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Fearless Films, Inc. – ‘10-Q’ for 3/31/22

On:  Monday, 5/23/22, at 2:37pm ET   ·   For:  3/31/22   ·   Accession #:  1493152-22-14749   ·   File #:  0-31441

Previous ‘10-Q’:  ‘10-Q’ on 11/22/21 for 9/30/21   ·   Latest ‘10-Q’:  This Filing

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 5/23/22  Fearless Films, Inc.              10-Q        3/31/22   41:2.6M                                   M2 Compliance LLC/FA

Quarterly Report   —   Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    479K 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     19K 
 3: EX-32.1     Certification -- §906 - SOA'02                      HTML     16K 
 9: R1          Cover                                               HTML     65K 
10: R2          Consolidated Balance Sheets                         HTML     90K 
11: R3          Consolidated Balance Sheets (Parenthetical)         HTML     32K 
12: R4          Consolidated Statements of Operations and           HTML     77K 
                Comprehensive Income (Loss) (Unaudited)                          
13: R5          Consolidated Statements of Stockholders'            HTML     78K 
                Deficiency (Unaudited)                                           
14: R6          Consolidated Statements of Cash Flows (Unaudited)   HTML     64K 
15: R7          Nature of Operations                                HTML     22K 
16: R8          Basis of Presentation, Measurement and              HTML     19K 
                Consolidation                                                    
17: R9          Going Concern                                       HTML     21K 
18: R10         Summary of Significant Accounting Policies          HTML     53K 
19: R11         Intangible Assets                                   HTML     22K 
20: R12         Accounts Payable                                    HTML     17K 
21: R13         Loans Payable                                       HTML     25K 
22: R14         Stockholders? Deficiency                            HTML     65K 
23: R15         Related Party Transactions and Balances             HTML     27K 
24: R16         Commitments                                         HTML     26K 
25: R17         Subsequent Events                                   HTML     18K 
26: R18         Summary of Significant Accounting Policies          HTML     79K 
                (Policies)                                                       
27: R19         Intangible Assets (Tables)                          HTML     21K 
28: R20         Nature of Operations (Details Narrative)            HTML     32K 
29: R21         Going Concern (Details Narrative)                   HTML     19K 
30: R22         Summary of Significant Accounting Policies          HTML     15K 
                (Details Narrative)                                              
31: R23         Schedule of Indefinite-Lived Intangible Assets      HTML     23K 
                (Details)                                                        
32: R24         Accounts Payable (Details Narrative)                HTML     16K 
33: R25         Loans Payable (Details Narrative)                   HTML     27K 
34: R26         Stockholders? Deficiency (Details Narrative)        HTML    189K 
35: R27         Related Party Transactions and Balances (Details    HTML     47K 
                Narrative)                                                       
36: R28         Commitments (Details Narrative)                     HTML     40K 
39: XML         IDEA XML File -- Filing Summary                      XML     67K 
37: XML         XBRL Instance -- form10-q_htm                        XML    592K 
38: EXCEL       IDEA Workbook of Financial Reports                  XLSX     49K 
 5: EX-101.CAL  Inline XBRL Taxonomy Extension Calculation           XML     80K 
                Linkbase Document -- ferl-20220331_cal                           
 6: EX-101.DEF  Inline XBRL Taxonomy Extension Definition Linkbase   XML    198K 
                Document -- ferl-20220331_def                                    
 7: EX-101.LAB  Inline XBRL Taxonomy Extension Label Linkbase        XML    467K 
                Document -- ferl-20220331_lab                                    
 8: EX-101.PRE  Inline XBRL Taxonomy Extension Presentation          XML    360K 
                Linkbase Document -- ferl-20220331_pre                           
 4: EX-101.SCH  Inline XBRL Taxonomy Extension Schema Document --    XSD     62K 
                ferl-20220331                                                    
40: JSON        XBRL Instance as JSON Data -- MetaLinks              192±   254K 
41: ZIP         XBRL Zipped Folder -- 0001493152-22-014749-xbrl      Zip     86K

‘10-Q’   —   Quarterly Report

Document Table of Contents

Page (sequential)   (alphabetic) ↑Top
 
11st Page  –  Filing Submission
"Part I -- Financial Information
"Financial Statements (Unaudited)
"Consolidated Balance Sheets
"Consolidated Statements of Operations and Comprehensive Income (Loss)
"Consolidated Statements of Stockholders' Deficiency
"Consolidated Statements of Cash Flows
"Notes to Consolidated Financial Statements
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Quantitative and Qualitative Disclosures About Market Risk
"Controls and Procedures
"Part Ii -- Other Information
"Legal Proceedings
"Risk Factors
"Unregistered Sales of Equity Securities and Use of Proceeds
"Defaults Upon Senior Securities
"Mine Safety Disclosures
"Exhibits
"Signatures

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM  i 10-Q

 

(Mark One)

 

 i ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the Quarter Ended  i March 31,  i 2022 / 
   
 i ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission File Number  i 000-31441

 

 i FEARLESS FILMS, INC.

(Exact name of registrant as specified in its charter)

 

 i Nevada    i 33-0921357
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

 i 467 Edgeley Blvd.,  i Unit 2,  i Concord,  i ON  i L4K 4E9

(Address of principal executive offices)

 

 i (888)  i 928-0184

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 i Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 i Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.

 

Large accelerated filer ☐   Accelerated filer ☐
 i Non-accelerated filer ☐   Smaller reporting company  i ☒
(Do not check if a smaller reporting company)   Emerging growth company  i ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  i ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.

Yes ☐  i No ☒ 

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

 

Class   Outstanding as of May 20, 2022
     
Common Stock, $0.001 par value     i 33,895,157

 

 

 

 C: 
 

 

 

TABLE OF CONTENTS

 

Heading   Page
     
  PART I — FINANCIAL INFORMATION  
     
Item 1. Financial Statements (Unaudited) 3
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 24
     
Item 4. Controls and Procedures 24
     
  PART II — OTHER INFORMATION  
     
Item 1. Legal Proceedings 24
     
Item 1A. Risk Factors 24
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
     
Item 3. Defaults Upon Senior Securities 25
     
Item 4. Mine Safety Disclosures 25
     
Item 5. Other Information 25
     
Item 6. Exhibits 26
     
  Signatures 27

 

 C: 
 C: 2

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

The accompanying unaudited balance sheet of Fearless Films, Inc. at March 31,2022, related to the unaudited statements of operations and statements of cash flows for the three and nine months ended March 31, 2022 and 2021, have been prepared by management in conformity with United States generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes thereto included in the company’s December 31, 2021 financial statements included in the company’s 10-K Annual Report filed with the SEC on April 15, 2022. Operating results for the period ended March 31, 2022, are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2022, or any other subsequent period.

 

 C: 
3

 

  

Consolidated Financial Statements (Unaudited)

 

Fearless Films, Inc.

 

For the three months ended March 31, 2022 and 2021

 

 C: 
4

 

 

Fearless Films, Inc.

Consolidated Financial Statements

For the three ended March 31, 2022 and 2021

 

 

Table of contents

 

Consolidated Balance Sheets 6
   
Consolidated Statements of Operations and Comprehensive Income (Loss) 7
   
Consolidated Statements of Stockholders’ Deficiency 8
   
Consolidated Statements of Cash Flows 9
   
Notes to Consolidated Financial Statements 10 - 19

 

 C: 
5

 

 

Fearless Films, Inc.

 

CONSOLIDATED BALANCE SHEETS

AS AT MARCH 31, 2022 (UNAUDITED) AND DECEMBER 31, 2021 (AUDITED)

(Expressed in US dollars)

 

   As at   As at 
   March 31,   December 31, 
   2022   2021 
   $   $ 
ASSETS          
           
Cash    i 2,725     i 1,816 
Prepaid expenses [Note 10]    i 67,917     i 288,871 
Total current assets    i 70,642     i 290,687 
           
Intangible Assets [Note 5]    i 88,400     i 88,400 
Total assets    i 159,042     i 379,087 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY          
Liabilities          
Accounts payable [Note 6]    i 594,175     i 546,393 
Accrued liabilities    i 88,804     i 81,021 
Loan payable [Note 7]    i 383,808     i 378,519 
Total current liabilities    i 1,066,787     i 1,005,933 
Total liabilities    i 1,066,787     i 1,005,933 
           
Stockholders deficiency          
Preferred stock, $ i  i 0.001 /  par value,  i  i 20,000,000 /  authorized.  i  i  i  i 1,000,000 /  /  /  shares issued and outstanding as at March 31, 2022 and December 31, 2021 respectively [Note 8]    i 1,000     i 1,000 
Common stock, $ i 0.001 par value,  i 500,000,000 authorized,  i  i  i  i 33,895,157 /  /  /  shares issued and outstanding as at March 31, 2022 and December 31,2021 respectively [Note 8]    i 33,895     i 33,895 
Common stock to be issued [Note 8]    i 1,872,149     i 1,872,149 
Additional paid-in-capital    i 3,869,088     i 3,869,088 
Accumulated other comprehensive income    i 112,417     i 156,962 
Accumulated deficit   ( i 6,796,294)   ( i 6,559,940)
Total stockholders deficiency   ( i 907,745)   ( i 626,846)
Total liabilities and stockholders deficiency    i 159,042     i 379,087 

 

Going Concern [Note 3]
Subsequent events [Note 11]

 

See accompanying notes

 

 C: 
6

 

 

Fearless Films, Inc.

 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(Expressed in US dollars) 

 

 

   Three months   Three months 
   ended   ended 
   March 31,   March 31, 
   2022   2021 
   $   $ 
         
REVENUE   —    — 
           
EXPENSES          
General and administrative    i 582     i 2,862 
Consulting Expenses [Note 10]    i 220,954     i 62,796 
Management fees [Note 9]    i 14,965     i 15,028 
Professional fees    i 35,780     i 48,415 
Total operating expenses    i 272,281     i 129,101 
           
(Loss) / Gain on settlement of payables [Note 8 & 10]   —     i 48,000 
Interest Expense [Note 7]   ( i 4,729)   ( i 4,534)
Exchange (Loss) / Gain    i 40,656     i 33,419 
Net (loss) income before income taxes   ( i 236,354)   ( i 52,216)
           
Income taxes   —    — 
Net (loss) income   ( i 236,354)   ( i 52,216)
           
Foreign currency translation adjustment   ( i 44,545)   ( i 34,847)
Comprehensive (loss) income   ( i 280,899)   ( i 87,063)
           
(Loss) earnings per share - basic and diluted   ( i 0.01)   ( i 0.00)
           
Weighted average number of common shares - basic and diluted    i 33,895,157     i 33,379,601 

 

See accompanying notes

 

 C: 
7

 

 

Fearless Films, Inc.

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY (UNAUDITED)

(Expressed in US dollars) 

 

 

                                                           
   Preference stock   Common stock  

Common stock to

be issued

   Additonal paid-in   Accumulated
 other
compreshensive		   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   capital   income   deficit   Total 
       $       $       $   $   $   $   $ 
As at December 31, 2020    i 1,000,000     i 1,000     i 32,295,157     i 32,295     i 585,569     i 878,353     i 3,598,688     i 166,667    ( i 5,317,385)   ( i 640,382)
                                                   
Share Subscription for cash   —    —    —    —     i 33,333     i 50,000    —    —    —     i 50,000 
Shares issued for settlement of accounts payable   —    —     i 1,600,000     i 1,600    —    —     i 270,400    —    —     i 272,000 
Foreign currency translation   —    —    —    —    —    —    —    ( i 34,847)   —    ( i 34,847)
Net loss for the period   —    —    —    —    —    —    —    —    ( i 52,216)   ( i 52,216)
As at March 31, 2021    i 1,000,000     i 1,000     i 33,895,157     i 33,895     i 618,902     i 928,353     i 3,869,088     i 131,820    ( i 5,369,601)   ( i 405,445)
                                                   
Share Subscription for cash   —    —    —    —     i 53,870     i 8,080    —    —    —     i 8,080 
Shares issued for settlement of accounts payable   —    —    —    —     i 5,000,000     i 900,000    —    —    —     i 900,000 
Foreign currency translation   —    —    —    —    —    —    —    ( i 41,225)   —    ( i 41,225)
Net loss for the period   —    —    —    —    —    —    —    —    ( i 422,404)   ( i 422,404)
As at June 30, 2021    i 1,000,000     i 1,000     i 33,895,157     i 33,895     i 5,672,772     i 1,836,433     i 3,869,088     i 90,595    ( i 5,792,005)    i 39,006 
                                                   
Share Subscription for cash   —    —    —    —     i 61,439     i 22,716    —    —    —     i 22,716 
Foreign currency translation   —    —    —    —    —    —    —     i 80,610    —     i 80,610 
Net loss for the period   —    —    —    —    —    —    —    —    ( i 423,232)   ( i 423,232)
As at September 30, 2021    i 1,000,000     i 1,000     i 33,895,157     i 33,895     i 5,734,211     i 1,859,149     i 3,869,088     i 171,205    ( i 6,215,237)   ( i 280,900)
                                                   
Share Subscription for cash   —    —    —    —     i 8,666     i 13,000    —    —    —     i 13,000 
Foreign currency translation   —    —    —    —    —    —    —    ( i 14,243)   —    ( i 14,243)
Net loss for the period   —    —    —    —    —    —    —    —    ( i 344,703)   ( i 344,703)
As at December 31, 2021    i 1,000,000     i 1,000     i 33,895,157     i 33,895     i 5,742,877     i 1,872,149     i 3,869,088     i 156,962    ( i 6,559,940)   ( i 626,846)
Beginning balance    i 1,000,000     i 1,000     i 33,895,157     i 33,895     i 5,742,877     i 1,872,149     i 3,869,088     i 156,962    ( i 6,559,940)   ( i 626,846)
                                                   
Foreign currency translation   —    —    —    —    —    —    —    ( i 44,545)   —    ( i 44,545)
Net loss for the period   —    —    —    —    —    —    —    —    ( i 236,354)   ( i 236,354)
As at March 31, 2022    i 1,000,000     i 1,000     i 33,895,157     i 33,895     i 5,742,877     i 1,872,149     i 3,869,088     i 112,417    ( i 6,796,294)   ( i 907,745)
Ending balance    i 1,000,000     i 1,000     i 33,895,157     i 33,895     i 5,742,877     i 1,872,149     i 3,869,088     i 112,417    ( i 6,796,294)   ( i 907,745)

  

See accompanying notes

 

 C: 
8

 

 

Fearless Films, Inc.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Expressed in US dollars) 

 

 

   Three months   Three months 
   ended   ended 
   March 31,   March 31, 
   2022   2021 
   $   $ 
         
OPERATING ACTIVITIES          
Net (loss) income   ( i 236,354)   ( i 52,216)
           
Adjustments to reconcile net income (loss) to net cash used in operations:          
Loss/(Gain) on settlement of accounts payable   —    ( i 48,000)
           
Changes in operating assets and liabilities:          
Prepaid expenses    i 220,954    ( i 289,122)
Accounts payable    i 45,053     i 345,662 
Accrued liabilities    i 7,319     i 7,041 
Cash used in operating activities    i 36,972    ( i 36,635)
           
FINANCING ACTIVITIES          
Issue of Shares for cash   —     i 50,000 
Proceeds from Loans Payable    i 5,000    — 
Cash provided by financing activities    i 5,000     i 50,000 
           
Net increase (decrease) in cash during the period    i 41,972     i 13,365 
           
Effect of foreign currency translation   ( i 41,063)   ( i 33,740)
           
Cash at beginning    i 1,816     i 39,036 
Cash at end    i 2,725     i 18,661 
           
           
Additional cash flow information          
Interest paid   —    — 
Taxes paid   —    — 

 

See accompanying notes

 

 C: 
9

 

 

Fearless Films, Inc.

Notes to Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

(Expressed in US dollars)

 

 

 i 

1. NATURE OF OPERATIONS

 

Fearless Films, Inc. (the “Company “) was incorporated in the State of Nevada as MYG Corp. on July 06, 2000. The Company changed its name from time to time and its latest name change was from Paw4mance Pet Products International, Inc. to Fearless Films, Inc. effective from November 19, 2014.

 

Pursuant to Share Exchange Agreement dated August 5, 2014 and its subsequent amendments effective from that date,  i the Company acquired 100% of the issued and outstanding shares of a Canadian based entity, Fearless Films Inc. (“Fearless”) in exchange for  i 1,000,000 Preferred Shares and  i 30,000,000 Common Shares of the Company. /  As a result of the Share Exchange, Fearless is now a wholly-owned subsidiary of the Company. This transaction was accounted for as a reverse merger. Consequently, the assets and liabilities and the historical operations reflected in the consolidated financial statements for the periods prior to August 5, 2014 are those of Fearless and are recorded at the historical cost basis. After August 5, 2014, the Company’s consolidated financial statements include the assets and liabilities of both Fearless and the Company and the historical operations of both after that date as one entity. Fearless was incorporated on January 23, 2008 under the laws of the Province of Ontario, Canada. The Company is engaged in providing post production facilities and services and on-site and off-site off-line suites for television series and feature films. Both the Companies did not have any revenue since inception, as these were primarily engaged in the business development activities.

 

Pursuant to Share Exchange Agreement as explained above, the Company also effected  i a reverse split of its common stock by 1 share for 1,000 shares.

 

On October 26, 2020  i the Company approved a reverse stock split of its issued and outstanding shares of common stock on a one share for 10 shares (1:10) basis. The reverse stock split was effected on December 8, 2020 with no change in par value. As a result of reverse stock split, the issued and outstanding common stock shares decreased to  i  i 32,295,157 / .

 

 /  i 

2. BASIS OF PRESENTATION, MEASUREMENT AND CONSOLIDATION

 

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in United States dollars (“USD”).

 

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair statement of the financial position, results of operations and cash flows for the three months ended March 31, 2022, and 2021 have been included. Operating results for the three months ended March 31, 2022, are not necessarily indicative of the results to be expected for any subsequent interim period or for the year ending December 31, 2022.

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Fearless. Significant intercompany accounts and transactions have been eliminated. The financial statements should be read in conjunction with the financial statements for the year ended December 31, 2021.

 

 i 

3. GOING CONCERN

 

The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred recurring losses from operations and as at March 31, 2022 and December 31, 2021 had a working capital deficiency of $ i 966,145 and $ i 715,246 respectively and an accumulated deficit of $ i 6,796,294 and $ i 6,559,940, respectively. Management anticipates the Company will attain profitable status and improve its liquidity through continued business development and additional debt or equity investment in the Company. Management is pursuing various sources of financing.

 

 C: 
10

 

 

Fearless Films, Inc.

Notes to Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

(Expressed in US dollars)

 

3. GOING CONCERN (continued)

 

The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance that the necessary debt or equity financing will be available or will be available on terms acceptable to the Company, in which case there may be substantial doubt that the Company will be able to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in the consolidated financial statements. The consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary should the Company be unable to continue in existence.

 

 /  i 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

 i 

Cash and Cash Equivalents

 

Cash includes cash on hand and balances with banks.

 

 i 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant estimates and assumptions include, fair value of stock options or services offered, deferred income tax assets and related valuation allowance, and accruals. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.

 

 i 

Earnings (Loss) Per Share

 

The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. Series A are convertible into common, and potentially dilutive.

 

 i 

Foreign Currency Translation

 

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

 

 C: 
11

 

 

Fearless Films, Inc.

Notes to Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

(Expressed in US dollars)

 

 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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.

 

 i 

Advertising and Marketing Costs

 

Advertising and marketing costs are expensed as incurred. During the three months ended March 31, 2022 and March 31, 2021 the Company incurred $nil and $ i 2,397 respectively in advertising and marketing costs included in General and Administrative costs.

 

 /  i 

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted the updated guidance effective January 1,2018 using the full retrospective method.

 

Under ASC 606, in order to recognize revenue, the Company is required to identify an approved contract with commitments to preform respective obligations, identify rights of each party in the transaction regarding goods to be transferred, identify the payment terms for the goods transferred, verify that the contract has commercial substance and verify that collection of substantially all consideration is probable. The adoption of ASC 606 did not have an impact on the Company’s operations or cash flows since the Company has not started earning any revenue.

 

 i 

Fair Value of Financial Instruments

 

ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

● Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.
● Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.
● Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.

 

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

 

 C: 
12

 

 

Fearless Films, Inc.

Notes to Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

(Expressed in US dollars)

 

 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates.

 

These financial instruments include cash and accounts payable. The Company’s cash, which is carried at fair value, is classified as a Level 1 financial instrument. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.

 

 i 

Intangible Assets

 

Intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually and whenever indicators of impairment exist. The fair value of intangible assets are compared with their carrying values, and an impairment loss would be recognized for the amount by which the carrying amount exceeds its fair value. The Company considers the intangibles acquired as assets with indefinite life and so not amortized. Acquired films rights have a three-year development limitation, after which if development has not started the film assets are to be recorded as impaired.

 

 i 

Convertible Notes Payable

 

The Company accounted for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40.

 

The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.

 

 i 

Stock Based Compensation

 

The Company accounts for share-based payments in accordance with the provision of ASC 718, which requires that all share-based payments issued to acquire goods or services, including grants of employee stock options, be recognized in the consolidated statement of operations based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to share-based awards is recognized over the requisite service period, which is generally the vesting period.

 

 C: 
13

 

 

Fearless Films, Inc.

Notes to Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

(Expressed in US dollars)

 

 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

The Company accounts for stock-based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the guidelines in ASC 718. The Company issues compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.

 

 i 

Recently Issued Accounting Pronouncements

 

On May 3, 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard. Early adoption is permitted, including adoption in an interim period. If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the potential impact but does not believe there will be an impact of the adoption of this standard on its results of operations, financial position and cash flows and related disclosures.

 

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. The update also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. The new guidance is effective for annual periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. This update can be adopted on either a fully retrospective or a modified retrospective basis. The Company is currently evaluating the potential impact but does not believe there will be an impact of the adoption of this standard on its results of operations, financial position and cash flows and related disclosures.

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminated certain exceptions and changed guidance on other matters. The exceptions relate to the allocation of income taxes in separate company financial statements, tax accounting for equity method investments and accounting for income taxes when the interim period year-to-date loss exceeds the anticipated full year loss. Changes relate to the accounting for franchise taxes that are income-based and non-income-based, determining if a step up in tax basis is part of a business combination or if it is a separate transaction, when enacted tax law changes should be included in the annual effective tax rate computation, and the allocation of taxes in separate company financial statements to a legal entity that is not subject to income tax. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the potential impact but does not believe there will be an impact of the adoption of this standard on its results of operations, financial position and cash flows and related disclosures.

 

 C: 
14

 

 

Fearless Films, Inc.

Notes to Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

(Expressed in US dollars)

 

 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2022.

 

 /  i 

5. INTANGIBLE ASSETS

 

 i 

Intangible assets were comprised of the following at:

 SCHEDULE OF INDEFINITE-LIVED INTANGIBLE ASSETS

   March 31,
2022
$		  

December 31,

2021
$

 
         
Rights to an online film marketplace    i 52,000     i 52,000 
Rights and interests in Films    i 20,800     i 20,800 
Film Scripts    i 15,600     i 15,600 
           
Net carrying value    i 88,400     i 88,400 
 / 

 

All intangible assets are considered to be indefinite life assets and not amortized. Acquired films rights have a three-year development limitation, after which if development has not started the film assets are to be recorded as impaired.

 

 /  i 

6. ACCOUNTS PAYABLE

 

As at March 31, 2022, total accounts payable include $ i 71,820 (2021: $ i 36,240) payable to directors of the Company.

 

 /  i 

7. LOANS PAYABLE

 

On July 1, 2021, the Company entered into a loan agreement with a third party for $ i 50,000. The loan is unsecured, bears interest at  i 5% per annum, and repayable on demand within 180 days of written notice of such demand. As at March 31, 2022, total gross proceeds received against this loan are $ i 15,800.

 

As at March 31, 2022, the Company owed $ i 383,808 (2021: $ i 367,880) under various loan agreements with third parties and shareholders. All loans are unsecured, interest free and  i repayable on demand within 180 days of written notice of such demand. Implied interest at the rate of  i 5% per annum has been accrued on all loans outstanding as of March 31, 2022.

 

As at March 31, 2022, accrued liabilities includes interest on loans payable of $ i 54,033.

 

 C: 
15

 

 

Fearless Films, Inc.

Notes to Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

(Expressed in US dollars)

 

 

 /  i 

8. STOCKHOLDERS’ DEFICIENCY

 

Share Exchange Agreement

 

As explained in Note 1 to the consolidated financial statements, on August 5, 2014 the Company acquired  i 100% of the issued and outstanding shares of Fearless Films Inc. (“Fearless”) in exchange for  i 1,000,000 Preferred Shares and  i 30,000,000 Common Shares of the Company. As a result, Fearless became a wholly owned subsidiary of the Company.

 

Authorized stock

 

The Company is authorized to issue  i 500,000,000 common shares with a par value of $ i 0.001 and  i 20,000,000 preferred shares with a par value of $ i 0.001.

 

Common Stock

 

As explained in Note 1 to the consolidated financial statements, on September 23, 2014, the Board of Directors and stockholders of the Company approved a Certificate of Amendment to its Articles of Incorporation for a  i 1:1000 Reverse split of its Common Stock with shares rounded up to the nearest whole number. The Reverse split solely effected the issued and outstanding Common Stock and did not have any effect on the Authorized Common Stock. As a result of the Reverse split, the issued and outstanding Common Stock of the Company decreased from  i 155,085,275 shares prior to the Reverse split to  i 155,289 shares following the Reverse split.

 

As explained in Note 1 to the consolidated financial statements, on October 26, 2020, the Board of Directors and stockholders of the Company approved a Certificate of Amendment to its Articles of Incorporation for a  i 1:10 Reverse split of its Common Stock with shares rounded up to the nearest whole number. The Reverse split solely effected the issued and outstanding Common Stock and did not have any effect on the Authorized Common Stock. As a result of the Reverse split, the issued and outstanding Common Stock of the Company decreased from  i 322,944,837 shares prior to the Reverse split to  i 32,295,157 shares following the Reverse split and $ i 290,649 was reclassified from Common Stock to Additional Paid-In Capital.

 

On June 1, 2020, the Company entered into private placement agreements with shareholders for issue of  i 666,667 shares at a price of $ i 1.50 per common share for a total of $ i 1,000,000 gross proceeds. As at March 31, 2022 gross proceeds received are $ i 657,923. As at March 31, 2022,  i 337,900 shares have been issued and  i 100,715 shares are included in common stock to be issued.

 

On June 15, 2020, the Company announced their decision to purchase the film “The Lunatic” from the President and CEO of the operating subsidiary. The purchase price will be in the form of common shares and the number of shares will be set by an independent appraisal of the film expected to take place during the fourth quarter of 2022.

 

On June 17, 2020, the Company announced the acquisition of FilmOla.com, a website for aficionados of film and which can provide a platform for distribution for the Company’s media properties. Payment for this acquisition was in the form of  i 100,000 common shares of the Company. As at March 31, 2022, these shares have been issued and fair valued at $ i 52,000 based on market price at the time of issue and included in intangible assets.

 

On June 24, 2020, the Company announced the acquisition of rights to the film, Only Minutes, an addition to the company’s growing library of media titles. Payment for this acquisition was in the form of  i 20,000 common shares of the Company. As at March 31, 2022, these shares have been issued and fair valued at $ i 10,400 based on market price at the time of issue and included in intangible assets.

 

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Fearless Films, Inc.

Notes to Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

(Expressed in US dollars)

 

 

8. STOCKHOLDERS’ DEFICIENCY (continued)

 

On July 1, 2020, the Company entered into private placement agreements with shareholders for issue of  i 333,333 shares at a price of $ i 1.50 per common share for a total of $ i 500,000 gross proceeds. As at March 31, 2022 gross proceeds received are $ i 402,615 and the respective  i 268,410 shares are included in common stock to be issued.

 

On July 1, 2020, the Company entered into a private placement agreement with a third party for issue of  i 333,333 shares at a price of $ i 1.50 per common share for a total of $ i 500,000 gross proceeds of. As at March 31, 2022 gross proceeds received are $ i 451,043. As at March 31, 2022,  i 32,252 shares have been issued and  i 268,443 shares are included in common stock to be issued.

 

On July 28, 2020, the Company announced the acquisition of rights to the film, In the Lair, an addition to the company’s growing library of media titles. Payment for this acquisition was in the form of  i 20,000 common shares of the Company. As at March 31, 2022, these shares have been issued and fair valued at $ i 10,400 based on market price at the time of issue and included in intangible assets.

 

On August 24, 2020, the Company announced the acquisition of film script Dead Bounty, another significant addition to the company’s growing portfolio of films and intellectual property. Payment for this acquisition was in the form of  i 30,000 common shares of the Company. As at March 31, 2022, these shares have been issued and fair valued at $ i 15,600 based on market price at the time of issue and included in intangible assets.

 

On January 30, 2021, the Company issued  i 1,600,000 shares of common stock with a fair value of $ i 272,000 to settle an account payable $ i 320,000, resulting in a gain of $ i 48,000. 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 (Note 10).

 

On May 3, 2021, the Company authorised to issue  i 5,000,000 shares of common stock with a fair value of $ i 900,000 to settle an account payable of $ i 815,000, resulting in a loss of $ i 85,000. The fair value of the common stock was determined based on the closing price of the Company’s common stock on the date of settlement. As at March 31, 2022, these shares have not been issued and included in common stock to be issued. (Note 10).

 

On June 1, 2021, the Company entered into a private placement agreement with a third party for issue of  i 666,667 shares at a price of $ i 0.15 per common share for a total of $ i 100,000 gross proceeds. As at March 31, 2022 gross proceeds received are $ i 15,796. As at March 31, 2022, these shares have not been issued and are included in common stock to be issued.

 

As at March 31, 2022, the Company has  i  i 33,895,157 /  (December 31, 2021:  i  i 33,895,157 / ) shares issued and outstanding common stock (comprising  i 22,400,419 restricted stock and  i 11,494,738 unrestricted stock).

 

Preference Stock

 

On June 25, 2014, the Board of Directors authorized the following designations for the class of  i 20,000,000 Preference Shares of the Company of $  i 0.001 par value per share:

 

●  i 10,000,000 Shares shall be designated “Series A”
  Each Preference Share of Series A shall have 100 votes over that of each Common share and shall have rights convertible to  i 10 Common Shares.
●  i 10,000,000 Shares shall be designated “Series B”
  Each Preference Share of Series B shall have no voting rights or power and shall have rights convertible to  i 10 Common Shares

 

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Fearless Films, Inc.

Notes to Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

(Expressed in US dollars)

 

 

8. STOCKHOLDERS’ DEFICIENCY (continued)

 

On August 5, 2014, the Company issued  i 1,000,000 Preference Stock Series “A” pursuant to Share Exchange Agreement.

 

As at March 31, 2022 and December 31, 2021, the Company has  i  i 1,000,000 /  outstanding restricted Preference Stock.

 

 /  i 

9. RELATED PARTY TRANSACTIONS AND BALANCES

 

The Company’s transactions with related parties were carried out on normal commercial terms and in the course of the Company’s business. Other than those disclosed elsewhere in the financial statements, the related party transactions and balances are as follows:

 

On January 1, 2019, the Company entered into a consulting agreement with a shareholder. Pursuant to this agreement, the compensation is $ i 5,000 per month and the duration of the agreement is open until terminated by either party. These fees are included in the Management Fees.

 

During the year ended December 31, 2019, the Company entered into loan agreements for $ i 184,000 with a shareholder who is also the brother of the President and CEO of the Company. Pursuant to the loan agreement, the loan is unsecured, interest free and repayable on demand within 180 days of written notice of such demand.

 

On January 1, 2020, the Company entered into a loan agreement for $ i 28,000 with a shareholder who is also the brother of the President and CEO of the Company. Pursuant to the loan agreement, the loan is unsecured, interest free and repayable on demand within 180 days of written notice of such demand.

 

On June 1, 2020, the Company entered into a share subscription agreement for  i 233,333 shares of the Company at $ i 1.50 per share for a total of $ i 350,000, with a shareholder who is also the brother of the President and CEO of the Company. As at March 31, 2022 gross proceeds received are $ i 67,000. As at March 31, 2022,  i 31,333 shares have been issued and  i 13,333 shares are included in common stock to be issued.

 

On June 15, 2020, the Company announced their decision to purchase the film “The Lunatic” from the President and CEO of the Company. The purchase price will be in the form of common shares and the number of shares will be set by an independent appraisal of the film expected to take place during the fourth quarter of 2022

 

Management fees for the three months ended March 31, 2022 represent charges from directors of $ i 14,965 (2021: $ i 15,028  ). Accounts payable as at March 31, 2022, and December 31, 2021 include $ i 71,820 and $ i 57,650, respectively, due to the directors in connection with management fees.

 

As at March 31, 2022, all loans from related parties remain unpaid

 

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Fearless Films, Inc.

Notes to Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

(Expressed in US dollars)

 

 

 /  i 

10. COMMITMENTS

 

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 $ i 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, 2022, $ i 17,204 (2021: $ i 62,796) was included in consulting expenses. As at March 31, 2022, the agreement has not been renewed.

 

On January 30, 2021, the Company issued  i 1,600,000 common stock shares in settlement of the first-year fees of $ i 320,000. At date of issue, the shares were fair valued at $ i 272,000 resulting in a gain of $ i 48,000. 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.

 

On March 23, 2021, the Company entered into an agreement with a company who is to assist with investor relations efforts aimed at increasing the investment community’s awareness of Fearless Films (OTC: FERL). Fees for these services are to be $ i 100,000 per month and the agreement will remain valid unless terminated prior to the 1st of any month. Either party may terminate the agreement upon written notice to the other party. On May 3, 2021, the Company re-negotiated the fees of $ i 100,000 per month and agreed to pay $ i 815,000 for the next 12 months from May 1, 2021 to May 1, 2022. During the three months ended March 31, 2022, $ i 203,750 (2021: $nil) was included in consulting expenses. As at March 31, 2022, $ i 67,917 was included in prepaid expenses and is to be expensed out over the period to May 1, 2022.

 

On May 3, 2021, the Company authorized to issue  i 5,000,000 common stock shares in settlement of the first-year fees of $ i 815,000. At date of settlement, the shares were fair valued at $ i 900,000 resulting in a loss of $ i 85,000. The fair value of the common stock was determined based on the closing price of the Company’s common stock on the date of settlement.

 

 /  i 

11. SUBSEQUENT EVENTS

 

The Company’s management has evaluated subsequent events up to May 23, 2022, the date the consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:

 

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.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

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 2022 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, 2022 compared to the three months ended March 31, 2021.

 

We did not realize revenues from operations during the three months ended March 31, 2022 and March 31, 2021. 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.

 

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During the three months ended March 31, 2022, total operating expenses were $272,281 compared to $129,101 in the same period in 2021. Operating expenses are reported in four categories. General and administrative expenses were $582 in the three months ended March 31, 2022 compared to $2,862 in the same period one year earlier. Consulting fees were $220,954 in the three months ended March 31, 2022 compared to $62,796 in the three months ended March 31, 2021. The increase was due to a investor relations consulting contract that was signed in Q1 of 2021. Management fees were $14,965 during the three months ended March 31, 2022 versus $15,028 in the three months of ended March 31, 2021essentially unchanged. Professional fees during the three months ended March 31, 2022 were $37,780, compared to $48,415 in the three months ended March 31, 2021, essentially unchanged.

 

During the three months ended March 31,2022 we recorded an interest expense of $4,729, compared to an interest expense of $4,534 in the three months ended March 31, 2021. 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, 2022.

 

During the three months ended March 31, 2022, we recorded a gain on exchange of $40,656 compared to a gain of $33,419 in the same three-month period in 2021. 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, 2022, $203,750 were included in consulting expenses and $67,917 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 period ending March 31, 2022. 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.

 

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As a result of the above, we reported a net loss of $236,354 for the three months ended March 31, 2022 compared to a net loss of $52,216 for the same period in 2021., The invrease in net loss in Q1 of 2022 is primarily attributed to the increase in Consulting expenses during the quarter. We recorded a foreign currency translation adjustment loss of $44,545 for the three months ended March 31, 2022 compared to a foreign currency translation gain of $34,847 for the three months ended March 31, 2021.

 

Thus, after the foreign currency translation adjustment, our comprehensive income for the three months ended March 31, 2022 was $280,899 ($0.00 per share), compared to a comprehensive loss for the same three months of 2021 of $87,063 ($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.

 

Liquidity and Capital Resources

 

At March 31, 2022, we had total assets of $159,042, consisting of $2,725 in cash, prepaid expenses of $67,917 and intangible assets of $88,400. At December 31, 2021, we had total assets of $379,087, comprised of $1,816 in cash, $88,400 of intangible assets and $288,871 in prepaid expenses. The decrease 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, 2022 were $1,066,787, compared to $1,005,933 at December 31. 2021. Included in current liabilities are accounts payable of $594,175 at March 31, 2022 compared to $546,393 at December 31, 2021, and loans payable that remained essentially unchanged from $378,519 at December 31, 2021 to $383,808 at March 31, 2022. The increase in accounts payable was due to accruals for management fees that were not paid during the quarter. Additionally, accrued liabilities increased from $81,021 at December 31, 2021 to $88,804 at March 31, 2022 due to the increase in accrued implied interest.

 

At March 31, 2022 we had a working capital deficit of $996,145 compared to a working capital deficit of $715,246 December 31, 2021. The company has incurred recurring losses from operations and as at March 31, 2022 and December 31, 2021 had an accumulated deficit of $6,796,294 and $6,559,940, 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.

 

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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 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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Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

This item is not required for a smaller reporting company.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and principal accounting officer, to allow timely decisions regarding required disclosures.

 

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our management, including our principal executive officer and principal accounting officer, concluded that, as of March 31, 2021, our disclosure controls and procedures were not effective due to a lack of adequate segregation of duties and the absence of an audit committee.

 

Changes in Internal Control Over Financial Reporting. Management has evaluated whether any change in our internal control over financial reporting occurred during the first quarter of fiscal 2021. Based on its evaluation, management, including the chief executive officer and principal accounting officer, has concluded that there has been no change in our internal control over financial reporting during the first quarter of fiscal 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

 

There are no material pending legal proceedings to which we are a party or to which any of our property is subject and, to the best of our knowledge, no such actions against us are contemplated or threatened.

 

Item 1A. Risk Factors

 

Not required for a smaller reporting company.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

During the first quarter of 2021 the company issued 1,600,000 Common shares. as payment for Investor Relations services to be provided during fiscasl 2021. The securities were issued to persons in private transactions exempt from registration under Section 4(a)(2) of the Securities Act of 1933.

 

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Item 3. Defaults Upon Senior Securities

 

This Item is not applicable.

 

Item 4. Mine Safety Disclosures

 

This Item is not applicable.

 

Item 5. Other Information

 

None.

 

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Item 6. Exhibits

 

Exhibit 31.1 Certification of C.E.O. and Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
Exhibit 32.1 Certification of C.E.O. and Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
Exhibit 101* Interactive Data File

 

 

 

* In accordance with Rule 406T of Regulation S-T, these XBRL (eXtensible Business Reporting Language) documents are furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  FEARLESS FILMS, INC.
   
Date: May 23, 2022 By: /S/ VICTOR ALTOMARE
    Victor Altomare
    Chief Executive Officer and Director
    (Principal Accounting Officer)

 

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 C: 

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
12/31/22
12/15/22
Filed on:5/23/22
5/20/22
5/1/22
4/15/2210-K
For Period end:3/31/22NT 10-K,  NT 10-Q
12/31/2110-K,  NT 10-K
12/15/21
9/30/2110-Q,  NT 10-Q
7/1/21
6/30/2110-Q
6/1/21
5/3/21
5/1/21
3/31/2110-Q,  10-Q/A,  NT 10-Q
3/23/21
1/30/21
1/8/21
12/31/2010-K,  NT 10-K
12/15/20
12/8/208-K
10/26/20DEF 14C,  PRE 14C
8/24/20
7/28/20
7/1/20
6/24/20
6/17/20
6/15/20
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