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FREE FLOW, INC. & SUBSIDIARIES
|
Consolidated Statements of Cash Flows
|
|
|
|
| Year
|
| Year
|
|
|
|
|
| Ended
|
| Ended
|
|
|
|
|
| December 31,
|
| December 31,
|
|
|
| | 2021
|
| 2020
|
|
CASH FLOW FROM OPERATING ACTIVITIES
|
|
|
|
|
| Net Profit
| $517,043
|
| $850,610
|
|
| Adjustments:
|
|
|
|
|
| Depreciation
| 52,434
|
| 59,018
|
|
| Changes in operating assets:
|
|
|
|
|
| Increase /(Decrease) in Trades Payable
| 13,880
|
| (10,513)
|
|
| Decrease /(Increase) Trade Receivables
| 97,949
|
| (95,579)
|
|
| Decrease /(Increase) Inter Company
| -
|
| 6,073
|
|
| (Increase) / Decrease in Inventory
| (746,660)
|
| (1,002,236)
|
|
|
| NET CASH USED IN OPERATING ACTIVITIES
| (38,500)
|
| (192,627)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
| Purchase of Land and Building
| -
|
| (935,708)
|
|
| Payment against improvement in progress
| (1,255)
|
| (9,341)
|
|
|
| NET CASH (USED IN) INVESTING ACTIVITIES
| (1,255)
|
| (945,049)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
| Proceeds from notes payable - related parties
| 300
|
| -
|
|
| Repayment / Proceeds from subscription - related parties
| (25,500)
|
| 25,500
|
|
| Proceeds from Notes payable
| 18,755
|
| 940,000
|
|
| Repayment / Proceeds from Line of Credit
| (13,699)
|
| 38,488
|
|
| Repayment / Proceeds from Pay Pal Advance
| (14,707)
|
| 52,087
|
|
| Proceeds from PPP1
| 13,875
|
| 27,800
|
|
| Proceeds from EIDL
| -
|
| 146,300
|
|
| Repayment of Loan from River Valley Bank
| (12,572)
|
| (16,209)
|
|
|
| NET CASH (USED IN)/ PROVIDED BY FINANCING ACTIVITIES
| (33,549)
|
| 1,213,966
|
|
|
|
|
|
|
|
|
|
NET (DECREASE)/ INCREASE IN CASH AND CASH EQUIVALENTS
| (73,304)
|
| 76,290
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD
| 83,516
|
| 7,226
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
| $10,212
|
| $83,516
|
|
The accompanying notes are an integral part of the Consolidated Financial Statements
25
FREE FLOW, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2021
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 to enter the green energy industry. It began with the idea of developing swimming pool solar pump system. The solar energy business became very volatile due to constant decline in prices of solar panels. The Company could not conclude any business in the solar energy sector. In February 2016 the Company formed a subsidiary namely JK Sales, Corp. (name changed to “Accurate Auto Sales, Inc.”) and began the business of selling used auto parts.
Accurate Auto Sales, Inc., at a 19+ acre facility that it now owns, in King George, VA, buys end of life and wrecked automobiles from Insurance Auctions and disassembles the same to parts. After the dis-assembly these parts are labelled and stored at its warehouse, the inventory is uploaded and sold through a very sophisticated internet network. The primary customers are auto body and mechanic shops.
In December 2020 the Company acquired the Assets of Inside Auto Parts, Inc. incorporated in 1993, which is centrally located between Richmond, Charlottesville, and Fredericksburg, Virginia with easy access to main transport routs. The salvage dealership, specializing in used foreign car and truck parts has been acquired by Free Flow, Inc. subsidiary named “FFLO - Inside Auto Parts, Inc.” and has 21,953.9 square feet fully enclosed and another 17,392.35 square feet under roof enclosed on 3 sides, all located on 16 acres of land in Mineral, Virginia now owned by Free Flow, Inc.
Current management of Inside Auto Parts, Inc. will remain in place to manage FFLO – Inside Auto Parts, Inc.
Subsequent to receipt of an LOI from an overseas buyer the Company’s plan to set up a “Scrap Metal Processing” plant is in place and funding for equipment is being sought. Management forecasts that the scrap metal processing would add another $10 to $12 million in gross sales.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING BASIS
The statements were prepared following generally accepted accounting principles of the United States of America (US GAAP) consistently applied and the rules and regulations of U.S. Securities and Exchange Commission (SEC).
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 and cash equivalents include cash on hand, operating accounts and short-term, highly liquid investments with maturities of three months or less at the time of acquisition.
26
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
Regarding the Aging of Trade Accounts Receivable and Trade Accounts Payable, the industry standard is very strange in this business. Often, the aging could go to 2 to 3 years and the receivables are good. The reason is that when the customer buys a part which is a firm sale, if they use the part which was purchased, they pay within 60 to 75 days. But if the part did not get used for whatever reason, and they failed to return the part within 30 days, then as a courtesy, the Sellers, does not demand payment so that new sales of other parts continue. Thus, no forceful demand is made if it is a running account and cash is coming in against new sales. The management learnt of this trait after the business was acquired. There were receivables as well as payables that went back to 2 years. Even in the new acquisition that the Company has recently done, while we did not assume any trade liabilities or receivables, the same fact has been observed in the Seller’s books of accounts. The management has not suffered any significant bad debts.
Trade Accounts Receivable: Balance is $104,721 as on 12/31/2021 which includes $67,076 as receivables for 365 days or more in the aging analysis.
The company did not make any provision for such a long outstanding receivable because (a) these buyers are generally repair shops; (b) when used for the customers, these repair shops send the payment within 60 days; (c) when not used, they are still in possession of the parts until the next purchase as a possible way the truck mileage for the return. When the parts are not returned, our company policy is not to ship anything else, until the previous outstanding sales invoice is paid.
In the past 3 years, this company did not have significant bad debt for the domestic business. One invoice in the amount of $12,929.23 owed by SAM International, UAE has been written off due to failure to collect the same on account of the owner having gone out of business due to severe incapability to conduct business as a result of heath.
The $20,000 paid for the sales leads which have been used by the Company and another sum amounting to $28,000 for Advance for Purchases, has been written off and charged to “other income” and have thus been recognized as impaired assets..
Trade Accounts Payable: Balance is $23,709 as on 12/31/2021 which includes $0 as payable for 365 days or more in the aging analysis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less of accumulated depreciation. Expenditures for major additions and improvements that extend the useful life of the related asset are capitalized. As property or equipment sold or retired, the applicable cost and accumulated depreciation are removed from the accounts and resulting gain or loss thereon is recognized. Work in progress consist primarily of building. Depreciation is calculated using straight-line method. The estimated useful lives of Equipment and fixtures are 5 years.
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
27
given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable.
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.
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 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:
o 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.
o 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.
o 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.
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
28
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 PRONOUNCEMENTS
Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below.
In May 2011, FASB issued Accounting Standards Update ("ASU") No. 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.GAAP and IFRS" ("ASU No. 2011-04"). ASU No. 2011-04 provides guidance which is expected to result in common fair value measurement and disclosure requirements between U.S. GAAP and IFRS. It changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. It is not intended for this update to result in a change in the application of the requirements in Topic 820. The amendments in ASU No. 2011-04 are to be applied prospectively. ASU No. 2011-04 is effective for public companies for interim and annual periods beginning after December 15, 2011. Early application is not permitted. This update is not expected to have a material impact on the Company's financial statements.
In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income" ("ASU No. 2011-05"). In ASU No. 2011-05, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The amendments in ASU No. 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. They also do not change the presentation of related tax effects, before related tax effects, or the portrayal or calculation of earnings per share. The amendments in ASU No. 2011-05 should be applied retrospectively. The amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. This update is not expected to have a material impact on the Company's financial statements.
In September 2011, the FASB issued ASU No. 2011-08, "Intangibles -- Goodwill and Other (Topic 350)" ("ASU No. 2011-08"). In ASU No. 2011-08, an entity is permitted to make a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it would not be required to perform the two-step impairment test for that reporting unit. The ASU's objective is to simplify how an entity tests goodwill for impairment. The amendments in ASU No. 2011-08 are effective for annual and interim goodwill and impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity's financial statements for the most recent annual or interim period have not yet been issued. The Company is evaluating the requirements of ASU
No. 2011-08 and has not yet determined whether a revised approach to evaluation of goodwill impairment will be used in future assessments. The Company does not expect the adoption of ASU No. 2011-08 to have a material impact on its financial statements.
29
Other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 - 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, 2021 the Company had a net profit of $543,898. Net operating loss carry-forward, expires twenty years from the date the loss was incurred.
|
|
| December 31,
|
|
| December 31,
|
|
|
| 2021
|
|
| 2020
|
|
|
|
|
|
|
|
Net operating profit (loss) Carry Forward
|
| $
| 543,898
|
| $
| 850,610
|
|
|
|
|
|
|
|
Valuation allowance
|
|
| -
|
| $
| -
|
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 (the taxes are filed on Cash basis):
Free Flow, Inc.
|
Tax Calculations
|
|
|
|
|
|
|
|
|
|
| December 31,
|
|
| December 31,
|
|
|
| 2021
|
|
| 2020
|
|
|
|
|
|
|
|
Net profit (loss) before taxes per financial statement
|
| $
| 543,898
|
| $
| 850,610
|
Income tax rate
|
|
| 34%
|
|
| 34%
|
Income tax benefit
|
|
| 184,925
|
|
| 289,207
|
Valuation allowance change
|
|
| 184,925
|
|
| 289,207
|
Provision for income tax
|
|
| 0
|
|
| 0
|
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 financial reporting and tax purposes. The significant components of deferred income tax assets and liabilities at December 31, 2021 and December 31, 2020 are as follows:
Net deferred income tax asset - The Company has recognized a valuation allowance for the deferred income tax asset 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
30
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 income.
NOTE 4- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
|
|
| As of December 31,
|
|
|
| 2021
|
|
| 2020
|
|
|
|
|
|
|
|
Property, Land and Building at cost
|
| $
| 1,712,413
|
| $
| 1,712,413
|
Trucks at cost
|
|
| 3,500
|
|
| 3,500
|
Equipment at cost
|
|
| 35,000
|
|
| 35,000
|
|
|
|
|
|
|
|
Total Fixed Assets
|
| $
| 1,750,913
|
| $
| 1,750,913
|
Less: Accumulated Depreciation
|
|
| (215,609)
|
|
| (163,175)
|
|
| $
| 1,535,304
|
| $
| 1,587,738
|
Depreciation expenses for the periods ended December 31, 2021 and December 31, 2020 were $52,434 and $59,018 respectively
NOTE 5 – INVENTORY
|
|
| As of December 31,
|
|
|
| 2021
|
|
| 2020
|
|
|
|
|
|
|
|
Auto Parts (used)
|
| $
| 2,525,484
|
| $
| 1,778,824
|
|
|
|
|
|
|
|
|
| $
| 2,525,484
|
| $
| 1,778,824
|
The increase in the inventory was a result of acquisition of asset by the subsidiary company namely FFLO – Inside Auto Parts, Inc. that would significantly support the increase of sales.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is not presently involved in any litigation.
NOTE 7 - GOING CONCERN
Future issuances of the Company's equity or debt securities will be required for the Company to continue to finance its operations and continue as a going concern. The Company's present revenues are marginally sufficient to meet operating expenses. The financial statement of the Company has 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 had incurred cumulative net losses of $559,705 since its inception which have been turned around to net profits of $543,898 and $850,610 during
31
the year 2021 and 2020 but still requires greater sales for its contemplated operational and marketing activities to take place. The Company's ability to increase additional sales through the future is unknown. The obtainment of additional sales, 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 uncertainties.
NOTE 8 - RELATED PARTY TRANSACTIONS
Sabir Saleem, the officer and director of the Company, may in the future, become involved in other business opportunities as they become available, thus he may face a conflict in selecting between the Company and his other business opportunities. The Company has not formulated a policy for the resolution of such conflicts.
NOTE 9 - NOTES PAYABLE - RELATED PARTY
REDFIELD HOLDINGS, LTD, MAIN SHAREHOLDER
During the year 2018, the Company received additional loans totaling $294,518.09 from Redfield Holdings, Ltd and the Company paid $0 of the loan balance, and the total amount owed by the Company to Redfield Holdings, Ltd. Thus on December 31, 2018 was $470,935. By mutual consent, this loan amount was converted to preferred shares – Series –C and classified as mezzanine capital for Accurate Auto Parts, Inc. The qualifications are as under:
a) Each share to carry one vote.
b) Each share will be redeemable upon repayment of Loan(s) made by River Valley Bank to Accurate Auto Parts, Inc.
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 C" are bought by the subscriber.
e) Each share will carry a dividend right at par with the common shares.
The Company issued 9,700 shares to Redfield Holdings, Ltd. against a subscription for $58,000 which was accepted by the Company and shares there against issued to Redfield Holdings, Ltd.
NOTE 10 - CAPITAL STOCK
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.
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. 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.
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.
32
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 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. for a total sum 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. On March 31, 2015, by mutual consent this note and accrued interest was converted to 330,000 preferred shares - Series "B".
On December 31, 2018 the Company had a Note outstanding in the principal amount of $470,935; by mutual consent this note and accrued interest was converted to 470,935 preferred shares - Series C".
On April 2, 2019 the Company received a sum of $14,490 for issuance of 21,000 restricted common shares.
As of December 31, 2019, the Company had 26,221,000 shares of common stock issued and outstanding and 10,000 shares of preferred Shares – Series “A”, 330,000 Series “B” and 470,935 Series “C” issued and outstanding.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures (as defined in Rule 13(a) - 15(e)) are controls and procedures that are designed to ensure that information required to be disclosed by a public company in the reports that if files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed.
To ensure that information required to be disclosed by a public company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of December 31, 2018, the Chief Executive Officer/Principal Accounting Officer has founded such controls and procedures to be ineffective as discussed further below.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Free Flow's management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
33
accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company's assets;
(2) 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 being made only in accordance with authorizations of Free Flow's management and directors; and
(3) 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 Free Flow's financial statements.
Our Chief Executive Officer/Principal Accounting Officer, who is the same individual, has identified certain material weaknesses in internal control over financial reporting relating to a shortage of accounting and reporting personnel due to limited financial resources and the size of our Company, as detailed below:
(1) The Company currently does not have but is in the process of developing formally documented accounting policies and procedures, which includes establishing a well-defined process for financial reporting.
(2) Due to the limited size of our accounting department, we currently lack the resources to handle complex accounting transactions. We believe this deficiency could lead to errors in the presentation and disclosure of financial information in our annual, quarterly, and other filings.
(3) As is the case with many companies of similar size, we currently have a lack of segregation of duties in the accounting department. Until our operations expand and additional cash flow is generated from operations, a complete segregation of duties within our accounting function will not be possible.
Considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations and the fact that we have been a small business with limited employees, such items caused a weakness in internal controls involving the areas disclosed above.
Our Chief Executive Office/Principal Accounting Officer has concluded that our internal controls over financial reporting were ineffective as of December 31, 2015, due to the existence of the material weaknesses noted above that we have yet to fully remediate.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to permanent rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
There was no change in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
34
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
NAME
|
| AGE
|
| POSITION
|
| TERM
|
|
|
|
|
|
|
|
Sabir Saleem
|
| 73
|
| President, CEO, CFO and Director
|
| Annual
|
CURRENT OFFICERS AND DIRECTORS
SABIR SALEEM, PRESIDENT, CEO, CFO AND DIRECTOR, SECRETARY& TREASURER AGE 73.
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.
MR. SHAH WALI KHAN, DIRECTOR was appointed on November 25, 2020 to serve as a director of the Company. In addition to his management and oversight role on the Board of Directors, Mr. Khan will use his business management skills to assist with the planned global expansion of Free Flow’s subsidiary operations.
On September 18, 2020 the Company announced formation of Company’s Advisory Board and introduced its first member, JEFF K. RUSSELL, who will serve as the Advisory Board’s Director of Marketing Strategies.
FORMER OFFICERS AND DIRECTORS
DR. MELODY JACKSON, DIRECTOR was appointed on November 22, 2020. Dr. Jackson is a management expert, college faculty member, and a researcher with over 20 years of management and supervisory experience that includes an executive level of management for functions such as Strategic Management, Project Management, Human Resources Management, and Environmental management with over 7 years of service as a Management Professor. Dr. Jackson’s resignation was accepted on December 27, 2021.
FERNANDINO FERRARA, FORMER SECRETARY/TREASURER AND DIRECTOR, AGE 66
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 AccuLease(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. Due to personal reasons Mr. Ferrara’s resignation as Secretary/Treasurer and Director was accepted effective May 1, 2018.
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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, 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 currently. When the Company is 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 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 15 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.
36
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, 2021, 2020.
Mr. Saleem do not have employment agreements with the Company, he does receive compensation from the Company.
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, 2021:
Summary Executive Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sabir Saleem
|
|
| Fernandino Ferrara
|
|
|
| 2021
|
|
| 2020
|
|
| 2018
|
|
| 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonus
|
| $
| 44,397
|
| $
| 66,895
|
|
| 0
|
|
| 0
|
Stock Awards
|
|
| 0
|
|
| 0
|
|
| 0
|
|
| 0
|
Option Awards
|
|
| 0
|
|
| 0
|
|
| 0
|
|
| 0
|
Non-Equity Incentive Plan Compensation
|
|
| 0
|
|
| 0
|
|
| 0
|
|
| 0
|
Non-Qualified Deferred Compensation Earnings
|
|
| 0
|
|
| 0
|
|
| 0
|
|
| 0
|
All other Compensations
|
|
| 0
|
|
| 0
|
|
| 0
|
|
| 0
|
Total
|
| $
| 44,397
|
| $
| 66,895
|
| $
| -
|
| $
| -
|
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 limited compensation for serving.
37
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, 2020 and 2019
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.
38
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:
o 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;
o Free Flow's Chief Executive Officer, its other executive officers, and each director as identified in the "Management -- Executive Compensation" section; and
o 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 26,221,000 are outstanding at March 30, 2019.
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, 2021.
TITLE OF CLASS
| NAME AND ADDRESS OF BENEFICIAL OWNER (1)
| AMOUNT AND NATURE OF BENEFICIAL OWNER
| PERCENT OF CLASS
|
Common shares
| Sabir Saleem, President, CEO and Director (2) (3)
| 17,990,000
| 68.66%
|
Preferred Shares – Series “A”
| Redfield Holdings, Ltd.
| 10,000
| 100%
|
Preferred Shares – Series “B”
| Redfield Holdings, Ltd.
| 330,000
| 100%
|
Preferred Shares – Series “C”
| Redfield Holdings, Ltd.
| 470,935
| 100%
|
|
|
|
|
All Directors and Executive Officers as a Group (1 Person)
| Common Shares
| 17,990,000
| 68.66%
|
(1) Address is c/o Free Flow, Inc., 6269 Caledon Road, King George, VA 22485.
(2) Mr. Saleem is an officer, director and/or beneficial shareholder of Redfield Holdings, Ltd. Redfield Holdings, Ltd. holds 17,990,000 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, 2018, 10,000 Preferred Shares - Series A stock was issued and outstanding.
39
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 13 A. SUBSEQUENT EVENTS
1.With mutual consent, effective January 1, 2022 all of the assets of FFLO – Inside Auto Parts, Inc. were sold to Inside Auto Parts, Inc. (the original seller of the assets, which were originally purchased by FFLO – Inside Auto Parts, Inc.). The settlement included: as consideration the cancellation of the promissory note for the residual balance of $937,666; Inventory in the amount of $1,492,544 and Trade Receivables in the amount of $22,843.
The total assets booked on the date of acquisition on December 22, 2019 were in the amount of $1,835,344.
The effective date of handing over the operations was January 1, 2022 while the return of Deed of Title and Promissory Notes that were held with the Escrow Agent occurred on March 7, 2022.
The above settlement occurred due to the fact that the Company was unable to obtain financing for the acquisition.
2.The Company reviewed its business plan and decided to liquidate its inventory as scrap to make provision for fresh inventory that would comprise of newer model automobiles. While the process of selling the inventory to scrap metal processors the Company received enquiries from overseas customer for scrap metal which have been entertained and shipments are being processed. The management hopes to build the export business to a significant level while it would be building its auto parts inventory in the months to come.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Yusufali & Associates, LLC (“Yusufali") 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 Yusufali’s independence. The engagement of our independent registered Public Accounting firm was approved by us prior to the start of the audit of our consolidated financial statements for the years ended December 31, 2019 and has automatically renewed to cover the present period.
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PART IV
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.
41
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.
/s/ Sabir Saleem
|
| March
|
|
|
|
Sabir Saleem
|
|
|
(Chief Executive Officer/Principal Executive Officer
|
|
|
& Principal Accounting Officer)
|
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacity and on the dates indicated.
/s/ Sabir Saleem
|
| March
|
|
|
|
Sabir Saleem, Director, CEO
|
|
|
42