FFLO.OQBFree Flow Usa, INC
10-Q: Free Flow USA Inc. Reports Q3 2024 Results, Sees Significant Net Income Increase Due to Asset Sale
Sentiment:
Quarterly Report
Free Flow USA Inc. reports a significant increase in net income for the nine months ended September 30, 2024, primarily due to a gain on the sale of fixed assets.
Capital raiseThe company issued 4,073,100 common shares during the nine months ended September 30, 2024.The company completed a Private Placement Memorandum (PPM) to raise $19.5 million, though the PPM was withdrawn, the allocation of 15 million Series D shares is still valid.The company accepted a subscription agreement against issuance of 1,000,000 shares for a sum of $200,000.The company accepted a subscription agreement against issuance of 3,073,100 restricted shares for a sum of $307.
Better than expectedThe company's net income of $731,155 for the nine months ended September 30, 2024, is a significant improvement compared to the net loss of $71,066 for the same period in 2023.The company's gross profit of $2,339 for the nine months ended September 30, 2024, is a significant improvement compared to the gross loss of $11,539 for the same period in 2023.The company's revenue increased to $6,123 for the nine months ended September 30, 2024, compared to $4,032 for the same period in 2023.
Summary
- Free Flow USA Inc. reported a net income of $731,155 for the nine months ended September 30, 2024, a significant turnaround from a net loss of $71,066 for the same period in 2023.
- The company's revenue increased to $6,123 for the nine months ended September 30, 2024, compared to $4,032 for the same period in 2023.
- The cost of goods sold decreased to $3,785 for the nine months ended September 30, 2024, compared to $15,571 for the same period in 2023.
- The company's gross profit was $2,339 for the nine months ended September 30, 2024, compared to a gross loss of $11,539 for the same period in 2023.
- Operational expenses increased to $428,941 for the nine months ended September 30, 2024, compared to $93,821 for the same period in 2023, primarily due to increased professional and financial expenses.
- A gain of $1,199,622 was recognized from the sale of fixed assets, contributing significantly to the net income.
- The company wrote off $81,527 in uncollectible receivables and payables.
- As of September 30, 2024, the company had total current assets of $381,121, including $34,289 in cash, $6,680 in trade receivables, $32,730 in a refund due from the IRS, and $300,000 in notes receivable.
- The company's total liabilities were $729,733, and total stockholders' equity was a deficit of $1,149,547.
- The company issued 4,073,100 common shares during the nine months ended September 30, 2024.
Sentiment
Score: 6
Explanation: The document shows a significant improvement in net income due to a one-off asset sale, but the company still faces challenges with operational expenses, negative equity, and weak internal controls. The future outlook is uncertain, but the company is actively pursuing new business opportunities.
Positives
- The company achieved a significant net income of $731,155 for the nine months ended September 30, 2024, a major turnaround from the previous year's loss.
- Revenue increased to $6,123 for the nine months ended September 30, 2024, compared to $4,032 for the same period in 2023.
- The cost of goods sold decreased significantly, leading to a gross profit of $2,339 compared to a gross loss of $11,539 in the same period of 2023.
- The sale of fixed assets resulted in a substantial gain of $1,199,622.
- The company has $300,000 in notes receivable.
Negatives
- Operational expenses increased significantly to $428,941 for the nine months ended September 30, 2024, compared to $93,821 for the same period in 2023.
- The company has a negative stockholders' equity of $1,149,547.
- The company wrote off $81,527 in uncollectible receivables and payables.
- The company's cash balance is low at $34,289.
Risks
- The company's current cash reserves are marginally sufficient to meet operating expenses.
- The company has a significant accumulated deficit of $1,872,349.
- The company's internal controls over financial reporting are not fully developed, which could lead to errors in financial reporting.
- The company does not have any accounting staff due to limited financial resources.
- The company's ability to continue as a going concern is dependent on its ability to generate sufficient revenue and manage its expenses.
Future Outlook
The company plans to continue trading in auto parts and may pursue setting up its own scrap metal processing facility. The company also plans to strengthen its internal controls and recruit accounting staff.
Management Comments
- Management believes the company will continue as a going concern and recover expenses through trading activities.
- The credit committee reviewed and wrote off uncollectible trade receivables and payables.
- Management is committed to strengthening internal controls effectively in the coming months.
Industry Context
The company's shift from green energy to auto parts and scrap metal reflects a strategic pivot in response to market volatility. The company is now operating in the OEM recycled auto parts sector.
Comparison to Industry Standards
- It is difficult to compare Free Flow USA Inc. to industry standards due to its unique business model and small scale of operations.
- The company's financial performance is highly dependent on the sale of assets and the success of its trading activities.
- The company's lack of accounting staff and weak internal controls are not in line with industry best practices for public companies.
- The company's negative equity position is a significant concern compared to industry benchmarks.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Board of Directors Member | Ravinder Tikoo M.D. | 2024-08-26 | Addition to the Board of Directors | |
| Chairman of the Company | Ravinder Tikoo M.D. | 2024-08-26 | Appointment as Chairman |
Related Party Transactions
- As of December 31, 2023, the Company had a note payable in the amount of $9,988 to Redfield Holdings, Ltd., a related party, which was paid in September 2024.
- All preferred shares were issued to Redfield Holdings, Ltd., which is 100% owned by Mr. Sabir Saleem, the CEO of the company, and later transferred to Mr. Sabir Saleem.
Stakeholder Impact
- Shareholders may be encouraged by the improved net income, but should be aware of the company's negative equity and operational challenges.
- Employees may be impacted by the company's limited financial resources and plans to recruit accounting staff.
- Customers and suppliers may be affected by the company's shift in business focus and potential changes in operations.
- Creditors should be aware of the company's high liabilities and negative equity.
Next Steps
- The company plans to continue trading in auto parts.
- The company may pursue setting up its own scrap metal processing facility.
- The company plans to strengthen its internal controls.
- The company plans to recruit accounting staff.
Key Dates
| Date | Description |
|---|---|
| 2011-10-28 | Free Flow USA, Inc. was incorporated. |
| 2015-02-01 | Promedaff, Inc. was incorporated. |
| 2015-03-30 | Shareholders meeting designated 500,000 shares as Series B preferred shares. |
| 2016-02-04 | JK Sales, Corp. (later Accurate Auto Parts, Inc.) was incorporated. |
| 2017-01-04 | City Autos, Corp. was incorporated. |
| 2017-09-30 | Total preferred shares issued and outstanding are 10,000 Series A and 330,000 Series B. |
| 2018-04-17 | Accurate Investments, Inc. was incorporated. |
| 2019-04-02 | Company accepted $14,490 for 21,000 restricted common shares. |
| 2020-08-05 | Company filed an amendment to the Capital Stock. |
| 2020-08-17 | Company completed its Private Placement Memorandum (PPM) to raise $19.5 million. |
| 2022-06-20 | 1,379,100 restricted common shares were cancelled. |
| 2023-04-27 | Company accepted $10,000 for 35,000 restricted common shares. |
| 2023-05-11 | Company accepted $1,000 for 1,000,000 restricted common shares. |
| 2023-12-30 | Company accepted $10,000 for 50,000 restricted common shares. |
| 2024-03-31 | Accurate Auto Sales, Inc. sold its facility. |
| 2024-04-01 | The company's 2023 Form 10-K was filed with the SEC. |
| 2024-07-29 | Company accepted a subscription agreement for 1,000,000 shares for $200,000. |
| 2024-08-26 | Ravinder Tikoo M.D. was added to the Board of Directors and appointed as Chairman. |
| 2024-09-28 | Preferred shares transferred from Redfield Holdings, Ltd. to Sabir Saleem; Company accepted a subscription agreement for 3,073,100 restricted shares for $307. |
| 2024-09-30 | End of the reporting period for the Q3 2024 results. |
| 2024-10-09 | Date the financial statements were prepared and the number of shares outstanding was 30,000,000. |
Keywords
financial results, net income, revenue, asset sale, stock issuance, going concern, auto parts, scrap metal, financial statements, quarterly report
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