Forward-Looking Statements and Associated Risks.
This Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "estimate," or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include but are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.
Based on our financial history since inception, our auditor has expressed
substantial doubt as to our ability to continue as a going concern. As reflected
in the accompanying financial statements, as of
RESULTS OF OPERATIONS
For the Three Months Ended
During the three months ended
Gross profit for the three months ended
During the three months ended
Derivative gains of
The loss on debt extinguishment of
Interest expense increased for the three months ended
During the three months ended
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LIQUIDITY AND CAPITAL RESOURCES
We incurred
In addition, we report increases and reductions in liabilities as uses of cash
and deceases assets and increases in liabilities as sources of cash, together
referred to as changes in operating assets and liabilities. For the three months
ended
Cash flows from financing activities were (
Cash flows used in investing activities were
These factors raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In
The Company has taken advantage of the stimulus offerings and received
In order for us to continue as a going concern for a period of one year from the issuance of these financial statements, we will need to obtain additional debt or equity financing and look for companies with cash flow positive operations that we can acquire. There can be no assurance that we will be able to secure additional debt or equity financing, that we will be able to acquire cash flow positive operations, or that, if we are successful in any of those actions, those actions will produce adequate cash flow to enable us to meet all our future obligations. Most of our existing financing arrangements are short-term. If we are unable to obtain additional debt or equity financing, we may be required to significantly reduce or cease operations.
Ongoing Assessment of the Impact of COVID-19
Companies have undertaken and are generally in the process of making a diverse
range of operational adjustments in response to the effects of COVID-19. These
adjustments are numerous and include a transition to telework; supply chain and
distribution adjustments; and suspending or modifying certain operations to
comply with health and safety guidelines to protect employees, contractors, and
customers, including in connection with a transition back to the workplace.
These types of adjustments may have an effect on a company that would be
material to an investment or voting decision, and affected companies should
carefully consider their obligations to disclose this information to investors.
Companies also are undertaking a diverse and sometimes complex range of
financing activities in response to the effects of COVID-19 on their businesses
and markets. These activities may involve obtaining and utilizing credit
facilities, accessing public and private markets, implementing supplier finance
programs, and negotiating new or modified customer payment terms. The
32 Table of Contents
· What are the material operational challenges that management and the Board of
Directors are monitoring and evaluating? · We have been challenged by the gathering restrictions under state and local rules and lack of events due to cancellation specifically related to our Blue Collar operations.
· How and to what extent have you altered your operations, such as implementing
health and safety policies for employees, contractors, and customers, to deal with these challenges, including challenges related to employees returning to the workplace? · We have allowed our employees to work from home and are using contract service providers where appropriate. Blue Collar was completely shut down for a period of time but has implemented health and safety policies for employees, contractors and customers to be able to resume some of their operations.
· How are the changes impacting or reasonably likely to impact your financial
condition and short- and long-term liquidity? · The changes had impaired our Blue Collar operations significantly in the prior years but which operations seem to be rebounding.
· How is your overall liquidity position and outlook evolving?
· We have raised limited funds to help our liquidity position but hope our outlook is bright primarily through financing opportunities. To the extent COVID-19 is adversely impacting your revenues, consider whether
such impacts are material to your sources and uses of funds, as well as the · materiality of any assumptions you make about the magnitude and duration of
COVID-19's impact on your revenues. Are any decreases in cash flow from operations having a material impact on your liquidity position and outlook? · COVID-19 reduced our historical revenues in the past. The bans on events and gatherings were very material to our Blue Collar operations.
· Have you accessed revolving lines of credit or raised capital in the public
or private markets to address your liquidity needs? · We have raised some funds through financing opportunities described herein. · Have COVID-19 related impacts affected your ability to access your traditional funding sources on the same or reasonably similar terms as were available to you in recent periods? · No. · Have you provided additional collateral, guarantees, or equity to obtain funding? · No.
· Have there been material changes in your cost of capital?
· No. · How has a change, or a potential change, to your credit rating impacted your ability to access funding? · No. · Do your financing arrangements contain terms that limit your ability to obtain additional funding? If so, is the uncertainty of additional funding reasonably likely to result in your liquidity decreasing in a way that would result in you being unable to maintain current operations? · No. 33 Table of Contents · Are you at material risk of not meeting covenants in your credit and other agreements? · No. · If you include metrics, such as cash burn rate or daily cash use, in your disclosures, are you providing a clear definition of the metric and explaining how management uses the metric in managing or monitoring liquidity? · Not Applicable. · Are there estimates or assumptions underlying such metrics the disclosure of which is necessary for the metric not to be misleading? · No.
· Have you reduced your capital expenditures and if so, how?
· No.
· Have you reduced or suspended share repurchase programs or dividend payments?
· No. · Have you ceased any material business operations or disposed of a material asset or line of business? · No. · Have you materially reduced or increased your human capital resource expenditures? · Yes, we previously reduced staff for Blue Collar and are using more contractors for current work. · Are any of these measures temporary in nature, and if so, how long do you expect to maintain them? · These measures were temporary and are starting to be changed. · What factors will you consider in deciding to extend or curtail these measures? · We are opening up and allow operations as much as possible.
· What is the short- and long-term impact of these reductions on your ability
to generate revenues and meet existing and future financial obligations? · There is no impact of these reductions upon our ability to generate revenues or meet financial obligations.
· Are you able to timely service your debt and other obligations?
· Yes, for most debt instruments. · Have you taken advantage of available payment deferrals, forbearance periods, or other concessions? What are those concessions and how long will they last? · Yes.
· Do you foresee any liquidity challenges once those accommodations end?
· Possibly, if creditors demand all deferrals at once rather than payment over time as indicated.
· Have you altered terms with your customers, such as extended payment terms or
refund periods, and if so, how have those actions materially affected your financial condition or liquidity? · We have not altered terms with customers. · Did you provide concessions or modify terms of arrangements as a landlord or lender that will have a material impact? · No. · Have you modified other contractual arrangements in response to COVID-19 in such a way that the revised terms may materially impact your financial condition, liquidity, and capital resources? · Possibly, if creditors demand all deferrals at once rather than payment over time as indicated. 34 Table of Contents · Are you relying on supplier finance programs, otherwise referred to as supply chain financing, structured trade payables, reverse factoring, or vendor financing, to manage your cash flow? · Yes. · Have these arrangements had a material impact on your balance sheet, statement of cash flows, or short- and long-term liquidity and if so, how? · No.
· What are the material terms of the arrangements?
· Most vendors situations now provide up to 30 days terms; but a good portion has now returned to normal payment terms.
· Did you or any of your subsidiaries provide guarantees related to these
programs? · No.
· Do you face a material risk if a party to the arrangement terminates it?
· No. · What amounts payable at the end of the period relate to these arrangements, and what portion of these amounts has an intermediary already settled for you? · There have been no settlements. Most related to up to 30 days with telecommunications vendors and payments are being included in planned cash flows. · Have you assessed the impact material events that occurred after the end of the reporting period, but before the financial statements were issued, have had or are reasonably likely to have on your liquidity and capital resources and considered whether disclosure of subsequent events in the financial statements and known trends or uncertainties in MD&A is required? · There are no material events occurring after the end of the reporting period but before financial statements were issued which would have any affect on liquidity or capital resources and there are no new trends or uncertainties needed to be disclosed.
Government Assistance - The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
The CARES Act includes financial assistance for companies in the form of loans and tax relief in the form of deferred or reduced payments and potential refunds. Companies receiving federal assistance must consider the short- and long-term impact of that assistance on their financial condition, results of operations, liquidity, and capital resources, as well as the related disclosures and critical accounting estimates and assumptions. We have not received any financial assistance from the banks or any government agency.
· How does a loan impact your financial condition, liquidity and capital resources? · We have no government loans, except PPP loans that have been forgiven. · What are the material terms and conditions of any assistance you received, and do you anticipate being able to comply with them? · PPP loans only and they have been forgiven. · Do those terms and conditions limit your ability to seek other sources of financing or affect your cost of capital? · No. 35 Table of Contents · Do you reasonably expect restrictions, such as maintaining certain employment levels, to have a material impact on your revenues or income from continuing operations or to cause a material change in the relationship between costs and revenues? · No. · Once any such restrictions lapse, do you expect to change your operations in a material way? · No. · Are you taking advantage of any recent tax relief, and if so, how does that relief impact your short- and long-term liquidity? · We are using payroll tax deferrals allowed by the tax relief programs.
· Do you expect a material tax refund for prior periods?
· No. · Does the assistance involve new material accounting estimates or judgments that should be disclosed or materially change a prior critical accounting estimate? · No. · What accounting estimates were made, such as the probability a loan will be forgiven, and what uncertainties are involved in applying the related accounting guidance?
· We have recognized forgiveness of all PPP loans.
A Company's Ability to Continue as a Going Concern
The
· Are there conditions and events that give rise to the substantial doubt about
the company's ability to continue as a going concern? · Yes. There was concern about our ability to continue as a going concern prior to COVID 19, however the continuation of COVID-19 restrictions may hamper Blue Collar from operating and generating revenues at full capacity.
· For example, have you defaulted on outstanding obligations?
· Yes, but not because of COVID-19.
· Have you faced labor challenges or a work stoppage?
· No.
· What are your plans to address these challenges?
· At the point of allowing full operations for Blue Collar and film production companies to fully operate.
· Have you implemented any portion of those plans?
· No, it's a matter of allowing Blue Collar to fully operate and trying to raise money and fund operational plans.
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