FACT, INC. The following discussion and analysis should be read together with our consolidated financial statements and the related notes appearing elsewhere in this Report. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See "Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under "Risk Factors" and elsewhere in this Report.
Overview
The Company was established under the laws of the
On
All data is stored securely on the block-chain for real time collection
management. We are currently developing a front-end user interface as well as
modifying existing ballistics firmware for a comprehensive verification,
tracking and reporting system. A workable prototype (the "Prototype") is
expected to be ready during the Company's second quarter ending
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We plan to market to various channels in different capacities including, but not
limited to, subscription models, leasing models, and individual point of sale
models. The fees for our different models will range from a flat fee to a
percentage of sales fee. We are hopeful the Company will commence its marketing
efforts in the Company's first quarter ending
On
Research and Development
Research and development expenses consists of costs incurred while performing research and development activities to discover and develop our product. This includes conducting studies and trials, manufacturing development efforts and activities. We recognize research and development expenses as they are incurred. Our research and development expense primarily consist of:
? forensic technology product testing and regulatory-related costs;
? expenses incurred under agreements with investigative sites and consultants
that conduct our product testing;
? manufacturing and testing costs and related supplies and materials;
? employee-related expenses, including salaries, benefits, travel and
stock-based compensation; and
? facility expenses dedicated to research and development.
We typically use our employee, consultant and infrastructure resources across our development programs. We track outsourced development costs by product or development program, but we do not allocate personnel costs, other internal costs or external consultant costs to specific product or development programs.
Substantially all of our research and development expenses to date have been incurred in connection with our product. We expect our research and development expenses to increase significantly for the foreseeable future as we advance an increased number of our product through development. The successful development of product is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs required to complete the remaining development of any product. This is due to the numerous risks and uncertainties associated with the development of product.
We do not expect any of our products to be commercially available until the end
of the Company's second quarter ending
? continue research and development, including development of our existing
product;
? seek to discover and develop additional product;
? establish a commercialization infrastructure and scale up our manufacturing
and distribution capabilities to commercialize any of our product for which we
may obtain regulatory approval;
? seek to comply with regulatory standards and laws;
? maintain, leverage and expand our intellectual property portfolio;
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? hire manufacturing, scientific and other personnel to support our product
development and future commercialization efforts;
? add operational, financial and management information systems and personnel;
and
? incur additional legal, accounting and other expenses in operating as a public
company.
Results of Operations for years ended
The following tables set forth certain selected condensed statement of operations data for the periods indicated in dollars. In addition, we note that the period-to-period comparison may not be indicative of future performance as they relate to the Company's historic business.
Year ended
January 31 Variation
2021 2020 $ %
Revenue $ - $ 4,500
Cost of Goods sold $ - $ 2,700
Gross Profit $ - $ 1,800
Operating Expenses $ 447,374 $ 25,585
Income (loss) from operations
Revenues
During the year ended
A workable Prototype is expected to be ready during the Company's first quarter
ending
FACT will be marketed to five (5) main channels with a variety of ancillary packages:
(1) Financial Markets -Art Insurance & Art Secured Lending (2) Sales Markets - Auction Houses, Art Dealers, & Gallery Sales (3) Logistics Markets - Shipping/Transport Companies, Storage facilities, & Ancillary Services (4) Collectors Market -Private Museums , Institutions & Collectors (5) Individual Market - Scans at an select FACT location
FACT is hopeful that it will also have an ancillary channel: Leasing of FACT
device and software to clients
Each channel will be priced in a different capacity to reflect the service provided to such channel. Revenues are expected from the following areas:
? Individual scans - Scans for individualswho want one or two time FACT Scans. ? Salesman Package - These are scans that would be purchased by Auction houses, dealers, and gallery owners to verify that the painting is authentic as well as verification in the shipping/logistics process. 11 ? Financial package - Art Insurers and Art Secured Lenders would use FACT to ensure that the painting they are inuring/lending against is not a forgery. In addition, if the painting is held as collateral, the owner can make sure that the painting returned is authenticated. ? Logistics package - Warehouse and Shipping expertswho specialize in art would use the FACT system to verify the painting that left point A is the same that arrived at point B. In addition, FACT's GPS system provides real time location tracking. ? Collectors package - Private museums, Foundations, & Institution Collectors would use the FACT system to authenticate a piece of art that for example was loaned to a museum for an exhibit.
Operation, General and Administrative Expenses
General and administrative expenses for the years ended
Liquidity and Capital Resources
Initially, we anticipate the Company will be funded from investors, through the sale of debt or equity securities.
On
In addition, in connection with the Note Purchase Agreement, the Company issued
to Oasis 100,000 shares of Common Stock and a five year warrant (the "Warrant")
to purchase up to 291,775 shares of Common Stock at a price equal to
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In connection with the
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We may raise additional funds through the sale of debt and/or equity in the future.
We anticipate that material expenditures in the next six (6) months will include
development costs for the software and the firmware as well purchases of the
hardware. The Company estimates that development of the Prototype should cost
approximately
While we are hopeful that the initial capital expenditures will be covered by
investor funds (see the description of the Equity Purchase Agreement above for
detailed explanation), ongoing cash flows from operations will fund future
expenditures. We anticipate that future expenditures post product launch by the
end of the Company's second quarter ending
Cash flows from operations are expected to commence at the beginning of the
Company's second fiscal quarter ending
Cash Flows
For the year ended
Off Balance Sheet Arrangements
As of the date of this Annual Report, we do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Significant Accounting Policies
For a discussion of the Company's significant accounting policies please refer to Note 3 of the Company's financial statements included herein.
Revenue Recognition
We adopted Accounting Standards Codification ("ASC") Topic 606, "Revenue from Contracts with Customers", and all related interpretations for recognition of our revenue. Previously we recorded revenue based on ASC Topic 605. Adoption of new accounting standard did not have any material impact on our reported revenue.
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Basic and Diluted Income (Loss) Per Share
The Company computes income (loss) per share in accordance with FASB ASC 260
"Earnings per Share". Basic loss per share is computed by dividing net income
(loss) available to common shareholders by the weighted average number of
outstanding common shares during the period. Diluted income (loss) per share
gives effect to all dilutive potential common shares outstanding during the
period. Dilutive loss per share excludes all potential common shares if their
effect is anti-dilutive. As of
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid instruments purchased with an original maturity of three months or less
to be cash equivalents. The Company's bank accounts are deposited in insured
institutions. The funds are insured up to
Stock-Based Compensation
As of
Stock-based compensation is accounted for at fair value in accordance with ASC 718, when applicable. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Use of Estimates
Preparing financial statements in conformity with accounting principles
generally accepted in
Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
COVID-19
The novel coronavirus ("COVID-19") was first identified in late 2019. COVID-19
spread rapidly throughout the world and, in
Management continues to closely monitor and evaluate the impact of the COVID-19 pandemic on the Company's operations and will take, the necessary actions to right-size the business in this environment, which is evolving daily. Some potential actions include, but are not limited to, modified work schedules as well as appropriate adjustments to the operating expenditures and capital spending plans.
The Company is not able to predict the ultimate impact that COVID -19 will have on its new business; however, if the current economic conditions continue, the Company will be forced to significantly scale back its business operations and its growth plans, and could ultimately have a significant negative impact on the Company.
Recently Issued Accounting Pronouncements
The Company has no material items to report at this time.
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