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, 2015 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 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 because of these uncertainties.
RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2017 COMPARED TO THE YEAR ENDED DECEMBER 31, 2016
During the year ended December 31, 2017, the Company recognized revenues of $340,148 from sales. During the year ended December 31, 2016, the Company recognized a revenue of $551,182 from its operational activities.
During the year ended December 31, 2017, the Company incurred operational expenses of $205,960. During the year ended December 31, 2016, the Company incurred operational expenses of $315,155. The decrease of appx. $109,195 was primarily a result of decrease in administrative and cost of goods sold expenses
During the year ended December 31, 2017, the Company recognized a net loss of $81,093 compared to a net profit of $134,291 during the year ended December 31, 2016.
LIQUIDITY
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S REPORT ON THE COMPANY'S FINANCIAL STATEMENTS AS OF DECEMBER 31, 2015, AND FOR EACH OF THE YEARS IN THE TWO-YEAR PERIOD THEN ENDED, INCLUDES A "GOING CONCERN" EXPLANATORY PARAGRAPH, THAT DESCRIBES SUBSTANTIAL DOUBT ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN.
At December 31, 2017, the Company had total current assets of $188,631 consisting of $5,354 in cash, $1,906 in accounts receivable and $177,871 in inventories and work in progress. At December 31, 2017, total current liabilities were $197,557 consisting of $21,140 in accounts payable, notes payable to related party of $176,417 and accrued interest of $0.
During the year ended December 31, 2017, the Company used $8,009 in funds in its operational activities. During the year ended December 31, 2017, the Company recognized a net loss of $82,853. During the year ended December 31, 2016, the Company used ($132,413) in its operations, a net profit of $134,291.
SHORT TERM
On a short-term basis, the Company has generated limited revenues not sufficient to cover operations. For short term needs the Company will be dependent on receipt, if any, of offering proceeds.
CAPITAL RESOURCES
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.
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 merchandise is shipped and/or service is performed and collectability is reasonably assured. The Company reported $897,450 in revenues from inception to December 31, 2017.
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, 2017 or December 31, 2016.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of Free Flow Inc. for the two-years ended December 31, 2017 and 2016 and for the period from Inception through December 31, 2016 starting on page 11.
FREE FLOW, INC.
Report of Independent Audit Firm Registered with PCAOB
To the Board of Directors and Stockholders Free Flow, Inc.
We have audited the accompanying balance sheet of Free Flow, Inc. (the Company) as of December 31, 2017, the related statements of operations, changes in shareholders' equity (deficit) and cash flows for the year ended December 31, 2017. 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 about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements 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, 2017 and the result of its operations and its cash flows for the year ended December 31, 2017 in conformity with U.S. generally accepted accounting principles.
The financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 8 to the financial statements, the Company's losses from operations raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Farasat Farooq, CPA
|
|
|
Farasat Farooq, CPA
|
East West Accounting Services, LLC
|
11583 SW, 253 Street
|
Homestead, FL-33032
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
5,354
|
|
|
$
|
3,718
|
|
Trade Receivables
|
|
|
1,906
|
|
|
|
7,755
|
|
Advances for inventory purchases
|
|
|
-
|
|
|
|
14,224
|
|
Pre-paid Rent
|
|
|
-
|
|
|
|
48,600
|
|
Inventory
|
|
|
177,871
|
|
|
|
200,060
|
|
TOTAL CURRENT ASSETS
|
|
|
185,131
|
|
|
|
274,357
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Automobiles - Delivery Trucks
|
|
|
3,500
|
|
|
|
3,500
|
|
TOTAL OTHER ASSETS
|
|
|
3,500
|
|
|
|
3,500
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
188,631
|
|
|
$
|
277,857
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS' (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
$
|
21,140
|
|
|
$
|
73,157
|
|
Notes payable - related parties
|
|
|
176,417
|
|
|
|
130,773
|
|
TOTAL CURRENT LIABILLITIES
|
|
|
197,557
|
|
|
|
203,930
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
197,557
|
|
|
$
|
203,930
|
|
|
|
|
|
|
|
|
|
|
Redeemable Preferred Stock
|
|
|
|
|
|
|
|
|
Series B; 500,000 shares authorized;330,000 and 0 issued and outstanding
|
|
|
|
|
|
|
|
|
as of December 31, 2017 and 2016 respectively (Classified as Mezzanine equity)
|
|
|
330,000
|
|
|
|
330,000
|
|
|
|
|
|
|
|
|
|
|
Stockholders' (Deficit)
|
|
|
|
|
|
|
|
|
Preferred stock ($0.0001) par vaule, 20,000,000 shares authorized
|
|
|
|
|
|
|
|
|
10,000 shares par value $0.0001Class A issued as on December 31, 2015
|
|
|
1
|
|
|
|
1
|
|
Additional Paid in capital
|
|
|
|
|
|
|
|
|
Common stock, ($0.0001 par value, 100,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
26,200,000 shares issued and outstanding as of December 31, 2017 and December 31, 2016
|
|
|
2,620
|
|
|
|
2,620
|
|
Additional paid-in-capital
|
|
|
114,545
|
|
|
|
114,545
|
|
Accumulated Deficit
|
|
|
(456,092
|
)
|
|
|
(373,239
|
)
|
TOTAL STOCKHOLDERS' (DEFICIT)
|
|
|
(338,926
|
)
|
|
|
(256,073
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES & STOCKHOLDERS' (DEFICIT)
|
|
$
|
188,631
|
|
|
$
|
277,857
|
|
The accompanying notes are an integral part of these financial statements
|
|
Year
|
|
|
Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
REVENUES
|
|
|
|
|
|
|
Sales
|
|
$
|
340,148
|
|
|
$
|
551,182
|
|
TOTAL REVENUES
|
|
|
340,148
|
|
|
|
551,182
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD
|
|
|
217,041
|
|
|
|
101,736
|
|
GROSS PROFIT
|
|
|
123,107
|
|
|
|
449,446
|
|
|
|
|
|
|
|
|
|
|
General & Administrative Expenses
|
|
|
205,960
|
|
|
|
315,155
|
|
|
|
|
|
|
|
|
|
|
Other Expenses:
|
|
|
|
|
|
|
|
|
Provision for write-off - Inventory
|
|
|
-
|
|
|
|
-
|
|
Provison for impairment of Trade Mark
|
|
|
-
|
|
|
|
-
|
|
Total Expenses
|
|
|
205,960
|
|
|
|
315,155
|
|
|
|
|
|
|
|
|
|
|
Net Profit (Loss)
|
|
|
(82,853
|
)
|
|
|
134,291
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS)
|
|
$
|
(82,853
|
)
|
|
$
|
134,291
|
|
|
|
|
|
|
|
|
|
|
BASIS INCOME (LOSS) PER SHARE
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
26,200,000.00
|
|
|
|
26,200,000
|
|
The accompanying notes are an integral part of these financial statements
FREE FLOW, INC.
Statement of Changes in Shareholders' (Deficit)
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
Common Stock
|
|
Preferred Stock
|
|
Paid-In
|
|
Accumulated
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
Series -A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2017
|
|
|
26,200,000
|
|
|
$
|
2,620
|
|
|
$
|
10,000
|
|
|
$
|
1
|
|
|
$
|
114,545
|
|
|
$
|
(373,239
|
)
|
|
$
|
(507,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(82,853
|
)
|
|
|
(82,853
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2017
|
|
|
26,200,000
|
|
|
$
|
2,620
|
|
|
$
|
10,000
|
|
|
$
|
1
|
|
|
$
|
114,545
|
|
|
$
|
(456,092
|
)
|
|
$
|
(373,239
|
)
|
The accompanying notes are an integral part of these financial statements
FREE FLOW, INC.
Statements of Cash Flows
|
|
Year
|
|
|
Year
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
CASH FLOW FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net Profit (loss)
|
|
$
|
(82,853
|
)
|
|
$
|
134,291
|
|
(Increase) in Other Assets - Delivery Trucks
|
|
|
-
|
|
|
|
(3,500
|
)
|
Impairmaent of Trade-mark
|
|
|
-
|
|
|
|
-
|
|
Inventory provision
|
|
|
-
|
|
|
|
-
|
|
(Increase) Advance for Inventory Purchase
|
|
|
14,224
|
|
|
|
(6,789
|
)
|
(Increase) in Trade receivables
|
|
|
5,848
|
|
|
|
(7,755
|
)
|
(Increase ) Decrease in inventory
|
|
|
22,190
|
|
|
|
(200,060
|
)
|
(Increase) Decrease in prepaid expensess
|
|
|
48,600
|
|
|
|
(48,600
|
)
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
8,009
|
|
|
|
(132,413
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from notes payable - realated party
|
|
|
45,644
|
|
|
|
79,151
|
|
Proceeds from Accounts Payable - trade (Decrease in Accounts Payable)
|
|
|
(52,017
|
)
|
|
|
56,306
|
|
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
(6,373
|
)
|
|
|
135,457
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
|
1,636
|
|
|
|
3,044
|
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
|
3,718
|
|
|
|
674
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
|
$
|
5,354
|
|
|
$
|
3,718
|
|
The accompanying notes are an integral part of these financial statements
FREE FLOW, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2017
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 leased facility in King George, VA, buys end of life and wrecked automobiles from Insurance Auctions and dis-assembles 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 net-wok. The primary customers are auto body and mechanic shops.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING BASIS
The statements were prepared following generally accepted accounting principles of the United States of America consistently applied. 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 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 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 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.
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, 20174 the Company had a net operating loss carry-forward of approximately $456,092. 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
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Net (profit) loss before income taxes per financial statement
|
|
$
|
82,853
|
|
|
$
|
(134,291
|
)
|
Income tax rate
|
|
|
34
|
%
|
|
|
34
|
%
|
Income tax benefit
|
|
|
(28,170
|
)
|
|
|
45,659
|
|
Valuation allowance change
|
|
|
(28,170
|
)
|
|
|
45,659
|
|
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, 2017and December 31, 2016 are as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Net operating loss carry forward
|
|
$
|
456,092
|
|
|
$
|
373,239
|
|
Valuation allowance
|
|
$
|
(456,092
|
)
|
|
$
|
(373,239
|
)
|
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 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 EQUIPEMENT
Property and equipment consists of the following:
|
|
As of
|
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
3,500
|
|
|
$
|
3,500
|
|
Total Fixed Assets
|
|
|
3,500
|
|
|
|
3,500
|
|
Less: Accumulated Depreciation
|
|
|
0
|
|
|
|
0
|
|
Net Fixed Assets
|
|
$
|
3,500
|
|
|
$
|
3,500
|
|
Depreciation expenses for the periods ended December 31, 2017 and December 31, 2016 were $0 and $0 respectively
NOTE 5 - INVENTORY
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Auto Parts [used]
|
|
$
|
177,871
|
|
|
$
|
200,060
|
|
|
|
$
|
177,871
|
|
|
$
|
200,060
|
|
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 insufficient 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 has incurred cumulative net losses of $456,092 since its inception and requires capital for its contemplated operational and marketing activities to take place. 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 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
On December 31, 2017, the Company received cash loans totaling $176,417 from Redfield Holdings, Ltd and the Company paid $0 of the loan balance. These loans are at 0% interest with principle balance due prior to December 30, 2018.
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
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"
As of December 31, 2015, the Company had 26,200,000 shares of common stock issued and outstanding and 300 shares of preferred Shares issued and outstanding.
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, 2015, 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 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.