ITEM 1. BUSINESS
HISTORY AND COMPANY OVERVIEW
Free Flow, Inc. (the "Company" or "Free Flow") was incorporated on October 28, 2011 under the laws of State of Delaware to enter into the green energy industry. The Company began with the idea several business ideas but none of the contracts was not effectuated due to the inability of the parties involved to comply with the terms of the contract(s).
In February 2015, the company incorporated a subsidiary, Promedaff, Inc. and purchased a skin care product line and formulations for $2,000,000 against a promissory note. An e commerce platform was set up for sales and marketing. The efforts did not bear any success and the entire inventory was sold through the Seller and the Promissory Note was cancelled and marked “VOID”. The name of this entity has been changed to Motors & Metals, Inc. and has remained inactive but is in good standing. Motors & Metals, Inc. intends to operate as a separate entity to conduct business in refurbishing automotive engines and selling metals recovered from MMM Auto Parts facility, and have an independent profit center.
As reported in 10Qs for the earlier quarters, on February 4, 2016 the company incorporated another subsidiary in the State of Virginia under the name JK Sales, Corp. and entered in to an agreement with Al-Mustafa Enterprise, Inc. in King George, Virginia to act as Managing and Sales Agent. On August 24, 2016 JK Sales, Corp. Bought the book of business and trade name namely MMM Auto Parts and took over the facility under a long term lease arrangement.
This company is thus fully focused on the used parts business and has become known as an OEM Recycled Auto Parts seller.
The Company's capitalization is 100,000,000 common shares with a par value of $0.0001 per share and 20,000,000 preferred shares with a par value of $ 0.0001 per share.
Of the 20,000,000 authorized preferred shares, the Company has designated:
10,000 shares as "Preferred Shares - Series A". Each share of "Preferred Shares - Series A" carries voting rights equal to ten thousand (10,000) votes. In other words, the 10,000 "Preferred Shares - Series A" collectively have a voting right equal to one hundred million (100,000,000) common shares of the Corporation.
500,000 shares as “Preferred Shares - Series B”. These preferred shares - Series "B" were assigned the following preferences:
a)
Each share to carry one vote.
b)
Each share will be redeemable with a 365 days written notice to the company.
c)
Each share will be junior to any debt incurred by the Company.
d)
The redemption value will be the par value at which such "preferred shares - series B" are bought by the subscriber.
e)
Each share will carry a dividend right at par with the common shares.
On December 31, 2014 the Company had a Note outstanding in the principal amount of $330,000 plus interest payable to GS Pharmaceuticals, Inc., (a related party). On March 31, 2015, by mutual consent this note and accrued interest was converted to 330,000 preferred shares - Series "B"
On March 31, 2015 an amount of $58,000 was subscribed by Redfield Holdings, Ltd. by cancellation of a Note against the issuance of 9,700 shares of preferred shares - Series "A". These shares were issued to Redfield Holding, Ltd. thus making a total of entire designated preferred shares - Series "A" shares to Redfield Holdings, Ltd. Each share of preferred shares - Series "A" carries voting right equal to 10,000 common shares.
On November 22, 2011, the Company issued a total of 25,000,000 shares of common stock to one director for cash in the amount of $0.0008 per share for a total of $20,000.
On December 6, 2011, the Company issued a total of 1,200,000 shares of common stock to Garden Bay International for cash in the amount of $0.000833 per share for a total of $1,000.
On August 1, 2014, the Company issued 300 Preferred Shares--Series A stock issued to Redfield Holdings, Ltd. for $1 each for a total of $300.
On March 31, 2015, the Company issued 9,700 Preferred Shares-Series A issued to Redfield Holdings, Ltd. for a total sum of $ 58,000.00.
As of April 15, 2015, the Company had 26,200,000 shares of common stock issued and outstanding and 10,000 Preferred Shares - Series A and 330,000 Series B shares issued and outstanding.
COMPANY OVERVIEW
INCORPORATION OF SUBSIDIARIES
On January 24, 2015, Free Flow, Inc. incorporated Promedaff, Inc. in the state of Virginia as a wholly-owned subsidiary. This subsidiary purchased a skin care product line and set up an e commerce platform for sale. The marketing efforts did not succeed, thus the entire transaction was reversed. Promedaff, Inc. changed its name to Motors & Metals, Inc. and is looking into developing business to refurbish automobile engines and sell precious metals extracted from catalyst converters recovered from salvaged automobiles.
On February 4, 2016, Free Flow, Inc. incorporated JK Sales, Corp. in the state of Virginia as a wholly-owned subsidiary.
The business description and plan entails:
1)
Purchasing end of life and salvage titled automobiles, having them disassembled at its facility and sell presorted automobile parts through a "parts locator network" over the internet which is a very sophisticated Inventory Management System. www.mmmautopartsva.com
2)
Selling used auto parts to Auto Body & Repair centers. JK Sales, Corp. has set up its marketing & sales department. The inventory is purchased on line concurrent to being sold on line or over the telephone.
NUMBER OF PERSONS EMPLOYED
As of December 31, 2016 we have nine employees.
DESCRIPTION OF PROPERTIES/ASSETS
We do not own any properties. The subsidiary JK Sales, Corp. has leased a 19+ acre facility zoned as automobile recycling facility. The lease is for 25+ years.
ITEM 1A.
ITEM 1A. RISK FACTORS
Not Applicable.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2.
ITEM 2. PROPERTIES
FACILITIES. The corporate office of the Company is leased by the CEO , Inc. at 2301 Woodland Crossing Drive, Suite #155, Herndon, VA 20171. Until February 2016 the space is provided by the Company's President but since the beginning of active business of JK Sales, Corp. approximately $1,600.00 rent is paid by the Company.
JK Sales, Corp. operates from a 19+ acre facility located at 6269 Caledon Road, King George, VA 22485. The amount of the lease is $5,400 per month and the initial insurance for property and liability is covered by the Landlord.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings nor do we have any knowledge of any threatened litigation.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
On April 3, 2013, the Company's common stock was accepted for trading by FINRA on the OTCBB and the Over-the-Counter Markets OTCBB and was assigned the symbol is "FFLO".
The following table sets forth the range of high and low closing prices for the common stock of each full quarterly period during the years ended December 31, 2016 and 2015. The quotations were obtained from information published by the FINRA and reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
HOLDERS
There are approximately 67 shareholders of record of our common stock as of December 31, 2016.
DIVIDEND POLICY
Holders of our common stock are entitled to receive such dividends as may be declared by our board of directors. We have not declared or paid any dividends on our common shares and it does not plan on declaring any dividends in the near future. The Company currently intends to use all available funds to finance the operation and expansion of its business.
RECENT SALES OF UNREGISTERED SECURITIES
On March 30, 2015, the Company issued 9,700 shares of Preferred Shares - Series A stock to Redfield Holdings, Ltd. for a total of $58,000. On December 31, 2014 the Company had a Note outstanding in the principal amount of $330,000 plus interest payable to GS Pharmaceuticals, Inc., (a related party). On March 30, 2015 by mutual consent this note and accrued interest was converted to 330,000 preferred shares - Series "B".
ISSUER PURCHASES OF EQUITY SECURITIES
The Company did not repurchase any shares of its common stock during the years ended December 31, 2016 and 2015
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENTS' DISCUSSION AND ANALYSIS THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN.
THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS, SUCH AS STATEMENTS RELATING TO OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS, PLANS, OBJECTIVES, FUTURE PERFORMANCE AND BUSINESS OPERATIONS. THESE STATEMENTS RELATE TO EXPECTATIONS CONCERNING MATTERS THAT ARE NOT HISTORICAL FACTS. THESE FORWARD-LOOKING STATEMENTS REFLECT OUR CURRENT VIEWS AND EXPECTATIONS BASED LARGELY UPON THE INFORMATION CURRENTLY AVAILABLE TO US AND ARE SUBJECT TO INHERENT RISKS AND UNCERTAINTIES. ALTHOUGH WE BELIEVE OUR EXPECTATIONS ARE BASED ON REASONABLE ASSUMPTIONS, THEY ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND THERE ARE A NUMBER OF IMPORTANT FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. BY MAKING THESE FORWARD-LOOKING STATEMENTS, WE DO NOT UNDERTAKE TO UPDATE THEM IN ANY MANNER EXCEPT AS MAY BE REQUIRED BY OUR DISCLOSURE OBLIGATIONS IN FILINGS WE MAKE WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE FEDERAL SECURITIES LAWS. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM OUR FORWARD-LOOKING STATEMENTS
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S REPORT ON THE COMPANY'S FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016 INCLUDES A "GOING CONCERN" EXPLANATORY PARAGRAPH THAT DESCRIBES SUBSTANTIAL DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN.
PLAN OF OPERATIONS
We have only recently generated limited revenues. We will need substantial additional capital to support our proposed future operations. We have limited revenues. We have no committed source for any funds as of date hereof, no representation is made that any funds will be available when needed. In the event funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve sales, and could fail in business as a result of these uncertainties.
RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2016 COMPARED TO THE YEAR ENDED DECEMBER 31, 2015
During the year ended December 31, 2016, the Company recognized $551,181 in gross revenues. During the year ended December 31, 2015, the Company recognized no revenues.
During the year ended December 31, 2016, the Company incurred operational expenses of $315,153. During the year ended December 31, 2015, the Company incurred operational expenses of $81,092. The increase of approximately $234,000 was primarily a result of an increase in salary and other operating expenses.
During the year ended December 31, 2016, the Company recognized a net profit of approximately $134,000 compared to a net loss of $417,325 during the year ended December 31, 2015.
LIQUIDITY
The independent registered public accounting firm’s report on the Company’s financial statements as of December 31, 2016 and for each of the years in the two-year period then ended, including a “Going Concern” explanatory paragraph that raises substantial doubt about the Company’s ability to continue as a going concern.
At December 31, 2016, the Company had total current assets of $274,357 consisting of $3,718 in cash, advance for prepaid expense for purchase of parts of $14,224, Inventory of $200,060, pre-paid rent for the JK Sales, facility of $48,600 and trade receivables of $7,755 from a number of customers. At December 31, 2016, total current liabilities were $203,930 consisting of $73,156 in accounts payable and notes payable to related party of $130,773. During the year ended December 31, 2016, the Company used $132,412 in funds in its operational activities. During the year ended December 31, 2016, the Company recognized a net profit of $134,292. During the year ended December 31, 2015, the Company used $82,134 in its operations which include a net loss of $417,325.
The Company's capitalization is 100,000,000 common shares with a par value of $0.0001 per share and 20,000,000 preferred stock, with a par value of $ 0.0001 per share. The Company has no material commitments for capital expenditures within the next year, however if operations expand, substantial capital will be needed to pay for participation, investigation, acquisition and working capital
NEED FOR ADDITIONAL FINANCING
The Company does not have capital sufficient to meet its cash needs. The Company will have to seek loans or equity placements to cover such cash needs.
No commitments to provide additional funds have been made by the Company's management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover the Company's expenses as they may be incurred.
SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin Topic 13, revenue recognition and FASB ASC 605-15-25, revenue recognition. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.
EARNINGS PER SHARE
The Company has adopted ASC 260-10-50, earnings per share, which provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Basic and diluted losses per share were the same at the reporting dates as there were no common stock equivalents outstanding at December 31, 2016 or December 31, 2015.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of Free Flow Inc. for the two-years ended December 31, 2016 and 2015 starting on page 9.
EAST WEST ACCOUNTING SERVICES, LLC
11583 SW 253 STREET
PRINCETON, FL 33032
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Free Flow, Inc.
We have audited the accompanying balance sheet of Free Flow, Inc. as of December 31, 2016 and the related statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance 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 audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred above present fairly, in all material respects, the financial position of Free Flow, Inc.as of December 31, 2016, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This Company reports a profit of $ 134,291 from operations in 2016, a positive cash flow of $ 3,044 from operations in 2016, and a stockholders' deficiency of $ 256,073 as of December 31, 2016.
/s/ East West Accounting Services, LLC
Princeton, Florida
March 31, 2017
Paritz & Company, P.A
15 Warren Street, Suite 25
Hackensack, New Jersey 07601
(201) 342-7753
Fax: (201) 342-7598
E-Mail: PARITZ@paritz.com
Certified Public Accountants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Free Flow, Inc.
We have audited the accompanying balance sheet of Free Flow, Inc. as of December 31, 2015 and the related statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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 audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Free Flow, Inc.as of December 31, 2015, and the results of its operations and cash flows for the year ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As described in Note 3 the Company has generated minimal revenues since inception. In addition the Company incurred cumulative net losses of $507,530 since inception and has incurred a net loss of $417,325 during the year ended December 31, 2015. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Paritz & Company, P.A.
Hackensack, New Jersey
April 15, 2016
FREE FLOW, INC.
Balance Sheet
The accompanying notes are an integral part of these financial statements
FREE FLOW, INC.
Statements of Operations
The accompanying notes are an integral part of these financial statements
FREE FLOW, INC.
Statement of Changes in Shareholders' (Deficit)
The accompanying notes are an integral part of these financial statements
FREE FLOW, INC.
Statements of Cash Flows
The accompanying notes are an integral part of these financial statements
FREE FLOW, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Free Flow, Inc. (the "Company") was incorporated on October 28, 2011 under the laws of State of Delaware. The Company is primarily focused on the business of Used Auto Parts - OEM Recycled. At the 19+ acre facility, which it has leased in King George, Virginia on long-term basis, Free Flow, Inc. through its wholly owned subsidiary, namely, JK Sales, Corp. d/b/a MMM Auto Parts, disassembles salvaged automobiles and sells presorted automobile parts through a "parts locator network" over the internet which is a very sophisticated Inventory Management System. www.mmmautopartsva.com . The Company also owns the formulation and trademark - HYGIENiQ for an Aerosol that eliminates smoke odor, mold and mildew and is useful in automobiles and home applications.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATIONS
The statements were prepared following generally accepted accounting principles of the United States of America consistently applied.
USE OF ESTIMATES:
Use of estimates: Management uses estimates and assumptions in preparing these financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.
CASH AND CASH EQUIVALENTS
Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Equipment and fixtures are being depreciated using the straight-line method over the estimated asset lives, 5 year.
INTANGIBLE ASSETS
Initial Measurement
Intangible asset acquisitions in which the consideration given is cash are measured by the amount of cash paid, which generally includes the transaction costs of the asset acquisition. However, if the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued), measurement is based on either the cost which shall be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable.
FREE FLOW, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Subsequent Measurement
The company accounts for its intangible assets under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification Subtopic ("ASC") 350-30-35 "Intangibles--Goodwill and Other--General Intangibles Other than Goodwill-Subsequent Measurement". Under this method the company is required to test an indefinite-lived intangible asset for impairment on at least an annual basis. This is done by comparing the asset's fair value with its carrying amount. If the carrying amount exceeds the asset's fair value, the difference in those amounts is recognized as an impairment loss. The Company impaired the trade-mark as of December 31, 2015.
INCOME TAXES:
The Company accounts for its income taxes in accordance with FASB Accounting Standards Codification ("ASC") No. 740, "Income Taxes". Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.
FINANCIAL INSTRUMENTS
Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. ASC 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. FASB ASC 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:
·
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.
·
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
·
Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.
FREE FLOW, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The carrying amounts reported in the balance sheet for cash, accounts payable and notes payable approximate their estimated fair market value based on the short-term maturity of this instrument. In addition, FASB ASC 825-10-25 "Fair Value Option" was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.
NET LOSS PER SHARE Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share.
RECENTLY ISSUED ACCOUNTING PROUNCEMENTS
In May 2014, the FASB issued ASU 2014-09, which establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The ASU allows for the use of either the full or modified retrospective transition method, and the standard will be effective for us in the first quarter of our fiscal year 2019, although early adoption is permitted. We are currently evaluating the impact of this new standard on our consolidated financial statements, as well as which transition method we intend to use.
In May 2014, the FASB issued ASU No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under accounting principles generally accepted in the United States of America. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB approved a one-year deferral of the effective date of ASU 2014-09, which will be effective for the Company in the first quarter of fiscal year 2019 and may be applied on a full retrospective or modified retrospective approach. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures, including which transition method it will adopt.
In August 2014, the FASB issued ASU 2014-15, which requires that management evaluate the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. Disclosure is required if there is substantial doubt about the entity's ability to continue as a going concern. The standard will be effective for us in the fourth quarter of our fiscal year 2017, although early adoption is permitted. We do not expect that the adoption of this ASU will have a significant impact on our consolidated financial statements.
FREE FLOW, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016
NOTE 3 - GOING CONCERN
The financial statement of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated minimal revenue since inception. In addition the Company has incurred cumulative net losses of $373,239 since its inception and has earned a profit of $134,292 during the year ended December 31, 2016. The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
NOTE 4 - PROVISION FOR INCOME TAXES
Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carry-forwards are expected to be available to reduce taxable income. As the achievement of required future taxable income is uncertain, the Company recorded a valuation allowance. As of December 31, 2016 the Company had a net operating loss carry-forward of approximately $171,298. Net operating loss carry-forward, expires twenty years from the date the loss was incurred.
The Company is subject to United States federal and state income taxes at an approximate rate of 34%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company's income tax expense as reported is as follows:
Free Flow, Inc.
Tax Calculations
FREE FLOW, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred income taxes arise from temporary differences in the recognition of income and expenses for financials reporting and tax purposes. The significant components of deferred income tax assets and liabilities at December 31, 2016 and December 31, 2015 are as follows:
The Company has approximately $256,073 of Net Operating loss carry forward ((NOL). The Company has recognized a valuation allowance for the deferred tax asset resulting from the NOL’s since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years. The valuation allowance is reviewed annually. When circumstances change and which cause a change in management's judgment about the realizability of deferred income tax assets, the impact of the change on the valuation allowance is generally reflected in current operations.
NOTE 5 - INVENTORY
The cost of recycled OEM inventory is established based upon the price the Company pays for a vehicle, including storage and towing fees, as well as expenditures for buying and dismantling vehicles. After the vehicles are disassembled, the value assigned to the salvaged parts and scrap is determined by using the average cost to sales percentage at the dismantling facility and applying the same percentage to the facility’s inventory at expected selling prices. The average cost to sales percentage is derived from Company’s historical and estimated sales.
All inventory is recorded at the lower of cost or market. Experienced professional staff reviews the selling price on an ongoing basis.
NOTE 6 - TRADE MARK
On July 31, 2014, the Company purchase "HYGIENiQ", the trade mark AMOUNTING $250,000 from GS Pharmaceutical, Inc., a related party. The ownership rights to produce, market and sell globally of the HYGIENiQ products and the rights and privileges in regard to ownership of the trade mark, i.e., HYGIENiQ (registered or unregistered) were sold, assigned and transferred to the Company. The consideration for all of the above included all advertisement and sales promotion material including but not limited to website, videos for infomercials etc. In 2015, the trademark was impaired due to lack of sale as noted in notes. During the year 2015 the Company recorded a full amount of impairment.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
There are no commitments and contingencies that exist at present.
NOTE 8 - PREPAID RENT
The Company entered a long term lease agreement for the 19+ acre facility in King George, VA, at which location the business operations of its subsidiary company namely JK Sales, Corp. are being conducted. As part of the agreement the landlord recognized and confirmed having received an advance rent payment in the amount of $54,000 plus $10,800 for the first and last month’s rent.
FREE FLOW, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016
NOTE 9 - TAX RETURNS
The company has not yet filed the tax returns. Arrangements are being made to file the tax returns and is expected to file shortly.
NOTE 10 - INVENTORY PURCHASE PROCEDURE AND POLICY:
The salvaged and/or end of life automobiles are sources from:
Auto dealers: The anchor supplier namely, King George Motors has allowed viewing access to their supply sources which are various auctioneers. The Vice President of Inventory and the Vice President of Marketing & Sales along with the Vice President of Purchases and Procurement browse on the internet the forthcoming automobiles at the auctioneer’s site. Notes are prepared to pick and choose the desired automobile. CEO’s final approval is sought to determine a final bid price is which is then submitted to the Auto dealer... Thus in coordination with the Auto dealer bids are submitted and the deals are closed if the bids are accepted.
Walk In trades: Individuals walk in and offer their vehicles for sale. The Vice President for Purchases in consultation with the Vice President of Marketing & Sales conclude the deal by offering the best lowest price. The final purchase is approved by the CEO.
NOTE 11 - SALES DISCOUNT & RETURN POLICY
The industry standard provides a 100 days return policy for exchange or refund if exchange is not possible due to non-availability of the item sold. If goods are returned within three days a re-stocking charge of 15% is levied. For items that are sold on “as is” basis there is no return or exchange policy.
Exceptions are allowed if proposed by the Vice President of Marketing & Sales with final approval by the CEO. Judgment call is made at the management level to ensure that the relationship with the existing customer is not jeopardized. Sales return are insignificant, thus no reserves have been provided for as yet.
NOTE 12 - BUDGET & INTERNAL CONTROL PROCEDURES
Internal control procedures for inventory and cash control are being developed and implemented on an ongoing basis to ensure higher levels of performances. Surveillance and monitoring cameras have been installed at strategic locations and can be monitored from remote as well. Management has submitted to the Board of Directors a detailed financial budget for the next 12 months and is pending approval. The summary of the projected figures for the subsidiary company are as follows: [please read in conjunction with “forward looking statement” disclosure on page 4 above].
JK Sales Corp.
Projected Income & Expense Statement
FREE FLOW, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016
NOTE 13 - PAYROLL PROCEDURE
All employees are paid on weekly basis with a one week hold. The hours are logged in on time sheet punched by a time clock. The payroll is submitted to an independent payroll company that processes the payroll, determines the taxes to be withheld and paid. The batch of checks is sent to the facility by courier and taxes are deposited directly by the payroll company through a ACH debit process. Thus the withheld taxes are paid on time and periodical reports submitted by the Payroll Company. These services are received against payment of a nominal fee charged by the payroll company on weekly basis.
The Company does not allow any overtime, thus no overtime payments are involved.
NOTE 14 - MISCELLANEOUS INFORMATION
a)
The insurance for fire and theft is provided by the landlord.
b)
The company is using an automobile for business purposes which has been provided by the CEO. The amount of actual lease payment with is approximately $100.00 per month is reimbursed to the CEO.
NOTE 15 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 2016 and 2015, the Company received loans totaling $130,773 and $75,621 respectively from Redfield Holdings, Ltd. These loans are non-interest bearing with principle balance due prior to December 30, 2016.
Out of the Twenty Million (20,000,000) Authorized Preferred shares of the Corporation, Five Hundred Thousand (500,000) shares of Preferred shares of the corporation were designated as “Preferred Shares - Series B”. Each share of "Preferred Shares - Series B" have the following preferences attached to it:
a)
Each share to carry one vote.
b)
Each share will be redeemable with a 365 days written notice to the company.
c)
Each share will be junior to any debt incurred by the Company.
d)
The redemption value will be the par value at which such “preferred shares - series B” are bought by the subscriber.
e)
Each share will carry a dividend right at par with the common shares.
NOTE 16 - ACQUISITION AND DISPOSITION OF ASSETS.
ACQUISITION
The Company acquired three delivery truck that have been registered in the name of JK Sales, Corp. for a total consideration of $3,500.
DISPOSITION
No assets were disposed during the year 2016.
FREE FLOW, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2016
NOTE 17 - CAPITAL STOCK
The Company is authorized to issue 100,000,000 common shares with a par value of $0.0001 per share and 20,000,000 preferred stock, with a par value of $ 0.0001 per share.
Of the 20,000,000 authorized Preferred Stock, the Company has designated 10,000 shares as "Preferred Shares - Series A". Each share of "Preferred Share - Series A" carries voting rights equal to ten thousand (10,000) votes.
On August 1, 2014, the Company issued 300 Preferred Shares--series A to Redfield Holdings Ltd. for $1 each for a total of $300.
On March 30, 2015, the Company issued 9,700 Preferred Shares - Series A to Redfield Holdings Ltd., a related party, to conversation of debt totaling $58,000
On December 31, 2014 the Company had a Note outstanding in the principal amount of $330,000 plus interest payable to GS Pharmaceuticals, Inc., a related party. On March 31, 2015, by mutual consent this note and accrued interest was converted to 330,000 preferred shares - Series "B"
As of December 31, 2016, the Company had 26,200,000 shares of common stock issued and outstanding and 10,000 shares of preferred Series ‘A” and 330,000 shares of Series “B” issued and outstanding.
ITEM 9.
ITEM 9. DISAGREEMENT WITH THE THEN AUDITORS ON INVENTORY VALUATION.
Anton & Chia, during the audit for the quarter ending September 30, 2016 did not agree with the procedure to value inventory on hand. The management made all reasonable efforts to convince the auditors that the valuation policy is in line with the industry standards, by furnishing the copy of the filing by the NASDAQ listed competitor. But Anton & Chia opted to resign.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
No Changes in Internal Control over Financial Reporting
No changes were made to our internal control over financial reporting during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting
INTERNAL CONTROLS.
Management is responsible for establishing and maintaining adequate internal control so as
(1)
maintain the records in reasonable detail, which will accurately and fairly reflect the transactions and dispositions of the Company's assets;
(2)
to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are made within the delegated authority ; and
(3)
to provide reasonable assurance for the prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on company’s financial statements.
However, the management asserts that the company does not have any accounting staff due to limited financial resources though has plans to recruit gradually. Also, this company does not have a well written document on accounting policies and procedures, though has plans to have them shortly. Consequently, this can result in possible errors in the presentation and disclosure of financial information in our annual, quarterly, and other filings.
The SIC Code of 1700 as showing in Edgar for this company is no longer valid, since this company is now dealing with the auto parts, as OEM Recycled Auto Parts. Segregation of duties is an important factor in Internal Control. Though it is achieved to a certain extent, the management is committed to strengthen the internal controls effectively in the coming months.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
CURRENT OFFICERS AND DIRECTORS
SABIR SALEEM, PRESIDENT, CEO, CFO AND DIRECTOR, AGE 69
Mr. Saleem was appointed President, CEO, CFO and a Director of Free Flow, Inc. on April 18, 2014. Mr. Saleem has been the CEO and 100% owner of Redfield Holdings, Ltd. since its formation in February, 2014. From 2003 until December 2007, he was President of United Medscan Corp; and after that Registrant was sold, he remained a consultant with United Medscan until October, 2009. Mr. Saleem was CEO of Total Medical Care, Inc., a not-for-profit corporation, from July 2006 until 2011. CEO of GS Pharmaceuticals, Inc., a pharmaceutical Registrant since February, 2012; From December 2010 until January 2012, Mr. Saleem was the
CEO of Michelex Corporation (TS: MLXO), a pharmaceutical manufacturer. All of the foregoing, except MLXO, are privately-owned companies.
FERNANDINO FERRARA, SECRETARY/TREASURER AND DIRECTOR, AGE 62
Mr. Fernandino Ferrara was appointed Secretary/Treasurer and Director of Free Flow, Inc. on April 18, 2014. Mr. Ferrara has been President and CEO of Lease-it-Capital d/b/a AcuLease(TM), located in Farmingdale, NY, for the past 15 years. Mr. Ferrara is also the Secretary-Treasurer of Adopt-A-Battalion, Inc., a charitable support organization for overseas and returning US servicemen and servicewomen; and he is the Vice-President of the Suffolk County Police Reserves Foundation a charitable support organization for Suffolk County, New York, police.
FORMER OFFICERS AND DIRECTORS
S. DOUGLAS HENDERSON, FORMER PRESIDENT, CFO, SECRETARY AND DIRECTOR
Mr. Henderson was President, CFO, Secretary and sole director of Free Flow from October 29, 2011 through April 18, 2014. From 1998 until 2008 he was Admissions Director, Senior Flight Instructor of San Diego Flight Training International, and San Diego CA. Since July 2004, he has worked part time as an income tax preparer for H & R Block. Mr. Henderson is also part owner of J. Bright Henderson, Inc., a dealer in fine art.
Mr. Henderson was a director of Ads in Motion, Inc., a public company, from August 2007 until June 28, 2010 and was secretary of Ads in Motion from May 2007 until June 28, 2010.
Our officers are spending up to 5 hours per week on our business at this time. At such time as the Company is not financially capable of paying salaries, it is anticipated that management will assume full- time roles in the Company's operations and be paid accordingly.
CONFLICTS OF INTEREST - GENERAL.
Our directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholders and/or partners of other entities engaged in a variety of businesses. Thus, there exist potential conflicts of interest including, among other things, time, efforts and corporation opportunity, involved in participation with such other business entities. While each officer and director of our business is engaged in business activities outside of our business, the amount of time they devote to our business will be up to approximately 5 hours per week.
CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES
Presently, no requirement contained in our Articles of Incorporation, Bylaws, or minutes which requires officers and directors of our business to disclose to us business opportunities which come to their attention. We have no intention of merging with or acquiring an affiliate, associate person or business opportunity from any affiliate or any client of any such person.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company is managed under the direction of its board of directors.
The board of directors has no nominating, auditing committee or a compensation committee. Therefore, the selection of person or election to the board of directors was neither independently made nor negotiated at arm's length.
EXECUTIVE COMMITTEE
The members of the Board of Directors serve as its executive committee.
AUDIT COMMITTEE
The members of the Board of Directors serve as its audit committee
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the fact that officers received a cash salary during the last three fiscal years. The following table sets forth this information by the Company including salary, bonus and certain other compensation to the Company's Chief Executive Officer and named executive officers for the years ended December 31, 2016, 2015 and 2014.
Summary Executive Compensation Table
Mr. Saleem and Mr. Ferrara do not have employment agreements with the Company. Mr. Ferrara does not receive compensation for his services from the Company, Mr. Saleem did receive compensation as shown above.
DIRECTOR COMPENSATION
The following table sets forth certain information concerning compensation paid to our directors for services as directors, but not including compensation for services as officers reported in the "Summary Executive Compensation Table" during the year ended December 31, 2016:
All or our officers and/or directors will continue to be active in other companies. All officers and directors have retained the right to conduct their own independent business interests.
It is possible that situations may arise in the future where the personal interests of the officers and directors may conflict with our interests. Such conflicts could include determining what portion of their working time will be spent on our business and what portion on other business interest. Any transactions between us and entities affiliated with our officers and directors will be on terms which are fair and equitable to us. Our Board of Directors intends to continually review all corporate opportunities to further attempt to safeguard against conflicts of interest between their business interests and our interests.
We have no intention of merging with or acquiring an affiliate, associated person or business opportunity from any affiliate or any client of any such person. Directors receive no compensation for serving.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
Free Flow does not have a stock option plan as of the date of this filing. There was no grant of stock options to the Chief Executive Officer and other named executive officers during the fiscal years ended December 31, 2016 and 2015.
LIMITATION ON LIABILITY AND INDEMNIFICATION
Free Flow, Inc. officers and directors are indemnified as provided by the Delaware Revised Statutes and the bylaws. Under the Delaware Revised Statutes, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company's Articles of Incorporation. Our Articles of Incorporation do not specifically limit the directors' immunity. Excepted from that immunity are:
(a) a willful failure to deal fairly with us or our shareholders in connection with a matter in which the director has a material conflict of interest; (b) a violation of criminal law, unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful; (c) a transaction from which the director derived an improper personal profit; and (d) willful misconduct.
Our bylaws provide that it will indemnify the directors to the fullest extent not prohibited by Delaware law; provided, however, that we may modify the extent of such indemnification by individual contracts with the directors and officers; and, provided, further, that we shall not be required to indemnify any director or officer in connection with any proceeding, or part thereof, initiated by such person unless such indemnification: (a) is expressly required to be made by law, (b) the proceeding was authorized by the board of directors, (c) is provided by us, in sole discretion, pursuant to the powers vested under Delaware law or (d) is required to be made pursuant to the bylaws.
Our bylaws provide that it will advance to any person who was, or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of us, or is or was serving at the request of us as a director or executive officer of another company, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefore, all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under the bylaws or otherwise.
Our bylaws provide that no advance shall be made by us to an officer except by reason of the fact that such officer is, or was, our director in which event this paragraph shall not apply, in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made: (a) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to the proceeding, or (b) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of us.
ITEM 12.
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 Free Flow's outstanding common stock by:
·
each person who is known by the Company to be the beneficial owner of five percent (5%) or more of the Company's common stock;
·
Free Flow's Chief Executive Officer, its other executive officers, and each director as identified in the "Management -- Executive Compensation" section; and
·
all of the Company's directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock and options, warrants and convertible securities that are currently exercisable or convertible within 60 days of the date of this document into shares of Free Flow's common stock are deemed to be outstanding and to be beneficially owned by the person holding the options, warrants or convertible securities for the purpose of computing the percentage ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
There are currently 100,000,000 common shares authorized of which 26,200,000 are outstanding at March 4, 2017
The following sets forth information with respect to our common stock beneficially owned by each Officer and Director, and by all Directors and Officers as a group as of December 31, 2016.
(1)
Address is c/o Free Flow, Inc., 2301 Woodland Crossing Dr., Suite #155, Herndon, VA 20171.
(2)
Mr. Saleem is an officer, director and/or beneficial shareholder of Redfield Holdings, Ltd. Redfield Holdings, Ltd. holds 19,995,000 shares of common stock.
(3)
Each share of Preferred Share - Series A stock carries voting rights equal to ten thousand (10,000) votes. Redfield Holdings, Ltd. holds 10,000 shares of Preferred Shares - Series A stock. Mr. Saleem is an officer, director and/or beneficial shareholder of Redfield Holdings, Ltd. As of December 31, 2016, 10,000 Preferred Shares - Series A stock was issued and outstanding.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Other than the transactions discussed below, we have not entered into any transaction nor are there any proposed transactions in which any of our founders, directors, executive officers, shareholders or any members of the immediate family of any of the foregoing had or is to have a direct or indirect material interest.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
East West Accounting Services, LLC (“EastWest”) is the Company's principal auditing accountant firm. The Company's Board of Directors has considered whether the provisions of audit services are compatible with maintaining East West’s independence. The engagement of our independent registered public accounting firm was approved by our of our board directors prior to the start of the audit of our consolidated financial statements for the years ended December 31, 2016.
The following table represents aggregate fees billed to the Company for the years ended December 31, 2016 by East West Accounting Services, LLC and Anton & Chia, CPA the former auditors; 2015 by Paritz & Co. CPA (the former auditors).
All audit work was performed by the auditors' full time employees.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following is a complete list of exhibits filed as part of this Form 10K. Exhibit number corresponds to the numbers in the Exhibit table of Item 601 of Regulation S-K.
*
Filed as Exhibits with the Company's S-1 Registration Statement filed with the Securities and Exchange Commission (www.sec.gov), dated March 6, 2012.
(1)
Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized
FREE FLOW, INC.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.