UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 2)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURUTIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
Commission file number 000-54868
FreeFlow, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 45-3838831
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
9130 Edgewood Drive
La Mesa, CA 91941
(619) 741-1006 Fax: (619)
421-2653
(Address of Principal Executive Offices, Zip Code & Telephone Number)
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
(Name, Address and Telephone Number of Agent for Service)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $0.0001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of February 8, 2013, the registrant had 26,200,000 shares of common stock
issued and outstanding. No market value has been computed based upon the fact
that no active trading market had been established.
FREEFLOW, INC.
TABLE OF CONTENTS
Page No.
--------
Part I
Item 1. Business 3
Item 1A. Risk Factors 5
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Mine Safety Disclosures 8
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 8. Financial Statements and Supplementary Data 11
Item 9A. Controls and Procedures 24
Item 9B. Other Information 25
Part III
Item 10. Directors and Executive Officers 26
Item 11. Executive Compensation 26
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 28
Item 13. Certain Relationships and Related Transactions 29
Item 14. Principal Accounting Fees and Services 29
Part IV
Item 15. Exhibits 30
Signatures 30
2
PART I
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this annual report on Form 10-K contain or may contain
forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements were based on various factors and were derived
utilizing numerous assumptions and other factors that could cause our actual
results to differ materially from those in the forward-looking statements. These
factors include, but are not limited to, our ability to consummate a merger or
business combination, economic, political and market conditions and
fluctuations, government and industry regulation, interest rate risk, U.S. and
global competition, and other factors. Most of these factors are difficult to
predict accurately and are generally beyond our control. You should consider the
areas of risk described in connection with any forward-looking statements that
may be made herein. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this report.
Readers should carefully review this annual report in its entirety, including
but not limited to our financial statements and the notes thereto. Except for
our ongoing obligations to disclose material information under the Federal
securities laws, we undertake no obligation to release publicly any revisions to
any forward-looking statements, to report events or to report the occurrence of
unanticipated events. For any forward-looking statements contained in any
document, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
ITEM 1. BUSINESS
GENERAL INFORMATION
FreeFlow, Inc. 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. We are a development stage company with no revenues and a
limited operating history. Our fiscal year end if December 31st.
Our financial statements from inception (October 28, 2011) through December 31,
2012 report no revenues and a net loss of $22,864. Our independent auditor has
issued an audit opinion for FreeFlow, Inc. which includes a statement expressing
substantial doubt as to our ability to continue as a going concern.
We have a total of 100,000,000 authorized common shares with a par value of
$0.0001 per share with 26,200,000 common shares issued and outstanding as of
December 31, 2012. We have a total of 20,000,000 authorized preferred shares
with a par value of $0.0001 per share with no preferred shares issued and
outstanding as of December 31, 2012.
EXECUTIVE SUMMARY
PROPOSED PRODUCT OVERVIEW
The FreeFlow swimming pool solar pump system creates a blend of green energy
harvesting while maintaining your present system.
3
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. This Provisional patent expired on 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.
4
NEED FOR GOVERNMENT APPROVAL FOR ITS PROPOSED PRODUCT
We are not required to apply for or have any government approval for our
proposed product.
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
personnel.
REPORTS TO SECURITY HOLDERS
We make available an annual report including audited financials on Form 10-K to
security holders. We file the necessary reports with the SEC pursuant to the
Exchange Act, including but not limited to, reports on Form 8-K, annual reports
on Form 10-K, and quarterly reports on Form 10-Q.
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports,
proxy and information statements, and other electronic information regarding the
Company and filed with the SEC at http://www.sec.gov.
ITEM 1A. 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
5
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 NO PATENT RIGHTS AND 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 organizations
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.
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;
6
* 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.
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
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 OUR AUDITORS.
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 an equity or debt offering to continue in business.
7
ITEM 2. PROPERTIES
We do not currently own any property. We are currently operating out of the
premises of our President on a rent free basis during our development stage. We
consider our current principal office space arrangement adequate and will
reassess our needs based upon the future growth of the company.
We do not have any investments or interests in any real estate. We do not invest
in real estate mortgages, nor do we invest in securities of, or interests in,
persons primarily engaged in real estate activities.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings nor do we have any
knowledge of any threatened litigation.
ITEM 4. MINE SAFETY DISCLOSURES
None.
8
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is not currently a public market for our common stock. 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 will 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 are 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 our recent registration
statement may be sold free of restriction.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
We are a development stage company and have generated no revenues since
inception (October 28, 2011) and have incurred $22,864 in expenses through
December 31, 2012. For the years ended December 31, 2012 and 2011 we incurred
$19,754 and $2,893, respectively, in general and administrative expenses and
$217 and $0 in interest expense, respectively.
The following table provides selected financial data about our company for the
years ended December 31, 2012 and 2011.
Balance Sheet Data: 12/31/12 12/31/11
------------------- -------- --------
Cash $ 7,407 $ 13,765
Total assets $ 8,353 $ 18,107
Total liabilities $ 10,217 $ 0
Shareholders' equity (deficit) $ (1,864) $ 18,107
9
Cash provided by financing activities since inception through December 31, 2012
was $20,000 from the sale of 25,000,000 shares of common stock to our officer
and director in November 2011 and $1,000 from the issuance of 1,200,000 shares
of common stock to Garden Bay International in December, 2011.
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance at December 31, 2012 was $7,407, with $10,217 in outstanding
liabilities, consisting of $217 in accrued interest payable and $10,000 in a
long-term note payable to a related party. If we experience a shortfall of cash
our director has agreed to loan us additional funds for operating expenses,
however he has no legal obligation to do so. Total expenditures over the next 12
months are expected to be approximately $20,000.
PLAN OF OPERATION
The Company has during 2012:
* 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.
The Company intends to recruit addition pool maintenance firms to market its
product. The Company feels that these firms have the best contact with
prospective buyers.
The Company has direct mailed its brochures to pool contractors in the Southern
California area and will continue to do so during the winter.
Winter is a cool season in Southern California and many persons use there pools
by using heaters or solar devices. 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 during the Summer of 2013, but no assurance can
be given.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
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. This is
because we have not generated revenues and no revenues are anticipated until we
begin selling our solar pool heating systems. There is no assurance we will ever
reach that point.
10
ITEM 8. FINANCIAL STATEMENTS
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, 2012 and 2011, the related statements of
operations, changes in shareholders' equity and cash flows for the year ended
December 31, 2012 and the period from October 28, 2011 (inception) to December
31, 2012 and 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, 2012 and 2011, and the result of its operations and its cash flows for the
year ended December 31, 2012 and the period from October 28, 2011 (inception) to
December 31, 2012 and 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 7 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 8, 2013
San Diego, CA. 92111
11
FreeFlow, Inc.
(A Development Stage Company)
Balance Sheets
--------------------------------------------------------------------------------
As of As of
December 31, December 31,
2012 2011
-------- --------
ASSETS
CURRENT ASSETS
Cash $ 7,407 $ 13,765
-------- --------
TOTAL CURRENT ASSETS 7,407 13,765
FIXED ASSETS
Equipment, net 946 --
TOTAL FIXED ASSETS 946 --
-------- --------
OTHER ASSETS
Intangible Assets, net -- 4,342
-------- --------
TOTAL OTHER ASSETS -- 4,342
-------- --------
TOTAL ASSETS $ 8,353 $ 18,107
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ -- $ --
-------- --------
TOTAL CURRENT LIABILITIES -- --
LONG-TERM LIABILITIES
Accrued interest payable 217 --
Notes payable 10,000 --
-------- --------
TOTAL LONG-TERM LIABILITIES 10,217 --
TOTAL LIABILITIES 10,217 --
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock ($0.0001 par value, 20,000,000 shares
authorized; zero shares issued and outstanding
as of December 31, 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 December 31, 2012 and December 31, 2011 2,620 2,620
Additional paid-in capital 18,380 18,380
Deficit accumulated during development stage (22,864) (2,893)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (1,864) 18,107
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 8,353 $ 18,107
======== ========
The accompanying notes are an integral part of these financial statements
12
FreeFlow, Inc.
(A Development Stage Company)
Statements of Operations
--------------------------------------------------------------------------------
October 28, 2011 October 28, 2011
(inception) (inception)
Year Ended through through
December 31, December 31, December 31,
2012 2011 2012
------------ ------------ ------------
REVENUES
Revenues $ -- $ -- $ --
------------ ------------ ------------
TOTAL REVENUES -- -- --
GENERAL & Administrative Expenses
Administrative expenses 6,167 1,235 7,402
Professional fees 9,050 1,000 10,050
Depreciation Expense 195 -- 195
Amortization Expense 4,342 658 5,000
------------ ------------ ------------
TOTAL GENERAL & ADMINISTRATIVE EXPENSES 19,754 2,893 22,647
------------ ------------ ------------
LOSS FROM OPERATION (19,754) (2,893) (22,647)
------------ ------------ ------------
OTHER EXPENSE
Interest expense 217 -- 217
------------ ------------ ------------
TOTAL OTHER EXPENSES 217 -- 217
------------ ------------ ------------
NET INCOME (LOSS) $ (19,971) $ (2,893) $ (22,864)
============ ============ ============
BASIC EARNINGS PER SHARE $ (0.00) $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 26,200,000 21,396,926
============ ============
The accompanying notes are an integral part of these financial statements
13
FreeFlow, Inc.
(A Development Stage Company)
Statement of changes in Shareholders' Equity (Deficit)
From October 28, 2011 (Inception) through December 31, 2012
--------------------------------------------------------------------------------
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
=========== ======= ======== ======== ========
Loss for the year ended
December 31, 2012 (19,971) (19,971)
----------- ------- -------- -------- --------
BALANCE, DECEMBER 31, 2012 26,200,000 $ 2,620 $ 18,380 $(22,864) $ (1,864)
=========== ======= ======== ======== ========
The accompanying notes are an integral part of these financial statements
14
FreeFlow, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Audited)
--------------------------------------------------------------------------------
October 28, 2011 October 28, 2011
(inception) (inception)
Year Ended through through
December 31, December 31, December 31,
2012 2011 2012
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(19,971) $ (2,893) $(22,864)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization expense 4,342 658 5,000
Depreciation expense 195 -- 195
Changes in operating assets and liabilities:
Increase (Decrease) in accounts payable and accrued liabilities -- -- --
Increase in accrued interest 217 -- 217
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (15,217) (2,235) (17,452)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment (1,141) -- (1,141)
Acquisition of Intangible Assets -- (5,000) (5,000)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,141) (5,000) (6,141)
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 21,000
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 10,000 21,000 31,000
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (6,358) 13,765 7,407
CASH AT BEGINNING OF PERIOD 13,765 -- --
-------- -------- --------
CASH AT END OF PERIOD $ 7,407 $ 13,765 $ 7,407
======== ======== ========
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
15
FreeFlow, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 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.
16
FreeFlow, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 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:
* 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.
17
FreeFlow, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2012
--------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
* 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.
18
FreeFlow, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 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.
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.
19
FreeFlow, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2012
--------------------------------------------------------------------------------
NOTE 3 - INTANGIBLE ASSETS
The Company 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, 2012 is $0.
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, 2012 the Company had a net operating
loss carry-forward of approximately $22,864. 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, December 31,
2012 2011
-------- --------
Net loss before income taxes per
financial statements $ 22,864 $ 2,893
Income tax rate 34% 34%
Income tax recovery (7,774) (984)
Permanent differences -- --
Temporary differences -- --
Valuation allowance change 7,774 984
-------- --------
Provision for income taxes $ -- $ --
======== ========
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
20
FreeFlow, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2012
--------------------------------------------------------------------------------
NOTE 4 - PROVISION FOR INCOME TAXES- CONTINUED
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, 2012 and December 31, 2011 are
as follows:
December 31, December 31,
2012 2011
-------- --------
Net operating loss carryforward $ 7,774 $ 984
Valuation allowance (7,774) (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
------------------------------
December 31, December 31,
2012 2011
-------- --------
Equipment $ 1,141 $ --
-------- -------
Total Fixed Assets 1,141 --
Less: Accumulated Depreciation (195) --
-------- -------
Net Fixed Assets $ 946 $ --
======== =======
Depreciation expenses for the periods ended December 31, 2012 and December 31,
2011 were $195 and $0
21
FreeFlow, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 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
$22,864 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 December 31, 2012 the
amount due to S Douglas Henderson was $10,000
On June 16, 2012, the Company received a $10,000 loan. This loan is at 4%
interest with principle and interest all due on June 16, 2014. As of December
31, 2012, accrued interest is $217.
22
FreeFlow, Inc.
(A Development Stage Company)
Notes to Financial Statements
December 31, 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 December 31, 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 December 31, 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.
23
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and the principal financial officer (our
president), we have conducted an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the
end of the period covered by this report. Based on this evaluation, our
principal executive officer and principal financial officer concluded as of the
evaluation date that our disclosure controls and procedures were effective such
that the material information required to be included in our Securities and
Exchange Commission reports is accumulated and communicated to our management,
including our principal executive and financial officer, recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms relating to our company, particularly during
the period when this report was being prepared.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act, for the Company.
Internal control over financial reporting includes those policies and procedures
that: (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of its management and directors; and (3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness
of any system of internal control, and accordingly, even effective internal
control can provide only reasonable assurance with respect to financial
statement preparation and may not prevent or detect material misstatements. In
addition, effective internal control at a point in time may become ineffective
in future periods because of changes in conditions or due to deterioration in
the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant
deficiencies, that results in there being a more than remote likelihood that a
material misstatement of the annual or interim financial statements will not be
prevented or detected.
Under the supervision and with the participation of our president, management
conducted an evaluation of the effectiveness of our internal control over
financial reporting, as of December 31, 2012, based on the framework set forth
in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on our evaluation under
this framework, management concluded that our internal control over financial
reporting was not effective as of the evaluation date due to the factors stated
below.
24
Management assessed the effectiveness of the Company's internal control over
financial reporting as of evaluation date and identified the following material
weaknesses:
INSUFFICIENT RESOURCES: We have an inadequate number of personnel with requisite
expertise in the key functional areas of finance and accounting.
INADEQUATE SEGREGATION OF DUTIES: We have an inadequate number of personnel to
properly implement control procedures.
LACK OF AUDIT COMMITTEE & OUTSIDE DIRECTORS ON THE COMPANY'S BOARD OF DIRECTORS:
We do not have a functioning audit committee or outside directors on our board
of directors, resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures.
Management is committed to improving its internal controls and will (1) continue
to use third party specialists to address shortfalls in staffing and to assist
the Company with accounting and finance responsibilities, (2) increase the
frequency of independent reconciliations of significant accounts which will
mitigate the lack of segregation of duties until there are sufficient personnel
and (3) may consider appointing outside directors and audit committee members in
the future.
Management, including our president, has discussed the material weakness noted
above with our independent registered public accounting firm. Due to the nature
of this material weakness, there is a more than remote likelihood that
misstatements which could be material to the annual or interim financial
statements could occur that would not be prevented or detected.
This annual report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management's report in this annual report.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting that
occurred during the last fiscal quarter for our fiscal year ended December 31,
2012 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
25
PART III
ITEM 10. DIRECTOR AND EXECUTIVE OFFICER
The Executive Officer and Director of the Company is 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
advertising 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 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.
CODE OF ETHICS
We do not currently have a code of ethics, because we have only limited business
operations and only one officer and director, we believe a code of ethics would
have limited utility. We intend to adopt such a code of ethics as our business
operations expand and we have more directors, officers and employees.
ITEM 11. 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.
26
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
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
27
There are no current employment agreements between the company and its officer
and director.
On November 1, 2011 a total of 25,000,000shares 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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of
shares of our common stock owned beneficially as of the date of this prospectus
by: (i) each person (including any group) known to us to own more than five
percent (5%) of any class of our voting securities, (ii) our director, and or
(iii) our officer. Unless otherwise indicated, the stockholder listed possesses
sole voting and investment power with respect to the shares shown.
Amount and Nature Percentage of
Name and Address of Beneficial Common
Title of Class of Beneficial Owner Ownership Stock (1)
-------------- ------------------- --------- ---------
Common Stock S Douglas Henderson, Director 25,000,000 95.4%
9130 Edgewood Dr. Direct
La Mesa, CA 91941
Common Stock Officer and/or director as a Group 25,000,000 95.4%
HOLDERS OF MORE THAN 5% OF OUR COMMON STOCK
----------
(1) A beneficial owner of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship,
or otherwise has or shares: (i) voting power, which includes the power to
vote, or to direct the voting of shares; and (ii) investment power, which
includes the power to dispose or direct the disposition of shares. Certain
shares may be deemed to be beneficially owned by more than one person (if,
for example, persons share the power to vote or the power to dispose of the
shares). In addition, shares are deemed to be beneficially owned by a
person if the person has the right to acquire the shares (for example, upon
exercise of an option) within 60 days of the date as of which the
information is provided. In computing the percentage ownership of any
person, the amount of shares outstanding is deemed to include the amount of
shares beneficially owned by such person (and only such person) by reason
28
of these acquisition rights. As a result, the percentage of outstanding
shares of any person as shown in this table does not necessarily reflect
the person's actual ownership or voting power with respect to the number of
shares of common stock actually outstanding as of the date of this
prospectus. As of the date of this report, there were 26,200,000 shares of
our common stock issued and outstanding.
A total of 25,000,000 shares have been issued to our sole officer/director and
are restricted securities, as that term is defined in Rule 144 of the Rules and
Regulations of the SEC promulgated under the Act. Under Rule 144, such shares
can be publicly sold, subject to volume restrictions and certain restrictions on
the manner of sale, commencing six months after their acquisition.
Rule 144(i)(1) states that the Rule 144 safe harbor is not available for the
resale of securities "initially issued" by a shell company (other than a
business combination related shell company) or an issuer that has "at any time
previously" been a shell company (other than a business combination related
shell company). Consequently, the Rule 144 safe harbor is not available for the
resale of such securities unless and until all of the conditions in Rule
144(i)(2) are satisfied at the time of the proposed sale.
Any sale of shares held by Mr. Henderson (after applicable restrictions expire)
and/or the sale of shares purchased in this offering (which would be immediately
resalable after the offering), may have a depressive effect on the price of our
common stock in any market that may develop, of which there can be no assurance.
Our principal shareholder does not have any plans to sell his shares at any time
after this offering is complete.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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.
We do not currently have any conflicts of interest by or among our current
officer, director, key employee or advisors. We have not yet formulated a policy
for handling conflicts of interest; however, we intend to do so upon completion
of this offering and, in any event, prior to hiring any additional employees.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The total fees charged to the Company for audit services, including quarterly
reviews, were $7,600 for audit-related services were $Nil, for tax services were
$Nil and for other services were $Nil during the year ended December 31, 2012.
The total fees charged to the Company for audit services, including quarterly
reviews, were $Nil for audit-related services were $Nil, for tax services were
$Nil and for other services were $Nil during the year ended December 31, 2011.
29
PART IV
ITEM 15. EXHIBITS
The following exhibits are included with this filing:
Exhibit
Number Description
------ -----------
3(i) Articles of Incorporation*
3(ii) Bylaws*
31.1 Sec. 302 Certification of CEO
31.2 Sec. 302 Certification of CFO
32.1 Sec. 906 Certification of CEO
32.2 Sec. 906 Certification of CFO
101 Interactive data files pursuant to Rule 405 of Regulation S-T
----------
* Included in our S-1 filing under Commission File Number 000-54868.
SIGNATURES
Pursuant to the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
December 4, 2013 FreeFlow, Inc., Registrant
By: /s/ S Douglas Henderson
-----------------------------------------------
S Douglas Henderson, President, Chief Executive
Officer, Principal Accounting Officer, and
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
December 4, 2013 FreeFlow, Inc., Registrant
By: /s/ S Douglas Henderson
-----------------------------------------------
S Douglas Henderson, President, Chief Executive
Officer, Principal Accounting Officer, and
Chief Financial Officer
30