As filed with the Securities and Exchange Commission on August 27, 2012
Registration No. 333-179909
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1/A3
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933
FreeFlow, Inc.
(Name of Small Business Issuer in its Charter)
Delaware 1711 45-3838831
(State or other Jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or Organization) Classification Code Number) Identification No.)
FreeFlow, Inc.
9130 Edgewood Drive
La Mesa CA 91941
(619) 741-1006 Fax: (619)
421-2653
(Address of Principal Place of Business or
Intended Principal Place of Business)
"S" Douglas Henderson
FREEFLOW, INC.
9130 Edgewood Drive
La Mesa CA 91941
Phone (619) 619 741-1006 Fax (619) 421-2653
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies of Communications to:
Karen A.Batcher, Esq.
Synergen Law Group, APC
819 Anchorage Place, Suite 28
Chula Vista, CA 91914
Telephone 619 475 7882
Fax 866 352 4342
Approximate date of commencement of proposed sale to the public: As soon as
possible after this Registration Statement is effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
Accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated Filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
================================================================================
Title of Proposed Proposed
Securities Amount Maximum Maximum Amount of
to be to be Offering Price Aggregate Registration
Registered Registered Per Share Offering Price Fee
--------------------------------------------------------------------------------
Common Stock 1,134,404 $0.01 $11,344 $1.38 (1)
================================================================================
(1) Calculated pursuant to Rule 457(a).
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
FREEFLOW, INC.
1,134,404 SHARES of COMMON STOCK
All of the shares of FREEFLOW, INC. ("the Company") offered hereby are being
offered to the public by Garden Bay International, Ltd. through Garden Bay's
selling Shareholders who will receive their shares as a dividend from Garden Bay
International, Ltd. upon the effectiveness of this registration. These
Shareholders are considered underwriters. Garden Bay International, Ltd. owns
1,200,000 shares of the common stock of FreeFlow, Inc., a Delaware Corporation.
Garden Bay International, Ltd. will distribute to its shareholders 1,134,404
shares of its FreeFlow common stock (see "Distribution"). The Company is filing
this registration statement to register the issuance of the 1,134,404 shares by
Garden Bay as a dividend to its shareholders and the subsequent sale of these
shares by the shareholders. The distribution will be made to holders of record
of Garden Bay International, Ltd. stock as of the close of business on January
31, 2012, on the basis of one share of FreeFlow's common stock for each five
share of Garden Bay International, Ltd. common stock held. The 1,134,404 shares
of the common stock distributed to Garden Bay International, Ltd. shareholders
will represent approximately 4.3% of all the issued and outstanding shares of
the common stock of the Company. Garden Bay International, Ltd. acquired the
1,200,000 shares of the common stock of FreeFlow on December 6, 2011 for $1,000.
After the distribution, a shareholder of FreeFlow, The Company president and
sole Director, "S" Douglas Henderson, will control approximately 95% of the
outstanding common stock.
Neither FreeFlow nor Garden Bay will receive any proceeds since no consideration
will be paid to Garden Bay or FreeFlow in connection with the distribution or
sale of these shares. The selling stockholders named in this prospectus are
offering the 1,134,404 shares of common stock of FreeFlow, Inc. ("Company")
offered through this prospectus. FreeFlow has set an offering price for these
securities of $0.01 per share of its common stock offered through this
prospectus.
Proceeds to Selling
Stockholders Before
Offering Price Commissions Expenses and Commissions
-------------- ----------- ------------------------
Per Share $ 0.01 Not Applicable $ 0.01
Total $ 11,345 Not Applicable $11,345
FreeFlow is not selling any shares of its common stock in this Offering and
therefore will not receive any proceeds from this Offering. The Company's common
stock is presently not traded on any market or securities exchange. The sales
price to the public is fixed at $0.01 per share for the duration of this
offering. Although the Company intends to apply for trading of its common stock
on the OTC Bulletin Board, public trading of its common stock may never
materialize.
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or adequacy
of this Prospectus. Any representation to the contrary is a criminal offense. C
FreeFlow, Inc. does not consider itself a blank check company and does not have
any intention to engage in a reverse merger with any entity in an unrelated
industry.
Free Flow, Inc. is an emerging growth company.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK, AND PROSPECTIVE PURCHASERS
SHOULD BE PREPARED TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT (SEE "RISK
FACTORS" ON PAGE 4).
This Offering will terminate 180 days after this prospectus is declared
effective by the SEC unless extended by our board of directors for an additional
90 days. None of the proceeds from the sale of stock by the selling stockholders
will be placed in escrow, trust or similar account.
For purposes of qualifying pursuant to a Registration Statement filed on Form
S-1, the Company has placed an aggregate value on the 1,134,404 Shares of $1,000
or $0.0008 per share (see "Determination of Offering Price").
Garden Bay International, Ltd. and the selling Shareholder's are considered
underwriters.
The date of this Prospectus is ____________, 2012
FreeFlow is not currently subject to the periodic reporting requirements of the
Securities Exchange Act of 1934, but will be subject to such requirements after
the distribution. It is the intention of FreeFlow to send to each of its
shareholders an Annual Report containing certified financial statements
following the end of each fiscal year.
TABLE OF CONTENTS
PROSPECTUS SUMMARY ......................................................... 3
OUR COMPANY ................................................................ 3
THE OFFERING ............................................................... 3
SUMMARY FINANCIAL STATUS ................................................... 3
RISK FACTORS ............................................................... 4
THE DISTRIBUTION ........................................................... 8
LIABILITY .................................................................. 12
MANAGEMENT'S DISCUSSION AND ANALYSIS ....................................... 16
BUSINESS ................................................................... 20
MANAGEMENT ................................................................. 21
PRINCIPAL SHAREHOLDERS ..................................................... 25
CERTAIN TRANSACTIONS ....................................................... 25
DESCRIPTION OF SECURITIES .................................................. 25
PENNY STOCK RULES .......................................................... 26
LEGAL MATTERS .............................................................. 27
EXPERTS .................................................................... 27
FINANCIAL STATEMENTS ....................................................... F-1
2
PROSPECTUS SUMMARY
This entire Prospectus and our consolidated financial statements and related
notes should be read carefully. There is more detailed information in other
places of the Prospectus. Unless the context requires otherwise, 'we,' 'us,'
'our,' and similar terms refer to FreeFlow, Inc.
OUR COMPANY
FreeFlow was incorporated in Delaware on October 28, 2011. Our address and
telephone numbers are 9130 Edgewood Drive, La Mesa, CA, 91941; (619) 741-1006,
Fax (619) 421-2653. FreeFlow, Inc. does not consider itself a blank check
company and does not have any intention to engage in a reverse merger with any
entity in an unrelated industry.
SUMMARY OF THE OFFERING
Securities Offered (1) This prospectus covers the distribution as a dividend
of 1,134,404 shares of common stock of FreeFlow, Inc.
by Garden Bay International, Ltd., Inc., which
constitutes approximately 4.6% of the common stock
and the subsequent sale to the public through the
selling Shareholders who are considered underwriters.
The distribution will be made to holders of record of
Garden Bay International, Ltd., stock as of the close
of business on January 31, 2012, on the basis of one
share of FreeFlow's common stock for each five shares
of Garden Bay International, Ltd., common stock held.
Number of Shares of:
Common Stock
Outstanding: 26,200,000 shares
Risk Factors: The shares of the common stock involve a high degree
of risk. Holders should review carefully and consider
the factors described in "Risk Factors."
SUMMARY FINANCIAL INFORMATION
The following tables set forth for the periods indicated selected financial
information for FREEFLOW, INC.
SUMMARY BALANCE SHEET DATA:
As of As
June 30, December 31,
2012 2011
-------- --------
Current Assets: $ 14,708 $ 13,765
Total Assets: $ 17,611 18,107
Total Liabilities: $ 12,732 0
Shareholders Equity $ 4,879 $ 18,107
SUMMARY STATEMENT OF OPERATIONS DATA
October 28, 2011
Three months Six months (inception)
ended ended through
June 30, June 30, June 30,
2012 2012 2012
-------- -------- --------
(Unaudited) (Unaudited) (Unaudited)
Income $ 0 $ 0 $ 0
Net Loss $ (4,354) $(13,228) $(16,121)
FreeFlow has been in the development stage since October 28, 2011 and has been
actively involved in the development and sales of its product services.
3
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
prospectus before investing in our common stock. If any of the following risks
occur, our business, operating results and financial condition could be
seriously harmed. The trading price of our common stock, when and if we trade at
a later date, could decline due to any of these risks, and you may lose all or
part of your investment.
RISKS ASSOCIATED WITH OUR BUSINESS
WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE NO OPERATING HISTORY OR GENERATED
ANY REVENUES. AN INVESTMENT IN THE SHARES OFFERED HEREIN IS HIGHLY RISKY AND
COULD RESULT IN A COMPLETE LOSS OF YOUR INVESTMENT IF WE ARE UNSUCCESSFUL IN OUR
BUSINESS PLAN.
FreeFlow, Inc. was incorporated October 28, 2011 and we have not realized any
revenues. We have no operating history, and only one proposed product upon which
an evaluation of our future prospects can be made. Based upon current plans, we
expect to incur operating losses in future periods as we incur expenses
associated with the initial startup of our business. Further, we cannot
guarantee that we will be successful in realizing revenues or in achieving or
sustaining positive cash flow at any time in the future. Any such failure could
result in the possible closure of our business or force us to seek additional
capital through loans or additional sales of our equity securities to continue
business operations, which would dilute the value of any shares you purchase in
this offering.
WE HAVE ONLY A PROVISIONAL PATENT AT THE PRESENT TIME. THIS PROVISIONAL PATENT
DOES NOT PROVIDE THE CONTINUING PROTESTION OF A FULL PATENT.
FreeFlow, Inc. has the rights to a provisional patent not a full patent. A
provisional patent is only effective for twelve months from filing. The
provisional patent rights that the Company has expire on November 12, 2012.
Unless the Company files for a standard patent before that date, the Company
will lose all protection on its proposed product.
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, AND/OR WE
INADVERTENTLY MAY BE INFRINGING ON THE INTELLECTUAL PROPERETY RIGHTS OF OTHERS,
WHICH COULD RESULT IN SIGNIFICANT EXPENSE AND LOSS OF INTELLECTUAL PROPERTY
RIGHTS.
If a court determines that we infringed on the rights of others, we may be
required to obtain licenses from such other parties and may be required to pay
significant sums as damages to such parties. The persons or ortganizations
holding the desired technology may not grant licenses to us or the terms of such
licenses may not be acceptable to us. In addition, we could be required to
expend significant resources to develop non infringing technology, or to defend
claims of infringement brought against us.
We rely on the registration of patents and trademarks, as well as on compliance
with trade secret laws and confidentiality agreements. We may need to expend
significant resources to protect and enforce our intellectual property rights.
BECAUSE OUR CURRENT OFFICER AND DIRECTOR HAS OTHER BUSINESS INTERESTS, HE MAY
NOT BE ABLE OR WILLING TO DEVOTE A SUFFICIENT AMOUNT OF TIME TO OUR BUSINESS
OPERATIONS, CAUSING OUR BUSINESS TO FAIL.
Mr. Henderson our sole officer and director, currently devotes approximately 2
hours per week providing management services to us. While he presently possesses
adequate time to attend to our interest, it is possible that the demands on him
from other obligations could increase, with the result that he would no longer
be able to devote sufficient time to the management of our business. This could
negatively impact our business development.
4
WE CANNOT PREDICT WHEN OR IF WE WILL PRODUCE REVENUES, WHICH COULD RESULT IN A
TOTAL LOSS OF YOUR INVESTMENT IF WE ARE UNSUCCESSFUL IN OUR BUSINESS PLANS.
We are in the early stages of implementing our business plan. We have only
recently contracted with an independent contractor to offer our product to
swimming pool owners. We have also just signed a contract with a firm to install
our system. Therefore, we have not yet generated any revenues from operations.
There can be no assurance that we will generate revenues or that revenues will
be sufficient to maintain our business. As a result, you could lose all of your
investment if you decide to purchase shares in this offering and we are not
successful in our proposed business plans.
A FAILURE TO MEET CUSTOMER SPECIFICATIONS OR EXPECTATIONS COULD RESULT IN LOST
REVENUES, INCREASED EXPENSES, NEGATIVE PUBLICITY, CLAIMS FOR DAMAGES AND HARM TO
OUR REPUTATION AND CAUSE DEMAND FOR OUR PROPOSED PRODUCT TO DECLINE.
In addition, our customers may have additional expectations about our proposed
product. Any failure to meet customers' specifications or expectations could
result in:
* delayed or lost revenue;
* requirements to provide additional services to a customer at reduced
charges or no charge;
* negative publicity about us, which could adversely affect our ability
to attract or retain customers; and
* claims by customers for substantial damages against us, regardless of
our responsibility for such failure, which may not be covered by
insurance policies and which may not be limited by contractual terms.
OUR ABILITY TO SUCCESSFULLY MARKET OUR PROPOSED PRODUCT COULD BE SUBSTANTIALLY
IMPAIRED IF OUR PROPOSED PRODUCT AND ITS APPLICATIONS DO NOT PROVE TO BE
RELIABLE, EFFECTIVE AND COMPATIBLE.
We may experience difficulties that could delay or prevent the successful
development, introduction or marketing of our proposed product. If our proposed
product suffers from reliability, quality or compatibility problems, market
acceptance of our proposed product could be greatly hindered and our ability to
attract customers could be significantly reduced. We cannot assure you that our
proposed product will be free from any reliability, quality or compatibility
problems. If we incur increased costs or are unable, for technical or other
reasons, to install and manage our proposed product, our ability to successfully
market our proposed product could be substantially limited.
IF WE ARE UNABLE TO MAINTAIN EXISTING AND DEVELOP ADDITIONAL RELATIONSHIPS WITH
CONTRACTORS AND BUILDERS, THE SALES AND MARKETING OF OUR PROPOSED PRODUCT MAY BE
UNSUCCESSFUL. OUR DEPENDENCE ON THIRD PARTIES INCREASES THE RISK THAT WE WILL
NOT BE ABLE TO MEET OUR FUTURE CUSTOMERS' NEEDS ON A TIMELY OR COST-EFFECTIVE
BASIS, WHICH COULD RESULT IN THE LOSS OF CUSTOMERS.
Our services will rely on products and services of third-party contractors.
There can be no assurance that we will not experience operational problems. Our
proposed product and services will be provided through third-party contractors.
Currently the Company has no plans or agreements to manufacture, distribute,
market (other than our web site) or install our proposed product.
THE LOSS OF MR. HENDERSON COULD SEVERELY IMPACT OUR BUSINESS OPERATIONS AND
FUTURE DEVELOPMENT OF OUR PRODUCTS, WHICH COULD RESULT IN A LOSS OF REVENUES AND
YOUR ABILITY TO EVER SELL ANY SHARES YOU PURCHASE IN THIS OFFERING.
Our performance is substantially dependent upon the professional expertise of
our President, Mr Henderson. We are dependent on his ability to develop and
market our proposed product. If he were unable to perform his services, this
loss could have an adverse effect on our business operations, financial
condition and operating results if we are unable to replace him with another
5
individual qualified to develop and market our proposed product. The loss of his
services could result in a loss of revenues, which could result in a reduction
of the value of any shares you purchase in this offering.
GOING CONCERN OPINION FROM OURAUDITORS.
Our Auditors have questioned wither or not the company will continue as a going
concern. The auditors question wither or not the company has sufficient capital
to continue in business or will be able in the future to raise sufficient
capital through either a equity or debt offering to continue in business.
RISKS ASSOCIATED WITH THIS OFFERING
THE TRADING IN OUR SHARES WILL BE REGULATED BY THE SECURITIES AND EXCHANGE
COMMISSION RULE 15G-9 WHICH ESTABLIHES THE DEFINITION OF A "PENNY STOCK."
The shares being offered are defined as a penny stock under the Securities and
Exchange Act of 1934, and rules of the Commission. The Exchange Act and such
penny stock rules generally impose additional sales practice and disclosure
requirements on broker-dealers who sell our securities to persons other than
certain accredited investors who are, generally, institutions with assets in
excess of $4,000,000 or individuals with net worth in excess of $1,000,000 or
annual income exceeding $200,000 ($300,000 jointly with spouse), or in
transactions not recommended by the broker-dealer. For transactions covered by
the penny stock rules, a broker dealer must make certain mandated disclosures in
penny stock transactions, including the actual sale or purchase price and actual
bid and offer quotations, the compensation to be received by the broker-dealer
and certain associated persons, and deliver certain disclosures required by the
Commission. Consequently, the penny stock rules may make it difficult for you to
resell any shares you may purchase, if at all.
DUE TO THE LACK OF A TRADING MARKET FOR OUR SECURITIES, YOU MAY HAVE DIFFICULTY
SELLING ANY SHARES YOU PURCHASE IN THIS OFFERING.
We are not registered on any public stock exchange. There is presently no demand
for our common stock and no public market exists for the shares being offered in
this prospectus. We plan to contact a market maker immediately following the
completion of the offering and apply to have the shares quoted on the
Over-The-Counter Electronic Bulletin Board (OTCBB). The OTCBB is a regulated
quotation service that displays real-time quotes, last sale prices and volume
information in over-the-counter (OTC) securities. The OTCBB is not an issuer
listing service, market or exchange. Although the OTCBB does not have any
listing requirements per se, to be eligible for quotation on the OTCBB, issuers
must remain current in their filing with the SEC or applicable regulatory
authority. Market makers are not permitted to begin quotation of a security
whose issuer does not meet his filing requirement. Securities already quoted on
the OTCBB that become delinquent in their required filings will be removed
following a 30 to 60 day grace period if they do not make their required filing
during that time. We cannot guarantee that our application will be accepted or
approved and our stock listed and quoted for sale. As of the date of this
filing, there have been no discussions or understandings between FreeFlow and
anyone acting on our behalf, with any market maker regarding participation in a
future trading market for our securities. If no market is ever developed for our
common stock, it will be difficult for you to sell any shares you purchase in
this offering. In such a case, you may find that you are unable to achieve any
benefit from your investment or liquidate your shares without considerable
delay, if at all. In addition, if we fail to have our common stock quoted on a
public trading market, your common stock will not have a quantifiable value and
it may be difficult, if not impossible, to ever resell your shares, resulting in
an inability to realize any value from your investment.
WE WILL INCUR ONGOING COSTS AND EXPENSES FOR SEC REPORTING AND COMPLIANCE.
WITHOUT REVENUE WE MAY NOT BE ABLE TO REMAIN IN COMPLIANCE, MAKING IT DIFFICULT
FOR INVESTORS TO SELL THEIR SHARES, IF AT ALL.
Our business plan allows for the payment of the estimated $5,000 cost, to the
Company, of this registration statement to be paid from existing cash on hand.
The remainder will be paid by Garden Bay. If necessary, in his sole opinion, Mr.
Henderson, our director, has verbally agreed to loan the company funds to
complete the registration process. On June 16, 2012 Mr. Henderson loaned the
6
Company $10,000. The terms were all interest and principle due in two years.
Interest at 4% simple on the unpaid balance. We plan to contact a market maker
immediately following the close of the offering and apply to have the shares
quoted on the OTC Electronic Bulletin Board. To be eligible for quotation,
issuers must remain current in their filings with the SEC. In order for us to
remain in compliance we will require future revenues to cover the cost of these
filings, which could comprise a substantial portion of our available cash
resources. If we are unable to generate sufficient revenues to remain in
compliance it may be difficult for you to resell any shares you may purchase, if
at all.
MR. HENDERSON, THE DIRECTOR OF THE COMPANY, BENEFICIALLY OWNS 95% OF THE
OUTSTANDING SHARES OF OUR COMMON STOCK. AFTER THE COMPLETION OF THIS OFFERING HE
WILL OWN 95% OF THE OUTSTANDING SHARES. IF HE CHOOSES TO SELL HIS SHARES IN THE
FUTURE, IT MIGHT HAVE AN ADVERSE EFFECT ON THE PRICE OF OUR STOCK.
Since Mr. Henderson controls more that 50% of the voting stock, under Delaware
law he may take any action without consulting the other shareholders. His only
obligation to the minority shareholders is to inform them of his actions in a
current time frame. Mr. Henderson may chose to sell this control shares to
another entity without the advice or consent of the other shareholders.
Due to the amount of Mr. Henderson's share ownership in our company, if he
chooses to sell his shares in the public market, the market price of our stock
could decrease and all shareholders suffer a dilution of the value of their
stock. If he does sell any of his common stock, he will be subject to Rule 144
under the 1933 Securities Act which will restrict his ability to sell his
shares.
LOANS FROM MR. HENDERSON, COMPANY PRESIDENT
When Mr. Henderson makes any loans to the Company, the terms will be decided at
the time of the loans. Since Mr. Henderson is the sole director, this will not
be an arms length transaction. On June 16, 2012 Mr. Henderson made a $10,000
loan to the Company. The terms were all principle and interest due in two years
with simple interest on the unpaid balance at 4% per annum.
NEED AND ABILITY TO RAISE ADDITIONAL CAPITAL
The Company will in the future most likely need to raise additional capital
through loans or equity. The Company has no agreements with any professional
organization to raise additional capital. The Company must raise additional
capital from its own resources. The Company may raise additional capital in the
form of an additional loan from its president. The Company also plans to offer
additional equity to its new shareholders after the distribution who were
shareholders of Garden Bay on January 31, 2012 who received the stock dividend
which is the subject of this registration. If the Company needs to raise
additional capital and fails to do so, the shareholders could lose all of their
investment in this offering. There is no guarantee the Company will be able to
raise additional capital.
AS AN "EMERGING GROWTH COMPANY" UNDER THE JUMPSTART OUR BUSINESS STARTUPS ACT
(JOBS), WE ARE PERMITTED TO RELY ON EXEMPTIONS FROM CERTAIN DISCLOSURE
REQUIREMENTS.
We qualify as an "emerging growth company" under the JOBS Act. As a result, we
are permitted to, and intend to, rely on exemptions from certain disclosure
requirements. For so long as we are an emerging growth company, we will not be
required to:
* have an auditor report on our internal controls over financial
reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
7
* comply with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or
a supplement to the auditor's report providing additional information
about the audit and the financial statements (i.e., an auditor
discussion and analysis);
* submit certain executive compensation matters to shareholder advisory
votes, such as "say-on-pay" and "say-on-frequency;" and
* disclose certain executive compensation related items such as the
correlation between executive compensation and performance and
comparisons of the CEO's compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an emerging growth
company can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards. In other words, an emerging growth company can delay the adoption of
certain accounting standards until those standards would otherwise apply to
private companies. We will remain an emerging growth company for up to five full
fiscal years, although if the market value of our common stock that is held by
non-affiliates exceeds $700 million as of any July 31 before that time, we would
cease to be an emerging growth company as of the following December 31, or if
our annual revenues exceed $1 billion, we would cease to be an emerging growth
company the following fiscal year, or if we issue more than $1 billion in
non-convertible debt in a three-year period, we would cease to be an emerging
growth company immediately.
WE WILL ELECT TO TAKE ADVANTAGE OF THE EXTENDED TRANSITION PERIOD FOR COMPLYING
WITH NEW OR REVISED ACCOUNTING STANDARDS UNDER SECTION 102(B)(1)
This election allows us to delay the adoption of new or revised accounting
standards that have different effective dates for public and private companies
until those standards apply to private companies. As a result of this election
our financial statements may not be comparable to companies that comply with
public company effective dates.
The existing scaled executive compensation disclosure requirements for smaller
reporting companies will continue to apply for so long as the Company is an
emerging growth company, regardless of whether the Company remains a smaller
reporting company.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock offered
through this prospectus by the selling shareholders
THE DIVIDEND DISTRIBUTION BY GARDEN BAY INTERNATIONAL, LTD.
GENERAL
Approximately 4.6% of the outstanding common stock of FreeFlow is presently
owned by Garden Bay International, Ltd. Garden Bay International, Ltd., is
primarily a business consulting firm. Garden Bay International, Ltd.,
shareholders will not be required to pay for shares of our common stock received
8
in the distribution or to exchange shares of Garden Bay International, Ltd., in
order to receive our common stock. The major shareholders of Garden Bay are, by
voting percentage:
Robert Berk (President and Director) 17.2%
Athena K. Brady 12.4%
Juan Solis 12.4%
Iann Perez 12.4%
Edward F. Myers III * 12.4%
Hannah Reeves 12.4%
Betty N. Myers 12.4%
----------
* Mr. Myers was the President and Director of Ads in Motion, Inc., a public
"Emerging growth company"
MANNER AND PLAN OF DISTRIBUTION
FreeFlow, Inc. is offering 1,134,404 shares to the public through the selling
shareholders. The Company is filing this registration statement to register the
distribution of the 1,134,404 shares by Garden Bay as a dividend to its
shareholders.
Pursuant to the plan of distribution, Garden Bay International, Ltd. will
distribute to its shareholders 1,134,404 shares of the common stock of FreeFlow.
One share of FreeFlow for each five shares of Garden Bay International, Ltd.,
common stock held of record as of January 31, 2012. Fractional shares will be
rounded up to the next full share. On January 31 2012, Garden Bay International,
Ltd., had issued and outstanding approximately 5,672,000 shares. On January 31,
2012, Garden Bay International, Ltd., had approximately 49 shareholders of
record. Shares of FreeFlow will be mailed to Garden Bay International, Ltd.
Shareholders along with a copy of this prospectus.
PURPOSE OF DISTRIBUTION
The purpose of the sale of 1,200,000 shares of stock to Garden Bay was to obtain
a group of shareholders who could assist the Company is raising capital. By
originally purchasing stock in Garden Bay they have shown an interest in
investing in small start up companies. Finding a source of possible future
investors may assist the Company in furthering its business plan. This offering
will possibly provide liquidity to the Garden Bay shareholders if the Company is
successful. There can be no guarantee that the Company will be successful.
Management believes if the Garden Bay shareholders take a greater interest in
the Company, the more likely they are to invest. There can be no grantee that
anyone will ever invest in the Company.
TAX CONSEQUENCES OF GARDEN BAY INTERNATIONAL, LTD., DISTRIBUTION
FreeFlow believes the following are the material federal income tax consequences
expected to result from the distribution under currently applicable law. The
following discussion is intended as general information only. It may not be
applicable to stockholders who are neither citizens nor residents of the United
States. It does not discuss the state, local, and foreign tax consequences of
the distributor. Stockholders should consult their own tax advisors regarding
the consequences of the distribution in their particular circumstances under
federal, state, local, and foreign tax laws.
Garden Bay International, Ltd., will recognize a gain or loss based upon the
fair market value of the Common stock at the date of the Distribution. This gain
or loss is measured by the difference between Garden Bay's' tax basis in the
common stock distributed in the distribution and the fair market value of that
stock.
As a result of Garden Bay International, Ltd., having no current or accumulated
earnings and profits allocable to the distribution, no portion of the amount
distributed will constitute a dividend for federal income tax purposes.
Therefore, no portion of the amount received constitutes a dividend, and will
not be eligible for the dividends-received deduction for corporations. Each
Garden Bay stockholder will have a tax basis in FreeFlow's common stock
9
distributed equally to the fair market value of the common stock distributed on
the distribution date. The distribution is not taxable as a dividend. The
distribution will be treated as a tax-free return of capital to the extent that
the fair market value of such portion of the amount received does not exceed the
stockholder's basis in the Garden Bay International, Ltd., common stock held,
and as a capital gain if and to the extent that the fair market value of such
portion is greater than such tax basis.
Any taxes payable by any recipient of shares of FreeFlow's common stock in the
distribution will be the responsibility of such recipient.
The foregoing is only a summary of certain federal income tax consequences of
the distribution under current law and is intended for general information only.
Each stockholder should consult his tax advisor as to the particular
consequences of the distribution to such stockholder, including the application
of state, local and foreign tax laws.
EACH GARDEN BAY INTERNATIONAL, LTD., SHAREHOLDER IS ADVISED TO SEEK PROFESSIONAL
TAX COUNSEL REGARDING ANY TAX LIABILITY THAT MAY ARISE FROM THIS DISTRIBUTION.
BLUE SKY LAWS
This Distribution is not being made in any jurisdictions of the United States in
which this distribution would not be in compliance with the securities or Blue
Sky laws of such jurisdiction. Only shareholders of Garden Bay residing in the
states set forth below may obtain the shares pursuant to the Distribution.
FreeFlow initially selected the jurisdictions in which shareholders may
participate in the distribution after determining from the shareholder records
of Garden Bay International, Ltd., and from record owners the states where
substantially all the known owners reside.
IF A BENEFICIAL OWNER RESIDES IN A STATE OF THE UNITED STATES OF AMERICA NOT SET
FORTH BELOW, SUCH OWNER MAY NOT PARTICIPATE IN THE DISTRIBUTION.
CALIFORNIA
This Prospectus will be delivered to those Shareholders of Garden Bay
International, Ltd., eligible to participate in this Distribution.
NON-US RESIDENTS
Those Garden Bay International, LTD. shareholders residing outside the United
States of America will be eligible to receive the distribution.
This Prospectus relates to the shares received in the distribution to the Garden
Bay International, Ltd., shareholders. The distribution of the Company's common
stock will be made to Garden Bay International, Ltd., shareholders without any
consideration being paid and without any exchange of shares by the shareholders
of Garden Bay International, Ltd. Neither Garden Bay International, Ltd., nor
the Company, will receive any proceeds from the distribution by Garden Bay
International, Ltd., of such shares of the Company's common stock, nor from the
sale of any such shares by any persons who may be deemed to be the underwriters.
A copy of this Prospectus is being mailed to each Garden Bay International,
Ltd., shareholder of record on January 31, 2012, together with the certificate
representing the number of the FreeFlow shares to which he is entitled. Persons
wishing to evaluate the FreeFlow shares being distributed to them should review
this Prospectus carefully.
REASON FOR THE DISTRIBUTION
The Board of Directors of Garden Bay International, Ltd. has decided that the
shares of FreeFlow in the hands of individual shareholders will provide more
value to the Garden Bay International, Ltd. shareholders than if corporately
owned. If at some future date the shares of FreeFlow are publicly traded, then
shareholders may determine for themselves on an individual basis whether they
wish to sell their shares and obtain personal liquidity or wish to retain the
10
shares for possible future potential. There can be no assurance that the shares
will be publicly traded, or if so, whether the market will provide any
particular return to the shareholder.
COSTS OF DISTRIBUTION
FreeFlow estimates that the total cost of the distribution will be approximately
$15,000. Garden Bay International, Ltd. has agreed to pay all such costs except
the audit.
Direct Free Flow expenses:
Securities and Exchange Commission Registration Fee $ 1
Accounting and Audit Fees $5,350
------
TOTAL $5,351
======
Garden Bay International, LTD has agreed to pay all costs, except for Audit,
incurred in connection with the distribution of the shares which are the subject
of this Registration Statement.
These are estimated as follows:
Legal $6,000
Printing 500
Transfer agent and certificate printing 1,000
Postage 200
Accounting 2,000
------
TOTAL $9,700
======
THE OFFERING
The Issuer: FreeFlow, Inc.
Selling Security Holders: The selling shareholders will receive their
shares as a dividend from Garden Bay
International, Ltd. as described in this
prospectus. The Shareholders have not paid for
this stock
Securities Being Offered: Up to 1,134,404 shares of our common stock, par
value $0.0001 per share.
Offering Price: The offering price of the common stock is $0.01.
Duration of Offering: This offering will terminate 180 days after this
prospectus is declared effective by the SEC
unless extended for an additional 90 days by the
board of directors.
Minimum Number of Shares
To Be Sold in This Offering: None.
Common Stock Outstanding
Before and After the Offering: 26,200,000 shares of our common stock are issued
and outstanding as of the date of this
prospectus. All of the common stock to be sold
under this prospectus will be sold by existing
stockholders.
Use of Proceeds: We will not receive any proceeds from the sale
of the common stock by the selling stockholders.
11
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
There is not currently a public market for our common stock. After the
distribution is complete, we intend to request trading on the OTCBB (Over the
Counter Bulletin Board). We cannot assure you as to the price at which our
common stock might trade after the distribution date or whether or not FreeFlow
can qualify for listing. Listing requirements include being a reporting company
under the Securities Exchange Act of 1934 and having all required reports
current. Upon the distribution of the shares of this offering FreeFlow will be a
reporting company and may apply to the FENRA for listing. FreeFlow has not
discussed market making with any broker-dealer.
Prior to the distribution, there were two common shareholders. After the
distribution, there will be 52 shareholders of common equity. Garden Bay will
continue to hold 65,596 unregistered shares.
There are no securities subject to outstanding warrants or options to purchase
common stock.
We have never distributed dividends; and, since we are a development company, we
do not foresee doing so in the future.
There are 25,000,000 common shares that could be sold under Rule 144. The
1,134,404 shares which are the subject of this offering are not available to be
sold under Rule 144.
In general, under Rule 144, a person (or persons whose shares are aggregated)
who has satisfied a one-year holding period may sell, within any three-month
period, a number of shares which does not exceed the greater of one percent of
the then outstanding shares of common stock or the average weekly trading volume
during the four calendar weeks prior to such sale. Rule 144 also permits the
sale of shares, without any quantity limitation, by a person who is not an
affiliate of the Company and who has beneficially owned the shares a minimum
period of two years. Hence, the possible sale of these restricted shares may, in
the future, dilute an investor's percentage of free-trading shares and may have
a depressive effect on the price of FreeFlow's common stock. No shares, other
than the 1,134,404 shares which are the subject of this registration may be sold
free of restriction.
DETERMINATION OF OFFERING PRICE FOR DIVIDEND DISTRIBUTION
Since the distribution is a dividend by a present stockholder, there is no
offering price and no dilution to existing stockholders of FreeFlow. For the
purpose of computing the instant registration fee, FreeFlow and Garden Bay have
set the price per share at $0.0005 per common share, which was the book value on
December 31, 2011. According to this calculation the total price for the
1,134,404 shares is $630. Such price has no relationship to FreeFlow's results
of operations and may not reflect the true value of such Common stock.
DETERMINATION OF OFFERING PRICE BY SHAREHOLDERS
The $0.01 per share offering price of our common stock is completely arbitrary.
There is no relationship whatsoever between this price and our assets, earnings,
book value or any other objective criteria of value.
DILUTION
The common stock to be sold by the selling stockholders is common stock that is
currently issued and outstanding. Accordingly, there will be no dilution to our
existing stockholders.
SELLING SECURITY HOLDERS
Garden Bay International, Ltd. is offering through the selling stockholders
named in this prospectus all of the 1,134,404 shares of common stock offered
through this prospectus. The selling stockholders will receive their shares of
our common stock offered through this prospectus as a dividend from Garden Bay
International, Ltd. after this registration has becomes effective. The only
12
relationship between the Company and Garden Bay International, Ltd. Is that
Garden Bay is a shareholder in Free Flow, Inc.
The following table provides as of January 31, 2012 information regarding the
beneficial ownership of our common stock held by each of the selling
stockholders, including:
1. the number of shares beneficially owned by each prior to this
Offering;
2. the total number of shares that are to be offered by each;
3. the total number of shares that will be beneficially owned by each
upon completion of the Offering;
4. the percentage owned by each upon completion of the Offering; and
5. the identity of the beneficial holder of any entity that owns the
shares.
Beneficial Ownership Beneficial Ownership
Before Offering (1) After Offering (1)
------------------------- Number of -----------------------
Name of Number of Shares Being Number of
Selling Stockholder (1) Shares Percent (2) Offered Shares Percent (2)
----------------------- ------ ----------- ------- ------ -----------
Chand Singh Brar 400 * 400 NIL *
Gurdev Brar 400 * 400 NIL *
Joginder Singh Brar 400 * 400 NIL *
Checkers Investements, Ltd (3) 29,500 * 29,500 NIL *
Aminmohaned Dhalla 400 * 400 NIL *
Azim Dhalla 400 * 400 NIL *
Azmina Dhalia 400 * 400 NIL *
Jagsir Dhaliwal 400 * 400 NIL *
Nadira Dhalla 400 * 400 NIL *
Darrell Fauser 400 * 400 NIL *
Anil Fazel 400 * 400 NIL *
Shamila Fazal 400 * 400 NIL *
Clement Ferris 400 * 400 NIL *
Edith Ferris 400 * 400 NIL *
Gloria Froese 400 * 400 NIL *
Ursula Grauer 80,000 * 80,000 NIL *
Doan Husarik 400 * 400 NIL *
Icon Technologies (3) 29,100 * 29,100 NIL *
Harjit Mand 600 * 600 NIL *
Ranvir Mand 400 * 400 NIL *
Reuben McDonald 20000 * 20000 NIL *
David McMurray 400 * 400 NIL *
Melanie McMurray 400 * 400 NIL *
Ashraf Mithani 400 * 400 NIL *
Noorisa Mithani 400 * 400 NIL *
Sameer Mithani 400 * 400 NIL *
Sareena Mithani 400 * 400 NIL *
Shairoz Mithani 400 * 400 NIL *
13
Anette Ouimet 400 * 400 NIL *
Claire Penner 400 * 400 NIL *
Jane Preslie 200 * 200 NIL *
Brian Rakos 400 * 400 NIL *
Jason Shriner 400 * 400 NIL *
Jeffery Sulima 400 * 400 NIL *
Elaine Sulima 400 * 400 NIL *
Leonard Sulima 400 * 400 NIL *
Tradewinds Investments Ltd. (3) 6,000 * 6,000 NIL *
Turf Holding Ltd. (3) 6,000 * 6,000 NIL *
David Walsh 200 * 200 NIL *
Tina Webber 400 * 400 NIL *
Paul Workentine 200 * 200 NIL *
Ruth Workentine 200 * 200 NIL *
Robert Berk 178,572 * 178,572 NIL *
Iann Perez 128,572 * 128,572 NIL *
Juan C. Solis 128,572 * 128,572 NIL *
Athena K. Brady 128,572 * 128,572 NIL *
Edward F. Myers III 128,572 * 128,572 NIL *
Hannah Reeves 128,572 * 128,572 NIL *
Betty N. Myers 128,572 * 128,572 NIL *
TOTAL 1,134,404 4.33% 1,134,404 NIL *
NOTES
* Represents less than 1%
(1) The named party beneficially owns and has sole voting and investment power
over all shares or rights to these shares, unless otherwise shown in the
table. The numbers in this table assume that none of the selling
stockholders sells shares of common stock not being offered in this
prospectus or purchases additional shares of common stock, and assumes that
all shares offered are sold.
(2) Applicable percentage of ownership is based on 26,200,000 common shares
outstanding as of January 31 2012 , plus any securities held by such
security holder exercisable for or convertible into common shares within
sixty (60) days after the date of this prospectus, in accordance with Rule
13d-3(d)(1) under the Securities Exchange Act of 1934, as amended.
(3) Beneficial owners for Corporate shares are:
Checkers Investments Ltd Mr. M.L.H. Quin
Icon Technologies, Inc. G. Greatex
Tradewinds Investments Ltd. M. Christian
Turf Holding Ltd. A. McKinney
Except as disclosed above, none of the selling stockholders:
(i) has had a material relationship with us other than as a stockholder at
any time within the past three years; or
(ii) has ever been one of our officers or directors.
14
PLAN OF DISTRIBUTION BY SELLING SHAREHOLDERS
This prospectus is part of a registration statement that enables Garden Bay to
distribute their shareholders and the selling stockholders to sell their shares.
The selling stockholders may sell some or all of their common stock in one or
more transactions, including block transactions:
1. On such public markets as the common stock may from time to time be
trading;
2. In privately negotiated transactions;
3. Through the writing of options on the common stock;
4. In short sales; or
5. In any combination of these methods of distribution.
The sales price to the public is fixed at $0.01 per share for the duration of
this offering
The selling stockholders named in this prospectus may also sell their shares
directly to market makers acting as agents in unsolicited brokerage
transactions. Any broker or dealer participating in such transactions as agent
may receive a commission from the selling stockholders, or, if they act as agent
for the purchaser of such common stock, from such purchaser. The selling
stockholders will likely pay the usual and customary brokerage fees for such
services.
We can provide no assurance that all or any of the common stock offered will be
sold by the selling stockholders named in this prospectus. The estimated costs
of this offering are $15,000 of which the Company will pay approximately $5,000
and Garden Bay $9,000. We and Garden Bay are bearing all costs relating to the
registration of the common stock. The selling stockholders, however, will pay
any commissions or other fees pay to brokers or dealers in connection with any
sale of the common stock.
The selling stockholders named in this prospectus must comply with the
requirements of the Securities Act and the Exchange Act in the offer and sale of
the common stock. The selling stockholders and any broker-dealers who execute
sales for the selling stockholders is deemed to be an "underwriter" within the
meaning of the Securities Act in connection with such sales. In particular,
during such times as the selling stockholders may be deemed to be engaged in a
distribution of the common stock, and therefore be considered to be an
underwriter, they must comply with applicable law and may among other things
1. Not engage in any stabilization activities in connection with our
common stock;
2. Furnish each broker or dealer through which common stock may be
offered, such copies of this prospectus, as amended from time to time,
as may be required by such broker or dealer; and
3. Not bid for or purchase any of our securities or attempt to induce any
person to purchase any of our securities other than as permitted under
the Exchange Act.
If an underwriter is selected in connection with this offering, an amendment
will be filed to identify the underwriter, disclose the arrangements with the
underwriter, and we will file the underwriting agreement as an exhibit to this
prospectus.
The selling stockholders should be aware that the anti-manipulation provisions
of Regulation M under the Exchange Act will apply to purchases and sales of
shares of common stock by the selling stockholders, and that there are
restrictions on market-making activities by persons engaged in the distribution
of the shares. Under Regulation M, the selling stockholders or their agents may
not bid for, purchase, or attempt to induce any person to bid for or purchase,
shares of our common stock while such selling stockholder is distributing shares
covered by this prospectus. Accordingly, the selling stockholders are not
15
permitted to cover short sales by purchasing shares while the distribution is
taking place. The selling stockholders are advised that if a particular offer of
common stock is to be made on terms constituting a material change from the
information set forth above with respect to the Plan of Distribution, then, to
the extent required, a post-effective amendment to the accompanying registration
statement must be filed with the SEC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CERTAIN FORWARD-LOOKING INFORMATION
Information provided in this prospectus filed on Form S-1 may contain
forward-looking statements that are not historical facts and information. These
statements represent the Company's expectations or beliefs, including, but not
limited to, statements concerning future and operating results, statements
concerning industry performance, the Company's operations, economic performance,
financial conditions, margins and growth in sales of the Company's services,
capital expenditures, financing needs, as well as assumptions related to the
foregoing. For this purpose, any statements contained in the S-1 filing that are
not statements of historical fact may be deemed to be forward-looking
statements. These forward-looking statements are based on current expectations
and involve various risks and uncertainties that could cause actual results and
outcomes for future periods to differ materially from any forward-looking
statement or views expressed herein.
We have generated no revenue since inception and have incurred no research or
development expenses through June 30, 2012.
As of June 30, 2012 the Company has spent $5,065 on Administration fees. $7,800
on Professional fees and has had an amortization expense of $3,158.
The following table provides selected financial data about our company for the
period from the date of incorporation through June 30, 2012. For detailed
financial information, see the financial statements included in this prospectus.
Balance Sheet Data: 6/30/2012
------------------- ---------
Cash $14,708
Total assets $17,611
Total liabilities $12,732
Shareholders' equity $ 4,879
GOING CONCERN
Our auditor has issued a going concern opinion. This means that there is
substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital to pay our bills. Our cash
balance at June 30, 2012 was $14,708. We believe our cash balance is sufficient
to fund our limited levels of operations.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
LIMITED OPERATING HISTORY; NEED FOR ADDITIONAL CAPITAL
There is no historical financial information about us on which to base an
evaluation of our performance. We are a development stage company and have not
generated revenues from operations. We cannot guarantee we will be successful in
our business operations. Our business is subject to risks inherent in the
establishment of a new business enterprise, including limited capital resources,
16
possible delays in implementing our business plan, and possible cost overruns
due to increases in the cost of services.
To become profitable and competitive, we must implement our business plan and
generate revenue and raise additional capital.
PUBLIC COMPANY EXPENSE
The Company estimates its quarterly public company expense as follows:
Audit review $1,800
Accounting 450
Edgar 500
------
Total $2,750
======
LIQUIDITY AND CAPITAL RESOURCES
Our director has agreed to advance funds as needed. While he has agreed to
advance the funds, the agreement is verbal and is unenforceable as a matter of
law. On June 16, 2012 our director, Mr. Henderson, made a loan to the Company of
$10,000. Terms were all principle and interest due in two years. Interest at 4%
simple per annum. The Company intends to make an equity offering to its new
shareholders after the distribution.
We received our initial funding of $20,000 through the sale of common stock to
"S" Douglas Henderson, our officer and director, who purchased 25,000,000 shares
of our common stock at $0.0008 per share on November1, 2011. Our financial
statements from inception (October 28, 2011) through the year ended June 30,
2012 report no revenues.
ADVERTISING AND MARKETING
There were no advertising and marketing expenses for the period ended June 30,
2012.
CORPORATE HISTORY
The Company was incorporated on October 28, 2011. As of June 30, 2012 the
Company had a cash balance of $14,708. As of June 16, 2012 the Company had a
working capital of about $15,000. FreeFlow may raise additional capital either
through debt or equity. No assurances can be given that such efforts will be
successful. The Company plans to attempt to raise additional equity capital by
making an equity offering to its new shareholders as soon as possible after the
Distribution. New shareholders are the Garden Bay shareholders who were
shareholders on January 31, 2012 and received the dividend distribution. On June
16, 2012 Mr. Henderson, our president, loaned the Company $10,000. The terms
were all due and payable in two years with simple interest at 4% on the unpaid
balance.
JOBS ACT
Because we generated less than $1 billion in total annual gross revenues during
our most recently completed fiscal year, we qualify as an "emerging growth
company" under the Jumpstart Our Business Startups ("JOBS") Act.
We will lose our emerging growth company status on the earliest occurrence of
any of the following events:
1. on the last day of any fiscal year in which we earn at least $1 billion in
total annual gross revenues, which amount is adjusted for inflation every five
years;
2. on the last day of the fiscal year of the issuer following the fifth
anniversary of the date of our first sale of common equity securities pursuant
to an effective registration statement;
17
3. on the date on which we have, during the previous 3-year period, issued more
than $1 billion in non-convertible debt; or
4. the date on which such issuer is deemed to be a `large accelerated filer', as
defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any
successor thereto."
A "large accelerated filer" is an issuer that, at the end of its fiscal year,
meets the following conditions:
1. it has an aggregate worldwide market value of the voting and non-voting
common equity held by its non-affiliates of $700 million or more as of the last
business day of the issuer's most recently completed second fiscal quarter;
2. It has been subject to the requirements of section 13(a) or 15(d) of the Act
for a period of at least twelve calendar months; and
3. It has filed at least one annual report pursuant to section 13(a) or 15(d) of
the Act.
As an emerging growth company, exemptions from the following provisions are
available to us:
1. Section 404(b) of the Sarbanes-Oxley Act of 2002, which requires auditor
attestation of internal controls;
2. Section 14A(a) and (b) of the Securities Exchange Act of 1934, which require
companies to hold shareholder advisory votes on executive compensation and
golden parachute compensation;
3. Section 14(i) of the Exchange Act (which has not yet been implemented), which
requires companies to disclose the relationship between executive compensation
actually paid and the financial performance of the company;
4. Section 953(b)(1) of the Dodd-Frank Act (which has not yet been implemented),
which requires companies to disclose the ratio between the annual total
compensation of the CEO and the median of the annual total compensation of all
employees of the companies; and
5. The requirement to provide certain other executive compensation disclosure
under Item 402 of Regulation S-K. Instead, an emerging growth company must only
comply with the more limited provisions of Item 402 applicable to smaller
reporting companies, regardless of the issuer's size.
Pursuant to Section 107 of the JOBS Act, an emerging growth company may choose
to forgo such exemption and instead comply with the requirements that apply to
an issuer that is not an emerging growth company. WE HAVE ELECTED TO MAINTAIN
OUR STATUS AS AN EMERGING GROWTH COMPANY AND TAKE ADVANTAGE OF THE JOBS ACT
PROVISIONS.
SMALLER REPORTING COMPANY
IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY - THE JOBS ACT
We qualify as an emerging growth company as that term is used in the JOBS Act.
An emerging growth company may take advantage of specified reduced reporting and
other burdens that are otherwise applicable generally to public companies. These
provisions include:
* A requirement to have only two years of audited financial statements
and only two years of related MD&A
* Exemption from the auditor attestation requirement in the assessment
of the emerging growth company's internal control over financial
reporting under Section 404 of the Sarbanes-Oxley Act of 2002;
* Reduced disclosure about the emerging growth company's executive
compensation arrangements; and
* No non-binding advisory votes on executive compensation or golden
parachute arrangements.
18
We have already taken advantage of these reduced reporting burdens in this
prospectus, which are also available to us as a smaller reporting company as
defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Further, we may continue to take advantage of these reduced
reporting requirements applicable to smaller reporting companies even if we no
longer qualify as an "emerging growth company." In addition, Section 107 of the
JOBS Act also provides that an emerging growth company can take advantage of the
extended transition period provided in Section 7(a)(2)(B) of the Securities Act
of 1933, as amended (the "Securities Act") for complying with new or revised
accounting standards. We have elected to use the extended transition period
provided above and therefore our financial statements may not be comparable to
companies that comply with public company effective dates. We could remain an
emerging growth company for up to five years, or until the earliest of (i) the
last day of the first fiscal year in which our annual gross revenues exceed $1
billion, (ii) the date that we become a "large accelerated filer" as defined in
Rule 12b-2 under the Exchange Act, which would occur if the market value of our
common stock that is held by non-affiliates exceeds $700 million as of the last
business day of our most recently completed second fiscal quarter, or (iii) the
date on which we have issued more than $1 billion in non-convertible debt during
the preceding three year period.
The following are the past and projected future activities of the company in
milestone format. The specific timing of each milestone will depend on the
ability of FreeFlow to raise capital; therefore these dates are estimates which
may not be met.
MILESTONES:
JANUARY - JUNE 2012
The Company has during this period:
* Purchased a patent on its product
* Built and operated a model of its product successfully
* Opened a web site to display its product "Freeflowpools.com"
* Published a sales brochure
* Signed a contract with a large pool construction company to install
its product.
* In addition it has received additional funding in the form of a loan
from its president.
* Recruited a commission sales person within the pool industry.
We have signed an agreement with an independent commission sales person. He is
to receive 10% of the gross sales for which he is responsible. This person works
for a swimming pool maintenance company and visits properties of persons who are
potential customers for our product. When these persons are at home he gives
them a brochure and discusses the advantages of our product. He visits over 40
such properties each week as he does their pool maintenance.
JULY, AUGUST AND SEPTEMBER 2012
This will be the Company's first summer season. The Company will use independent
contract personell to visit pool owners and explain our system. The Company has
already signed an agreement with one independent sales person. He will receive
10% of the gross sales on any sales for which he is responsible. He works for a
pool company and has access to many pool owners each week. The Company plans to
recruit additional pool maintance personell to market its product. We will also
direct mail our brochures to home pool owners.
OCTOBER, NOVEMBER AND DECEMBER 2012
The Company will continue to introduce its system to pool contractors and
directly to pool owners.
In the next 12 months, FreeFlow will pursue arrangements for the sale of its
product. Revenues are expected late 2012, but no assurance can be given.
19
BUSINESS
PROPOSED PRODUCT OVERVIEW
The FreeFlow swimming pool solar pump system creates a blend of green energy
harvesting while maintaining your present system.
Our proposed product circulates the water in swimming pools using solar power
thus saving on electricity provided by the commercial grid. How it works:
1. The FreeFlow pump system is powered by a solar panel. This panel
produces approximately 250 watts
2. The FreeFlow pump is connected around the normal pump powered off the
electric grid.
3. The FreeFlow computer control system checks the energy available from
the solar panel and determines when to turn off the electric grid pump
and circulate water with the solar powered pump. The computer system
also logs the amount of water circulated to insure the total daily
circulation meets the pool requirements.
COMPETITIVE STRENGTHS & STRATEGY
The principle advantage of the FreeFlow solar pump is the use of the sun to
power pool circulation instead of power from the commercial grid. For many
households the pool pump is the greatest consumer of electric energy in the
home. Our proposed product does not require expensive electronic equipment to
convert the direct current output of the solar panels to alternating current
which is used by pool pumps connected to the commercial grid.
BANKRUPTCY OR SIMILAR PROCEEDINGS
There has been no bankruptcy, receivership or similar proceeding.
REORGANIZATION, PURCHASE OR SALE OF ASSETS
There have been no material reclassifications, mergers, consolidations, or
purchase or sale of a significant amount of assets not in the ordinary course of
business except for the purchase of a provisional patent. On November 13, 2011
the Company purchased the rights to a Provisional Patent for a solar pump
system, for the price of $5,000, from Edward F. Myers II.
COMPLIANCE WITH GOVERNMENT REGULATION
We will be required to comply with all regulations, rules and directives of
governmental authorities and agencies applicable to the normal course of
business in the United States and the State of California.
PATENTS, TRADEMARKS, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS OR LABOR
CONTRACTS
On November 13, 2011 the inventor, Edward F. Myers, for the amount of $5,000
assigned all his rights in a Provisional patent EFS 113937725 titled "FreeFlow"
to FreeFlow, Inc. Mr. Myers has been President and Director of Unseen Solar,
Inc. a public company. This Provisional patent is valid until November 12, 2012.
It is the Company's intention to file for a conventional patent on this
invention. A short description: The energy from solar panels is used to operate
a pump which is plumbed around the normal electric pump, providing circulation
using solar energy. A small computer controls the operation of the system to
insure the there is sufficient circulation. If this provisional patent expires
before the Company obtains a full patent it is the Company's intention to
continue the business since it sees being first with the idea gives it a
competitive advantage. It is the intent of the Company to file for a
conventional patent as soon after this offering as can be done.
NEED FOR GOVERNMENT APPROVAL FOR ITS PROPOSED PRODUCT
We are not required to apply for or have any government approval for our
proposed product.
20
RESEARCH AND DEVELOPMENT COSTS DURING THE LAST TWO YEARS
We have not expended funds for research and development costs since inception.
EMPLOYEES AND EMPLOYMENT AGREEMENTS
Our only employee is our sole officer, Mr. Henderson who currently devotes 2
hours per week to company matters and after receiving funding he plans to devote
as much time as the board of directors determines is necessary to manage the
affairs of the company. There are no formal employment agreements between the
company and our current employee. The Company also has agreements with contract
personell.
RELATED PARTY TRANSACTIONS
Mr. Henderson provides office space at no cost to the Company. Mr. Henderson has
offered to make loans to the Company at some future date if he considers it in
the best interests of the Company. Mr. Henderson's offer is not unlimited nor is
it legally required. On June 16, 2012 Mr. Henderson loaned the Company $10,000.
The loan is payable all interest and principle in two years with simple interest
at 4% on the unpaid balance.
On November 1, 2011, FreeFlow sold 25,000,000 shares of common stock to "S".
Douglas Henderson, the Company's president, for a total of $20,000.
PROPERTIES
FreeFlow shares office with its President at no cost to the Company.
EMPLOYEES
All activities are carried out by our president and director Mr. Henderson. The
Company intends to hire independent contractors who will receive 10% of any
contract received. The Company has contracted with one such person.
LEGAL PROCEEDINGS
FreeFlow is not a party to any legal proceeding.
MANAGEMENT
The Executive Officers and Directors of the Company and their ages are as
follows:
Name Age Position Date Elected
---- --- -------- ------------
"S" Douglas Henderson 75 President, CFO October 29, 2011
Director, Secretary
"S" Douglas Henderson has been President, CFO, Secretary and sole director of
FreeFlow since October 29th 2011. From 1998 until 2008 he was Admissions
Director, Senior Flight Instructor of San Diego Flight Training International,
San Diego CA. Since July 2004, he has worked part time as an income tax preparer
for H & R Block. Mr. Henderson is also part owner of J. Bright Henderson, Inc.,
a dealer in fine art.
Mr. Henderson was a director of Ads in Motion, Inc., a public company, from
August 2007 until June 28, 2010 and was secretary of Ads in Motion from May 2007
until June 28, 2010.
During the time Mr. Henderson was a director, Ads in Motion advanced its
business plan with the building of a prototype of its elevator advertizing and
the installation in a building and the signing of a contract with a tenet of the
building for advertising. Ads in Motion also signed a contract with a sign
company for the development of its video advertising signs. Ads in Motion built
a demo in a van which contained video signs which was used to advertise in the
21
downtown area of San Diego, CA. Ads in Motion also direct mailed its brochures
to the owners and operators of the high-rise buildings in San Diego, CA and
personally made sales calls on them. In 2009 and 2010 the climate for selling a
new type of advertising and raising capital were poor and the company was unable
to continue operation.
The Directors are elected to serve until the next annual meeting of shareholders
and until their successors have been elected. Executive officers serve at the
discretion of the Board of Directors.
The foregoing person may be deemed a "promoter" and "parent" of the Company as
that term is defined in the rules and regulations promulgated under the
Securities and Exchange Act of 1933.
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company reports revenue and expenses using the accrual method of accounting,
for financial and tax reporting purposes.
USE OF ESTIMATES
Management uses estimates and assumptions in preparing these financial
statements in accordance with 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.
DEPRECIATION, AMORTIZATION AND CAPITALIZATION
The Company records depreciation and amortization, when appropriate, using both
straight-line method over the estimated useful lives of the assets (five to
seven years). Expenditures for maintenance and repairs are charged to expense as
incurred. Additions, major renewals and replacements that increase the
property's useful life are capitalized. Property sold or retired, together with
the related accumulated depreciation is removed from the appropriate accounts
and the resultant gain or loss is included in net income.
INCOME TAXES
The company provides for income taxes under Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and liability approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some of all of the deferred tax assets will not be realized.
The provision for income taxes differs from the amounts which would be provided
by applying the statutory federal income tax rate to net loss before provision
for income taxes for the following reasons:
As of
June 30, 2012
-------------
Income tax expense at statutory rate $ 0
Valuation allowance $ 0
--------
Income tax expense per books $ 0
========
22
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial accounting Standards Statement No. 107, "Disclosures about Fair Value
of Financial Instruments", requires the Company to disclose, when reasonably
attainable, the fair market values of its assets and liabilities which are
deemed to be financial instruments. The Company's financial instruments consist
primarily of cash and certain investments.
INVESTMENTS
Investments that are purchased in other companies are valued at cost less any
impairment in the value that is other than temporary in nature.
PER SHARE INFORMATION
The Company computes per share information in accordance with SFAS No. 128,
"Earnings per Share" which requires presentation of both basic and diluted
earnings per share on the face of the statement of operations. Basic loss per
share is computed by dividing the net loss available to common shareholders by
the weighted average number of common shares outstanding during such period.
Diluted loss per share gives effect to all dilutive potential common shares
outstanding during the period. Dilutive loss per share excludes all potential
common shares if their effect is anti-dilutive. The Company has basic and
diluted loss per share of $0.00276.
EXECUTIVE COMPENSATION
MANAGEMENT COMPENSATION
Currently, "S" Douglas Henderson, our sole officer and director, receives no
compensation for his services during the development stage of our business
operations. He is reimbursed for any out-of-pocket expenses that he incurs on
our behalf. In the future, we may approve payment of salaries for future
officers and directors, but currently, no such plans have been approved. We do
not have any employment agreements in place with our sole officer and director.
We also do not currently have any benefits, such as health or life insurance,
available to our employees.
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred All
Name and Plan Compen- Other
Principal Stock Option Compen- sation Compen-
Position Year Salary Bonus Awards Awards sation Earnings sation Totals
------------ ---- ------ ----- ------ ------ ------ -------- ------ ------
"S" Douglas 2011 0 0 0 0 0 0 0 0
Henderson
President,
CEO, CFO and
Director
23
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
Option Awards Stock Awards
---------------------------------------------------------------- ---------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Awards: Payout
Equity Number of Value of
Incentive Number Unearned Unearned
Plan Awards; of Market Shares, Shares,
Number of Number of Number of Shares Value of Units or Units or
Securities Securities Securities or Units Shares or Other Other
Underlying Underlying Underlying of Stock Units of Rights Rights
Unexercised Unexercised Unexercised Option Option That Stock That That That
Options (#) Options (#) Unearned Exercise Expiration Have Not Have Not Have Not Have Not
Name Exercisable Unexercisable Options (#) Price Date Vested(#) Vested Vested Vested
---- ----------- ------------- ----------- ----- ---- --------- ------ ------ ------
"S" 0 0 0 0 0 0 0 0 0
Douglas
Henderson
DIRECTOR COMPENSATION
Change in
Pension
Value and
Fees Non-Equity Nonqualified
Earned Incentive Deferred
Paid in Stock Option Plan Compensation All Other
Name Cash Awards Awards Compensation Earnings Compensation Total
---- ---- ------ ------ ------------ -------- ------------ -----
"S" Douglas 0 0 0 0 0 0 0
Henderson
There are no current employment agreements between the company and its officer
and director.
On November 1, 2011 a total of 25,000,000 shares of common stock were issued to
Mr. Henderson in exchange for cash in the amount of $20,000 or $0.0008 per
share.
Mr. Henderson currently devotes approximately 2 hours per week to manage the
affairs of the company. He has agreed to work with no remuneration until such
time as the company receives sufficient revenues necessary to provide management
salaries. At this time, we cannot accurately estimate when sufficient revenues
will occur to implement this compensation, or what the amount of the
compensation will be.
There are no annuity, pension or retirement benefits proposed to be paid to the
officer or director or employees in the event of retirement at normal retirement
date pursuant to any presently existing plan provided or contributed to by the
company or any of its subsidiaries, if any.
OPTIONS
There are no options outstanding.
24
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of August 1, 2012, the name, address, and
number of shares owned directly or beneficially by persons who own 5% or more of
the company's common stock and by each executive officer and director and owner
after the Distribution.
Shares/Percent as Shares/Percent after
Beneficial Owner of June 1, 2012 the Distribution
---------------- --------------- ----------------
"S" Douglas Henderson 25,000,000 - 95.4% 25,000,000 - 95.4%
9130 Edgewood Dr.
La Mesa, CA 91941
Garden Bay International, Ltd. 1,200,000 - 4.6% 65,596 - 0.25%
4190 Bonita Road
Bonita Ca, 91902
All Executive Officers
and Directors as a Group
(2) persons) 25,000,000 - 95.4% 25,000,000 - 95.4%
----------
(1) Based on 26,200,000 shares outstanding on August 1, 2012
CERTAIN TRANSACTIONS
On December 6, 2011 FreeFlow sold 1,200,000 shares of its common stock to Garden
Bay International, Ltd. for $1000.
On November 1, 2011, FreeFlow sold 25,000,000 shares of common stock to "S".
Douglas Henderson, the Company's president, for a total of $20,000.
The above sales were exempt from registration under the Securities Act of 1933,
as amended, in reliance on Section 4(2) for sales not involving a public
offering.
DESCRIPTION OF SECURITIES
The authorized common stock of FreeFlow consists of 100,000,000 shares (par
value $0.0001 per share), of which 26,200,000 shares were outstanding on June 1,
2012. The holders of common stock are entitled to one vote per share on all
matters to be voted on by stockholders. Holders of common stock are entitled to
receive dividends when, as, and if declared by the Board of Directors. The
approval of proposals submitted to shareholders at a meeting requires a
favorable vote of the majority of shares voting. Holders of the common stock
have no preemptive, subscription, redemption, or conversion rights, and there
are no sinking fund provisions with respect to the common stock. All of the
outstanding shares of common stock are, and the shares to be transferred in the
Distribution will be, fully paid and non-assessable. As of August 1, 2012
FreeFlow had two common shareholders.
Penny Stocks must, among other things:
* Provide customers with a risk disclosure statement, setting forth
certain specified information prior to a purchase transaction;
* Disclose to the customer inside bid quotation and outside offer
quotation for this Penny Stock, or, in a principal transaction, the
broker-dealer's offer price for the Penny Stock;
* Disclose the aggregate amount of any compensation the broker-dealer
receives in the transaction;
25
* Disclose the aggregate amount of the cash compensation that any
associated person of the broker-dealer, who is a natural person, will
receive in connection with the transaction;
* Deliver to the customer after the transaction certain information
concerning determination of the price and market trading activity of
the Penny Stock.
Non-stock exchange and non-NASDAQ stocks would not be covered by the definition
of Penny Stock for:
(i) issuers who have $2,000,000 tangible assets ($5,000,000 if the issuer
has not been in continuous operation for 3 years);
(ii) transactions in which the customer is an institutional accredited
investor; and
(iii) transactions that are not recommended by the broker-dealer.
PENNY STOCK RULES
The Securities and Exchange Commission has adopted rule 15g-9, which established
the definition of a "penny stock" for the purposes relevant to FreeFlow as any
equity security that has a market price of less than $5.00 per share, or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require:
(1) that a broker or dealer approve a person's account for transactions in
penny stocks: and
(2) the broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the penny
stock to be purchased.
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:
(1) obtain financial information and investment experience objectives of
the person; and
(2) make a reasonable determination that the transactions in penny stocks
are suitable for that person, and the person has sufficient knowledge
and experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock:
(1) a disclosure schedule prepared by the Commission relating to the penny
stock market, which, in highlight form,
(2) sets forth the basis on which the broker or dealer made the
suitability determination; and
(3) that the broker or dealer received a signed, written agreement from
the investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading and about:
(1) the commissions payable to both the broker-dealer and the registered
representative;
(2) current quotations for the securities;
(3) the rights and remedies available to an investor in cases of fraud in
penny stock transactions; and
(4) monthly statements have to be sent disclosing recent price information
for the penny stock held in the account and information on the limited
market in penny stocks.
PREFERRED STOCK
FreeFlow is also authorized to issue as many as 20,000,000 shares of the
preferred stock (par value $0.0001). The preferred stock may be issued in one or
more series with such preferences, conversion, and other rights, voting powers,
restrictions, limitations as to dividends and qualifications, and rights as the
Company's Board of Directors may determine.
26
As of August 1, 2012, there were no shares of preferred stock outstanding.
Preferred stock can thus be issued without the vote of the holders of common
stock. Rights could be granted in the future to the holders of preferred stock,
which could reduce the attractiveness of FreeFlow as a potential takeover
target, make the removal of management more difficult, or adversely impact the
rights of holders of common stock.
LIMITATION OF LIABILITY OF DIRECTORS AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS
The Certificate of Incorporation of FreeFlow provides for indemnification of
directors and officers of FreeFlow as follows:
EIGHTH. No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law: (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct, or a
knowing violation of law; (iii) pursuant to Section 174 of the Delaware General
Corporation Law; or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article eighth
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment."
DELAWARE GENERAL CORPORATION LAW
Delaware General Corporation Law Section 145 provides that FreeFlow may
indemnify any officer or director who was made a party to a suit because of the
Securities Act covering the common stock offered by this prospectus. This
position, including derivative suits, if he was acting in good faith and in a
manner he reasonably believed was in the best interest of FreeFlow, except, in
certain circumstances, for negligence or misconduct in the performance of his
duty to FreeFlow. If the director or officer is successful in his suit, he is
entitled to indemnification for expenses, including attorneys' fees.
LEGAL MATTERS
The legality of the Shares of Common stock to be registered hereby will be
passed upon for FreeFlow by Karen Batcher, Esquire. Tax opinion given by Karen
Batcher, Esquire.
EXPERTS
The financial statements of FreeFlow for the periods from October 28, 2011, to
December 31, 2011, January 1, 2012 to June 30, 2012 and related notes which are
included in this Prospectus have been examined by PLS CPA, A Professional Corp.,
and have been so included in reliance upon the opinion of such accountant given
upon their authority as an expert in auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the U.S. Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act covering the common stock offered
by this Prospectus, which constitutes a part of the registration statement,
omits some of the information described in the registration statement under the
rules and regulations of the Commission. For further information on FreeFlow and
the common stock offered by this prospectus, please refer to the registration
statement and the attached exhibits. Statements contained in this prospectus as
to the content of any contract or other document referred to are not necessarily
complete, and in each instance, reference is made to the copy filed as an
exhibit to the registration statement; each of these statements is qualified in
all respects by that reference. The registration statement and exhibits can be
inspected and copied at the public reference section at the Commission's
principal office, 100 F Street , NE, Washington, D.C. 20549 and through the
Commission's Web site (http://www.sec.gov). Copies may be obtained from the
commission's principal office upon payment of the fees prescribed by the
Commission.
27
PLS CPA, A PROFESSIONAL CORP.
* 4725 MERCURY STREET #210 * SAN DIEGO * CALIFORNIA 92111 *
* TELEPHONE (858) 722-5953 * FAX (858) 761-0341 * FAX (858) 433-2979
* E-MAIL changgpark@gmail.com *
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
FreeFlow, Inc.
We have audited the accompanying balance sheet of FreeFlow, Inc. (A Development
Stage "Company") as of December 31, 2011 and the related statements of
operations, changes in shareholders' equity and cash flows for the period from
October 28, 2011 (inception) to December 31, 2011. 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 FreeFlow, Inc. as of December
31, 2011, and the result of its operations and its cash flows for the period
from October 28, 2011 (inception) to December 31, 2011 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 6 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/PLS CPA
--------------------
PLS CPA, A Professional Corp.
February 9, 2012
San Diego, CA. 92111
Registered with the Public Company Accounting Oversight Board
F-1
FreeFlow, Inc.
(A Development Stage Company)
Balance Sheet
--------------------------------------------------------------------------------
As of
December 31,
2011
--------
(Audited)
ASSETS
CURRENT ASSETS
Cash $ 13,765
--------
TOTAL CURRENT ASSETS 13,765
OTHER ASSETS
Intangible Assets, net 4,342
--------
TOTAL OTHER ASSETS 4,342
--------
TOTAL ASSETS $ 18,107
========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ --
--------
TOTAL CURRENT LIABILITIES --
LONG-TERM LIABILITIES --
--------
TOTAL LONG-TERM LIABILITIES --
TOTAL LIABILITIES --
STOCKHOLDERS' EQUITY
Preferred Stock ($0.0001 par value, 20,000,000 shares
authorized; zero shares issued and outstanding
as of December 31, 2011 --
Common stock, ($0.0001 par value, 100,000,000 shares
authorized; 26,200,000 shares issued and outstanding
as of December31, 2011 2,620
Additional paid-in capital 18,380
Deficit accumulated during development stage (2,893)
--------
TOTAL STOCKHOLDERS' EQUITY 18,107
--------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 18,107
========
The accompanying notes are an integral part of these financial statements
F-2
Freeflow, Inc.
(A Development Stage Company)
Statement of Operations
--------------------------------------------------------------------------------
October 28, 2011
(inception)
through
December 31,
2011
------------
REVENUES
Revenues $ --
------------
TOTAL REVENUES --
GENERAL & Administrative Expenses
Administrative expenses 1,235
Professional fees 1,000
Amortization Expense 658
------------
TOTAL GENERAL & ADMINISTRATIVE EXPENSES 2,893
------------
LOSS FROM OPERATION (2,893)
------------
OTHER EXPENSE
Interest expense --
------------
TOTAL OTHER EXPENSES --
------------
NET INCOME (LOSS) $ (2,893)
============
BASIC EARNINGS PER SHARE $ (0.00)
============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,396,926
============
The accompanying notes are an integral part of these financial statements
F-3
FreeFlow, Inc.
(A Development Stage Company)
Statement of changes in Shareholders' Equity (Deficit)
From October 28, 2011 (Inception) through December 31, 2011
--------------------------------------------------------------------------------
Deficit
Accumulated
Common Stock Additional During
--------------------- Paid-in Development
Shares Amount Capital Stage Total
------ ------ ------- ----- -----
Balance, October 28, 2011 (Inception) -- $ -- $ -- $ -- $ --
Common stock issued, November 22, 2011
at $0.0008 per share 25,000,000 2,500 17,500 -- 20,000
Common stock issued, December 6, 2011
at $0.000833 per share 1,200,000 120 880 -- 1,000
Loss for the period beginning
October 28, 2011 (inception) to
December 31, 2011 (2,893) (2,893)
----------- ------- -------- -------- --------
BALANCE, DECEMBER 31, 2011 26,200,000 $ 2,620 $ 18,380 $ (2,893) $ 18,107
=========== ======= ======== ======== ========
The accompanying notes are an integral part of these financial statements
F-4
FreeFlow, Inc.
(A Development Stage Company)
Statement of Cash Flows
--------------------------------------------------------------------------------
October 28, 2011
(inception)
through
December 31,
2011
--------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (2,893)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization expense 658
Changes in operating assets and liabilities:
Increase (Decrease) in accounts payable and
accrued liabilities --
Increase in accrued interest --
--------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (2,235)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Intangible Assets (5,000)
--------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (5,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in advance from officer --
Increase in notes payable - related party --
Issuance of common stock 21,000
--------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 21,000
--------
NET INCREASE (DECREASE) IN CASH 13,765
CASH AT BEGINNING OF PERIOD --
--------
CASH AT END OF PERIOD 13,765
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest $ --
========
Income Taxes $ --
========
The accompanying notes are an integral part of these financial statements
F-5
FREEFLOW, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
FreeFlow, Inc. (the "Company") was incorporated on October 28, 2011 under the
laws of the State of Delaware to enter into the green energy industry. The
FreeFlow swimming pool solar pump system creates a blend of green energy
harvesting while maintaining your present system. Our proposed product
circulates the water in swimming pools using solar power thus saving on
electricity provided by the commercial grid.
The Company's activities to date have been limited to organization and capital.
The Company has been in the development stage since its formation and has not
yet realized any revenues from its planned operations. The Company's fiscal year
end is December 31.
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.
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.
F-6
FREEFLOW, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
--------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Measuremnet". 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 of 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:
* 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.
* 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.
F-7
FREEFLOW, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
--------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
* 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 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.
F-8
FREEFLOW, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
--------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
F-9
FREEFLOW, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
--------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 - INTANGIBLE ASSETS
Freeflow, Inc. capitalized as intangible assets the purchase cost of the rights
to certain technologies acquired from Edward F Myers in November 13, 2011. The
life of the provisional patent is one year and will expire on November 13, 2012.
The patent will be amortized one hundred percent from November 14, 2011 to
November 13, 2012. The value of the patent on December 31, 2011 is $4,342.
NOTE 4 - 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, 2011 the Company had a net operating
loss carry-forward of approximately $2,893. 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:
December 31, 2011
-----------------
Net loss before income taxes per financial statements $ 2,893
Income tax rate 34%
Income tax recovery (984)
Permanent differences --
Temporary differences --
Valuation allowance change 984
-------
Provision for income taxes $ --
=======
F-10
FREEFLOW, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
--------------------------------------------------------------------------------
NOTE 4 - PROVISION FOR INCOME TAXES- CONTINUED
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
financials reporting and tax purposes. The significant components of deferred
income tax assets and liabilities at December 31, 2011 are as follows:
December 31, 2011
-----------------
Net operating loss carryforward $ 984
Valuation allowance (984)
-------
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 5 - COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is not presently involved in any litigation.
NOTE 6 - GOING CONCERN
Future issuances of the Company's equity or debt securities will be required in
order 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 have 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
$2,893 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
F-11
FREEFLOW, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2011
--------------------------------------------------------------------------------
NOTE 6 - GOING CONCERN (CONTINUED)
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 aforementioned uncertainties.
NOTE 7 - RELATED PARTY TRANSACTIONS
S Douglas Henderson, the sole 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 8 - STOCK TRANSACTIONS
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.
As of December 31, 2011 the Company had 26,200,000 shares of common stock issued
and outstanding.
NOTE 9 - STOCKHOLDERS' EQUITY
The stockholders' equity section of the Company contains the following classes
of capital stock as of December 31, 2011:
Common stock, $ 0.0001 par value: 100,000,000 shares authorized; 26,200,000
shares issued and outstanding.
Preferred stock, $ 0.0001 par value: 20,000,000 shares authorized; no shares
issued and outstanding.
NOTE 10 - SUBSEQUENT EVENTS
In accordance with ASC 855, SUBSEQUENT EVENTS, the Company has evaluated
subsequent events through February 9, 2012, the date of available issuance of
these audited financial statements. During this period, the Company did not have
any material recognizable subsequent events.
F-12
FreeFlow, Inc.
(A Development Stage Company)
Balance Sheets
--------------------------------------------------------------------------------
As of As of
June 30, December 31,
2012 2011
-------- --------
(Unaudited) (Audited)
CURRENT ASSETS
Cash $ 14,708 $ 13,765
-------- --------
TOTAL CURRENT ASSETS 14,708 13,765
FIXED ASSETS
Equipment, net 1,061
-------- --------
TOTAL FIXED ASSETS 1,061 --
OTHER ASSETS
Intangible Assets, net 1,842 4,342
-------- --------
TOTAL OTHER ASSETS 1,842 4,342
-------- --------
TOTAL ASSETS $ 17,611 $ 18,107
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 2,715 $ --
-------- --------
TOTAL CURRENT LIABILITIES 2,715 --
LONG-TERM LIABILITIES
Accrued interest payable 17
Notes payable 10,000
-------- --------
TOTAL LONG-TERM LIABILITIES 10,017 --
TOTAL LIABILITIES 12,732 --
STOCKHOLDERS' EQUITY
Preferred Stock ($0.0001 par value, 20,000,000 shares
authorized; zero shares issued and outstanding
as of June 30, 2012 and December 31, 2011 --
Common stock, ($0.0001 par value, 100,000,000 shares
authorized; 26,200,000 shares issued and outstanding
as of June 30, 2012 and December 31, 2011 2,620 2,620
Additional paid-in capital 18,380 18,380
Deficit accumulated during development stage (16,121) (2,893)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 4,879 18,107
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 17,611 $ 18,107
======== ========
The accompanying notes are an integral part of these financial statements
F-13
Freeflow, Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)
--------------------------------------------------------------------------------
October 28, 2011
Three Months Six Months (inception)
Ended Ended through
June 30, June 30, June 30,
2012 2012 2012
------------ ------------ ------------
REVENUES
Revenues $ -- $ -- $ --
------------ ------------ ------------
TOTAL REVENUES -- -- --
GENERAL & ADMINISTRATIVE EXPENSES
Administrative expenses 780 3,830 5,065
Professional fees 2,250 6,800 7,800
Depreciation Expense 57 81 81
Amortization Expense 1,250 2,500 3,158
------------ ------------ ------------
TOTAL GENERAL & ADMINISTRATIVE EXPENSES 4,337 13,211 16,104
------------ ------------ ------------
LOSS FROM OPERATION (4,337) (13,211) (16,104)
------------ ------------ ------------
OTHER EXPENSE
Interest expense 17 17 17
------------ ------------ ------------
TOTAL OTHER EXPENSES 17 17 17
------------ ------------ ------------
NET INCOME (LOSS) $ (4,354) $ (13,228) $ (16,121)
============ ============ ============
BASIC EARNINGS PER SHARE $ (0.00) $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 26,200,000 26,200,000
============ ============
The accompanying notes are an integral part of these financial statements
F-14
FreeFlow, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
--------------------------------------------------------------------------------
October 28, 2011
Six Months (inception)
Ended through
June 30, June 30,
2012 2012
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(13,228) $(16,121)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Amortization expense 2,500 3,158
Depreciation expense 81 81
Changes in operating assets and liabilities:
Increase (Decrease) in accounts payable and accrued liabilities 2,715 2,715
Increase in accrued interest 17 17
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (7,915) (10,150)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment (1,142) (1,142)
Acquisition of Intangible Assets 0 (5,000)
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,142) (6,142)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in advance from officer -- --
Proceed from notes payable - related party 10,000 10,000
Issuance of common stock -- 21,000
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 10,000 31,000
-------- --------
NET INCREASE (DECREASE) IN CASH 943 14,708
CASH AT BEGINNING OF PERIOD 13,765 --
-------- --------
CASH AT END OF PERIOD 14,708 14,708
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest $ -- $ --
======== ========
Income Taxes $ -- $ --
======== ========
The accompanying notes are an integral part of these financial statements
F-15
Freeflow, Inc.
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
June 30, 2012
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
FreeFlow, Inc. (the "Company") was incorporated on October 28, 2011 under the
laws of the State of Delaware to enter into the green energy industry. The
FreeFlow swimming pool solar pump system creates a blend of green energy
harvesting while maintaining your present system. Our proposed product
circulates the water in swimming pools using solar power thus saving on
electricity provided by the commercial grid.
The Company's activities to date have been limited to organization and capital.
The Company has been in the development stage since its formation and has not
yet realized any revenues from its planned operations. The Company's fiscal year
end is December 31.
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
year.
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.
F-16
Freeflow, Inc.
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
June 30, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 of 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:
F-17
Freeflow, Inc.
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
June 30, 2012
* 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.
* 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.
* 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 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.
F-18
Freeflow, Inc.
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
June 30, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
F-19
Freeflow, Inc.
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
June 30, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 - INTANGIBLE ASSETS
Freeflow, Inc. capitalized as intangible assets the purchase cost of the rights
to certain technologies acquired from Edward F Myers in November 13, 2011. The
life of the provisional patent is one year and will expire on November 13, 2012.
The patent will be amortized one hundred percent from November 14, 2011 to
November 13, 2012. The value of the patent on June 30, 2012 is $1,842.
NOTE 4 - 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 March 31, 2012 the Company had a net operating loss
carry-forward of approximately $16,121. 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:
June 30, December 31,
2012 2011
-------- --------
Net loss before income taxes per
financial statements $ 16,121 $ 2,893
Income tax rate 34% 34%
Income tax recovery (5,481) (984)
Permanent differences -- --
Temporary differences -- --
Valuation allowance change 5,481 984
Provision for income taxes -- --
F-20
Freeflow, Inc.
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
June 30, 2012
NOTE 4 - PROVISION FOR INCOME TAXES- CONTINUED
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
financials reporting and tax purposes. The significant components of deferred
income tax assets and liabilities at June 30, 2012 and December 31, 2011 are as
follows:
June 30, December 31,
2012 2011
-------- --------
Net operating loss carryforward $ 5,481 $ 984
Valuation allowance (5,481) (984)
-------- --------
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 5: PROPERTY AND EQUIPEMENT
Property and equipment consists of the following:
As of
-------------------------------
June 30, December 31,
2012 2011
-------- --------
Equipment $ 1,141 $ 0
-------- --------
Total Fixed Assets 1,141 0
Less: Accumulated Depreciation (80) 0
-------- --------
Net Fixed Assets $ 1,061 $ 0
======== ========
Depreciation expenses for the periods ended June 30, 2012 and December 31, 2012
were $81 and $0
F-21
Freeflow, Inc.
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
June 30, 2012
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 in
order 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 have 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
$16,121 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 aforementioned uncertainties.
NOTE 8 - RELATED PARTY TRANSACTIONS
S Douglas Henderson, the sole 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
Since inception the Company received cash totaling $10,000 from S Douglas
Henderson in the form of a promissory of $10,000. As of June 30, 2012 the amount
due to S Douglas Henderson was $10,000
On June 16, 2012, the Company received $10,000 loan. This loan is at 4% interest
with principle and interest all due on June 16, 2014. As of June 30, 2012,
accrued interest is $17.
F-22
Freeflow, Inc.
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
June 30, 2012
NOTE 10 - STOCK TRANSACTIONS
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.
As of June 30, 2012 the Company had 26,200,000 shares of common stock issued and
outstanding.
NOTE 11 - STOCKHOLDERS' EQUITY
The stockholders' equity section of the Company contains the following classes
of capital stock as of June 30, 2012:
Common stock, $ 0.0001 par value: 100,000,000 shares authorized; 26,200,000
shares issued and outstanding.
Preferred stock, $ 0.0001 par value: 20,000,000 shares authorized; no shares
issued and outstanding.
NOTE 12 - SUBSEQUENT EVENTS
In accordance with ASC 855, SUBSEQUENT EVENTS, the Company has evaluated
subsequent events through August 22, 2012, the date of available issuance of
these audited financial statements. During this period, the Company did not have
any material recognizable subsequent events.
F-23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of the estimated amounts of all expenses
in connection with the Distribution of the securities which are the subject of
this Registration Statement.
Securities and Exchange Commission Registration Fee $ 1
Accounting and Audit Fees $5,350
------
TOTAL $5,351
======
Garden Bay International, LTD has agreed to pay all costs, except for Audit,
incurred in connection with the distribution of the shares which are the subject
of this Registration Statement.
These are estimated as follows:
Legal $6,000
Printing 500
Transfer agent and certificate printing 1,000
Postage 200
Accounting 2,000
------
TOTAL $9,700
======
ITEM 14. INDEMNIFICATION OF DIRECTOR AND OFFICERS.
Delaware General Corporation Law Section 145 provides that the Company may
indemnify any officer or director who was made a party to a suit because of his
position, including derivative suits, if he was acting in good faith and in a
manner he reasonably believed was in the best interest of the Company, except,
in certain circumstances, for negligence or misconduct in the performance of his
duty to the Company. If the director or officer is successful in his suit, he is
entitled to indemnification for expenses, including attorneys' fees. Article
Seventh of the Company's Certificate of Incorporation provides for
indemnification of the Company's officers and directors to the fullest extent
permitted by law. Indemnification agreements have been entered into with all
officers and directors of the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On December 6, 2011 FreeFlow sold 1,200,000 shares of its common stock to Garden
Bay International, Ltd. for $1000. The Company relied on Section 4(2) in that
there was no advertisement and Garden Bay was the only offeree.
On November 1, 2011, FreeFlow sold 25,000,000 shares of common stock to "S".
Douglas Henderson, the Company's president, for a total of $20,000.
The above sales of 26,200,000 common shares were exempt from registration under
the Securities Act of 1933 as amended in reliance on Section 4(2) for sales not
involving a public offering.
II-1
ITEM 16. EXHIBITS.
The following is a list of exhibits filed as part of the Registration Statement:
3.(i) Certificate of Incorporation*
3.(ii) Bylaws*
5.1 Legal Opinion of Karen Batcher, Esq*
10.1 Patent Sales Agreement*
10.2 Contracts
10.3 Douglas Henderson Note
23.1 Consent of Karen Batcher, Esq. (see Exhibit 5.1)*
23.2 Consent of PLS CPA, A Professional Corp.
----------
* Filed with S-1 on March 6, 2012
ITEM 17. UNDERTAKINGS.
FreeFlow, Inc. will:
(1) File, during any period in which it offers or sells securities, a post
effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of Prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) That, for the purpose of determining liability under the Securities Act to
any purchaser: (i) if the registrant is subject to Rule 430C, each
prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on Rule
430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as
to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
II-2
(5) For determining liability of the undersigned Registrant under the
Securities Act to any purchaser in the initial distribution of the
securities, that in a primary offering of securities of the undersigned
Registrant pursuant to this Registration Statement, regardless of the
underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned Registrant will be a seller to
the purchaser and will be considered to offer or sell such securities to
such purchaser:
(a) Any preliminary prospectus or prospectus of the undersigned Registrant
relating to the offering required to be filed pursuant to Rule 424;
(b) Any free writing prospectus relating to the offering prepared by or on
behalf of the undersigned Registrant or used or referred to by the
undersigned Registrant;
(c) The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
Registrant or its securities provided by or on behalf of the
undersigned Registrant; and,
(d) Any other communication that is an offer in the offering made by the
undersigned Registrant to the purchaser.
Insofar as indemnification for liabilities, arising under the Securities Act of
1933 may be permitted to Directors, Officers, or persons controlling the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer, or controlling person of the Company in the successful
defense of any action, suite or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the Company will, unless, in the opinion of its counsel, the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question as to whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of San Diego, State of California, on the 27th day of
August, 2012.
FreeFlow, Inc.
By: "S" DOUGLAS HENDERSON
/s/ "S" DOUGLAS HENDERSON/
----------------------------------------
"S" DOUGLAS HENDERSON
President and Director
Chief Executive Officer
/s/ "S" DOUGLAS HENDERSON
----------------------------------------
"S" DOUGLAS HENDERSON
Principal financial officer
Principal Accounting officer
/s/ "S" DOUGLAS HENDERSON
----------------------------------------
"S" DOUGLAS HENDERSON
Director and Secretary
II-4