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 Inc.
(Canada). On November 14, 2014, the company completed the acquisition of
Fearless Films Inc. (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 Inc. (Canada), is an independent full-service
production company and has been positioning itself to ultimately produce 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.
During the first fiscal quarter of 2021 we made no announcements regarding
acquisitions.
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, 2021 compared to the three months ended
March 31, 2020.
We did not realize revenues from operations during the three months ended March
31, 2021 and March 31, 2020. We have been working towards developing our
business as a provider of video production services to professional video
production companies and to develop our own film projects. 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, 2021, total operating expenses were
$129,101 compared to $388,056 in the same period in 2020. Operating expenses are
reported in four categories. General and administrative expenses were $2,862 in
the three months ended March 31, 2021 compared to $1,408 in the same period one
year earlier. Consulting fees were $62,796 in the three months ended March 31,
2021 compared to $300,000 in the three months ended March 31, 2020. The decrease
was due to a services consulting contract that was signed in Q4 of 2019 being
cancelled in Q3 if 2019. Management fees were $15,028 during the three months
ended March 31, 2021 versus $39,348 in the three months of ended March 31, 202.
reflecting lower charges from directors during the period. Professional fees
during the three months
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ended March 31, 2021 were $48,415, compared to $47,300 in the three months ended
March 31, 2020, essentially unchanged.
During the three months ended March 31,2021 we recorded an interest expense of
$4,534, compared to an interest expense of $5,736 in the three months ended
March 31, 2020. 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, 2021.
During the three months ended March 31, 2021, we recorded a gain on exchange of
$33,419 compared to a gain of $1,117 in the same three-month period in 2020. The
functional currency of the parent Company is United States dollar and the
functional currency of the subsidiary is Canadian dollar. Transactions
denominated in currencies other than the functional currency are translated into
the functional currency at the exchange rates prevailing at the dates of the
transaction. Monetary assets and liabilities denominated in foreign currencies
are translated using the exchange rate prevailing at the balance sheet date.
Non-monetary assets and liabilities are translated using the historical rate on
the date of the transaction. All exchange gains or losses arising from
translation of these foreign currency transactions are included in net loss for
the year. In translating the financial statements of the Company's Canadian
subsidiary from its functional currency into the Company's reporting currency of
United States dollars, balance sheet accounts are translated using the closing
exchange rate in effect at the balance sheet date and income and expense
accounts are translated using an average exchange rate prevailing during the
reporting period. Adjustments resulting from the translation, if any, are
included in accumulated other comprehensive income (loss) in stockholders'
equity. The Company has not, to the date of these consolidated financial
statements, entered into derivative instruments to offset the impact of foreign
currency fluctuations.
On January 8, 2021, the Company entered into an agreement with a company for
consulting services and to gain access to a premier investor intelligence and
communications platform built to track shareholders' behaviors and trends and
manage investor outreach. Initial term of the agreement is one year and will
automatically renew on a month-to-month basis after the first year until either
party gives the other party written notice of non-renewal at least 30 days prior
to the expiration of the then-current term "Renewal Term". Pursuant to the
agreement, fees for the first year were $320,000 to be paid on effective date of
agreement. Additional Fees may be assessed if the Depository Trust Company
("DTC") or Non-Objecting Beneficial Owner ("NOBO") lists exceed 5,000
Stakeholders or the frequency of the imports exceeds once per calendar week for
DTC and once per calendar month for NOBO. During the three months ended March
31, 2021, $62,796 were included in consulting expenses and $257,204 was included
in prepaid expenses. On January 30, 2021, the Company issued 1,600,000 shares
of common stock with a fair value of $272,000 to settle a accounts payable
$320,000, resulting in a gain of $48,000, versus nil in the same period one year
earlier. The fair value of the common stock was determined based on the closing
price of the Company's common stock on the date of issuance.
As a result of the above, we reported a net loss of $52,216 for the three months
ended March 31, 2021 compared to a net loss of $397,730 for the same period in
2020. The reduce net loss in Q1 of 2021 is primarily attributed to the reduction
of Consulting expenses during the quarter. We recorded a foreign currency
translation adjustment loss of $34,847 for the three months ended March 31, 2021
compared to a foreign currency translation gain of $4,676 for the three months
ended March 31, 2020.
Thus, after the foreign currency translation adjustment, our comprehensive
income for the three months ended March 31, 2021 was $87,063 ($0.00 per share),
compared to a comprehensive loss for the same three months of 2020 of $393,054
($0.01 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.
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Liquidity and Capital Resources
At March 31, 2021, we had total assets of $404,265, consisting of $18,661 in
cash, prepaid expenses of $297,204 and intangible assets of $88,400. At December
31, 2020, we had total assets of $135,419, comprised of $39,036 in cash and
$7,983 in prepaid expenses. The increase in prepaid expenses is attributed to
recognition of the terms of the contract for Investor Relations that was signed
in January of 2021. Total current liabilities at March 31, 2021 were $809,710,
compared to $775,801 at December 31. 2020. Included in current liabilities are
accounts payable that are essentially unchanged from $357,971 at December 31,
2020 to $384,310 at March 31, 2021, and loans payable that remained essentially
unchanged from $367,635 at December 31, 2020 to $367,880 at March 31, 2021. The
increase in accounts payable was due to accruals for management fees that were
not paid during the quarter. Additionally, accrued liabilities increased from
$50,195 at December 31, 2020 to $57,520 at March 31, 2021 due to the increase in
accrued implied interest.
At March 31, 2021 we had a working capital deficit of $493,845 compared to a
working capital deficit of $640,382 December 31, 2020. The company has incurred
recurring losses from operations and as at March 31, 2021 and December 31, 2020
had an accumulated deficit of $5,369,601 and $5,317,385, 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.
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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 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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FEARLESS FILMS, INC. 
