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 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 second fiscal quarter of 2020 we made a number of announcements
regarding acquisitions:
On April 23, 2020 we announced that we had confirmed full ownership to all
rights, interests and title to The Great Chameleon, a film that had been
produced by Fearless Films but whose title was unclear. We had announced on
January 6, 2020 that we had agreed to terms to acquire all rights to the film
from Victor Altomare, the founder of Fearless; it was discovered during due
diligence that all rights had been transferred to Fearless shortly after the
film's production in 2014.
On April 29, 2020 we announced that we had three film scripts that are ready for
development into films. We are currently working to secure production partners
for at least one of these scripts.
On June 15, 2020 we announced that we had decided to purchase the film The
Lunatic from Victor Altomare, the founder and controlling shareholder of
Fearless. We require an independent appraisal of the film to confirm the price.
This appraisal is expected to take place during the second half of fiscal 2020,
if company resources permit.
On June 17, 2020 we announced the acquisition of FilmOla.com, a website for
aficionados of film and which can provide a platform for distribution for our
media properties. Payment for this acquisition will be in the form of common
shares of the company; closing of the acquisition will take place in during the
third quarter of 2020.
On June 24, 2020 we announced that we had acquired the short film Only Minutes
from its creator. Our strategy behind these acquisitions is to build our media
library and distribution capabilities so as to create a more substantial asset
base for the company while we work on developing further productions. Payment
for
--------------------------------------------------------------------------------
20
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
this acquisition will be in the form of common shares of the company; closing of
the acquisition will take place in during the third quarter of 2020.
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 June 30, 2020 compared to the three months ended June
30, 2019.
We did not realize revenues from operations during the three months ended June
30, 2020 and June 30, 2019. 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 June 30, 2020, total operating expenses were
$985,471 compared to $72,962 in the same period in 2019. Operating expenses are
reported in three categories. General and administrative expenses were $716 in
the three months ended June 30, 2020 compared to $21,272 in the same period one
year earlier. Consulting fees were $300,000 in the three months ended June 30,
2020 compared to nil in the three months ended June 30, 2019. The increase was
due to a services consulting contract that was signed in Q4 of 2019. Management
fees were $39,781 during the three months ended June 30, 2020 versus $39,562 in
the three months of ended June 30, 2019, essentially unchanged. Professional
fees during the three months ended June 30, 2020 were $644,974, compared to
$12,128 in the three months ended June 30, 2019. The increase was due to an
investor relations services consulting contract signed in Q2 of 2020.
During the three months ended June 30,2020 we recorded an interest expense of
$5,938, compared to an interest expense of $1,940 in the three months ended June
30, 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 June 30,
2020. During the three months ended June 30, 2020, we recorded a gain on
exchange of $2,162 compared to a loss of $22,509 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 June 30, 2020 we
recorded a debt discount expense of $3,390 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 $992,637 for the three
months ended June 30, 2020 compared to a net loss of $97,411 for the same period
in 2019. We recorded a foreign currency translation adjustment loss of $4,737
for the three months ended June 30, 2020 compared to a foreign currency
translation gain of $21,268 for the three months ended June 30, 2019. Because
the functional currency of our parent, Fearless Films, is United States dollars
and the functional currency of our subsidiary, Fearless Films
--------------------------------------------------------------------------------
21
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Canada), is Canadian dollars, an adjustment is necessary. Thus, after the
foreign currency translation adjustment, our comprehensive loss for the three
months ended June 30, 2020 was $997,374 ($0.00 per share), compared to a
comprehensive loss for the same three months of 2019 of $76,143 ($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.
For the six months ended June 30, 2020 compared to the six months ended June 30,
2019.
We did not realize revenues from operations during the six months ended June 30,
2020 and June 30, 2019. During the six months ended June 30, 2020, total
operating expenses were $1,373,527 compared to $127,243 in the same period in
2019. Operating expenses are reported in three categories. General and
administrative expenses were $2,124 in the six months ended June 30, 2020
compared to $24,866 in the same period one year earlier. Consulting fees were
$600,000 in the six months ended June 30, 2020 compared to nil in the six months
ended June 30, 2019. The increase was due to a services consulting contract that
was signed in Q4 of 2019. Management fees were $79,129 during the six months
ended June 30, 2020 versus $79,078 in the six months of ended June 30, 2019,
essentially unchanged. Professional fees during the six months ended June 30,
2020 were $692,274, compared to $23,299 in the six months ended June 30, 2019.
The increase was due to an investor relations services consulting contract
signed in Q2 of 2020.
During the six months ended June 30,2020 we recorded an interest expense of
$11,674, compared to an interest expense of $3,390 in the six months ended June
30, 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 June 30,
2020. During the six months ended June 30, 2020, we recorded a gain on exchange
of $3,279 compared to a gain of $326 in the same six-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 six months ended June 30, 2020 we recorded a debt
discount expense of $8,445 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 $1,390,367 for the six
months ended June 30, 2020 compared to a net loss of $130,307 for the same
period in 2019. We recorded a foreign currency translation adjustment loss of
$61 for the six months ended June 30, 2020 compared to a foreign currency
translation loss of $2,042 for the six months ended June 30, 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 six months ended June 30,
2020 was $1,390,428 ($0.00 per share), compared to a comprehensive loss for the
same six months of 2019 of $132,349 ($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 June 30, 2020, we had total assets of $13,284, consisting of $5,701 in cash
and prepaid expenses of $7,583. At December 31, 2019, we had total assets of
$3,779, comprised of $2,779 in cash and $1,000 in prepaid expenses. The increase
in prepaid expenses is attributed to prepaid OTCQB annual fees. Total current
liabilities at June 30, 2020 were $1,666,752, 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 $1,223,486 at June 30, 2020, and loans
payable that increased from $339,248 at December 31, 2019 to $366,345 at June
30, 2020. The increase in accounts payable was due to accruals for consulting
services that were rendered, but not paid in cash. The increase in loans payable
during the first six months of 2020 was attributed to the company
--------------------------------------------------------------------------------
22
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 $26,921 at June 30, 2020 due to the increase in
accrued implied interest.
At June 30, 2020 we had a working capital deficit of $1,653,468 compared to a
working capital deficit of $818,268 December 31, 2019. The company has incurred
recurring losses from operations and as at June 30, 2020 and December 31, 2019
had an accumulated deficit of $5,499,843 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.
--------------------------------------------------------------------------------
23
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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.
© Edgar Online, source Glimpses
FEAS FILM 
