The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Form 10-Q.
Fearless Films, Inc. ("Fearless Films" or the "company") was organized as MYG
Corp. under the laws of the State of Nevada on July 6, 2000 and underwent name
changes to BisAssist, Inc. on December 21, 2000 and to Cody Ventures Corporation
on October 11, 2004. On April 7, 2011, the company changed its name to Paw4mance
Pet Products International, Inc. to reflect the business of distributing natural
based pet foods and treats. On September 26, 2014, we changed our name to
Fearless Films, Inc. in anticipation of the acquisition of Fearless Films
(Canada). On November 14, 2014, the company completed the acquisition of
Fearless Films (Canada), which became a wholly-owned subsidiary of the company.
The intent of the acquisition was to engage in the business of providing
professional services for short film and full-length feature film productions
and related services.
Our subsidiary, Fearless Films (Canada), is an independent full service
production company and has been positioning itself to ultimately produces top
quality entertainment. We intend to specialize in short film and feature film
production in addition to script writing, copywriting, fulfillment and
distribution. Because of a lack of adequate funding, we have not realized
revenues since our acquisition, but management believes we are in a position to
become fully operational with the infusion of new capital. We currently do not
have definite plans for securing adequate funding, but are working diligently to
be able to fund our operations. Since inception and prior to our acquisition,
Fearless Films (Canada) has produced more than ten films and also a pilot for a
series, The My Ciccio Show.
Our independent auditors have expressed a going concern modification to their
report to our financial statements. To date we have incurred substantial losses
and will require financing for working capital to meet future obligations. We
anticipate needing additional financing on an ongoing basis for the foreseeable
future unless our operations provide adequate funds, of which there can be no
assurance. We most likely will satisfy future financial needs through the sale
of equity securities, although we could possibly consider debt securities or
promissory notes. We believe the most probable source of funds will be from
existing stockholders and/or management, although there are no formal agreements
to do so. If we are unable to sustain a public trading market for our shares, it
will be more difficult to raise funds though the sale of common stock. We cannot
assure you that we will be able to obtain adequate financing, achieve
profitability, or to continue as a going concern in the future.
Results of Operations
For the three months ended March 31, 2020 compared to the three months ended
March 31, 2019.
We did not realize revenues from operations during the three months ended March
31, 2020 and March 31, 2019. We have been working towards developing our
business as a provider of video production services to professional video
production companies. However, we have not had sufficient capital to begin full
activities or to complete projects that have been initiated. We are hopeful that
with the restructuring of our debt we will be able to attract new financing that
will enable us to complete our existing projects and develop our marketing.
During the three months ended March 31, 2020, total operating expenses were
$388,056 compared to $54,281 in the same period in 2019. Operating expenses are
reported in three categories. General and
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administrative expenses were $1,408 in the three months ended March 31, 2020
compared to $3,594 in the same period one year earlier. Consulting fees were
$300,000 in the three months ended March 31, 2020 compared to nil in the three
months ended March 31, 2019. The increase was due to a services consulting
contract that was signed in Q4 of 2019. Management fees were to $39,348 during
the three months ended March 31, 2020 versus $39,516 in the three months of
ended March 31, 2019, essentially unchanged. Professional fees during the three
months ended March 31, 2020 were $47,300, compared to $11,171 in the three
months ended March 31, 2019. Stock based compensation was nil for the three
months ended March 31, 2020 compared to nil in the same period one year earlier.
During the three months ended March 31,2020 we recorded an Interest expense of
$5,736, compared to an interest expense of $1,450 in the three months ended
March 31, 2019. The interest expense reflects the fact that implied interest at
the rate of 5% per annum has been accrued on all loans outstanding as of March
31, 2020. During the three months ended March 31, 2020, we recorded a gain on
Exchange of $1,117 compared to a gain of $22,835 in the same three-month period
in 2019. The gains are the result of translations as the functional currency of
the parent Company is United States dollar and the functional currency of the
subsidiary is Canadian dollar. During the three months ended March 31, 2020 we
recorded a debt discount expense of $5,055 to reflect the terms of the Equity
Line financing entered into during the fourth quarter of 2019.
As a result of the above, we reported a net loss of $397,730 for the three
months ended March 31, 2020 compared to a net loss of $32,896 for the same
period in 2019. We recorded a foreign currency translation adjustment gain of
$4,676 for the three months ended March 31,2020 compared to a foreign currency
translation loss of $23,310 for the three months ended March 31, 2019. Because
the functional currency of our parent, Fearless Films, is United States dollars
and the functional currency of our subsidiary, Fearless Films (Canada), is
Canadian dollars, an adjustment is necessary. Thus, after the foreign currency
translation adjustment, our comprehensive loss for the three months ended March
31, 2020 was $393,054 ($0.00 per share), compared to a comprehensive loss for
the same three months of 2019 of $56,206 ($0.00 per share). Comprehensive income
and loss per share calculations are diluted and made giving effect to the share
amounts of common stock to be issued.
Liquidity and Capital Resources
At March 31, 2020, we had total assets of $6,530, consisting of $2,197 in cash
and prepaid expenses of $4,333. At December 31, 2019, we had total assets of
$3,779, comprised of $2,779 in cash and $1,000 in prepaid expenses. The decrease
in cash during the first three months of 2020 is due to the difference between
cash received from loans and payments made against current liabilities. The
increase in prepaid expenses during the first three months of 2020 is attributed
to amortization of the prepaid OTCQB annual fees. Total current liabilities at
March 31, 2020 were $1,217,852, compared to $822,047 at December 31. 2019.
Included in current liabilities are accounts payable that increased from
$417,199 at December 31, 2019 to $780,485 at March 31, 2020, and loans payable
that increased from $339,248 at December 31, 2019 to $365,222 at March 31, 2020.
The increase in accounts payable was due to accruals for services that were
rendered, but not paid in cash. The increase in loans payable during the first
three months of 2020 was attributed to the company entering into loan agreements
with third parties raising total gross proceeds of $28,000 during the period.
Additionally, accrued liabilities increased from $24,045 at December 31, 2019 to
$25,135 at March 31, 2020 as cash raised from new loans was used to pay down
accrued liabilities.
At March 31, 2020 we had a working capital deficit of $1,211,322 compared to a
working capital deficit of $818,268 December 31, 2019. The company has incurred
recurring losses from operations and as at March
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31, 2020 and December 31, 2019 had an accumulated deficit of $4,507,206 and
$4,109,476, respectively. We continue to seek additional funding, most likely
through the sale of securities or securing additional debt, although currently
we have no definite agreement of arrangement for additional funding.
Plan of Operation
We are a television and movie production company providing production services
to film producers and others. Over the next 12 to 24 months, we have plans to
undertake production of a full-length feature film under our own name, based on
a script that we will select.
During the next 12 months we intend to concentrate our efforts in two areas; (i)
administration, and (ii) film development. Administrative costs will include the
expense of maintaining our public company status, including legal and accounting
fees, as well expenses for maintaining our principal place of business and other
operating facilities, for salaries and compensation for key personnel. We
estimate these costs to be approximately $275,000, of which $100,000 will be
costs for reporting and compliance with public company obligations. Our film
development budget is expected to be between $3.0 million and $5.0 million.
Typical film budgets break down along the lines of; (i) 10% for writing, (ii)
20% for the cast, (iii) 50% for production, (iv) 15% for post-production, and
(v) 5% for other costs.
We anticipate that our first planned production will be based on the following
time and cost estimates: (i) Script development - approximately three months at
a cost of $75,000; (ii) Storyboarding - approximately two months for a cost of
$10,000; (iii) Pre-production, including sourcing equipment and talent
- approximately two months and $1.0 million; Production - approximately three
months and $2.0 million; and (v) Post-production - approximately four months and
$2.0 million.
At this time management is not able to predict when it will identify our first
project and precisely how financing will be secured. Management continues to
explore and investigate potential projects and a final decision will be based on
the perceived potential merit of the project and the feasibility of securing
necessary funding.
Management anticipates that it will be able to use its network of contacts and
industry relationships as a potentials sales team. As future revenue increases,
we plan to hire a sales team, but currently there are no agreements or
arrangements in place for the sales team.
We expect that financing to fund our future plans will come from private
issuances of our securities, debt and/or equity. There can be no assurances that
the company will be able to raise the necessary funds when needed.
Impact of COVID-19
The occurrence of the COVID-19 pandemic may negatively affect our business,
financial condition and results of operations.
We are in the early stages of developing our business plan of building a
revenue-producing film service business and becoming an independent producer of
television and movie content. Because our business is customer-driven, our
revenue requirements will be reviewed and adjusted based on future revenues.
Expenses associated with operating as a public company are included in
management's budget. The occurrence of an uncontrollable event such as the
COVID-19 pandemic is likely to negatively affect our operations. A
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pandemic such as COVID-19 can result in social distancing, travel bans and
quarantines, which can lead to limited access to customers, management, support
staff, consultants and professional advisors. These, in turn, will not only
impact our operations, financial condition and demand for our services and
products, but our overall ability to react timely to mitigate the impact of the
event. It may also substantially hamper our efforts to provide investors with
timely information and our ability to comply with filing obligations with the
SEC.
Forward-Looking and Cautionary Statements
This report contains forward-looking statements relating to future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may," "will" "should," "expect," "intend,"
"plan," anticipate," "believe," "estimate," "predict," "potential," "continue,"
or similar terms, variations of such terms or the negative of such terms. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors. Although forward-looking statement, and any
assumptions upon which they are based, are made in good faith and reflect our
current judgment, actual results could differ materially from those anticipated
in such statements. Except as required by applicable law, including the
securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results. We
believe the expectations reflected in these forward-looking statements are
reasonable, however such expectations cannot guarantee future results, levels of
activity, performance or achievements.
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