FACT, INC. PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. The reader should understand that several factors govern whether any forward-looking statement contained herein will be or can be achieved. Any one of those factors could cause actual results to differ materially from those projected herein. These forward-looking statements include plans and objectives of management for future operations, including plans and objectives relating to the products and the future economic performance of the Company. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, and the time and money required to successfully complete development projects, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of those assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in any of the forward-looking statements contained herein will be realized. Based on actual experience and business development, the Company may alter its marketing, capital expenditure plans or other budgets, which may in turn affect the Company's results of operations. In light of the significant uncertainties inherent in the forward-looking statements included therein, the inclusion of any such statement should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved.
A complete discussion of these uncertainties are contained in our Annual
Financial Statements included in the Form 10-K for the fiscal year ended
Introduction
Tiburon International Trading, Corp ("Tiburon") was established under the laws
of the State of Nevada on February 17, 2017 . Tiburon was established as a
development stage company focusing its business on the distribution of air
infiltration valves manufactured in China to markets in Europe and in the
Commonwealth of Independent States (CIS). On October 5, 2020 , Kryptos Art
Technologies, Inc , ("Kryptos"), an Ontario corporation purchased 2,500,000
shares of Tiburon from Yun Cai , who was the Chief Executive Officer, President,
Chief Financial Officer and Director of Tiburon. As a result of this sale,
Kryptos became the majority shareholder of the Tiburon. The shares owned by
Kryptos represent approximately 71.87% of Tiburon's outstanding common stock.
The purchase price was $232,467 . The funds were funds of Kryptos. Kryptos is
controlled by Victoria Glynn .
Mr. McWilliams was appointed Tiburon's Chief Executive Officer on October 5,
2020 . On October 8, 2020 , Kryptos, as the holder of approximately 71% of the
voting stock of the Company executed a shareholder consent to effect a name
change of the Tiburon to Fact, Inc. The Company wound down operations of the
historic Tiburon business, which had largely been curtailed by prior management
because of COVID-19 and lack of capital necessary for expansion of the website
and product offerings.
Kryptos had been working on a technology designed to detect and eliminate fraud
in the art world. Kryptos has assigned all of its technological know-how in this
area to the Company which we will pursue as our primary business operations. In
connection therewith, the Company has entered into and is negotiating a series
of development and consulting agreements with software and hardware developers
to complete the development of our products The Company expects to enter into a
license agreement to utilize fraud detection technology in the art area. The
Company expects to enter into such license agreement with an award winning
forensic ballistic technology company that revolutionized the Criminal Justice
system's approach to ballistics.
On October 8, 2020 , Kryptos, as the holder of approximately 71% of the voting
stock of Tiburon, executed a shareholder consent to effect a name change of
Tiburon to Fact, Inc. FACT is a leading innovator of bringing forensic
technology to the art world. Using white light interferometry, FACT takes a
non-destructive unique digital fingerprint of the art using over 10,000 unique
scans. These scans, measured at two (2) microns, 1/50th of a human hair, are
unable to be reproduced or forged. Scans are compared to one another by a
computer algorithm to verify the paintings authenticity.
3
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
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 Company's second quarter endingApril 30, 2022 , with the hope that the product may launch in the Company's second quarter endingJuly 31, 2022 . The following is a discussion of our financial condition, results of operations, financial resources, and working capital. This discussion and analysis should be read in conjunction with our financial statements contained in this Form 10-Q. OVERVIEW
The Company's sales from continuing operations for the three months ended
GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to generate sufficient cash flow to meet
its obligations on a timely basis. In order to continue as a going concern, the
Company will need, among other things, additional capital resources.
Management's plan is to obtain such resources for the Company by obtaining
capital from management and significant shareholders sufficient to meet its
minimal operating expenses and seeking third party equity and/or debt financing.
However, management cannot provide any assurances that the Company will be
successful in accomplishing any of its plans. These financial statements do not
include any adjustments related to the recoverability and classification of
assets or the amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
Results of Operations
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.
Three months ended April 30 Variation
2021 2020 $ %
Revenue $ - $ - $
Cost of Goods sold - -
Gross Profit - -
Operating Expenses 328,354 3,647 324,707 8903.40 %Income (loss) from operations 328,354 3,647
324,707 8903.40 % Net Loss per common Share $ 0.01$ 0.00 $ 0.01 4 Revenues During the three months endedApril 30, 2021 andApril 30, 2020 , the Company did not generate any revenue. A workable prototype (the "Prototype") is expected to be ready during the Company's second quarter endingJuly 31, 2022 .
Revenue are expected to be generated from several key channels as outlined below.
FACT will be marketed to five (5) main channels with a variety of ancillary packages:
(1) Financial Markets -
(2) Sales Markets - Auction Houses, Art Dealers, & Gallery Sales
(3) Logistics Markets - Shipping/Transport Companies, Storage facilities, &
Ancillary Services
(4) Collectors Market -
(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 who want unlimited on demand scans which can be added on any of the above subscription packages.
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 individuals who 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. 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 experts who 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.
Cost of Goods Sold
For the three months ended
Operating expenses
Total expenses and professional fees incurred for the three months ended
General and Administrative - General and administrative expenses for the three
months ended
5
Liquidity and capital resources
Initially, we anticipate the Company will be funded from investors, through the sale of debt or equity securities.
OnNovember 20, 2020 ,Fact, Inc. the Company andOasis Capital, LLC ("Oasis") entered into a Securities Purchase Agreement (the "Purchase Agreement") pursuant to which the Company agreed to sell and Oasis agreed to purchase$730,000 principal amount of convertible promissory notes (the "Note") for a purchase price of$610,000 which includes a 20% original issue discount and$10,000 of expenses. OnNovember 20, 2020 , Oasis funded$250,000 (the "First Tranche") as ofNovember 19, 2020 and the Company has in turn agreed to issue to Oasis a note in the principal amount of$310,000 . Under the Purchase agreement, the Company will sell Oasis an additional promissory note in the principal amount of$420,000 and issue an additional note for a purchase price of$350,000 (the "Second Tranche") upon the Company's filing of a registration statement with theSecurities and Exchange Commission (the "SEC"), pursuant to the registration rights agreement (the "Registration Rights Agreement") entered into by and between the Company. The maturity date for each of the First Tranche and the Second Tranche is six (6) months from the date on which Oasis funds the respective portion of the Note. The interest rate of the Note is 10% annum. The Note is convertible into shares of the Company's common stock, par value$.001 (the "Common Stock") at the option of the holder. In addition, in connection with the Purchase Agreement, the Company issued to Oasis 100,000 shares of Common Stock and a five year warrant (the "Warrant") to purchase up to 250,000 shares of Common Stock at a price equal to$1.10 per share. OnNovember 20, 2020 , the Company and Oasis entered into an Equity Purchase Agreement (the "EPA"), whereby Oasis has committed to purchase$10,000,000 worth of Common Stock, as requested by the Company (the "Equity Line"). The Company's ability to draw upon the Equity Line is subject to the effectiveness of a registration statement with theSEC and certain other contingencies. The Company entered into the Registration Rights Agreement with Oasis pursuant to the EPA. In connection with the EPA, the Company issued to Oasis an aggregate amount of 250,000 shares of Common Stock, of which 100,000 shares will be restricted until Oasis funds at least$1,000,000 under the Equity Line. Purchases made under the EPA will be made at a 15% discount under market
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$500,000 to$700,000 in upfront software and firmware development costs. The Company also anticipates it will require several pieces of hardware, including, but not limited to, an interferometer, scanning arms, vans, computers, monitors, and other related items. The Company anticipates costs of approximately$2,000,000 with associated hard assets. We have entered into an agreement withCurrencyWorks USA, Inc. to oversee development of the front-end platform of our system. The total cost of development is$200,000 to be paid over a period of six (6) months. Finally, we have contractedBusiness Interest Group (BIG) to assist us in overseeing and managing the development of the block-chain and/or cryptocurrency platform for$37,500 per month for 13 months. While we are hopeful that the initial capital expenditures will be covered by investor funds (see the description of the Oasis EPA above for detailed explanation), ongoing cash flows from operations will fund future expenditures. We anticipate that future expenditures post product launch in the Company's second fiscal quarter of 2021 will include normal expenses from operations, including, but not limited to, salaries, R&D, PP&E purchases, and marketing expenses. We anticipate there will be ongoing research and software development as the Company expands into future lines of business such as other collectibles. Cash flows from operations are expected to commence at the beginning of the Company's second fiscal quarter of 2021, slowly increasing at a slight percentage until the end of the Company's 2021 fiscal year. The Company expects its operations to result in negative net cash flow throughout the Company's fiscal 2021. Towards the end of fiscal 2021, the Company expects to increase net cash flow due to an anticipated increase in the Company's expected revenue and a decrease in its expected R&D expenditures for the Company's fourth fiscal quarter of 2021, endingJanuary 31 , as compared to the Company's expected revenue and R&D expenditures, respectively, for the Company's first fiscal quarter of 2021. There can be no assurances that the Company will achieve any revenues in fiscal 2021. 6 Inflation
The Company's results of operations have not been affected by inflation and management does not expect inflation to have a material impact on its operations in the future.
Off- Balance Sheet Arrangements
The Company currently does not have any off-balance sheet arrangements.
© Edgar Online, source
