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Free Flow USA, Inc. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
September 30, 2024 and 2023
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 as Free Flow USA, Inc. 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., sold its 19+ acre facility in March 2024 and began concentrating in international sales of scrap metal through its wholly owned subsidiary namely Motors & Metals, Inc.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and include all the adjustments necessary for the fair presentation of the Company’s financial position for the periods presented. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for 2023 (“2023 Form 10-K”) as filled with SEC on April 01, 2024.
Use of Estimates
In preparing the consolidated financial statements in conformity with U.S GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include but are not limited to, revenue recognition, the allowance for bad debts, income taxes, and unrecognized tax benefits. Actual results could differ from those estimates.
Recent Accounting Standards Not Yet Adopted
In December 2023 the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosure, which expands the disclosures required for income taxes, primarily through changes to the rate reconciliation and income taxes paid information. The ASU is effective for fiscal years beginning after December 15, 2024, with early adaptation permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
Cash and cash Equivalents
Cash and cash equivalents are on deposit with financial institutions without any restrictions. The Company maintains its cash with high-quality financial institutions.
Property and Equipment, net
Property and equipment are stated at cost less accumulated depreciation or impairment. Routine maintenance and repair costs are expensed as incurred. The costs of major additions, replacements, and improvements are capitalized. Gains and losses realized on the sale or disposal of property and equipment are recognized or charged to other expenses in the consolidated statement of operations.
Property, plant, and equipment depreciation is calculated using the straight-line method over the estimated useful lives.
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Stock Subscription Receivable
The Company recorded stock issuance at the effective date. If the subscription is not funded upon issuance, the Company records a Stock Subscription Receivable as an asset on Balance Sheet. When Stock Subscription receivables are not received prior to the issuance of financial statements at a reporting date in satisfaction of the requirements under FASB ASC 505 – 10 – 45 – 2, the stock subscription receivable is reclassified as a contra account to stockholder’s equity (deficit) on the balance sheet.
Basic Earnings (loss) per Share
The Company computes net income (loss) per share in accordance with ASC 260, Earnings per share, ASC 260 Specifies the computation, presentation, and disclosure requirements for earnings (loss) per share for entities with publicly held common stock.
Basic net earnings (loss) per share amounts are computed by dividing the net earnings (loss) by the weighted average Number of common shares outstanding. Diluted earnings (loss) per share are the same as basic earnings (loss) per Share due to the lack of dilutive items in the Company.
NOTE 3 – GOING CONCERN
The Company's present revenues along with cash and cash equivalent reserves 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 $1,052,419 since its inception. There are no significant fixed recurring expenses and the current receivables are far in excess of current payables, thus the management has no doubt that it will continue as a going concern and recover the expenses through trading activities that are in progress.
NOTE 4 – 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. In August 2018 Motors & Metals, Inc. received firm expression of interest from an overseas buyer willing to place long term purchase orders to buy 3,000 to 5,000 MT of Processed Scrap Metal. The company continues to make endeavors to source scrap metal to generate revenues.
As reported in 10Qs for the earlier quarters, as well as in 10-K for the Annual reports, on February 4, 2016 the company incorporated another subsidiary in the State of Virginia under the name of JK Sales, Corp. (on December 7, 2017 the name was changed to Accurate Auto Parts, Inc.,) and since sale of its recycling facility Accurate Auto Parts, Inc. is actively working to set up a trading platform for sale of used auto parts.
On April 17, 2018 the company incorporated in Virginia, another subsidiary named Accurate Investments, Inc. the objectives of acquiring real estate property, which plan did not materialize. However, Accurate Investments, Inc. continues to pursue other investment opportunities that could add revenues to the Company.
On January 4, 2017 the company incorporated in Virginia another subsidiary named City Autos, Corp. with the objectives of operating an auto dealership. Upon sale of facility the plan to operate has been suspended until new location is acquired.
NOTE 5 – NOTE PAYABLE, RELATED PARTY
As of December 31, 2023, the Company had a note payable in the amount of $9,988 to Redfield Holdings, Ltd. a related party. This Note was paid in September 2024. There was no interest on this Note Payable.
Redfield Holdings Ltd. is 100% owned by Mr. Sabir Saleem, the CEO of Free Flow USA, Inc.
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NOTE 6 – 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 $0.0001 per shares.
On August 5, 2020 the company filed the following Amendment to the Capital Stock:
The amount of the total Common Stock of the corporation is Hundred Million (100,000,000) shares of Common Stock, par value ($.0001) per shares.
The total amount of Preferred Stock of the corporation is Twenty Million (20,000,000) shares, par value ($.0001) per share. The preferences being that there will be various series of Preferred Share, such preferences are more specifically defined as under along with the number of shares allocated to each series:
Series “A”: Number of shares allocated are Ten Thousand (10,000) – par value $.0001 per share; one share of this class of Preferred Stock Series “A” will carry voting rights equal to Ten Thousand (10,000) shares of Common Shares; thus the voting rights attributed to all of these 10,000 shares would be equal to One Hundred Million common shares.
Series “B”: Number of shares allocated are Five Hundred Thousand (500,000) – par value $.0001 per share; one share of this class of Preferred Stock Series “B” will carry voting rights equal to one share of Common Shares; and are redeemable with 365 days’ notice.
Series “C”: Number of shares allocated are Five Hundred Thousand (500,000) – par value $.0001 per share; one share of this class of Preferred Stock Series “C” will carry voting rights equal to one share of Common Shares and could be used to assign corresponding capital in to any subsidiary of Free Flow, Inc. with a view to extend comfort to any lender. Such shares are redeemable upon such lender authorizing the redemption of capital in the respective subsidiary company.
Series “D”: Number of shares allocated are Fifteen Million (15,000,000) – par value $.0001 per share; one share of this class of Preferred Stock Series “D” will carry voting rights equal to one share of Common Shares This series of shares could be issued against subscription of any amount as the board of directors and/or majority of the shareholders approve. Series “D” shares could be converted in to common shares as approved by the majority shareholders.
Series “E”: Number of shares allocated are Three Million Nine Hundred Ninety Thousand (3,990,000) – par value $.0001 per share; one share of this class of Preferred Stock Series “E” will carry voting rights equal to one share of Common Shares This series of shares could be issued against subscription in cash or kind including but not limited to subscription directly into capital account of any subsidiary for any amount as the board of directors and/or majority of the shareholders approve. Series “E” shareholders could be entitled to a specifically defined profit sharing in a specific project or transaction(s). Series E shares could be redeemable and/or converted in to common shares as agreed between the subscriber(s) and approved by the majority shareholders and/or by the Board of Directors of the Company.
The amendment effected herein was authorized by the affirmative vote of the holders of a majority of the outstanding shares entitled to vote thereon at a meeting of the shareholders pursuant to Section 242 of the General Corporation Law of the State of Delaware.
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”.
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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 September 30, 2017, total preferred shares issued and outstanding are 10,000 Series “A” and 330,000 Series “B”.
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 of September 30, 2024 and December 31, 2023, stood at 30,000,000 and 25,876,900. During the nine months ended September 30, 2024 the company issued common shares of 50,000, 1,000,000 and 3,073,100.
On August 17, 2020 the Company completed its Private Placement Memorandum (PPM) to raise $19.5 million with no minimum, against issuance of 15,000,000 Series “D” shares at a price of $1.30 per share. The PPM was withdrawn while the allocation of 15 million shares of Series “D” is still valid.
On July 27, 2004, Ravinder K. Tikoo, M.D. executed a subscription agreement to purchase 1 million common shares under rule 144 of the SEC Act of 1934. The shares were issued to DKJ Trust as per order of Dr. Tikoo.
NOTE 7 – SUBSEQUENT EVENTS
The Company has evaluated subsequent event through October 09, 2024, the date these financial statements were prepared to be issued, and noted no material subsequent events for disclosure.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ALALYIS OR PLAN OF OPERATION
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN. IN CONNECTION WITH, AND BECAUSE WE DESIRE TO TAKE ADVANTAGE OF, THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WE CAUTION READERS REGARDING CERTAIN FORWARD LOOKING STATEMENTS IN THE FLOWING DISCUSSION AND ELSEWHERE IN THE THIS REPORT AND IN ANY OTHER STATEMENT MADE BY, OR AN BEHALF, WHETHER OR NOT IN FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, FORWARD-LOOKING STATEMENTS ARE STATEMENT NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS. FORWARD-LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE, THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FORM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING STATEMENTS MADE BY, OR ON OUR BEHALF, WE DIS TO UPDATE FORWARD-LOOKING STATEMENTS.
PLAN OF OPERATION
Auto Parts Division:
The company has decided to only trade in auto parts business.
City Autos, Corp.
The prospects are under review, the subsidiary may be closed for business as nothing much has been transacted since the beginning of 2024.
Motors & Metal, Inc.:
Having shelved the plan to set up a scrap metal processing plant at its facility in King George, as the purchase orders of customers from abroad are still active, the management in addition to trading in scrap metal may continue pursuing setting up its own facility.
The Company has moved its corporate office to 9243 John F. Kennedy Blvd., North Bergen, NJ 07047- 5322.
RESULTS OF OPERATIONS
The Company did recognize revenue for a sum of $6,123 during the nine months ended September 30, 2024, and $4,032 of revenues during the nine months ended September 30, 2023. The net revenues for the period ended September 30, 2024 were greater by $2,091 than for the same period during 2023 and the Cost of Goods Sold was low by $11,786 during the period ended September 30, 2024, as compared to the same period during 2023. There is a Gross Profit of $ 2,339 as of September 30, 2024, as compared to the Gross Loss of $ 11,539 for the same period during 2023
During the nine months ended September 30, 2024, the Company incurred operational expenses of $428,941. This compares to $93,821 for the nine months ended September 30, 2023. This increase in operational expenses is due to an increase in professional and financial expenses that were responded upon receiving final statements from the lending banks.
During the nine months ended September 30, 2024, the Company recognized a net gain of $ 812,683 as compared to the net loss of $ 71,065 for the corresponding period in the year 2023 thus recognizing a significant increase as compared to the nine months ended September 30,2023 due to gain upon sale of fixed assets, i.e. upon sale of 19+ acre property.
The tax returns for the previous year has be filed within the allowed filing date with no tax liability.
The credit committee comprising of sole member, namely Mr. Sabir Saleem reviewed all trade receivables and trade payables that were long outstanding and had become stagnant and un-collectible. All such amounts have been written off and/or set off so as not to show as an asset or liability on the books of accounts of the Company. The net impact of such adjustments amounted to $81,527.49 which has been booked as a loss. However, such receivables and payables have been recorded as memorandum and would be recognized as other income if and when such amounts are received.
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LIQUIDITY
Our consolidated financial statements have been prepared to assume that we will continue as a going concern.
On September 30, 2024, the Company had total current assets of $381,121 consisting of $34,289 in cash
and $6,680 in trade receivables, there was zero value of Inventory, receivable from IRS $32,730 and Notes Receivable $300,000.
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 $2,924,181 up to September 30, 2024 since it began operations.
BOARD OF DIRECTORS
On August 26, 2024, the Board of Directors of the Company approved the addition of Mr. Ravinder Tikoo M.D as a member of the Company Board of Directors and appointed as Chairman of the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
As a “Smaller Reporting Company” as defined by item 10 of Regulation S-K , we are not required to provide information required by this item.
ITEM 4. CONTROLS AND PROCEURES
Management's Report on Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate internal control so as to
(1) maintain the records in reasonable detail, which will accurately and fairly reflect the transactions and dispositions of the Company's assets;
(2) to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are made within the delegated authority ; and
(3) to provide reasonable assurance for the prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on company’s financial statements.
However, the management asserts that the company does not have any accounting staff due to limited financial resources though has plans to recruit gradually. Also, this company does not have a well written document on accounting policies and procedures, though has plans to have them shortly. Consequently, this can result in possible errors in the presentation and disclosure of financial information in our annual, quarterly, and other filings.
The SIC Code of 1700 as showing in Edgar for this company is no longer valid, since this company is now dealing with the auto parts, as OEM Recycled Auto Parts. Segregation of duties is an important factor in Internal Control. Though it is achieved to a certain extent, the management is committed to strengthen the internal controls effectively in the coming months.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the period ended September 30, 2024 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
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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
The Company has issued the following shares:
Preferred:
10,000 shares of Preferred Shares – Series “A” for a sum of $300 in cash and $58,000 which were the result of conversation of certain debts of the company.
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.
470,935 shares of Preferred Shares – Series “C’ for a sum of $470,935 which were the result of conversation of certain debts of the company.
All of the above preferred shares were issued to Redfield Holdings, Ltd. which is 100% owned by Mr. Sabir Saleem, the CEO of the company.
On September 28, 2024, as per request of Mr. Sabir Saleem, all of the above preferred shares were transferred from Redfield Holdings, Ltd. to Mr. Sabir Saleem, being the sole beneficial owner from day one, such transfer has no material effect because of the change of name of the shareholder.
Common:
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.
On June 20, 2022, in an amicable agreement 1,379,100 restricted common shares were cancelled.
On April 27, 2023, in a private transaction the Company accepted a sum of $10,000 against issuance of 35,000 restricted Common shares of the Company.
On May 11, 2023, in a private transaction the Company accepted a sum of $1,000 against issuance of 1,000,000 restricted shares of the Company.
On December 30, 2023, in a private transaction the Company accepted a sum of $10,000 against issuance of 50,000 restricted shares of the Company.
On July 29, 2024, in a private transaction the Company accepted a subscription agreement against issuance of 1,000,000 for a sum of $200,000.
On September 28, 2024, in a private transaction the Company accepted a subscription agreement against issuance of 3,073,100 restricted shares for a sum of $307.00.
Thus, the total number of common shares issued and outstanding as of September 30, 2024 are 30,000,000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable
ITEM 5. OTHER INFORMATION
PART II. OTHER INFORMATION
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:
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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 USA, Inc. |
| Registrant |
| | |
| | |
Dated: October 9, 2024 | By: | /s/ Sabir Saleem |
| | Sabir Saleem, Chief Executive Officer, |
| | Chief Financial and Accounting Officer |
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