Annual Statements Open main menu

Free Flow, Inc. - Quarter Report: 2022 June (Form 10-Q)


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

 

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-54868

Free Flow Inc.
(Exact name of registrant as specified in its charter)

Delaware

 

45-3838831

(State or other jurisdiction

 

(IRS Employer

of incorporation)

Identification No.)

 

6269 Caledon Road, King George, VA 22485
(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 Website, 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.

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company

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: 24,841,900 shares as of July 26, 2022.


 

ITEM 1.  FINANCIAL STATEMENTS

2

Notes to Condensed Consolidated Financial Statements

6

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

8

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

10

ITEM 4. CONTROLS AND PROCEDURES

10

PART II – OTHER INFORMATION

11

ITEM 1. LEGAL PROCEEDINGS

11

ITEM 1A. RISK FACTOR

11

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

11

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

11

ITEM 4. MINE SAFETY DISCLOSURE

11

ITEM 5. OTHER INFORMATION

11

PART II. OTHER INFORMATION

11

ITEM 6. EXHIBITS.

12

SIGNATURES

12


ITEM 1.  FINANCIAL STATEMENTS

FREE FLOW, INC. & SUBSIDIARIES

Unaudited Condensed Consolidated  Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

June 30,2022

 

December 31,2021

 

 

(Unaudited)

 

Audited

 

ASSETS

 

 

Current Assets

 

 

 

 

Cash and cash equivalents

$137,254  

 

$10,212  

 

Trade Receivables - current

84,392  

 

104,721  

 

Rounding off the decimals - error

(2) 

 

(2) 

 

Inter-company

 

 

 

 

Inventories

5,600  

 

2,525,484  

 

 

 

 

TOTAL CURRENT ASSETS

227,245  

 

2,640,415  

 

 

 

 

Fixed Assets

 

 

 

 

Land and Building, without depreciation

772,413  

 

1,712,413  

 

Less: Allowance for Depreciation

(195,029) 

 

(195,029) 

 

 

 

 

TOTAL FIXED ASSETS

577,384  

 

1,517,384  

 

 

 

 

Other Assets

 

 

 

 

Delivery Trucks, before depreciation allowance

3,500  

 

3,500  

 

Allowance for Depreciation

(3,500) 

 

(3,500) 

 

Improvements in progress

10,697  

 

10,697  

 

Equipment and Delivery Trucks, before depreciation allowance

31,712  

 

35,000  

 

Allowance for Depreciation

(15,475) 

 

(17,080) 

 

 

 

 

TOTAL OTHER ASSETS

26,934  

 

28,617  

 

 

 

 

 

TOTAL  ASSETS

$831,562  

 

$4,186,416  

 

 

 

 

 

LIABILITES & STOCKHOLDERS' EQUITY (DIFICIT)

Current Liabilities

 

 

 

 

Accounts Payable

2,644  

 

23,709 

 

Notes Payable

15,379  

 

958,755 

 

Notes Payable - Related Parties

8,017  

 

1,989 

 

 

 

 

TOTAL CURRENT LIABILLITIES

26,040  

 

984,453 

 

 

 

 

Long Term Liabilities

 

 

 

 

Incredible Bank - Revolving Line of Credit - $350,000

319,319  

 

335,801 

 

PPP1

 

 

41,675 

 

EIDL

499,900  

 

146,300 

 

PayPal Advance

41,551  

 

48,236 

 

Incredible Bank

856,127  

 

860,559 

 

 

 

 

TOTAL LONG TERM  LIABILLITIES

1,716,897  

 

1,432,571 

 

 

 

 

 

Total Liabilities

1,742,937  

 

2,417,024 

 

 

 

 

Redeemable Preferred Stock

 

 

 

 

Series B; 500,000 shares authorized; 330,000 and 0 issued and outstanding as of December 31, 2018 and 2017 respectively (Classified as Mezzanine Equity)

330,000  

 

330,000 

 

Series C; 500,000 shares authorized; 470,935 and 0 issued and outstanding as of December 31, 2018 and 2017 respectively ( Classified as Mezzanine Equity) - As equity in  Accurate Auto Parts, Inc.

470,935  

 

470,935 

Stockholders' Equity (Deficit)

 

 

 

 

Preferred Stock ($0.0001) par value, 20,000,000 shares authorized 10,000 shares par value $0.0001 Class A issued on December 31, 2015

 

 

1 

 

Additional Paid in capital

 

 

 

 

Common stock, ($0.0001) par value, 100,000,000 shares authorized and 26,221,000 shares issued and outstanding as of December 31, 2021 and 2020 respectively

2,620  

 

2,620 

 

Additional Paid in capital

131,033  

 

131,033 

Subscription received - pending acceptance

 

 

- 

 

Current year Profit (Loss)

(2,680,767) 

 

543,898 

 

(Accumulated Deficit) / Net worth, brought forward

834,803  

 

290,905 

 

(Accumulated Deficit)  / Net worth

 

 

 

TOTAL STOCKHOLDERS' EQUITY / (DEFICIT)

(1,712,310) 

 

968,457 

 

 

 

 

 

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)

$831,562  

 

$4,186,416 

 

 

 

 

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements


2


FREE FLOW, INC. & SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

Three Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

REVENUES

$128,721  

 

$428,902 

 

$67,990  

 

$212,462  

 

 

 

 

 

 

 

TOTAL REVENUES

128,721  

 

428,902 

 

67,990  

 

$212,462  

 

COST OF GOODS SOLD

121,030  

 

225,437 

 

66,999  

 

151,897  

 

 

 

 

 

 

 

GROSS PROFIT

7,691  

 

203,465 

 

991  

 

60,565  

 

 

 

 

 

 

 

 

 

 

 

GENERAL AND ADMINISTRATIVE EXPENSES

 

 

 

 

 

 

 

 

 

Administrative expenses

77,702  

 

105,818 

 

46,518  

 

56,065  

 

 

Professional fees

47,204  

 

24,293 

 

37,067  

 

14,190  

 

 

Selling expenses

21,422  

 

41,671 

 

3,430  

 

24,502  

 

 

Financial expenses

48,582  

 

27,779 

 

40,097  

 

9,712  

 

TOTAL GENERAL & ADMINISTRATIVE EXPENSES

194,910  

 

199,561 

 

127,112  

 

104,469  

 

 

 

 

 

 

 

PROFIT (LOSS) FROM OPERATIONS

(187,219) 

 

3,904 

 

(126,121) 

 

(43,904) 

 

 

 

 

 

 

 

 

 

 

 

OTHER (EXPENSE)  INCOME  

(2,493,548) 

 

- 

 

47,642  

 

92  

 

Other Income - Additional Inventory Recovered

 

 

456,110 

 

 

 

108,329  

 

 

 

 

 

 

 

NET INCOME (LOSS)

(2,680,767) 

 

460,014 

 

(78,478) 

 

64,517  

 

 

 

 

 

 

 

BASIC EARNING PER SHARE

(0.102) 

 

0.018 

 

(0.003) 

 

0.002  

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

26,221,000  

 

26,221,000 

 

26,221,000  

 

26,221,000  

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements

 

 

 


3


 

FREE FLOW, INC. & SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

ADDITIONAL

 

 

 

 

 

TOTAL

 

COMMON STOCK

 

PREFERRED STOCK

 

PAID-IN

 

SUBSCRIPTION

 

RETAINED

 

STOCKHOLDERS'

SHARES

 

AMOUNT

 

SHARES

 

AMOUNT

 

CAPITAL

 

RECEIVED

 

EARNINGS

 

EQUITY

 

 

 

 

 

Series -A

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2022

 26,221,000 

 

 $ 2,620

 

 10,000

 

 $ 1.00

 

 $ 131,033

 

 $ - 

 

$ 834,803 

 

 $ 968,457 

Shares Cancelled

 (1,379,100)

 

  -

 

 -

 

  -

 

  -

 

 

 

 - 

 

 $ - 

Net loss for  the period

 - 

 

  -

 

 -

 

  -

 

  -

 

  - 

 

 (2,602,289)

 

 $ (2,602,289)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2022

 24,841,900 

 

 $ 2,620

 

 10,000

 

 $ 1.00

 

 $ 131,033

 

 $ 

 

$ (1,767,486)

 

 $ (1,633,832)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the period

 - 

 

  -

 

 -

 

  -

 

  -

 

  - 

 

$ (78,478)

 

 $ (78,478)

Balance as of June 30, 2022

 24,841,900 

 

 $ 2,620

 

 10,000

 

 $ 1.00

 

 $ 131,033

 

 $ 

 

$ (1,845,964)

 

 $ (1,712,310)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2021

 24,841,900 

 

 $ 2,622

 

 10,000

 

 $ 1.00

 

 $ 131,033

 

 $ 25,500 

 

$ 289,960 

 

 $ 449,116 

Subscription Received / (Returned)

 - 

 

  -

 

 -

 

  -

 

  -

 

  (25,000)

 

 - 

 

 $ (25,000)

Net Income for the period

 - 

 

  -

 

 -

 

  -

 

  -

 

 

 

 48,708 

 

 $ 48,708 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2021

 24,841,900 

 

 $ 2,622

 

 10,000

 

 $ 1.00

 

 $ 131,033

 

 $ 500 

 

$ 338,668 

 

 $ 472,824 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income for the period

 - 

 

 $ -

 

 

 

 $ -

 

 $ -

 

 $ 

 

$ 64,517 

 

 $ 64,517 

Balance as of June 30, 2021

24,841,900

 

 $ 2,622

 

10,000

 

 $ 1.00

 

 $ 131,033

 

 $ 500 

 

$ 749,975 

 

 $ 884,131 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements


4


 

FREE FLOW, INC. & SUBSIDIARIES

 

 

Unaudited Condensed Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

2022

 

2021

 

 

CASH FLOW FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net (Loss) / Profit

 

$(2,680,767) 

 

$460,015  

 

 

 

Adjustments to reconcile net income to net cash provided

 

 

 

 

 

 

by operating activities:

 

 

 

 

 

 

Loss on disposal of fixed assets

989  

 

 

 

 

 

Loan written off PPP 1

(41,675) 

 

 

 

 

 

(Increase) in Other Assets

 

 

(1,256) 

 

 

 

Increase (Decrease) due to inventory adjustment 2020

 

 

(944) 

 

 

 

Assets of IAP

940,000  

 

 

 

 

 

Inventory

2,525,484  

 

 

 

 

 

Notes payable IAP

(937,666) 

 

 

 

 

 

Changes in operating assets and liabilities :

 

 

 

 

 

 

(Decrease) in Trades Payable

(21,065) 

 

(7,184) 

 

 

 

(Increase) Decrease in Inventory

(5,600) 

 

(511,113) 

 

 

 

Decrease in Trade Receivables

20,329  

 

16,878  

 

 

 

 

NET CASH (USED IN) BY OPERATING ACTIVITIES

(199,970) 

 

(43,604) 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Proceeds from disposal of fixed assets

694  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET CASH PROVIDED BY INVESTING ACTIVITIES

694  

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from notes payable - related parties

6,028  

 

6,988  

 

 

 

Proceeds from Notes Payable

5,000  

 

 

 

 

 

Repayment of Notes Payable

(10,710) 

 

 

 

 

 

Repayment to Pay Pal Advance

(6,685) 

 

(5,348) 

 

 

 

Proceeds from Loan from River Valley Bank

(20,914) 

 

 

 

 

 

Proceeds from Subscription Money

 

 

(25,000) 

 

 

 

Rounding off the decimals - error

 

 

(1) 

 

 

 

Repayment to PPP1

 

 

18,466  

 

 

 

Proceeds / (Repayment) from EIDL Loan

353,600  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET CASH PROVIDED/(USED IN) BY  FINANCING ACTIVITIES

326,319  

 

$(4,895) 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE /(DECREASE) IN CASH AND CASH EQUIVALENTS

127,042  

 

(48,499) 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS IN THE BEGINNING OF PERIOD

10,212  

 

83,516  

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT THE END OF  PERIOD

$137,254  

 

$35,017  

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements


5


 

Free Flow, Inc.

Notes to Condensed Consolidated Financial Statements

June 30, 2022

(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 June 30, 2022 and the results of operations and cash flows for the periods presented. The results of operations for the six months ended June 30, 2022 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, 2021 filed with the SEC on April 15, 2022.

 

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 and / or sufficient reserves 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 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 has obtained working capital line of credit from its commercial bank 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 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.

The Company has prepared a Private Placement Memorandum offering under rule 506 (c) of Regulation D to raise $19.5 million with a minimum of $2,600,000 to pay off all interest-bearing debts and have enough minimum working


6


capital to grow its used auto parts business. The Company intends to become a Shariah Compliant publicly traded entity. The offering memorandum can be viewed on http://www.freeflowplc.com/offering/

 

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 was changed to Motors & Metals, Inc. and had remained inactive but was in good standing, until it received a letter of intent from an overseas buyer willing to enter a long term contract to purchase shredded steal derived from automobile other scrap metals. Thus Motors & Metals, Inc. has embarked upon substituting its automobile crushing and shredding business to only shredding of automobiles and other metals to recover ferrous metals.

Proposals form renowned manufacturers of auto shredding equipment have been received and are being evaluated to determine the most suitable and competitive supplier. The initial plan is laid out to have an output of 3,000 to 5,000 tons of shredded steel per month. The management hopes that upon the funds being raised through the offering made through the above-mentioned Private Placement Memorandum that it will begin the process to expand its scrap metal processing activities.

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

On April 17, 2018 the company incorporated in Virginia, another subsidiary named Accurate Investments, Inc. with the objectives of acquiring real estate property, and has remained dormant until any business is transacted.

On January 4, 2017 a subsidiary named City Autos, Corp. was incorporated in the Commonwealth of Virginia which remained dormant until July 21, 2020 whereby a business license has been obtained and City Auto is preparing to start business of auto “Lease – Rent To Own”. The premises were already zoned for use as an Auto Dealership, and there existed a used car deanship operated by the former owners. City Autos is preparing to obtain a dealership license from the State and expects to start with a 50 cars fleet to Lease – Rent to own.

 

NOTE 4 – RELATED PARTY

As of December 31, 2019, the Company had a note payable in the amount of $10,343 to Redfield Holdings, Ltd. a related party. During the six months ended the Company debited an additional $25 thus owing a total sum of $10,318 as of June 30, 2020. The note is unsecured and does not bear any interest and has a maturity date has been extended to December 30, 2022.

 

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.


7


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

a)Each share to carry one vote. 

b)Each share will be redeemable with a 365 days written notice to the company. 

c)Each share will be junior to any debt incurred by the Company.  

d)The redemption value will be the par value at which such “preferred shares – series B” are bought by the subscriber. 

e)Each share will carry a dividend right at par with the common shares. 

On December 31, 2014 the Company had a Note outstanding in the principal amount of $330,000 plus interest payable to GS Pharmaceuticals, Inc. By mutual consent this note and accrued interest was converted to 330,000 preferred shares – Series “B”.

On March 31, 2015 an amount of $58,000 was subscribed by Redfield Holdings, Ltd. by cancellation of a Note against the issuance of 9,700 shares of preferred shares – Series “A”. These shares were issued to Redfield Holding, Ltd. thus making a total of entire designated preferred shares – Series “A” shares to Redfield Holdings, Ltd. Each share of preferred shares – Series “A” carries voting right equal to 10,000 common shares.

On June 30, 2017 total preferred shares issued and outstanding are 10,000 Series “A” and 330,000 Series “B”.

January 1, 2019, by consent of the related party note holder i.e., by Redfield Holdings, Ltd. the debt for a sum of $470,935 was converted to Preferred Shares Series “C” to be described as Mezzanine Equity in its subsidiary, namely Accurate Auto Parts, Inc. The total number of shares classified as Preferred Shares Series “C” are 500,000.

On April 2, 2019, in a private transaction the Company accepted a sum of $14,490.00 against issuance of 21,000 restricted Common shares of the Company. Thus, the total common shares issued and outstanding as on June 30, 2021 stood at 26,221,000. In June 2022 the Company cancelled 1,379,100 shares that were returned to by the a few respective shareholders; as they were not used for the purpose they were issued for, i.e., these shareholders failed to provide consideration for which these shares were issued.

 

NOTE 6 – SUBSEQUENT EVENTS

On August 3, 2022 the Company entered into a Master Purchase Agreement with a company in Sharjah, United Arab Emirates who have agreed to purchase approximately 50 container of scrap metal for the next 12 months. The first shipment against this agreement is ready, the vessel is expected to sail by end of August 2022. The total value of the contract is approximately $1,000,000.

The Company concluded another Master Purchase Agreement dated August 12, 2022 whereby a bonafide international trading company based out of London, U.K. has agreed to purchase 45,000 MT of Heavy Melting Scrap ISRI 202  (80/20) ½  and  ISRI 211 shredded steel. The transaction entails payment via sight letters of credit issued by first class international banks. The Company has identified stockpiles and is negotiating with the Sellers. Simultaneously, the Company is trying to secure lines of credit for purchase of material. The value of the contract is approximately $14 million.

ITEM 2. MANAGEMENT’S DISCUSSION AND ALALYIS OR PLAN OF OPERATION

 

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED FINANCIAL STATEMENT SAND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND


8


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

N.B.   Market conditions may change, which my adversely affect the future results.

The Company liquidated most of its inventory as scrap metal due to the fact that cash resources available were not enough to purchase new inventory. Without fresh new inventory the sales of auxiliary parts, that were in hand, was negligible. This is due to the fact that the prices of end-of-life and wrecked automobiles has increased to more than double the previous prices. Accordingly, keeping in view the present market conditions the management felt that it would take a pause in building used auto parts’ inventory until and unless a sum of $750,000 to $1,000,000 has been mobilized for the used auto parts business.

Progress has been reported in Note 6 under “subsequent events” as above.

The Company through its subsidiaries, namely, Accurate Auto Parts, Inc. and Motor & Metals, Inc. has made a sale of $128,721 of Automobile Parts, Services and Processed Scrap. The Company continues seeking additional sales both in the domestic and international markets.

Regarding scrap metal processing: Motors & Metals, Inc., the subsidiary which is licensed to operate as scrap metal processor completed its scope of equipment and machinery and thereafter, on July 4, 2020 the company received a firm quotation from an equipment manufacturer. The cost of the project is estimated at $9,000,000 with a projected EBITDA of about 20% on an estimated annual revenue of $10,000,000. Financing arrangements are currently being worked upon and the Company expects to secure and firm up the plans as soon as possible. Due to Covit19, the response from Investors and Lenders/Equipment Leasing companies was rather slow which has resulted in delay to implement the plans.

A firm contract with the machinery suppliers will be executed as soon as financing is arranged.

City Autos, Corp. – the subsidiary of the Company has received the business license to operate as used car dealership which encompasses the business of auto leasing and renting. Application to the DMV in the Commonwealth of Virginia will soon be filed to obtain the dealer license. City Autos plans to confine its business to auto “Lease – Rent To Own” only. The model City Autos has chosen is a weekly program to Lease – Rent To Own on affordable weekly payments.  City Autos plans to stay with a 50 cars fleet until such time that adequate staff is hired and trained.

 

RESULTS OF OPERATIONS

The existing cash resources were thus diverted to trading activities in Scrap Metal business. Five containers have been exported since January 2022 with a target to export 4 to 5 containers per month. This requires less investment and once the targeted shipments are achieved, the company will be able to make enough profits and eliminate the deficit from operations.

The Company did recognize revenue for a sum of $128,721during the six months ended June 30, 2022 and $458,902


9


of revenues during the six month ended June 30, 2020. While the net revenues for the period ended June 30, 2022 were lower by $330,181than for the same period during 2021 and the Cost of Goods Sold was less by $104,407 during the period ended June 30, 2022 as compared to the same period during 2021. This 46 % decrease in cost of goods sold was due to decrease in automobile activities and decline in other overheads.  The general and administrative expenses for the period ended June 30 2022 were $77,702 as compared to $105,118 for the same period during 2021. During the period of 2022 the Company purchased less vehicles as compared to the same period and in the business of scrap metals due to which operation of the Company reduced which leads into decrease in Administrative expenses.

During the six months ended June 30, 2022 the company recognized a gross profit of $7,691 as compared to $203,465for the corresponding period in the year 2021, this decrease of $195,774 in Gross profit equates to approximately 96% as compared to the six months ended June 2021.

During the six-month ended June 30, 2022 the company recognized a net operating loss of $187,219 as compared to operating profit of $3,904 for the corresponding period in the year 2021, this operating loss of $187,219 is due to the fact that the sales was decreased by $300,181 and the fixed professional and financial expenses were significantly high thus yielding a low margin of profit.  

Management has opted to provide for the depreciation of equipment, trucks and building at the end of the year instead of providing for it on quarterly basis.

LIQUIDITY

THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S REPORT ON THE COMPANY’S FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021, 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.

BALANCE SHEET

On June 30, 2022 the Company had total current assets of $ 227,245 consisting of $137,254 in cash and $84,392 in trade receivables, and $5,600 in inventory. As on June 30, 2021 the Company has a total current assets of $2,510,746 consisting of $35,018 in cash and $185,791 in trade receivables, and $2,289,937 in inventory at cost.

EQUITY LINE OF CREDIT

The Company has obtained an equity line of credit from Incredible Bank, additionally personally guaranteed by the CEO, Mr. Sabir Saleem against which, a sum of $319,319 was drawn as on June 30, 2022. The line of credit is being used for operating expenses, primarily for purchase of inventory.

OTHER LOANS

As of June 30, 2022 the Company had an outstanding loan from PayPal in the amount of $41,551 and received a loan under Economic Injury Disaster Loan (EIDL) in the amount of $353,600.

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 $128,721 for the six months ended June 30, 2022.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABUT MARKET RISKS

Not Applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

Management's Report on Disclosure Controls and Procedures


10


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 June 30, 2021, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTOR

Not Applicable to Smaller Reporting Companies.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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.

In April 2019 the Company, as a private transaction, issued 21,000 restricted shares of Common Shares for a sum of $14,490.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not Applicable

ITEM 5. OTHER INFORMATION


11


 

ITEM 6. EXHIBITS.

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:

 

Exhibit No.

 

Description

 

 

 

3.1

 

Articles of Incorporation*

3.2

 

Bylaws*

31.1

 

Sec. 302 Certification of Principal Executive Officer

31.2

 

Sec. 302 Certification of Principal Financial Officer

32.1

 

Sec. 906 Certification of Principal Executive Officer

32.2

 

Sec. 906 Certification of Principal Financial Officer

101

 

Interactive data files pursuant to Rule 405 of Regulation S-T

 

 

SIGNATURES

 

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.

 

Free Flow Inc. 

Registrant 

 

 

Dated:  August 15, 2022By:/s/ Sabir Saleem 

______________________________ 

Sabir Saleem, Chief Executive Officer,  

Chief Financial and Accounting Officer


12