Free Flow, Inc. - Quarter Report: 2017 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017

Commission file number 000-54868

 

Free Flow Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

2301 Woodland Crossing Dr.

Suite 155, Herndon, VA 20171

(Address of Principal Executive Offices)

(703) 789-3344

(Registrant’s Telephone Number)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES [X] NO [   ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [   ]

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [  ] NO [X]

 

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:  26,200,000 shares as of May 24, 2017

 

TABLE OF CONTENTS

 

 

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	3
Condensed Balance Sheets - March 31, 2017 (Unaudited)
and December 31, 2016 (Audited)	3
Condensed Statements of Operations - March 31, 2017 (Unaudited)
and March 31, 2016 (Unaudited)	4
Condensed Statements of Cash Flows -
Three months ended March 31, 2017 (Unaudited)
and March 31, 2016 (Unaudited)	5
Notes to Financial Statements	6
Item 2. Management's Discussion and Analysis or Plan Of Operations	8
Item 3. Quantitative and Qualitative  Disclosures About Market Risks
Not  Applicable	9
Item 4. Controls and Procedures	9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None	9
Item 1A. Risk Factor
Not Applicable to Smaller Reporting Companies	9
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3. Defaults Upon Senior Securities
None	10
Item 4. Mine Safety Disclosures
Note Applicable	10
Item 5. Other Information
None	10
Item 6. Exhibits	10

 

 

 

		As of					As of
		March 31,					December 31,
		2017			See		2016
		(Unaudited)			Note		(Audited)
ASSETS
CURRENT ASSETS
Cash in hand and bank		$	1,932				$	3,718
Advances for Inventory Purchases			11,972					14,224
Prepaid Rent			32,400					48,600
Accounts Receivable - Trade			9,604					7,755
Inventory			250,972					200,060
TOTAL CURRENT ASSETS			306,880					274,357
OTHER ASSETS
Automobiles - Delivery Trusks			3,500					3,500
JK Sales, Corp.			200
TOTAL OTHER ASSETS			3,700					3,500
TOTAL ASSETS		$	310,580				$	277,857
LIABILITES & STOCKHOLDERS' EQUITY (DIFICIT)
Current Liabilities
Accounts Payable		$	43,671				$	73,157
Customer Deposits against Sales			8,100
Customer Deposit from related party			10,600
Notes payable - related parties			140,982					130,773
TOTAL CURRENT LIABILITES			203,353					203,930
LONG-TERM LIABILITES
None
TOTAL LONG-TERM LIABILITIES			-					-
Total Liabilities			203,353					203,930
Redeemable Preferred Stock
Series B; 500,000 shares authorized, 330,000 and 0 issued and outstanding
as of March 31, 2017 (Classified as Mezzanine equity)			330,000					330,000
Stockholders' (Deficit)
Preferred stock ($0.0001) par value, 20,000,000 shares authorized
10,000 shares part value $0.001 Class A issued on March 31, 2017 and December 31, 2016			1					1
Common Stock, ($0.0001 par value 100,000,000 shares authorized
26,200,000 shares issued and outstanding as of March 31, 2017 and December 31, 2016			2,620					2,620
Additional paid-in capital			114,545					114,545
Current Period - Profit			33,300
Accumulated Deficit			(373,239	)				(373,239	)
TOTAL  STOCKHOLDERS' EQUITY (DIFICIT)			(222,773	)				(256,073	)
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT		$	310,580				$	277,857

 

 

 

 

		3 month					3 month				Year Ended
		Ended					Ended				December 31,
		March 31,			See		March 31,				2016
		2017			Note		2016				(Audited)
REVENUES
Revenues		$	134,338				$	139,266			$	551,182
TOTAL REVENUES			134,338					139,266				551,182
COST OF GOODS SOLD			33,423					82,639				101,736
GROSS PROFIT			100,915					56,627				449,446
GENERAL & ADMINISTRATIVE EXPENSES
Administrative expenses			57,388					14,341				-
Professional fees			4,060					27,205				-
Selling expenses			3,620					-				-
Financial Expenses			2,549					-				-
Cost of goods - procurement expenses			-					-				315,155
TOTAL GENERAL & ADMISINSTRATEVIE EXPENSES			67,617					41,546				315,155
PROFIT (LOSS) FROM OPERATION			33,300					15,081				134,291
OTHER EXPENSE
Interest expense-related party								-
NET INCOME (LOSS)		$	33,300				$	15,081			$	134,291
BASIC EARNING PER SHARE			0.0013
WEIGHTED AVERAGE NUMBERO OF COMMON SHARESS OUTSTANDING			26,200,000

 

 

 

 

 

		Three months ended March 31,
		2017				2016
CASH FLOW FROM OPERATING ACTIVITIES
Net Profit		$	33,300			$	15,081
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities
(Increase) decrease in Inventory			(50,912	)			(1,256	)
(Increase) decrease in Prepaid expenses			16,200				(2,581	)
Increase (decrease) in Accounts payable			(29,486	)			66,473
(Increase) decrease in Accounts receivable			203				(72,357	)
NET CASH USED IN OPERATING ACTIVITIES			(30,695	)			5,360
CASH FLOW FROM FINANCING ACTIVITIES
Increase (decrease) in Proceeds from related party note			28,909				9,507
JK Sales, Corp. subscription made			-				(200	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			28,909				9,307
NET INCREASE IN CASH			(1,786	)			14,667
CASH AT BEGINNING OF PERIOD			3,718				674
CASH AT END OF PERIOD		$	1,932			$	15,341

 

 

 

 

The accompanying notes are an integral part of these financial statements

 

Free Flow, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2017

(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 March 31, 2017 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2017 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, 2016 filed with the SEC on April 3, 2017.

 

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 MMM Auto Parts facility, and have an independent profit center.

 

As reported in 10Qs for the earlier quarters, on February 4, 2016 the company incorporated another subsidiary in the State of Virginia under the name JK Sales, Corp. and entered in to an agreement with Al-Mustafa Enterprise, Inc. in King George, Virginia to act as Managing and Sales Agent. On August 24, 2016 JK Sales, Corp. Bought the book of business and trade name namely MMM Auto Parts and took over the facility under a long term lease arrangement.

 

NOTE 4 – RELATED PARTY

 

As of December 31, 2016, the Company had a note payable in the amount of $130,773 to Redfield Holdings, Ltd. a related party. During the three months ended the Company borrowed an additional $10,210 thus owing a total sum of $140,982 as of March 31, 2017. The note is unsecured and does not bear any interest and has a maturity date of December 30, 2017. During the three months ended the Company borrowed a sum of $10,600 from St. Gabriel Foundation, Inc. a related party, the note does not bear any interest. St. Gabriel Foundation anticipates to purchase automobiles against this sum of $10,600.00.

 

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:

 

 

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

 

Management has evaluated subsequent events through the date which the financial statements were available to be issued. Based on the evaluation there occurred a material event that require recognition in or disclosure to the financial statements. Motor & Metals has entered into an “Auto Parts and Distribution Agreement” with SAM International - F.Z.E, a Free Zone Enterprise in the Emirate of Ajman, United Arab Emirates, and anticipates a one to three million sales per annum of new and used auto parts. The agreement has been reported in the 8K filed on May 2, 2017. 

 

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED FINANCIAL STATEMENT SAND 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

JK Sales, Corp. the Company’s used auto parts subsidiary has made a sale of 134,338 of Automobile Parts. 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 $134,338 during the three months ended March 31, 2017 and $139,266 of revenues during the three month ended March 31, 2016. While the net revenues for the period ended March 31, 2017 were less by $ $4,928 than for the same period during 2016 but the Cost of Goods Sold was also less by $49,216 during the period ended March 31, 2017 as compared to the same period during 2016. Thus the Gross Profit had a significant increase, i.e. by $ 44,288 during the period ended March 31, 2017 as compared to the same period during 2016.

During the three months ended March 31, 2017, the Company incurred operational expenses of $67,616 of which $3,6205 were spend as selling expenses. This compares to $41,546 for the three months ended March 31, 2015.

During the three months ended March 31, 2017 the company recognized a net income of $33,300 as compared to $15,081 for the corresponding period in the year 2016, thus recognizing an increase of approximately 120 % as compared to the three months ended March 31, 2016.

LIQUIDITY

THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S REPORT ON THE COMPANY’S FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016, AND FOR EACH OF THE 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 March 31, 2016 the Company had total current assets of $306,880 consisting of $1,932 in cash and $9,6047 in trade receivables, and $11,972 in Advances for Purchases and $250,972 in inventory and $32,400 in pre-paid rent.

NEED FOR LINE OF CREDIT

The Company does not have cash sufficient to meets its cash needs. The Company will have to seek loans or equity placements to cover such cash needs. As aforementioned the Company is working to deploy a $2,000,000 Offering to meet its cash needs.

 

 

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 March 31, 2017, 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.