exercisable within 60 days of February 28, 2010.
 
 (5)
Includes 500,000 presently exercisable warrants. Excludes 1,500,000 warrants not exercisable within 60 days of February 28, 2010.





Securities Authorized for Issuance Under Equity Compensation Plans




We have not adopted any Equity Compensation Plans since our inception other than our March 28, 2007 Employment Agreement with Paul Gothard under which we issued 65,000 shares of our common stock to Mr. Gothard in May 2008. We have no further obligations to Mr. Gothard thereunder.




On October 22, 2009 we issued 10,100,000 warrants to members of our management and a key employee. See Item 5. “Recent Sales of Unregistered Securities.”




ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE




During 2009, we paid an aggregate of $154,267 to Thomas Barr for services provided to us by Mr. Barr in all capacities (See Item 10. Directors, Executive Officers, and Corporate Governance – Employment Agreements).




During 2009, we paid an aggregate of $72,745 to The ARM Partnership (“ARM”), a partnership in which Robert Galvin, our Chief Financial Officer, Treasurer and Secretary is a partner, for services provided to us by Mr. Galvin in all capacities (See Item 10. Directors, Executive Officers, and Corporate Governance – Employment Agreements).




During 2009, we paid an aggregate of $82,382 to David Miller for services provided to us by Mr. Miller in all capacities (See Item 10. Directors, Executive Officers, and Corporate Governance – Employment Agreements).




During 2009, we paid an aggregate of $28,942 to John Nangle for services provided to us in all capacities.




On October 22, 2009 we issued 5,800,000 warrants to Thomas Barr, 2,000,00 warrants to Robert Galvin and 2,000,000 warrants to David Miller, each exercisable, upon vesting for the purchase of one share of our common stock for a period of seven years at an exercise price of $0.07 per share. See Item 5. Market for Registrant’s Common Equity Related Shareholder Matters and Issuer Purchases of Equity Securities – Recent Sales of Unregistered Securities.




Director Independence




None of our three present directors are “independent” as that term is defined by the National Association of Securities Dealers Automated Quotations (“NASDAQ”) as they also serve as executive officers.




ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES




Audit Fees




The aggregate fees billed to us by RBSM LLP, our principal accountant for professional services rendered during the fiscal years ended December 31, 2009 and 2008 are set forth in the table below:




Fee Category

Fiscal year ended

December 31, 2009


Fiscal year ended

December 31, 2008Audit fees (1)

$
284,887


$
0Audit-related fees (2)

$
0


$
0Tax fees (3)

$
8,500


$
0All other fees (4)

$
0


$
0Total fees

$
293,387


$
0




(1) Audit fees consist of fees incurred for professional services rendered for the audit of consolidated financial statements, for reviews of our interim consolidated financial statements included in our quarterly reports on Form 10-Q and for services that are normally provided in connection with statutory or regulatory filings or engagements. The amount recorded above for the year ended December 31, 2009, includes $211,837 for the audits of the prior fiscal years 2008 and 2007 for professional services rendered and billed during the fiscal year 2009 by our current principal accountant.







42


(2) Audit-related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our consolidated financial statements, but are not reported under “Audit fees.”
 
 (3) Tax fees consist of fees billed for professional services relating to tax compliance, tax planning, and tax advice.
 
 (4) All other fees consist of fees billed for all other services.
 
 Audit Committee’s Pre-Approval Practice.
 
 Prior to our engagement of our independent auditor, such engagement was approved by our board of directors. The services provided under this engagement may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Pursuant our requirements, the independent auditors and management are required to report to our board of directors at least quarterly regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. Our board of directors may also pre-approve particular services on a case-by-case basis. All audit-related fees, tax fees and other fees incurred by us for the year ended December 31, 2009, were approved by our board of directors.





PART IV






ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES




Financial Statements
  See Index to Financial Statements immediately following the signature page of this report.
 Financial Statement Schedules




All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.




Exhibits




In reviewing the agreements included as exhibits to this Form 10-K, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:




•
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;




•
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;




•
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and




•
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.




Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-K and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.




43




The following exhibits are included as part of this report:




Exhibit No.

SEC Report

Reference No.

Description3.1

3.1

Articles of Incorporation of Registrant dated March 10, 2006 (1)3.2

3.2

By-laws of the Company (1)4.1

4.1

Form of October 22, 2009 Time Warrant (2)4.2

4.2

Form of October 22, 2009 Price Warrant (2)10.1

10.1

Asset Purchase Agreement dated March 27, 2006, entered into by and between James Laird and Registrant (3)10.2

10.1

Acquisition Agreement dated December 29, 2006 entered into by and among Registrant, Flex Fuels Energy Limited, the stockholders of Flex Fuels Energy Limited and the individuals signatory thereto (3)10.3

10.2

Form of a Voting Trust Agreement entered into in connection with the Acquisition Agreement (3)10.4

10.3

Form of Lock-up Agreement entered into in connection with the Acquisition Agreement (3)10.5

10.4

Subscription Agreement dated December 29, 2006 entered into by and among Registrant and the subscribers’ signatoriesthereto (4)10.6

10.6

Employment Agreement dated April 12, 2007 entered into by and between Registrant and James Laird (4)10.7

10.7

Employment Agreement dated January 1, 2007 entered into by and between Registrant and Thomas Barr (4)10.8

10.8

Supply of Services Agreement dated December 12, 2008 between Registrant and Thomas Barr (5)10.9

10.1

Stock Purchase Agreement dated May 21, 2009 between Registrant and Iestyn Morgan (6)10.10

10.2

Stock Purchase Agreement dated May 21, 2009 between Registrant and Mark Paulson (6)10.11

10.3

Stock Purchase Agreement dated May 21, 2009 between Registrant and Gillian Penton (6)10.12

10.1

Stock Purchase Agreement dated October 9, 2009 between Registrant and JTC Trustees Limited as Trustee of the LOGO Investment Trust (7)10.13

10.1

Supply of Services Agreement dated July 1, 2009 between Registrant and David Miller (8)




44






10.14

10.2

Supply of Services Agreement dated July 1, 2009 between Registrant and Thomas Barr (8)10.15

10.3

Supply of Services Agreement dated July 1, 2009 between Registrant and The ARM Partnership (8)10.16

10.1

Subscription and Shareholders’ Agreement, dated February 25, 2010 among Registrant, Bio AMD Holdings Limited (“Bio AMD”) and the Managers of Bio AMD (9)10.17

10.2

Service Agreement dated February 25, 2010 between Bio Alternative Medical Devices Ltd. and Dr. Nasr-Eddine

Djennati (9)10.18

10.3

Service Agreement dated February 25, 2010 between Bio Alternative Medical Devices Ltd. and Dr. Andrew Mitchell (9)10.19

10.4

Consultancy Agreement dated February 25, 2010 between Bio Alternative Medical Devices Ltd. and The ARM Partnership (9)10.20

*

Investment Agreement dated May 1 2009 between Registrant and WDX Organisation Ltd10.21

*

Loan Agreement dated May 1 2009 between Registrant and WDX Organisation Ltd14.1

14.1

Code of Ethics (5)21

*

List of Subsidiaries31.1

*

Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive Officer31.2

*

Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Financial Officer32.1

*

Rule 1350 Certification of Chief Executive Officer32.2

*

Rule 1350 Certification of Chief Financial Officer





45




(1)
Filed with the Securities and Exchange Commission on August 4, 2006, as an exhibit, numbered as indicated above, to the Registrant’s registration statement on the Registrant’s Registration Statement on Form SB-1 (file no. 333-136349), which exhibit is incorporated herein by reference.




(2)
Filed with the Securities and Exchange Commission on November 19, 2009, as an exhibit, numbered as indicated above, to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, which exhibit is incorporated herein by reference.




(3)
Filed with the Securities and Exchange Commission on January 5, 2007, as an exhibit, numbered as indicated above, to the Registrant’s Current Report on Form 8-K, which exhibit is incorporated herein by reference.




(4)
Filed with the Securities and Exchange Commission on April 17, 2007, as an exhibit, numbered as indicated above, to the Registrant’s Annual Report on Form 10-KSB for the year ended December 31, 2006, which exhibit is incorporated herein by reference.




(5)
Filed with the Securities and Exchange Commission on April 15, 2009 , as an exhibit, numbered as indicated above, to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, which exhibit is incorporated herein by reference.




(6)
Filed with the Securities and Exchange Commission on May 27, 2009, as an exhibit, numbered as indicated above, to the Registrant’s Current Report on Form 8-K dated May 21, 2009, which exhibit is incorporated herein by reference.




(7)
Filed with the Securities and Exchange Commission on October 13, 2009, as an exhibit, numbered as indicated above, to the Registrant’s Current Report on Form 8-K dated October 9, 2009, which exhibit is incorporated herein by reference.




(8)
Filed with the Securities and Exchange Commission on August 19, 2009, as an exhibit, numbered as indicated above, to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, which exhibit is incorporated herein by reference.




(9)
Field with the Securities and Exchange Commission on March 3, 2010, as an exhibit, numbered as indicated above, to the Registrant’s Current Report on Form 8-K dated February 25, 2010, which exhibit is incorporated herein by reference.




* Filed herewith.




46







SIGNATURES









Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




FLEX FUELS ENERGY, INC.Dated: March 22, 2010
By:
/s/ Thomas BarrThomas Barr, Chief Executive Officer

and Director


Dated: March 22, 2010
By:
/s/ Robert GalvinRobert Galvin, Chief Financial and

Accounting Officer





Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on this 22nd day of March, 2010.






/s/ Thomas Barr

March 22, 2010Thomas Barr, Chief Executive Officer and Director/s/ Robert Galvin

March 22, 2010Robert Galvin, Chief Financial and Accounting Officer, Secretary, Treasurer and Director/s/ David Miller

March 22, 2010David Miller, President, Director







47







FINANCIAL STATEMENTS





INDEX TO FINANCIAL STATEMENTS





PageReport of Independent Registered Public Accounting Firm
F-2Consolidated Balance Sheets as of December 31, 2009 and 2008
F-3Consolidated Statements of Operations  for the Years Ended December 31, 2009 and 2008

and for the period from March 10, 2006 (date of inception) through December 31, 2009
F-4Consolidated Statements of Stockholders’ Equity for the period from March 10, 2006

(date of inception) through December 31, 2009
F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and 2008

and the for the period from March 10, 2006 (date of inception) through December 31, 2009
F-6Notes to Consolidated Financial Statements
F-7 to F-26





F - 1








REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the Board of Directors and Stockholders of
 Flex Fuels Energy, Inc.
 
 
 We have audited the accompanying consolidated balance sheets of Flex Fuels Energy Inc. and its subsidiaries (the “Company”), a development stage company as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2009 and the period from March 10, 2006 (date of inception) through December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
 We have conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Flex Fuels Energy, Inc. and its subsidiaries as of December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2009 and the period from March 10, 2006 (date of inception) through December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.
 
 The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the accompanying consolidated financial statements, the Company is a development stage company and has not commenced its planned principal operations, has suffered recurring losses since inception and is experiencing difficulty in generating sufficient cash flow to sustain its operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 /s/ RBSM LLP
 
 
 New York, New York
 March 22, 2010




F - 2


FLEX FUELS ENERGY, INC. AND SUBSIDIARIES(A Development Stage Company)CONSOLIDATED BALANCE SHEETSDecember 31,


December 31,2009


2008ASSETSCurrent Assets:Cash and cash equivalents

$
6,771,218


$
7,382,778Prepaid expenses


16,668



24,803Value added tax and other receivables


10,965



52Current assets of discontinued operations


16,701



1,385,633Total Current Assets


6,815,552



8,793,266Fixed assets of discontinued operations


-



426,066Security deposits and other assets


20,461



-Total Assets

$
6,836,013


$
9,219,332LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Accounts payable

$
347,934


$
295,594Accrued expenses


20,645



119,985Taxation and social security


10,173



-Liabilities of discontinued operations


704



283,833Total Current Liabilities


379,456



699,412Total Liabilities


379,456



699,412Commitments and contingenciesStockholders' Equity:Common stock, $0.001 par value, 500,000,000 shares authorized,44,525,964 and 69,380,441 shares issued and outstanding at December 31, 2009 and 2008, respectively


44,526



69,380Additional Paid-in Capital


41,987,541



41,993,085Accumulated other comprehensive income (loss) - foreign currency translation adjustment


656,441



(4,086,527
)Deficit accumulated during development stage


(36,023,459
)


(29,456,018
)Total Flex Fuels Energy, Inc. Stockholders' Equity


6,665,049



8,519,920Non Controlling Interest


(208,492
)


-Total stockholders' equity


6,456,557



8,519,920Total Stockholders' Equity and Liabilities

$
6,836,013


$
9,219,332





The accompanying notes are an integral part of these consolidated financial statements.


F - 3


FLEX FUELS ENERGY, INC. AND SUBSIDIARIES


(A Development Stage Company)


CONSOLIDATED STATEMENTS OF OPERATIONS


For the Periodfrom March 10, 2006For the Years


(date of inception) throughended December 31,


December 31,2009


2008


2009Revenue

$
-


$
-


$
-Operating expenses:Mining exploration costs


13,003



1,045



21,726Selling, general and administrative charges


1,779,225



2,261,697



5,181,184Impairment loss - mineral claims


-



-



10,000Total operating expense


1,792,228



2,262,742



5,212,910Operating loss


(1,792,228
)


(2,262,742
)


(5,212,910
)Other income (expense):Interest and other income


68,385



-



68,385Loss from continuing operations, before provision for income taxes


(1,723,843
)


(2,262,742
)


(5,144,525
)Provision for income tax


-



-



-Loss from continuing operations


(1,723,843
)


(2,262,742
)


(5,144,525
)Loss on discontinued operations, net of tax


(5,052,602
)


(1,900,695
)


(31,087,938
)Net loss

$
(6,776,445
)

$
(4,163,437
)

$
(36,232,463
)Net loss attributable to the non-controlling interest


(209,004
)


-


$
(209,004
)Net loss attributable to Flex Fuels Energy, Inc. and Subsidiaries

$
(6,567,441
)

$
(4,163,437
)

$
(36,023,459
)Loss per common share from continuing operations attributable to Flex Fuels Energy, Inc. common shareholders - basic and fully diluted

$
(0.03
)

$
(0.03
)

$
(0.08
)Loss per common share from discontinued operations attributable to Flex Fuels Energy, Inc. common shareholders - basic and fully diluted


(0.09
)


(0.03
)


(0.49
)Net loss per common share attributable to Flex Fuels Energy, Inc. common shareholders - basic and fully diluted

$
(0.11
)

$
(0.06
)

$
(0.56
)Weighted average number of commonshares outstanding - basic and fully diluted


57,795,764



69,356,934



64,025,494Comprehensive Loss:Net Loss

$
(6,776,445
)

$
(4,163,437
)

$
(36,232,463
)Other comprehensive income (loss), net of tax:Foreign currency translation adjustment, net of tax


656,953



-



656,953Foreign currency translation adjustment attributable to discontinued operations, net of tax


4,086,527



(4,130,487
)


-Total other comprehensive loss, net of tax


(2,032,965
)


(8,293,924
)


(35,575,510
)Comprehensive (income) loss attributable to the non-contolling interest


(512
)


-



(512
)Comprehensive loss attributable to the Flex Fuels Energy Inc. and Subsidiaries

$
(2,033,477
)

$
(8,293,924
)

$
(35,576,022
)




The accompanying notes are an integral part of these consolidated financial statements.





F - 4




FLEX FUELS ENERGY, INC. AND SUBSIDIARIES


(A Development Stage Company)
 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 10, 2006 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2009


Deficit


AccumulatedAccumulated


OtherDuring


ComprehensiveShares


Amount


Additional

Paid-in Capital


Development Stage


Income/

(Loss)


Noncontrolling

Interest


Stockholders'

EquityShares issued to founders at $0.001 per share, March 10, 2006


60,000,000


$
60,000


$
(50,000
)

$
-


$
-


$
-


$
10,000Fair value of shares issued in lieu of payment for service on December 18, 2006


412,038



412



47,659



-



-



-



48,071Shares issued at $0.1167 per share in private placement on December 29, 2006


14,142,846



14,143



1,620,857



-



-



-



1,635,000Net Loss














(1,381,198
)


-



-



(1,381,198
)Balance at December 31, 2006


74,554,884



74,555



1,618,516



(1,381,198
)


-



-



311,873Shares of common stock retired on May 11, 2007


(51,685,723
)


(51,686
)


51,686



-



-



-



-Fair value of compensatory element of insider stock not retired in May 2007


-



-



307,978



-



-



-



307,978Fair value of shares issued in lieu of payment for services at $0.90 per share on May 22, 2007


137,344



137



123,382



-



-



-



123,519Fair value of shares acquired at below market value on May 25, 2007


-



-



178,300



-



-



-



178,300Shares of common stock issued at $0.90 per share in private placement on May 29, 2007


16,582,621



16,583



13,375,296



-



-



-



13,391,879Fair value of shares issued on acquisition of Flex Fuels Energy Ltd on May 29, 2007


24,854,477



24,854



22,344,175



-



-



-



22,369,029Shares of common stock issued at $0.90 per share in private placement on July 29, 2007


4,871,838



4,872



3,935,317



-



-



-



3,940,189Reserve held for shares to be issued for compensation on December 31, 2007


-



-



34,125



-



-



-



34,125Comprehensive income


-



-



-



-



43,960



-



43,960Net Loss


-



-



-



(23,911,383
)


-



-



(23,911,383
)Balance at December 31, 2007


69,315,441



69,315



41,968,775



(25,292,581
)


43,960



-



16,789,469Common stock issued for compensation on May 13, 2008


65,000



65



24,310



-



-



-



24,375Comprehensive loss


-



-



-



-



(4,130,487
)


-



(4,130,487
)Net loss


-



-



-



(4,163,437
)


-



-



(4,163,437
)Balance at December 31, 2008


69,380,441



69,380



41,993,085



(29,456,018
)


(4,086,527
)


-



8,519,920Shares of common stock bought back on June 5, 2009


(16,989,136
)


(16,989
)


(114,036
)


-



-



-



(131,025
)Shares of common stock bought back on October 9, 2009


(7,865,341
)


(7,865
)


(55,058
)


-



-



-



(62,923
)Stock based compensation


-



-



163,550



-



-



-



163,550Comprehensive income


-



-



-



-



4,742,968



512



4,743,480Net loss


-



-



-



(6,567,441
)


-



(209,004
)


(6,776,445
)Balance at December 31, 2009


44,525,964


$
44,526


$
41,987,541


$
(36,023,459
)

$
656,441


$
(208,492
)

$
6,456,557


The accompanying notes are an integral part of these consolidated financial statements.











F - 5





FLEX FUELS ENERGY, INC. AND SUBSIDIARIES(A Development Stage Company)CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Periodfrom March 10, 2006For the Years


(date of inception) throughEnded December 31,


December 30,2009


2008


2009Cash flows from operating activities:Net loss attributable to Flex Fuels Energy Inc. and Subsidiaries

$
(6,567,441
)

$
(4,163,437
)

$
(36,023,459
)Net loss from discontinued operations


(5,052,602
)


(1,900,695
)


(31,087,938
)Net loss from continuing operations attributable to Flex Fuels Energy Inc. and Subsidiaries


(1,514,839
)


(2,262,742
)


(4,935,521
)Adjustments to reconcile net loss to net cashused in operating activities:Impairment loss - mineral claims


-



-



10,000Shares of common stock issued or acquired in lieu of payment for services


-



24,375



716,369Stock based compensation


163,550







163,550Loss attributable to non-controlling interest, net of tax


(209,004
)


-



(209,004
)Changes in operating assets and liabilities:Prepaid expenses and other current assets


6,648



(7,873
)


(42,490
)Sales tax and interest receivable


(9,782
)


(52
)


(45,519
)Security deposit and other assets


(20,862
)


-



(26,074
)Accounts payable


53,566



287,667



434,139Accrued expenses


(99,327
)


95,485



123,536Taxation and social security payable


10,372



-



49,608Total Adjustments


(104,839
)


399,602



1,174,115Net cash used in operating activities of continuing operations


(1,619,678
)


(1,863,140
)


(3,761,406
)Cash flows from investing activities:Purchase of mineral claim


-



-



(10,000
)Net cash used in investing activities of continuing operations


-



-



(10,000
)Cash flows from financing activities:Repurchase of common stock


(193,948
)


-



(193,948
)Proceeds from sale of shares of common stock in private placements, net of issueance costs


-



-



18,977,068Net cash (used in) provided by financing activities of continuing operations


(193,948
)


-



18,783,120Cash flows from discontinued operations:Cash provided by (used in) operating activities of discontinued operations


705,151



(2,648,535
)


(7,798,992
)Cash used in investing activities of discontinued operations


(123,596
)


(131,442
)


(1,062,015
)Cash provided by (used in) financing activities of discontinued operations


-



-



-Effects of exchange rate changes on cash from discontinued operations


-



(4,130,487
)


-Net cash flows from discontinued operations


581,555



(6,910,464
)


(8,861,007
)Effects of exchange rate changes on cash from continuing operations


620,511



-



620,511Net (decrease) increase in cash and cash equivalents


(611,560
)


(8,773,604
)


6,771,218Cash and cash equivalents, beginning of period


7,382,778



16,156,382



-Cash and cash equivalents, end of period

$
6,771,218


$
7,382,778


$
6,771,218Supplementary disclosure of cash flow information:Cash paid during the period for:Interest

$
-


$
-


$
-Income tax

$
-


$
-


$
-Supplemental schedule of non-cash investing and financing activities:Continuing Operations:Shares of common stock issued or acquired in lieu of payment for services

$
-


$
24,375


$
716,369Total non-cash investing and financing activities from continuing operations

$
-


$
24,375


$
716,369Discontinued Operations:Transaction costs in connection with asset acquistion

$
-


$
-


$
22,897,759Office equipment acquired on credit / accounts payable

$
-


$
-


$
1,760Asset-prepaid expense acquire in connection with FFE Ltd.

$
-


$
-


$
449Liabilities-accounts payable assumed in connection with FFE Ltd.

$
-


$
-


$
4,516Liabilities-accrued expenses assumed in connection with FFE Ltd.

$
-


$
-


$
50,464Total non-cash investing and financing activities from discontinued operations

$
-


$
-


$
22,954,948The accompanying notes are an integral part of these consolidated financial statements.


F - 6







Flex Fuels Energy, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 
 Note 1 - Nature of Operations and Going Concern
 
 Nature of Operations
 
 Flex Fuels Energy, Inc. (“Flex Fuels”, “we”, “us”, “our”) (formerly Malibu Minerals, Inc.) was incorporated in the State of Nevada on March 10, 2006 to engage in the business of exploration and discovery of gold, minerals, mineral deposits and reserves. Flex Fuels has staked two mineral claims containing 33 cell claim units totaling approximately 683 hectares. These mining claims are hereafter referred to as the “Malibu Gold Mine Property” or the “Malibu Gold Property”. Flex Fuels purchased the Malibu Gold Property in March of 2006. The Malibu Gold Property is located approximately 110 km northwest of Vancouver, British Columbia.
 
 Flex Fuels has expended minimal assets on the Malibu Gold property since acquisition.
 
 During the fourth quarter of our 2006 fiscal year, for the purpose of diversifying our business, acquiring capital, gaining greater access to the capital markets and with the assistance of newly acquired capital promotion of Flex Fuels business of exploration and discovery of gold, minerals, mineral deposits and reserves, Flex Fuels entered into an Agreement with Flex Fuels Energy Limited (“FFE Ltd”) and the stockholders of FFE Ltd and FFE Ltd became our wholly-owned subsidiary effective on May 29, 2007. FFE Ltd engaged in the development of the business of manufacturing and distributing Oil Seed Rape (“OSR”) products.
  Effective June 5, 2009, after having carefully evaluated all options, we determined to abandon our proposed oil seed business as we no longer consider the business to be economically viable on either a go alone or partnered basis.  The proposed project initiated by prior management involving the establishment of an oil seed crushing plant at Cardiff by our wholly owned subsidiary, Flex Fuels Energy Limited, was compromised by constant delays, sub-optional design and substantial legal costs.  We are unable to raise the approximately $123,000,000 needed for maximum project efficiency, to locate a project partner, or to divest our interest in the project for value.  Accordingly, we have determined that our best course of action is to preserve value by winding down the oil seed operations of FFE Ltd which we have done on an orderly basis. The historical operations and costs of FFE Ltd and its assets and liabilities at December 31, 2009 and 2008 are classified as discontinued operations in the accompanying consolidated financial statements.
 
 On May 1, 2009, we entered into an Investment Agreement (the “Investment Agreement”) with WDX Organisation Limited (“WDX”), a corporation incorporated under the laws of England and Wales, and the founding shareholders of WDX (the “Founders”), the owners of all of the issued and outstanding shares of WDX.  On the same date, we entered into a related Loan Agreement (the “Loan Agreement”) and a related Option and Funding Agreement (the “Funding Agreement”) with WDX.  The Investment Agreement, Loan Agreement and Funding Agreement are hereinafter collectively referred to as the “Agreements”. Pursuant to the Agreements we acquired 51% ownership of WDX. WDX is the developer of a technology designed to mitigate currency risk. On August 14, 2009 we provided a further £150,000 (approximately $247,800) to WDX by way of a loan and have exercised certain call options. On November 20, 2009 we loaned an additional £150,000 (approximately US$249,840) to WDX and increased our equity position in WDX. The loans were the result of our ongoing investment in WDX as contemplated by our May 1, 2009 Investment Agreement with WDX.
 
 Altogether, these transactions have resulted in a total loan of £450,000 (approximately $717,000) to WDX and the ownership of 75.66% of WDX by the Company.
 
 F - 7
 Flex Fuels Energy, Inc. and/or Flex Fuels Energy, Inc., WDX, a majority-owned subsidiary and FFE Ltd, are hereafter collectively referred to as “Flex Fuels”, “we”, “us”, “our” or, the “Company”.
 
 In May of 2007, Flex Fuels authorized and affected a dividend in the form of common stock, whereby each stockholder of record of Flex Fuels as of the end of the business day on May 21, 2007, received five shares of common stock, in exchange for one share of existing common stock held, in effect 6 for 1 stock split.  All references in the accompanying consolidated financial statements and notes thereto have been retroactively restated to reflect the stock split, unless explicitly stated otherwise.
  Going Concern
 
 The accompanying consolidated 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.  The Company is a development stage entity and has not commenced its planned principal operations. As shown in the accompanying consolidated financial statements, the Company has not generated any revenue and has incurred recurring losses for the period from March 10, 2006 (date of inception) through December 31, 2009.  Additionally, the Company has negative cash flows from operations since its date of inception and has an accumulated deficit of $36,023,459 at December 31, 2009.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.
 
 The Company’s ability to continue existence is dependent upon commencing its planned operations, management’s ability to develop and achieve profitable operations and/or upon obtaining additional financing to carry out its planned business.  The Company intends to fund its development of the currency risk technology and acquisition endeavors and operations through equity and debt financing arrangements.  However, there can be no assurance that these arrangements will be sufficient to fund its ongoing capital expenditures, working capital, and other cash requirements.  The outcome of these matters cannot be predicted at this time.
 
 There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all.  In the event we are unable to continue as a going concern, we may elect or be required to seek protection from our creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not considered this alternative, nor does management view it as a likely occurrence.
 
 The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
 
 Note 2 - Summary of Significant Accounting Policies
 
 Use of estimates
 
 The preparation of consolidated financial statements in conformity with 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
 Development stage entity
 
 The Company is considered to be a development stage entity, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915. The Company has not generated any revenues to date, has incurred significant expenses and has sustained recurring losses. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from March 10, 2006 (date of inception) through December 31, 2009, the Company has accumulated losses of $36,023,459 (of which $31,087,938 has been incurred by the discontinued operations).
 F - 8
 Principles of consolidation
 
 The consolidated financial statements include the accounts of Flex Fuels Energy, Inc., Flex Fuels Energy Limited (“FFE Ltd”), a wholly owned subsidiary including the FFE Ltd. Subsidiaries (consisting of four inactive companies), and WDX Organisation Ltd. (a 75.66% owned subsidiary as of December 31, 2009). All significant intercompany transactions and balances have been eliminated in consolidation.  FFE Ltd ceased to be a variable interest entity on May 29, 2007 when the Company acquired the remaining 85% of FFE Ltd. Effective June 5, 2009 we have accounted for FFE Ltd as discontinued operations.
 
 The 24.34% third party ownership of WDX at December 31, 2009 is recorded as a noncontrolling interest in the consolidated financial statements.
 Reclassifications
 
 Certain reclassifications have been made to prior year’s consolidated financial statements and notes thereto for comparative purposes to conform with current year’s presentation, primarily related to the discontinued operations of FFE, LTD.  These reclassifications have no effect on previously reported results of operations.
 
 Foreign currency translation
 
 The Company’s reporting currency is US Dollars. Flex Fuels functional currency is US Dollars. The accounts of the Company’s wholly-owned subsidiary, FFE Ltd and of its 75.66% owned subsidiary, WDX, are maintained using the local currency (Great British Pound) as the functional currency. Monetary assets and liabilities are translated into U.S. Dollars at balance sheet date and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are deferred as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain.  Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations.
  As a result of the discontinuance of FFE Ltd.’s operations, we have reclassified the foreign currency translation adjustment loss of $4,051,638 related to FFE Ltd from accumulated other comprehensive loss and recognized as loss on disposal/abandonment of the investment in FFE, Ltd. or as a liquidation of the investment in FFE Ltd. under the caption, loss from discontinued operations in the consolidated financial statements during the quarter ended June 30, 2009 (see Note 3). Subsequent to June 30, 2009 we have recorded a foreign currency translation adjustment gain of $54,138 from discontinued operations.
 
 Property and equipment
 
 Property and equipment is stated at cost less accumulated depreciation. Depreciation was provided for on the straight line basis over the estimated useful lives of the assets as follows:
 
 Office equipment
2 yearsCapitalized Plant under Construction
N/A
 
 Costs relating to the design, permitting, specification and construction of the Company’s Cardiff Project were capitalized and not depreciated since the plant was not operational. The Company has recorded an asset impairment loss of $458,730 on its Capitalized Plant under Construction as of December 31, 2008 as a result of management’s detail review of the Cardiff oilseed crushing plant Project (see Note 2, “Impairment of long-lived assets”).  The Company has reclassified the asset impairment charge recognized in 2008 as loss on disposal – impairment loss from discontinued operations (see Note 3). During the quarter ended June 30, 2009, the Company recorded a loss on disposal/abandonment of assets of $565,714 as a result of the discontinued operations of FFE Ltd. (see Note 3).
 
 F - 9
 Expenditures for repairs and maintenance which do not materially extend the useful lives of property and equipment are charged to operations.  When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.
 
 Basic and diluted loss per share
 
 We utilize ASC 260, “Earnings Per Share” for calculating the basic and diluted loss per share. In accordance with ASC 260, the basic and diluted loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per share is computed similar to basic loss per share except that the denominator is adjusted for the potential dilution that could occur if stock options, warrants, and other convertible securities were exercised or converted into common stock. Potentially dilutive securities were not included in the calculation of the diluted loss per share as their effect would be anti-dilutive. The Company has 10,100,000 common stock equivalents at December 31, 2009 and none at December 31, 2008. For the year ended December 31, 2009 these potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share.
 
 Fair value of financial instruments
 
 In April 2009, we adopted accounting guidance which requires disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements.
 
 Our short-term financial instruments, including cash, receivables, prepaid expenses and other assets, accounts payable and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value.
 
 Income taxes
 
 The Company utilizes ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.
  Comprehensive Income (Loss)
 
 The Company utilizes ASC 220, "Comprehensive Income" which establishes standards for the reporting and displaying of comprehensive income (loss) and its components.  Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The guidance requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.
 
 Cash and cash equivalents
 
 For purposes of the statement of cash flows, cash and cash equivalents includes demand deposits, saving accounts and money market accounts. The Company considers all highly liquid debt instruments with maturities of three months or less when purchased to be cash and cash equivalents.
 
 F - 10
 Concentrations of Credit Risk
 
 The Company maintains cash and cash equivalents with major financial institutions. Cash held in UK bank accounts is insured by the Financial Services Authority (“FSA”) up to £50,000 at December 31, 2009 (approximately $80,000 at December 31, 2009) at each institution for each entity.  At time, such amounts may exceed the FSA limits.  The uninsured cash bank balances were approximately $6,692,000 and $8,561,000 at December 31, 2009 and 2008, respectively.  The Company has not experienced any loss on these accounts.  The balances are maintained in demand accounts to minimize risk.
 
 Stock-based compensation
 
 The Company accounts for its stock based compensation under ASC 718 “Compensation – Stock Compensation” which was adopted in 2006, using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.  This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.
 
 The Company does not have any employee stock option or stock purchase plans at December 31, 2009 or 2008.
 
 During the period from March 10, 2006 (date of inception) through December 31, 2009, the following stock-based compensation was issued.  On December 18, 2006, Mr. Thomas Barr received 412,038 shares, on May 22, 2007, Mr. Thomas Barr received 137,344 shares and on May 13, 2008, Mr. Paul Gothard received 65,000 shares.  These shares were fair valued based on the fair value of each respective private placement.
 
 There were 10,100,000 warrants granted to members of our management and a key consultant during the fourth quarter of 2009. There were no other employee stock options granted to employees and directors during the period from March 10, 2006 (date of inception) through December 31, 2009.
 
 Revenue recognition
 
 The Company has generated no revenues to date. It is the Company’s policy that revenue from product sales or services will be recognized in accordance with ASC 605 “Revenue Recognition”. Four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product was not delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
 
 
 
 F - 11
  Research and development
 
 In accordance with ASC 730, “Research and Development”, the Company expenses all research and development costs as incurred.  As at December 31, 2009 and 2008, the Company had incurred no research and development costs.
 
 Segment information
 
 The Company utilizes ASC 280 “Segment Reporting” which provides guidance on the way public companies report information about segments of their business in their quarterly and annual reports issued to stockholders.  It also requires entity-wide disclosures about the products and services that an entity provides, the material countries in which it holds assets and reports revenues and its major customers.  Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions how to allocate resources and assess performance. The Company has expended minimal assets on the Malibu Gold property since acquisition and its primary operations have been formerly in the development of the oil seed crushing plant through our wholly owned subsidiary, FFE Ltd. (through the date of discontinuance of those operations) and currently in the development of a technology designed to mitigate currency risk through our 75.66% owned subsidiary, WDX.
 
 Impairment of long-lived assets
 
 The Company follows ASC 360, "Property, Plant and Equipment" which requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of the long-lived assets and certain identifiable intangibles will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset.  ASC 360 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less disposal costs.
  The Company had recorded an impairment charge of $458,730 to its operations on December 31, 2008, which has been reclassified to loss from discontinued operations on the date of discontinuance of FFE, Ltd..  The asset impairment loss consist of an impairment loss on the Capitalized Plant under Construction Costs for the Cardiff Project as this was evaluated as no longer adding value to the Cardiff Project based on management’s detail review performed during December 2008 mainly due to the change in its strategy of the Cardiff Project from Biodiesel to Oilseed Crush. During the year ended December 31, 2009 the Company recorded a loss on disposal/abandonment of assets of $565,714 as a result of the discontinued operations of FFE Ltd.
 
 F - 12
 
 Non-controlling Interest
 
 On May 1, 2009, we entered into an Investment Agreement (the “Investment Agreement”) with WDX pursuant to which we acquired 51% ownership of WDX. On August 14, 2009 we provided a further £150,000 (approximately $247,800) to WDX by way of a loan and have exercised certain call options. On November 20, 2009 we loaned an additional £150,000 (approximately US$249,840) to WDX and increased our equity position in WDX. This has resulted in the ownership of 75.66% of WDX at December 31, 2009.
 
 The 24.34% third party ownership of WDX is recorded as a noncontrolling interest in the consolidated financial statements.
 At December 31, 2009 the Non-controlling Interest was as follows:AmountThird party investment

$
-Non-controlling interest’s share of losses


(209,004
)Non-controlling interest’s share of comprehensive income


512Balance at December 31, 2009

$
(208,492
)
 
 New Accounting Pronouncements Effective January 1, 2009
 
 Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.
 
 In March 2008, the FASB issued new accounting guidance which requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This guidance is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We adopted this guidance on January 1, 2009 and the adoption had no material effect on our consolidated financial position, results of operations or cash flows.
 
 F - 13
 
 
  In December 2007 the FASB issued new accounting guidance which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This guidance changes the way the consolidated income statement is presented. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. This guidance establishes disclosure requirements in the consolidated financial statements, which will enable users to clearly distinguish between the interests of the parent’s owners and the interests of the non-controlling owners of a subsidiary. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008; earlier adoption is prohibited. We adopted this guidance effective on January 1, 2009 which had no material effect on our consolidated financial position, results of operations or cash flows other than changing the description and moving the presentation of net loss attributable to the non-controlling interest below the net loss of our consolidated statements of operations for the period from inception as the non-controlling interest or formerly known as minority interest ceased on May 27, 2007.
 
 In December 2007, the FASB issued new guidance which prescribes the accounting for parties of a collaborative arrangement to present the results of activities for the party acting as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied accounting policy election. Further, the new guidance clarified the determination of whether transactions within a collaborative arrangement are part of a vendor-customer (or analogous) relationship. The new guidance is effective for collaborative arrangements that exist on January 1, 2009 and application is retrospective. We adopted the new guidance effective on January 1, 2009 and the adoption had no material effect on our consolidated financial position, results of operations or cash flows.
 
 In June 2008, the FASB issued new accounting guidance which requires entities to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock by assessing the instrument’s contingent exercise provisions and settlement provisions. Instruments not indexed to their own stock fail to meet the scope exception of ASC 815 and should be classified as a liability and marked-to-market. The statement is effective for fiscal years beginning after December 15, 2008 and is to be applied to outstanding instruments upon adoption with the cumulative effect of the change in accounting principle recognized as an adjustment to the opening balance of retained earnings. We adopted the new guidance effective on January 1, 2009 and the adoption had no material effect on our consolidated financial position, results of operations or cash flows.
 
 Recently Issued Accounting Standards
 
 In January 2009, the FASB issued new accounting guidance to achieve a more consistent determination of whether an other-than-temporary impairment has occurred. The Company adopted this new guidance and it did not have a material impact on the consolidated financial statements.
 
 In April 2009, the FASB issued new accounting guidance to be utilized in determining whether impairments in debt securities are other than temporary, and which modifies the presentation and disclosures surrounding such instruments. This guidance is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this guidance during the second quarter of 2009 had no impact on the Company’s consolidated financial position, results of operations, or cash flows.
 
 In April 2009, the FASB issued new accounting which provides additional guidance in determining whether the market for a financial asset is not active and a transaction is not distressed for fair value measurement purposes. The guidance is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this guidance during the second quarter of 2009 had no impact on the Company’s consolidated financial position, results of operations, or cash flows.
  F - 14
 In April 2009, the FASB issued new accounting guidance which requires disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. This guidance is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this guidance during the second quarter of 2009 had no impact on the Company’s consolidated financial position, results of operations, or cash flows.
 
 In May 2009, the FASB issued new accounting guidance which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The guidance will be effective for interim and annual financial periods ending after June 15, 2009. The Company adopted the guidance during the three months ended June 30, 2009 and has evaluated subsequent events through the issuance date of these financial statements. The adoption of this guidance had no impact on the Company’s consolidated financial position, results of operations, or cash flows.
 
 In June 2009, the FASB issued new accounting guidance which will require more information about the transfer of financial assets where companies have continuing exposure to the risks related to transferred financial assets. This guidance is effective at the start of a company’s first fiscal year beginning after November 15, 2009, or January 1, 2010 for companies reporting earnings on a calendar-year basis.
 
 In June 2009, the FASB issued new accounting guidance which will change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. Under this guidance, determining whether a company is required to consolidate an entity will be based on, among other things, an entity's purpose and design and a company's ability to direct the activities of the entity that most significantly impact the entity's economic performance. This guidance is effective at the start of a company’s first fiscal year beginning after November 15, 2009, or January 1, 2010 for companies reporting earnings on a calendar-year basis.
 
 In August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair Value , which provides additional guidance on how companies should measure liabilities at fair value under ASC 820. The ASU clarifies that the quoted price for an identical liability should be used. However, if such information is not available, an entity may use, the quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities traded as assets, or another valuation technique (such as the market or income approach). The ASU also indicates that the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer and indicates circumstances in which quoted prices for an identical liability or quoted price for an identical liability traded as an asset may be considered level 1 fair value measurements. This ASU is effective October 1, 2009. The adoption of this guidance during the fourth quarter of 2009 had no material impact on the Company’s consolidated results of operations or financial condition.
  In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force , that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. ASU No. 2009-13 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.
 
 F - 15
 In October 2009, the FASB issued ASU No. 2009-14, Certain Revenue Arrangements That Include Software Elements—a consensus of the FASB Emerging Issues Task Force , that reduces the types of transactions that fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be applied to an entire arrangement when the sale of any products or services containing or utilizing software when the software is considered more than incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance:  the tangible element of the product, software products bundled with tangible products where the software components and non-software components function together to deliver the product’s essential functionality, and undelivered components that relate to software that is essential to the tangible product’s functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). ASU No. 2009-14 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.
 
 Other recent accounting pronouncements issued by the FASB and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future consolidated financial statements.
  Note 3 – Discontinued Operations
 
 Effective June 5, 2009, after having carefully evaluated all options, we determined to abandon our proposed oil seed business as we no longer consider the business to be economically viable on either a go alone or partnered basis.  The proposed project initiated by prior management involving the establishment of an oil seed crushing plant at Cardiff by our wholly owned subsidiary, Flex Fuels Energy Limited, was compromised by constant delays, sub-optional design and substantial legal costs.  We are unable to raise the approximately $123,000,000 needed for maximum project efficiency, to locate a project partner, or to divest our interest in the project for value.  Accordingly, we have determined that our best course of action is to preserve value by winding down the oil seed operations of FFE Ltd which we have done on an orderly basis. The historical operations and costs of FFE Ltd and its assets and liabilities at December 31, 2009 and 2008 are classified as discontinued operations in the accompanying consolidated financial statements.
 
 The primary components of the amounts reported as discontinued operations are summarized as follows:
 
 F - 16
 Loss from discontinued operations:
 
 Years ended December 31,


Inception to2009


2008


December 31, 2009Loss from discontinued operations, net of tax

$
(489,388
)

$
(1,441,965
)

$
(3,168,407
)Loss on disposal/abandonment of discontinuedoperations:Impairment loss on capitalized plant underconstruction


-



(458,730
)


(458,730
)Loss on abandonment of assets


(565,714
)


-



(565,714
)Transaction costs incurredin connection with acquisition


-



-



(22,897,587
)Foreign currency translation adjustmentrelated to discontinued operations


(3,997,500
)


-



(3,997,500
)Total loss on disposal/abandonment ofdiscontinued operations, net of tax


(4,563,214
)


(458,730
)


(27,919,531
)Loss from discontinued operations

$
(5,052,602
)

$
(1,900,695
)

$
(31,087,938
)
 
 Assets and liabilities of discontinued operations:
 
 December 31,


December 31,2009


2008Assets:Cash

$
7,260


$
1,319,902Prepaid expenses


8,581



29,547Receivables


860



36,184Current assets of discontinued operations


16,701



1,385,633Property, plant and equipment


-



418,826Intangible assets


-



7,240Non-current assets of discontinued operations


-



426,066Total assets of discontinued operations

$
16,701


$
1,811,699Liabilities:Accounts payable

$
-


$
91,254Accrued expenses


704



153,342Taxation and social security


-



39,237Total liabilities of discontinued operations

$
704


$
283,833
 
 
 
 F - 17
  
 Note 4 - Property and Equipment
 
 A breakdown of the Company’s main items of property and equipment, classified as fixed assets of discontinued operations at December 31, 2008, are given in the table below:
 
 December 31,2008Capitalized Plant under Construction

$
868,065Office equipment


36,331904,396Asset impairment loss


(458,730
)Adjusted cost basis

$
445,666Accumulated depreciation and amortization


(26,840
)Carrying value

$
418,826
 
 Depreciation expense was $18,672 and $22,214 for the years ended December 31, 2009 and 2008, respectively, and $54,054 for the period from March 10, 2006 (date of inception) through December 31, 2009. These amounts have been reclassified and included in the loss from discontinued operations.
 
 The impairment charge was $0 and $458,730 for the years ended December 31, 2009 and 2008, respectively, and $458,730 for the period from March 10, 2006 (date of inception) through December 31, 2009. These amounts have been reclassified and included in loss from discontinued operations. During the year ended December 31, 2009 the Company recorded a loss on disposal/abandonment of assets of $565,714 as a result of the discontinued operations of FFE Ltd. This amount is also included in loss from discontinued operations.
 
 Note 5 - Related Party Transactions
 
 On March 27, 2006, the Company acquired the mineral license from Mr. Jim Laird, a former director and stockholder, for $10,000.
 
 As a non-Canadian individual or company cannot directly hold a mineral license in British Columbia, therefore it was initially held on behalf of the Company by Jim Laird (a former director). It was subsequently transferred to Esther Briner (a licensed prospecting agent and stockholder) in June 2006 who then transferred it to Coalharbour Consulting, Inc (“Coalharbour”), a licensed prospecting agent owned and controlled by Esther Briner (a stockholder) in July 2007. In December 2007, the license was transferred back to Jim Laird who holds the license on behalf of the Company.
 
 The claims on the mineral license are currently in good standing and are 100% owned by Flex Fuels, subject to a carried 3% Net Smelter Return Royalty if mineral production is commenced.
 Under the laws of the government of British Columbia regarding Mineral Tenure, the property can be held in perpetuity, provided all required governmental fees are paid in a timely manner.  Annual work requirements can be fulfilled by performing approved work or by payment of cash-in-lieu. Development of the property is subject to obtaining a work permit from the government for certain types of work beyond basic exploration sampling and geological studies. More advanced development programs may also require an environmental survey.
 
 F - 18
 The Sechelt First Nation Group (which represents the local Indian populace and is part of government in Canada) is brought into consultation at the work permit stage.  Additional government departments are also notified of the application for a work permit.  In general, the work permit process takes about 4 - 6 weeks, provided that it has been filed properly and fully.  There are no fees required to obtain a work permit.
  The duration of a work program must be stated on the permit application, and there are numerous regulations under the British Columbia Mineral Tenure Act 1996 (consolidated 2007) and the British Columbia Mineral Exploration Code which state how the work must be carried out.
 
 Prior to major production (not bulk-sampling), the mineral deposit area proposed for production must be surveyed and a mining lease obtained from the government of British Columbia.  Circumstances that may lead to relinquishing such rights include failure to determine profitable deposits, sale of the license and a lack of funding.
 
 Under the accounting treatment set forth in ASC 360, "Property, Plant and Equipment", because of the Company’s current period operating loss, its history of operating losses, a projection of continuing losses associated with the Malibu Gold property and the fact the property is without known reserves along with the fact the proposed program is exploratory in nature, the Company has treated the mining license as fully impaired.




NOTE 6 – Acquisitions
 
 WDX
 
 On May 1, 2009, we entered into an Investment Agreement (the “Investment Agreement”) with WDX Organisation Limited (“WDX”), a corporation incorporated under the laws of England and Wales, and the founding shareholders of WDX (the “Founders”), the owners of all of the issued and outstanding shares of WDX.  On the same date, we entered into a related Loan Agreement (the “Loan Agreement”) and a related Option and Funding Agreement (the “Funding Agreement”) with WDX.  The Investment Agreement, Loan Agreement and Funding Agreement are hereinafter collectively referred to as the “Agreements”. Pursuant to the Agreements we initially acquired 51% ownership of WDX. The cost of the initial investment was $74. WDX had no assets or liabilities or operations at the date of acquisition.
 
 WDX is the developer of a technology designed to mitigate currency risk (the “Product”).  Final development of the Product is in progress.  WDX has not achieved any operating revenues to date and does not expect to achieve operating revenues until such time, if ever, that the Product is successfully completed and marketed, hence it is a development stage entity.
 
 The Agreements provide for us to make loans to WDX in the minimum amount of approximately US$225,510 and the maximum amount of approximately US$902,040 and receive shares in WDX constituting a minimum of 51% and a maximum of 73% (subject to adjustment) of WDX’s outstanding share capital on a fully diluted basis.  The Agreements contain conditions which must be satisfied by WDX in connection with the loans.  Failure to satisfy such conditions could result in our receiving rights to acquire up to an additional 20% of WDX on a fully diluted basis, or 93% in total.
 
 The initial loan under the Agreements in the approximate amount of US$225,510 was made upon execution of the Agreements and resulted in our receipt of 51% of WDX’s fully diluted, outstanding share capital.  WDX is obligated to apply the Initial Loan proceeds and any subsequent loan proceeds to finance the development, marketing and sale of the Product.  On August 14, 2009 we provided a further £150,000 (approximately $247,800) to WDX by way of a loan and have exercised certain call options. On November 20, 2009 we loaned an additional £150,000 (approximately US$249,840) to WDX and increased our equity position in WDX. The loans were the result of our ongoing investment in WDX as contemplated by our May 1, 2009 Investment Agreement with WDX. During August, 2009 we exercised Call Option One, of Clause 5 of the original Investment Agreement dated May 1, 2009 as WDX was unable to satisfy certain conditions in connection with the loans.  Consequently, the Company received an additional 10% of the common stock of WDX, on a fully diluted basis, for the failure by WDX to satisfy the conditions attaching to the loans.  Altogether, these transactions have resulted in a total loan of £450,000 (approximately $717,000) to WDX and the ownership of 75.66% of WDX by the Company, as at the fiscal year ended December 31, 2009.
 F - 19
 FFE Ltd
 
 On May 29, 2007, Flex Fuels acquired the remaining 85% of FFE Ltd, a development stage company formed under the laws of England and Wales, for the purpose of diversifying the Company’s business. As a consideration for the acquisition of the shares, the Company issued an aggregate of 24,854,477 shares of its common stock, $0.001 par value to the stockholders of FFE Ltd.
  The Company has attributed a fair value of $22,369,000 on the shares issued based upon stock placed at $0.90 per share under the private placement completed on the same day. Flex Fuels had acquired its initial 15% holding in FFE Ltd in December 2006.
 
 The acquisition of FFE Ltd (a development stage company) has been accounted for not as part of a business combination but the purchase of assets and assumption of liabilities not qualifying as a business in accordance with ASC 805, “Business Combination”, Subtopic, “Definition of Business”. Management determined that FFE Ltd was not a business as it did not have a self-sustaining integrated set of activities and assets conducted and managed for the purpose of providing a return to investors.  In addition, FFE Ltd, the transferred set’s current activities are focused on the development of a planned business rather than the operation of a business.  Because the planned principal operations of FFE Ltd. had not yet commenced, the set is not a business in accordance with US GAAP.
 
 The assets acquired and liabilities assumed were recorded at fair value. Management undertook a review of intangible assets and concluded that the only potential intangible asset was the value of the business plan proposed by FFE Ltd and the ability of the FFE Ltd management to deliver that plan. Management then made an assessment as to whether this qualifies as a separately identifiable asset under US GAAP.
 
 For an asset to be identifiable it must either be separable and thus be capable of being sold, rented, licensed etc or the asset arises from contractual or legal obligations.
 
 The management concluded that the FFE Ltd business plan was not separately identifiable from FFE Ltd’s management and their ability to deliver the plan and neither the business plan nor management was subject to contractual obligations that could be capitalized. Additionally, because FFE Ltd had to further raise significant additional capital and secure numerous capital and operational contracts to execute the business plan the value of any such asset could not be measured reliably.
 
 Therefore management concludes that the cost of the purchasing the business plan and management‘s ability to deliver that plan cannot be capitalized and must therefore be expensed in the consolidated statements of operations in accordance with US GAAP as transaction costs in connection with asset acquisition.
 
 The Company had expensed the cost of the business plan acquired in the aggregate amount of $22,897,759 as transaction cost in connection with the asset acquisition of FFE Ltd. at the completion dates of these transactions. This amount has been reclassified and is included in loss from discontinued operations (see Note 3).
 
 Note 7 - Commitments and Contingencies
 
 Lease commitments
 
 The Company has no lease commitments.
 
 
 F - 20
 Employment agreements
 
 The Company terminated all employment agreements during the first half of 2009.  The Company has entered into consultancy agreements with certain management upon the discontinuance of FFE Ltd.’s operations and these consultancy agreements were effective on July 1, 2009 for a term of 12 months with an automatic extension of an additional 12 months.
  Consulting agreements
 
 The Company has entered into consulting agreements with outside contractors, certain of whom are also the Company’s stockholders and directors. The Agreements are generally for a term of one year or less from inception and renewable unless either the Company or Consultant terminates such agreement by written notice.  The Company incurred $392,035 and $187,512 in consulting fees to these individuals for the years ended December 31, 2009 and 2008, respectively. The Company incurred $655,383 in fees to these individuals for the period from March 10, 2006 (date of inception) through December 31, 2009.
 
 Litigation
 
 State Court Actions
  On July 24, 2008, Mr. Thomas Barr commenced an action (Case no. A568118) in the District Court of Clark County, Nevada (the “Court”) against our then CEO and Chairman of the Board, Mr. Brian Barrows, and a former director, Mr. James Laird ("Laird"), seeking declaratory and injunctive relief preventing Messrs. Barrows and Laird from taking actions Mr. Barr believed would be detrimental to the Company, including their taking control of the management of the Company. Mr. Barr's court action sought to preclude Mr. Laird, who had resigned as a director on May 16, 2008 from participating in any future meetings of the Board and to prevent Mr. Barr from being disciplined or otherwise punished for his filing on July 15, 2008, with the SEC, a current report on Form 8-K on behalf of the Company.  On the same date, Mr. Barr filed a motion for a Temporary Restraining Order and Preliminary Injunction seeking such relief on a temporary and preliminary basis pending a trial on the merits of the case.
  On July 28, 2008, the Court issued a temporary restraining order granting the relief sought by Mr. Barr and setting a non-evidentiary preliminary injunction hearing on the matter for August 11, 2008.  On August 1, 2008, Mr. Barr filed an amended complaint in this action to add the Company as a defendant.  On August 11, 2008, the Court held the non-evidentiary hearing, at which the Motion to Quash filed by Messrs. Barrows and Laird was denied and a Preliminary Injunction Hearing date was set for August 19, 2008.  On August 25, 2008, the parties executed a Stipulation and Order in which the parties stipulated to continue the Preliminary Injunction Hearing and to hold a shareholders’ meeting as soon as possible with respect to the election of directors.  A shareholders’ meeting was held on December 12, 2008 at which a slate of directors consisting of Mr. Barr, Mr. John Nangle and Mr. David Miller were elected. On January 25, 2010, Mr. Barr filed a Motion to Dismiss the Company from the case which was granted on March 1, 2010.
  On July 21, 2009 we commenced an action (Case No. A-09-595448-C) in the Court against our former corporate counsel, Mayer Brown, LLP, claiming relief for general and special damages in excess of $10,000 on each count of Professional Negligence, Breach of Fiduciary Duty and Breach of Contract, costs of the suit incurred including reasonable attorneys fees and such other relief as the court deemed just and proper. The costs of the action were not expected to exceed $500,000. On October 20, 2009 the Court granted a Motion to Dismiss filed by Mayer Brown, LLP on the grounds that the forum selection clause in the Company’s contract with Mayer Brown, LLP (as entered into by prior management) determined that any dispute, including relief for Professional Negligence, Breach of Fiduciary Duty and Breach of Contract, should be conducted in the U.K. courts. Accordingly, we have instructed our U.K. solicitors and Queens Counsel to evaluate a similar action in the U.K. to claim damages and the costs of the action against Mayer Brown, LLP, the ultimate outcome of which cannot be determined at this time.
  F - 21
 Federal Action
  The Company, along with Mr. Barrows, filed a complaint against Mr. Barr in federal district court (“the Federal Case”) in Nevada on October 7, 2008 (Case No. 2:08-cv-01358-KLD-RJJ) seeking compensatory and punitive damages and injunctive relief for, among other things, alleged breaches of his fiduciary duties as a director to the Company and its shareholders.  On October 30, 2008 Mr. Barr filed an answer to the complaint denying all of the material allegations set forth in the complaint and asserting affirmative defenses.  Subsequent to the shareholders’ meeting held on December 12, 2008 the Company’s directors, excluding Mr. Barr who recused himself (hereinafter referred to as the “Unaffected Directors”), commenced a review of the Federal Case and the facts and circumstances giving rise to its filing.  Such review included meetings with the Company's legal advisers, compiling and reviewing correspondence between the Company and its consultants, legal advisers, accountants, proxy solicitors and other persons relating to the litigation and the matters alleged therein, and discussions with Mr. Barr and other officers and employees of the Company.  In the course of their review, the Unaffected Directors examined such other records and matters as they deemed appropriate.  The Unaffected Directors concluded, and advised the Board, that the instigation and the continuation of the Federal Case was not in the best interest of the Company or its stockholders and recommended that the Company withdraw from the Federal Case which it did on February 11, 2009. The Federal Case remained active however, as Mr. Barrows did not elect to withdraw his claims against Mr. Barr.  On May 29, 2009 Mr. Barr applied for summary judgment in the Federal Case to dismiss Mr. Barrows’ remaining claims. Mr. Barrows did not offer a defense. On June 6, 2009 Mr. Barrows’ counsel applied to be withdrawn from the Federal Action. On October 16, 2009 Summary Judgment was granted by the Court in favor of Mr. Barr against Mr. Barrows, the court having dismissed Mr. Barrows’ remaining claims on finding that Mr. Barrows had no standing to bring those claims and, in any event, Mr. Barr had not violated the Computer Fraud and Abuse Act and the Stored Communications Act, as alleged by Mr. Barrows.
  Further, at the suggestion of the Unaffected Directors, on February 24, 2009, Brian Barrows was terminated as an employee of the Company’s subsidiary, Flex Fuels Energy Ltd. and has been removed as a director of Flex Fuels Ltd. by UK company law statutory process. We believe it is unlikely that Brian Barrows has any valid claims against Flex Fuels Energy Ltd.
 From time to time we may be a defendant and plaintiff in various other legal proceedings arising in the normal course of our business. Except as disclosed above, we are currently not a party to any material legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings. In addition, we are not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Furthermore, as of the date of this Annual Report, our management is not aware of any proceedings to which any of our directors, officers, or affiliates, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has a material interest adverse to us.
  Note 8 - Stockholders’ Equity
 
 The Company is authorized to issue 500,000,000 shares of its common stock, with par value of $.001 per share.  As of December 31, 2009 and 2008 there were 44,525,964 and 69,380,441 shares of common stock issued and outstanding, respectively.
 
 On March 10, 2006, the Company issued 60,000,000 shares of common stock to the founders for $10,000.
 
 On December 18, 2006, the Company issued 412,038 shares of common stock to Mr. Tom Barr in recognition of services provided to the Company as director. The Company has recognized compensation expense of $48,000 based upon a fair value of $0.1167 per share of its common stock based on the price of shares issued in the subsequent private placement on December 29, 2006.
 
 F - 22
 On December 29, 2006, the Company completed a private placement of 14,142,846 shares of common stock at $0.1167 per share to independent third parties. The Company received $1,635,000 net of legal costs of $15,000.
 
 On April 26, 2007, the Company (formerly, Malibu Minerals, Inc.) filed with the Secretary of State of the State of Nevada a Certificate of Amendment to its Articles of Incorporation (the “Amendment”) that was effective as of the same date. The Amendment was filed to increase the authorized common stock of the Company from 100,000,000 shares to 500,000,000 shares and to create 10,000,000 shares of “blank check” preferred stock, $0.001 par value per share.
  On May 11, 2007, the Stockholders of the Company, without direction from the Company, undertook a re-organization of their respective shareholdings by retiring varying percentages of their stock. In total 51,685,723 shares of common stock were retired.  As Mr. Tom Barr was not required to retire any stock and therefore gained additional common stock in the stock split on May 21, 2007.  The Company attributed the fair value of approximately $308,000 under compensatory arrangements based upon a fair value of $0.90 per share of common stock – the price of shares issued in the subsequent private placement on May 29, 2007.
 
 On May 21, 2007, the Board of Directors declared a stock split, in effect 6 for 1 stock split, distributable on May 22, 2007, in the form of a dividend of five additional shares of the Company's common stock for each share owned by stockholders of record at the close of business on May 21, 2007.   All references in the accompanying consolidated financial statements and notes thereto have been retroactively restated to reflect the stock split, unless explicitly stated otherwise.
 
 The stock retirement, stock dividend and stock split was agreed by the individual shareholders and the Company.  The consideration given to these shareholders was that the Company would effectively raise the required funds in the subsequent private placement and complete the acquisition of FFE Ltd.
 
 On May 22, 2007, the Company issued 137,344 shares of common stock to Mr. Tom Barr in recognition of services provided to the Company as director. The Company has recognized compensation expense of $124,000 based upon a fair value of $0.90 per share of its common stock based on the price of shares issued in the subsequent private placement on May 29, 2007.
 
 On May 25, 2007, Mr. Tom Barr acquired 200,000 shares of common stock from a stockholder at a discount to market value as compensation for providing certain services. The Company has attributed a fair value of $178,000 to the transaction under compensatory arrangements based a fair value of $0.90 per share of common stock from shares issued in the subsequent private placement on May 29, 2007 less the amount paid by Mr. Barr.
 
 On May 29, 2007, the Company completed a private placement of 16,582,621 shares of common stock at $0.90 per share to independent third parties. The Company received $13,392,000 net of placement costs of $1,492,000 and legal costs of $40,000.
 
 On May 29, 2007, the Company completed the acquisition of FFE Ltd and issued 24,854,477 shares of its common stock to the stockholders of FFE Ltd. The Company has attributed a fair value of $22,369,000 on the shares issued based on stock placed at $0.90 per share under the private placement completed on the same day.
 
 On July 29, 2007, the Company closed on a private placement offering in which it sold an aggregate of 4,871,838 shares (the “Shares”) of its common stock, $0.001 par value per share (the “Common Stock”), at a price of $0.90 per share for aggregate net proceeds of approximately $3,941,000
 
 F - 23
 International Capital Partners SA (“ICP”) acted as the placement agent for the offering. The Company paid the following fees in connection with the offering (i) a commission equal to approximately $438,000 paid to ICP representing 10% of the proceeds; and (ii) approximately $6,000 in legal and miscellaneous fees. The net proceeds of the offering are expected to be used as by the Company as working capital and for general corporate purposes.
 
 At December 31, 2007, the Company had set aside $34,000 in recognition of the fair value of 65,000 shares of its common stock to be issued to Mr. Paul Gothard, the former chief financial officer, upon the completion of four financial filings as per his employment agreements. The estimate of fair value is based on a value of $0.90 per share (the market value of a share at the date of grant) and is being amortized over 12 months, the vesting period to May 2008. These shares have not been included in the Earnings per Share calculation for the year ended December 31, 2007.  Such shares have been issued and expensed during the year ended December 31, 2008.
 
 On June 5, 2009 the Company repurchased and retired 16,989,136 shares of common stock for a purchase price of $131,025.
 
 On October 9, 2009 the Company repurchased and retired 7,865,341 shares of common stock for a purchase price of $62,923. The purchase agreement requires us to indemnify the seller against all claims, liabilities and assessments, if any, against the seller for additional capital gains tax imposed by HM Revenue and Customs (“HMRC”) based upon a determination by HMRC that the shares shall be deemed for tax purposes to have been sold for a purchase price in excess of $0.008 per share.  In such instance, the indemnification will not cover the capital gains tax due with respect to the first $0.008 per share of the deemed sales price.  We believe it is unlikely that there will be any significant losses as a result of this indemnification.
 Note 9 - Warrants
 
 Effective October 22, 2009 we issued an aggregate of 10,100,000 warrants to members of our management and a key consultant, each exercisable, upon vesting, for the purchase of one share of our common stock for a period of seven years at an exercise price of $0.07 per share.  The warrants contain cashless exercise and piggyback registration provisions and are subject to adjustment in the event of stock splits, recapitalizations or reclassifications of our common stock.  5,200,000 of the warrants (the “Time Warrants”) vest as follows:
 
 
 i.
25% upon issuance;ii.
25% on December 31, 2009;iii.
25% on December 2010; andiv.
25% on December 31, 2011.
 
 The vesting of 2,450,000 of the remaining 4,900,000 warrants is subject to our achieving an average closing price for our common stock of at least $0.45 per share over a period of twenty consecutive trading days on or prior to October 21, 2012 and the vesting of the remaining 2,450,000 warrants is subject to our achieving an average closing price for our common stock of at least $1.00 per share over a period of twenty consecutive trading days on or prior to October 21, 2012.  The 4,900,000 warrants subject to our achieving average minimum closing prices for our common stock are hereinafter referred to as the “Price Warrants”.
 
 We have recorded an expense of $163,550 during 2009 related to the fair value of the warrants vested during that period, using the Black-Scholes method based on the following weighted average assumptions:  (1) risk free interest rate of 3.2%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 243%; and (4) an expected life of the warrants of 4.9 years.
 
 F - 24
 
 Transactions involving our stock warrants are summarized as follows:
 
 2009


2008Number


Weighted

Average

Exercise Price


Number


Weighted

Average Exercise

PriceOutstanding at beginning of the period


—


$
—



—


$
—Granted during the period


10,100,000



0.07



—



—Exercised during the period


—



0.07



—



—Terminated during the period


—



—



—



—Outstanding at end of the period


10,100,000


$
0.07



—


$
—Exercisable at end of the period


2,600,000


$
0.07



—


$
—
 
 The weighted average remaining life of the warrants is 6.9 years.
  Note 10 - Income Taxes
 
 The Company utilizes ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.
 
 At December 31, 2009, the Company has available for U.S federal income tax purposes a net operating loss carry forward of approximately $26,443,000 expiring in the year 2029, subject to limitations of Sections 382 of the Internal Revenue Code, as amended that may be used to offset future taxable income.  The deferred tax asset related to the carrying forward is approximately $9,255,000.  The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized.  Due to significant changes in the Company’s ownership, the future use of its existing net operating losses may be limited. Components of deferred tax assets as of December 31, 2009 are presented below.
 
 For income tax reporting purposes, the Company has available for UK unused net operating loss carry forward of approximately $5,629,000 with no expiration.  The Company has provided a valuation reserve against the full amount of UK unused net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized.
 
 The provision for income taxes differ from the amount of income tax determined by applying the applicable U.S statutory rate to losses before income tax expense for the years ended December 31, 2009 and 2008 as follows:
 
 December 31,2009


2008Statutory federal income tax rate


35.0
%


35
%Statutory state and local income tax rate (0%), net of federal benefit


-



-Nondeductible items


(4.9
%)


(-)Net operating losses and other tax benefits for which no current benefit is being realized


(30.1
%)


(35
%)Effective tax rate


0.00
%


0.00
%
 
 F - 25
 
 Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following:
 Inception (March 10,Years ended


2006) toDecember 31,


December 31,2009


2008


2009Deferred tax assets:Net operating loss carry forward

$
803,000


$
1,324,000


$
10,831,000Less:  valuation allowance

$
(803,000
)

$
(1,324,000
)

$
(10,831,000
)Net deferred tax asset

$
-


$
-


$
-
 
 Note 11 - Subsequent Events
 
 Bio AMD Holdings Limited Acquisition:
 
 On February 25, 2010, we entered into a Subscription and Shareholders Agreement with Bio AMD Holdings Limited (“Bio AMD”), a United Kingdom company, and the managers of Bio AMD, under which we acquired a 63% interest in Bio AMD for £865,000 British Pounds Sterling (approximately US$1,286,775). Bio AMD is a development stage company, formed in February 2010, which, through its operating subsidiary, Bio Alternative Medical Devices Ltd. (“Bio-Medical”), principally operates in the Point of Care (“POC”) diagnostic space. Bio AMD owns three patents and three patent applications on technologies which it expects to enable it to develop highly accurate, low cost, hand held electronic diagnostic devices capable of reading third party assays. If successfully developed, Bio AMD expects to lease their technologies and devices to international manufacturers and distributors.
 
 The 37% of Bio AMD not owned by us is owned by Dr. Nasser Djennati (12.33%), Dr. Andrew Mitchell (12.33%) and Robert Galvin (12.33%). Bio AMD’s board of directors presently consists of Drs. Djennati and Mitchell and Mr. Galvin and may be expanded to provide for a fourth director to be appointed by us. Drs. Djennati and Mitchell and Mr. Galvin also serve as Bio AMD’s managers. Mr. Galvin is also an officer and director of ours but did not participate in the determination to proceed with the Bio AMD acquisition.
 WDX notice of call option:
 
 On March 8, 2010, we entered into a second Call Option and Draw Down Agreement with WDX pursuant to which we loaned an additional £150,000 (approximately US$224,055) to WDX and executed certain call options. The execution of the call option was the result of WDX not satisfying certain performance criteria in our May 1, 2009 Option and Funding Agreement with WDX and required us to make a nominal payment to them (approximately $500) in return for an additional 10% of their equity. As the result thereof, we increased our equity position in WDX to 93% which represents our maximum ownership position in WDX. The loan was our final investment in WDX as contemplated by our May 1, 2009 Investment Agreement with WDX.
 
 We have evaluated subsequent events through the date of issuance of the consolidated financial statements.