Free Flow, Inc.

Condensed Balance Sheets

 

 

 

 

The accompanying notes are an integral part of these financial statements

Free Flow, Inc.

Condensed Consolidated Statements of Operation

(Unaudited)

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

Free Flow, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

 

Free Flow, Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2087

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2018 and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended September 30, 2018 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on April 2, 2018.

NOTE 2 GOING CONCERN

The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has established itself as a stable ongoing business entity with established revenues sufficient to cover its operating costs and allow it to continue as a going concern. However, the ability of the Company to continue as a going concern is also dependent on the Company obtaining adequate Sales so that the Company can liquidate its inventories and continue as a going business.

In order to continue as a going concern, the Company will need, among other things, Sales of its product lines. Management has obtained such sales through Internet sales and marketing companies who specialize in promotion of such businesses. Management is obtaining capital from management and significant shareholders sufficient to meet its minimal operating expense and is expecting that cash flow from sales will soon be available to augment the operating capital needs. However, management cannot provide an assurance that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually fulfill the secured  purchase orders to attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – INCORPORATION OF SUBSIDIARY

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. operates as a separate entity to conduct business in refurbishing automotive engines and selling metals recovered from Accurate Auto Parts, Inc.’s facility, and has an independent profit center. The company has continued its research on the related subjects and expects to activate this line of business once it is adequately funded.

 

As reported in 10Qs for the earlier quarters, as well as in 10-K for the Annual reports, on February 4, 2016 the company incorporated another subsidiary in the State of Virginia under the name of JK Sales, Corp. (on December 7, 2017 the name was changed to Accurate Auto Parts, Inc.,) and has since remained in the business of buying end of life and salvage vehicles and selling auto parts.

 

NOTE 4 – RELATED PARTY

As of December 31, 2017, the Company had a note payable in the amount of $176,417 to Redfield Holdings, Ltd. a related party. During the nine months ended the Company borrowed an additional sum of $358,793 thus owing a total sum of $535,210 as of September 30, 2018. The note is unsecured and does not bear any interest and has a maturity date of December 30, 2019. During the nine months ended the Company paid off a sum of $11,100 to St. Gabriel Foundation, Inc. a related party, the note did not bear any interest. During the nine months ended the Company also paid off an advance payment against sales amounting to $ 17,100 from related party, thus the total liability as advance against sales amounts to $400.00.

Redfield Holdings Ltd. is 100% owned by the CEO, Mr. Sabir Saleem. St. Gabriel Foundation has also been incorporated by Mr. Sabir Saleem as a not-for-profit entity which has not yet constituted its functional board of directors/trustees. It is expected that St. Gabriel Foundation will soon define its mission and may become an arm to mobilize end of life automobiles to sell them to Accurate Auto Parts, Inc. and use the proceeds for charitable purposes.

 

NOTE 5 – CAPITAL STOCK

The Company has authorized 100,000,000 shares of common shares with a par value of $0.0001 per shares and 20,000,000 shares of preferred stock, with a par value of $0.0001 per shares.

Pursuant to the resolution of the shareholders meeting held on March 30, 2015 the Company designated 500,000 shares of the preferred authorized shares as preferred shares – Series “B” shares. The 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. 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.

NOTE 6 – SUBSEQUENT EVENTS

 

On October 26, 2018 the Company, singly and jointly with its CEO, Mr. Sabir Saleem, executed, as co-signers, a guarantee on behalf of its subsidiary, namely Accurate Auto Parts, Inc. against a term loam to Accurate Auto Parts, Inc. by River Valley Bank, Minnesota in the amount of $900,100.00. The 19+ acre property in King George, VA from where the Company operates its auto parts business has been purchased.

Accurate Auto Parts, Inc. also purchased additional inventory in the amount of $115,000 and continues to build its inventory to increase its sales.

 

The Parts and Distribution Agreement entered upon between the subsidiary company, namely, Motors & Metals, Inc. and Sam International, F.Z.E,; Emirate of Ajman, UAE of May 2017 as been revalidated and the first shipment of (Euro) €10,800.00 is expected to take place during this month (October 2018).

 

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND BECAUSE WE DESIRE TO TAKE ADVANTAGE OF, THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE CAUTION READERS REGARDING CERTAIN FORWARD LOOKING STATEMENTS IN THE FLOWING DISCUSSION AND ELSEWHERE IN THE THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR AN BEHALF, WHETHER OR NOT IN FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, FORWARD-LOOKING STATEMENTS ARE STATEMENT NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS. FORWARD-LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE, THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FORM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING STATEMENTS MADE BY, OR ON OUR BEHALF, WE DIS TO UPDATE FORWARD-LOOKING STATEMENTS.

PLAN OF OPERATION

Accurate Auto Parts, Inc. the Company’s used auto parts subsidiary has made a sale of $117,648 of Automobile Parts and Services. The Company continues seeking additional sales both in the domestic and international markets.

RESULTS OF OPERATIONS

The Company did recognize revenue for a sum of $117648 during the nine months ended September 30, 2018 and $317,651 of revenues during the Nine month ended September 30, 2017. While the net revenues for the period ended September 30, 2018 were less by $200,003 than for the same period during 2017 but the Cost of Goods Sold was also less by $104,117 during the period ended September 30, 2018 as compared to the same period during 2017. The Gross Profit had a decrease, i.e. by $ 95,886 during the period ended September 30, 2018 as compared to the same period during 2017.

During the Nine months ended September 30, 2018, the Company incurred operational expenses of $93,085. This compares to $150,183 for the nine months ended September 30, 2017.

During the nine months ended September 30, 2018 the company recognized a net loss of $8,611.00 as compared to $12,140.00 for the corresponding period in the year 2017, thus recognizing a decrease of approximately 30 % as compared to the nine months ended September 30, 2017.

As disclosed in the 10Q for the second quarter, for confidentiality reasons and in the best interest of the company, the management was waiting for the right time to disclose the fact that the landlord had defaulted in servicing her loan to the lending bank, and subsequently filed protection under chapter 11 of the bankruptcy court which was converted to a chapter 7. While the company had met its obligations under the lease and had made an advance payment for the lease of the premises, but the laws in the Commonwealth of Virginia are in favor of the mortgage-holder to get a vacant possession of the premises in the event of foreclosure. The company was constantly under fear that if the property was to foreclose, (which it did) and if the lenders would not accept our offer or if any our business competitor were to make a higher offer than ours, then the company would be facing multiple challenges which would include removing several hundred vehicles and auto parts at a short notice to another properly zoned location – which is hard to find due to environmental permits.

Keeping this sensitive subject in mind, the management began liquidating its inventory of “automobile shells” as metal scrap, which was a three to four months process. The company virtually discontinued purchasing new inventory which obviously effected the sales for the nine months of the year 2018.

 

In mid-January 2018, preliminary negotiations began with the bank that had foreclosed on the landlord whom they had made a loan of over $1.3 million for the same assets that the company had negotiated for $700,000.00.

The prime reason for decline in business was due to the above reasons. As mentioned in the Note 6 above, the situation has now been corrected and adequate inventory is on hand and continues to increase.

The inventory valuation is based on the industry standards, the management reviewed financial statements of other companies that are listed on NASDAQ and are audited by PCAOB firms like BDO. The management found that their approach was exactly same thus the inventory valuation is managements view is substantially accurate. Selling price of parts do not have too much fluctuations, in spite of this fact, the management does review their inventory price and the internal monthly reports do reflect any downward change which is subsequently reported in the quarterly reports. The Company has limited history, but the management has access to records to the previous owners’ activities which go back to over 10 years.

The tax returns for the previous years have been filed and there are no tax liabilities due to the fact that the books reflect a net loss.

The company’s administrative office is in Herndon, VA. Now that the Company owns the property the office will soon be located at 6269 Caledon Road, King George,VA 20171. The corporate address will also be changed from 13800 Coppermine Road, First Floor, Herndon, VA 20171 to the new address effective January 1, 2019.

 

LIQUIDITY

THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S REPORT ON THE COMPANY’S FINANCIAL STATEMENTS AS OF DECEMBER 31, 2017, AND FOR EACH OF THE PRECEDING YEARS THEN ENDED, INCLUDES A “GOING CONCERN” EXPLANATORY PARAGRAPH, THAT DESCRIBES SUBSTANTIALLY DOUBT ABOUT THE COMPANY’S ABILITY TO CONTINUE AS A GOING CONCERN.

On September 30, 2018 the Company had total current assets of $525,672 consisting of $3,861 in cash and $5,863 in trade receivables, and $429,902 in inventory.

NEED FOR LINE OF CREDIT

The Company’s need to have cash sufficient to meets its cash needs is fulfilled. The Company has firm commitment from River Valley Bank, Minnesota for working capital and to purchases the business property. See Note 6 – subsequent events. The $900,100 loan has thus been made.

REVENUE RECOGNITION

The Company recognizes revenues on arrangements in accordance with Securitas and Exchange Commission Staff Accounting Bulletin Topic 13, REVENUE RECOGNITION and FASB ASC 605-15-25, REVENUE RECONGNITION. 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 reasonable assured. The Company reported gross revenues of $551,182 for the year ending December 31, 2016.

Not Applicable.

 

Management's Report on Disclosure Controls and Procedures

 

Management is responsible for establishing and maintaining adequate internal control so as to

(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.

 

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the period ended September 30, 2018, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

 

PART II – OTHER INFORMATION

None.

Not Applicable to Smaller Reporting Companies.

During the period of January 1, 2015 and March 31, 2015, the Company issued 9,700 shares of Preferred Shares – Series “A” for a sum of $58,000 and 330,000 shares of Preferred Shares – Series “B” for a sum of $330,000 which were the result of conversion of certain debts of the company.

None.

Not Applicable

None.

The following exhibits are included with this quarterly filing.  Those marked with an asterisk and required to be filed hereunder, are incorporated by reference and can be found in their entirety in our original Registration Statement on Form S-1, filed under SEC File Number 000-54868, at the SEC website at www.sec.gov:

 

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