FREE FLOW, INC.
Statement of Changes in Shareholders' (Deficit)
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COMMON STOCK
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PREFERRED STOCK
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ADDITIONAL
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SHARES
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AMOUNT
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SHARES
Series -A
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AMOUNT
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PAID-IN
CAPITAL
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ACCUMULATED
DEFICIT
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TOTAL
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Balance, January 1, 2019
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26,200,000
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2,620
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10,000
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1
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114,545
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(437,245
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(457,212
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)
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Profit for the year ended December 31, 2019
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21,000
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21
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14,469
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(121,909
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19,967
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BALANCE, DECEMBER 31, 2019
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26,221,000
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264
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10,000
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1
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129,014
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(559,154
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(437,245
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FREE FLOW, INC. & SUBSIDIARY ACCURATE AUTO PARTS, INC.
Statements of Cash Flow
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Year
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Year
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Ended
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Ended
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December 31,
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December 31,
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2019
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2018
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CASH FLOW FROM OPERATING ACTIVITIES
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$
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(121,909
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$
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19,967
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Depreciation allowance
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38,573
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(Increase) in Other Assets
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$
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59,473
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(35,000
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(Increase) in Trades Payable
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$
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4,219
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(Increase) Advance for Inventory Purchases
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18,963
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(18,963
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(Increase) Trade Receivables
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(104,868
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(6,240
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(Increase) Decrease in Inventory
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(205,328
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(393,389
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NET CASH USED IN OPERATING ACTIVITIES
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$
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(349,450
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$
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(395,052
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CASH FLOW FROM FINANCING ACTIVITIES
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Proceeds from notes payable - related parties
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9,963
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294,898
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Proceeds from Line of Credit
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311,012
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Proceeds form Pay Pal Advance
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10,857
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Proceeds form Loan from River Valley Bank
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(10,760
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)
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900,100
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Proceeds from Subscription Money
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16,487
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Rounding off the decimals - error
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2
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(Increase) in Fixed Assets - Land, Building
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(772,513
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Proceeds from Accounts Payable - trade (Decrease in Accounts Payable)
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(13,672
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
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337,561
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408,813
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NET INCREASE (DECREASE) IN CASH
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(11,889
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13,761
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CASH AT BEGINNING PERIOD
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19,115
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5,354
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CASH AT END PERIOD
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$
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7,226
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$
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19,115
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FREE FLOW, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2019
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Free Flow, Inc. (the "Company") was incorporated on October 28, 2011 under the laws of State of Delaware to enter the green energy industry. It began with the idea of developing swimming pool solar pump system. The solar energy business became very volatile due to constant decline in prices of solar panels. The Company could not conclude any business in the solar energy sector. In February 2016 the Company formed a subsidiary namely JK Sales, Corp. (name changed to “Accurate Auto Sales, Inc.”) and began the business of selling used auto parts.
Accurate Auto Sales, Inc., at a 19+ acre facility that it now owns, in King George, VA, buys end of life and wrecked automobiles from Insurance Auctions and disassembles the same to parts. After the dis-assembly these parts are labelled and stored at its warehouse, the inventory is uploaded and sold through a very sophisticated internet network. The primary customers are auto body and mechanic shops.
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 net of depreciation. Equipment and fixtures are being depreciated using the straight-line method over the estimated asset lives, 5 years.
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.
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 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:
o 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.
o 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.
o 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, accounts payable and notes payable 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.
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.
NOTE 3 - 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, 2019 the Company had a net operating loss carry-forward of approximately $559,606. Net operating loss carry-forward, expires twenty years from the date the loss was incurred.
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December 31,
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December 31,
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2019
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2018
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Net operating loss Carry Forward
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$
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559,606
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$
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437,796
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Valuation allowance
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$
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(559,606
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)
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$
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(437,796
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)
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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:
Free Flow, Inc.
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Tax Calculations
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December 31,
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December 31,
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2019
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2018
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Net (profit) loss before taxes per financial statement
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$
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(121,810
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)
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$
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19,967
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Income tax rate
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34
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%
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34
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%
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Income tax benefit
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(41,415
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)
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(6,789
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)
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Valuation allowance change
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41,415
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(17,406
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)
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Provision for income tax
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0
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0
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The December 31, 2017 was reported as $82,853 and had been reduced to $81,183 as depreciation was not provided for in the previous year which has now been provided by adjustment to the appropriate account.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred income taxes arise from temporary differences in the recognition of income and expenses for financial reporting and tax purposes. The significant components of deferred income tax assets and liabilities at December 31, 2019 and December 31, 2018 are as follows:
Net deferred income tax asset - - The Company has recognized a valuation allowance for the deferred income tax asset since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years. The valuation allowance is reviewed annually. When circumstances change, and which cause a change in management's judgment about the realizability of deferred income tax assets, the impact of the change on the valuation allowance is generally reflected in current income.
NOTE 4 - PROPERTY AND EQUIPEMENT
Property and equipment consists of the following:
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As of
December 31,
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2019
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2018
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Property, Land and Building at cost
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$
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776,704
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$
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772,412
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Trucks at cost
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3,500
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3,500
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Equipment at cost
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35,000
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35,000
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Total Fixed Assets
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$
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815,204
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$
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810,912
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Less: Accumulated Depreciation
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(104,157
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)
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(40,393
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)
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$
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711,047
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$
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770,519
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Depreciation expenses for the periods ended December 31, 2019 and December 31, 2018 were $59,473 and $38,573 respectively
NOTE 5 - INVENTORY
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As of
December 31
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2019
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2018
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Auto Parts (used)
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$
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776,588
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$
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571,260
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$
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776,588
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$
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571,260
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The increase in the inventory was a result of financing secured from Incredible Bank (f/k/a River Valley Bank), and would significantly support increase of sales.
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 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 has been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses of $559,705 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 uncertainties.
NOTE 8 - RELATED PARTY TRANSACTIONS
Sabir Saleem, the 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
REDFIELD HOLDINGS, LTD, MAIN SHAREHOLDER
During the year 2018, the Company received additional loans totaling $294,518.09 from Redfield Holdings, Ltd and the Company paid $0 of the loan balance. and the total amount owed by the Company to Redfield Holdings, Ltd. Thus on December 31, 2018 was $470,935. By mutual consent, this loan amount was converted to preferred shares – Series –C and classified as mezzanine capital for Accurate Auto Parts, Inc. The qualifications are as under:
a) Each share to carry one vote.
b) Each share will be redeemable upon repayment of Loan(s) made by River Valley Bank to Accurate Auto Parts, Inc.
c) Each share will be junior to any debt incurred by the Company.
d) The redemption value will be the par value at which such "preferred shares - series C" are bought by the subscriber.
e) Each share will carry a dividend right at par with the common shares.
The Company issued 9,700 shares to Redfield Holdings, Ltd. against a subscription for $58,000 which was accepted by the Company and shares there against issued to Redfield Holdings, Ltd.
NOTE 10 - CAPITAL STOCK
The Company's capitalization is 100,000,000 common shares with a par value of $0.0001 per share and 20,000,000 preferred stock, with a par value of $ 0.0001 per share.
Of the 20,000,000 authorized Preferred Stock, the company has designated 10,000 shares as "Preferred Shares - Series A". Each share of "Preferred Share - Series A" carries voting rights equal to ten thousand (10,000) votes. In other words, the 10,000 "Preferred Shares - Series A" collectively have a voting right equal to one hundred million (100,000,000) common shares of the Corporation.
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.
On August 1, 2014, the Company issued 300 Preferred Shares--series A to Redfield Holdings Ltd. for $1 each for a total of $300
On March 30, 2015, the Company issued 9,700 Preferred Shares – Series A to Redfield Holdings Ltd. for a total sum of $58,000.
On December 31, 2014 the Company had a Note outstanding in the principal amount of $330,000 plus interest payable to GS Pharmaceuticals, Inc. On March 31, 2015, by mutual consent this note and accrued interest was converted to 330,000 preferred shares - Series "B"
On December 31, 2018 the Company had a Note outstanding in the principal amount of $470,935; by mutual consent this note and accrued interest was converted to 470,935 preferred shares - Series C".
On April 2, 2019 the Company received a sum of $14,490 for issuance of 21,000 restricted common shares.
As of December 31, 2019, the Company had 26,221,000 shares of common stock issued and outstanding and 10,000 shares of preferred Shares – Series “A”, 330,000 Series “B” and 470,935 Series “C” issued and outstanding.